An Opportunity to Make Real Money in Africa

Just today Google has shown that they are willing to invest in African mobile phone businesses. Does Google’s purchase of an equity stake in Mobile Planet mean the big web/mobile money will start flowing throughout Africa? Not necessarily, but it made me think of a conversation that I tend to have a lot in my travels.

The topic of conversation usually turns to this; what type of web or mobile application can you build to make some serious money in Africa? Though there are many answers to that question, as I believe there are many options for successful web and mobile companies in Africa, there are only a few that I think of as “sure things”.

Any entrepreneur is looking to either a) create a company with solid cash flow and grow it, or b) create a solid company with value and then sell it (or have an IPO). On the web that takes some well-known paths, and the most common is option “b” where the entrepreneur’s sell their company to a larger web entity (Amazon, Google, eBay, Nokia…etc).

A “Sure Thing” Formula

Create a Jabber-based chat application that works on the mobile phone and the web, grow it to a 1-2 million users within a region, sell to Google.

Why does this work?
You build your chat application with Jabber since it can interface with Google’s GTalk. Jabber is free, and also happens to be the what a couple other major applications are built on (see South Africa’s Mxit). Google is trying to grow in Africa, and I assume would be extremely happy to pay a very healthy amount of money to acquire an application with millions of active users that is built on the same protocol as their own chat system.

Hand Holding a Mobile Phone

Challenges

The formula for this particular idea is built on two premises. First, that you can actually get a couple million users within an African region using your chat application. Second, that Google wants more users on their platform(s).

The first challenge is born from the fact most mobile phone users in Africa don’t use data enabled phones, so they can’t run a Jabber application on their phone. Mxit’s answer to this in South Africa was to show that for 10% of the cost of a normal SMS, you could send a message through their system (which happens to be a highly bastardized customized Jabber app). Your goal is to get people who don’t have a data enabled phone to upgrade to one.

The second challenge is beyond your control. You’ll never know if Google wants to buy you out until they come knocking. However, if let’s just say you shouldn’t have to many problems monetizing a system that has 1-2 million users on it anyway…

Your goals to overcome these challenges is found in tapping into communities and spreading your app virally to gain critical mass with speed. Once it spreads, the first application like this to reach a decent amount of saturation will be the winner, even if it has some faults (see Twitter).

Opportunities

Though chat is the core of your application, that is both web and mobile phone accessible, it’s not the only value added service that you can provide. With some creativity, you can add services that allow more people to tap into, including locally relevant events, news, marketplaces, personals, jobs, etc…

On top of these services, you’ve got the advantage of building on an open source platform that other services use as their core.

Lastly, and most importantly. If you were to reach even 500,000 users you would have an incredibly viable opportunity for advertising revenue. The ability to target specific advertisements, or sponsorships, through the platform make it a marketers dream. Basically, you might not need, nor want, a buy out after all.

In Summary

Is it really a “sure thing”? No, every business move has inherent risk and depends on execution of the strategy.

Is it a good basic idea that could be built into a real product with a solid exit strategy? Yes, undoubtedly so.

We’ve already seen the booming success of Mxit in South Africa. There’s no reason to believe that you couldn’t have a margin of that same success in East, West or North Africa with the same type of service. If you build it with an end-goal of Google integration in it at the end, you also set yourself up for a real possibility of a buy out.

16 thoughts on “An Opportunity to Make Real Money in Africa

  1. Pingback: An Opportunity to Make Real Money in Africa | Txtin

  2. Mike

    There is another great way to make money here for you average person. Jabber is not a publicly traded company but Webb Interactive owns 25% of them. WEBB was trading at .05 last time I checked. How long until Jabber IPO’s? How high do you think your nickel per share investment will go?

  3. bankelele

    I think they have to show some financial returns for their investments in Kenya and buying into a leading value- added service provider that is well positioned in the mobile communication sector (and is steady partner of Safaricom) was a smart move

  4. Chris Blow

    There’s something to be said generally about flipping companies. Here’s a <a href=” http://www.nytimes.com/2008/07/29/technology/29flip.html?_r=1&em&ex=1217476800&en=9bc17e55ab4fcec5&ei=5087&oref=slogin“New York Times article on this. I’m wondering what African web apps a languishing on “prime real estate,” I imagine that there are lot.

    But in general I don’t believe that you can built an app just to flip it. Maybe I’m old fashioned but I think it takes real passion and understanding of the app space. Being bought always seems like like a side effect.

  5. HASH

    @Chris – I’d agree that the best businesses are grown out of passion for what you’re working on. For the record, I’m not exactly for “flip it” type businesses either. I’d rather run a 37 Signals than a Blogger (which sold to Google years ago).

    However, there is money to be had in selling your company, and that’s why we see successful buyouts like MySpace and YouTube for large chunks of cash. In fact, I remember reading that the guys at YouTube built their app specifically so that if Google wanted to buy it, the right architecture would be in place (have to find that post/article…).

  6. Kennedy

    Hi guys,

    I really like the debate on mobile apps raised by Hash. I am a web developer and allthough I have a fulltime job here in Kenya, I develop websites for my clients or help them maintain their existing websites. In actual fact the majority of we yound and talented developers are looking to cash in on outsourcing work from the US and UK etc.

    However as young as we are it is not so easy to get hold of a such contract and we do not have huge capital to buy and sell products online. I can for instance take a trip to the Masai Mara and take photos or film and design and elegant website offering tours and safaris, but I cannot target the actual tourist in the abroad without help. Later I could when the website is self sustaining I could flip it! Similary I could design a beatiful and full e-commerce website to sell African Curio made of Ebony, Mahogany and Precious Stones like rubi from northern Kenya. But to get the market from abroad and to win the trust of the customers is not easy with just SEOs. You need to do some ground work before the website can sell and then you decide to sell it otherwise where is the value?

    I would be grateful to partner with like minded guys like you and maybe somewhere down the road your idea and mine might just make the next buck!

    See ya!
    Nairobi

  7. Mbugua

    Hey Hash, I tend to share your train of thoughts on the sure thing formula. Coz while working at what you love is excellent, the cash from a buyout gives you wings to fast track your billion other ideas otherwise you remain in garage style mode.Remember that ideas are not mutually exclusive and any capital injection simple fast tracks delpoment and market entry esp because costs of advertising are so darn high here in Kenya. First mover advantage as witnessed in the Mobile Planet case is always a good thing – they managed to secure a lucrative working partnership with Safaricom and have got a media outlet via Citizen Tv and Radio, who by the latest Steadman reports are second in TV after KBC and virtually untouched in the radio sphere.
    Bottom line, funds help passions reach their peak.

  8. KE

    Kennedy:

    You need to sign up with companies like elance and start offering your web design services to americans. There’s a small monthly fee to join in, but once your in, you can bid for all kinds of jobs.

  9. Peter Njenga

    Nice thoughts, HASH.
    I like Kennedy’s idea and the info KE has provided on the same.
    I’m very interested in ICT related ventures and believe that those who grab the opportunities now will not only make money but might just change the world, if not their geographical regions.
    Am so headed to http://www.elance.com and see what I can do there.
    Thank you guys!

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  11. Nana Kwabena Owusu

    Good Article. However one think I can never figure out is how come the Mobile Operators, how still not been able to push the ‘data’ story to consumers.

    In Ghana, I still find a lot of people who think GPRS is exorbitantly expensive and that’s why they don’t use it. Lots of people in certain demographiscs (eg Uni & College students) have high end phones that go to waste.

    MTN, Zain, Vodafone (formerly GT), Tigo, Kasapa and still most people think an SMS costs less than an email with GPRS.

    Well if the MNO’s won’t seize the day, entrepreneurs should as is happening. I especially love TxtEagle’s idea and there was the project that also allows us international tweeps in areas with SMS device updates turned off by Twitter, to get SMS updates.

    Well I am involved in a project that’s trying to tap into this unleashed potential but we are still finding what the right way is. When we do (hope springs eternal) maybe I can help answer my own question.

    Ps. Does anyone know of any good African podcasts?

  12. Ford

    Wow I love the conversations that has been going on, and people have great ideas that I have been thinking about too. However, I’ve noticed there is many of us designers and people like kennedy who are able to do a lot about website designing and mobile apps to bring money. I think its better to create a group of people with this thought in mind via online and having some meetings online in order to do something about this to make enough money in the future or even change african regions. I am writing this via my phone, and I will try build a blog just to bring people out that can offer whatever they have in mind and put it in action, the hard part will be trust from people.

  13. Nan

    Good ideas. Bringing people together who share the same ideas will be an excellent opportunity for grow together. Iam a blogger and I really know it can help alot.

  14. longe samuel

    pls, how can i create and design my own chat application in nigeria??? i would like to get an e-mail from you on some tutorials cos i really need to make money!!. Thank you.

  15. Webroyal

    I love the conversation.
    Whether S.Africa,Ghana,Nigeria,Kenya…we are all Africans(Lets put our Heads together and move forward).
    There are many online businesses we can do eg:-Forex trading,Elancing,Hyips,Surveys,webdesign/Blogging for sale,Adsense/Adwords,Affiliate Marketing etc.
    But a major constraint is the payment system because Paypal (which is universally accepted) doesn’t accept our continent.
    Please i’ll love it if anyone (poster,kennedy)reached back to me by mail@Drabdulh@gmail.com
    +2348127852244 on this issue.Thnx

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