Mxit is a massive mobile social network that was started in South Africa a couple years ago. Today, Safaricom announced a partnership with them, using their marketing muscle (7 pages of ads in today’s newspaper) to import Mxit into Kenya.
[For the time being, we’ll ignore the complete ripoff of Twitter in their marketing...]
Mxit is a free instant messaging platform that uses the data network, thereby making it cheaper per message than sending an SMS. They claim 19 million users, most a younger demographic, who spend time chatting with friends or in chat rooms. MXit also supports gateways to other instant messaging platforms such as MSN Messenger, ICQ and Google Talk.
Local apps and entrepreneurs react
This should be a slap in the face to Kenyan programmers and tech business entrepreneurs. The model to build the same type of mobile social network has been openly working and available to do for at least three years.
To be fair, Mbugua and the Symbiotic team tried to create something like this a year ago, called Sembuse. Both he and Idd Salim aren’t very happy about this latest move, claiming that Kenyan entrepreneurs can’t get the same access or opportunities as their South African counterparts.
From Mbugua:
“The issue is not that they have a partnership with Mxit but that from personal experience, local developers and companies suffer greatly in their quest to have such partnerships.”
From Idd:
“Most likely, the marketing retards at Safcom were convinced to believe that Mxit will increase data ARPU for Safcom. Mxit is meant to be a replacement to SMS. … So Instead of sending an SMS, you will use Mxit. Safaricom will lose KSHS 3.5 per SMS, but gain KSHS 0.003 per data exchange over Mxit. Talk of Safaricon Conned! Pwagu amepata pwaguzi.”
The issue with Safaricom
On one side, the Sembuse team have a point. Safaricom has been promising to open up their API and platform for real extension. This has never been fulfilled. They have promised to (honestly) engage with the local programming community, and this hasn’t happened either. They were publicly called out on all of these facts and more at the Mobile Web East Africa conference this year.
In many ways Safaricom walks arrogantly through the Kenyan market, lying, stealing and cheating their way to even larger profits. However, they also push the edges. While others are happy to sit back and make their current margins, Safaricom takes risks and eats their lunch. Innovation, whether it’s home built, bought or stolen still has the same effect.
Business reality
For whatever reason (marketing, value add, etc), Sembuse didn’t catch on – it hasn’t reached critical mass. Numbers of users, rather than technology ability even when it’s better, are the things that larger companies are looking for in this type of play. If you don’t have half a million users, you aren’t even in the game.
Though I’m no Safaricom apologist, I can’t fault them for making a decision to go with a tested product from an established business. Yes, SMS is currently a cash cow, especially here in Kenya. However, everyone can see the writing on the wall: data is the future, and controlling the channel is more important than anything else.
As David Kiania from the Skunkworks list noted, “Rule No. 4 in business: Cannibalize your revenue and business model before your competition does it for you.”
I’m more disappointed that no Kenyan company has been able to make a go at this by themselves, just like Mxit did years ago. You don’t need Safaricom or any other mobile app provider to be successful in this space, Mxit if anything, has proven that.
Like I said 2 years ago, this is a sure win if you can pull it off correctly. The technology to do this is not new, as Idd Salim points out as well, neither is the model – so you know that the strategy here is on marketing and communications to show the value add to potential customers.
More than anything else, Kenyan entrepreneurs should be upset with themselves for missing a sure opportunity, not upset with Safaricom for making a good business decision.
May 21, 2010 at 6:49 am
Well, you said it… “More than anything else, Kenyan entrepreneurs should be upset with themselves for missing a sure opportunity, not upset with Safaricom for making a good business decision.”
At some point you have to build your own brand not piggyback on someone else. Equity tried Eazzy (failed) & got in bed with Safaricom with M-Kesho but they tried not cried!
May 21, 2010 at 6:51 am
” HASH says – I’m more disappointed that no Kenyan company has been able to make a go at this by themselves, just like Mxit did years ago. You don’t need Safaricom or any other mobile app provider to be successful in this space, Mxit if anything, has proven that. ”
I concur with your thoughts, you dont need an operator to make it happen but collaboration boosts value…
May 21, 2010 at 6:54 am
@coldtusker…collaboration boosts value. From the Equity and Safcom Mkesho deal are we saying that only big brands ought to get cozy with each other?
May 21, 2010 at 7:04 am
How does safaricom import the service to kenya? Does it mean that it’ll be incorporated into sim menus or will it be now as an IM, that you set up on native phone app just like mms? I have been using the jar application and don’t get what changes now that safaricom has imported it. Does it’s service use IMPS which works with the native nokia service?
May 21, 2010 at 7:14 am
I think this really demonstrates the point that other than innovation, capital is needs at some point to scale such products up in the future.
There may be other strategies that one can deploy but an environment which lacks proper financing institutions willing to lend a hand is doomed to incursions from bigger and not necessarily better players.
Safaricom has/had the money to support a local solution even if it was their own but has now stabbed what could have been its greatest resource in the back.
Now we wait and see…
May 21, 2010 at 7:27 am
Mbugua – These brands became big… they were not conceived ‘big’…
Safaricom does not owe Kenyans anything [Yes, it is in Kenya but it owes its customers its fealty not us as developers, VC, etc] & we need to take the bull by the horns…
I am a fan of Josef Schumpeter… and I believe someone/something will knock down Safaricom… Just a matter of time…
May 21, 2010 at 8:16 am
@coldtusker am yet to understand how limiting prospects for local developers is in the companies interests.
In the absence of any communication from Safaricom as Hash has said we cannot know for sure what is Safaricom’s approach to local developers.
But all we know is that the perception is bad.
This should be worrying for shareholders as it already is for the stakeholders.
May 21, 2010 at 9:05 am
We cant expect a cook or a watchman to analyze the plight of software developers in Kenya, coldtusker, can we? As for the coders, the struggle continues. We will never stop. We will never give up.
May 21, 2010 at 9:37 am
@kwenda – Relax. The word ‘import’ if contextual. Don’t get all hormonal over it.
The thing is Safcom refused to take up Sembuse because WE refused to give them 90% revenue… and they Take up Mxit for FREE… Hypocrisy.
May 21, 2010 at 9:50 am
Just to point out, I’m not knocking Sembuse in this piece. In fact, Symbiotic need to be lauded for trying. It’s a lucrative space, and amazing to see how few local entrepreneurs have been working to attack it with a viable product.
I will say this though, everyone needs to build their own businesses up on their own as much as possible. 90% from Safcom is one example of the BS that’s ongoing and much needed for realignment in the seed capital space. However, why go to Safcom with this anyway? Better to build up at least 100k users on your own, then partner with someone smaller who is also hungry. You bring down the big guys by moving faster, thinking creatively and striking without remorse where they are weakest.
Finally, Safcom can’t really “take up” Mxit. It’s a web service equally accessible on Yu or Zain. The angle that Safcom is taking here is they believe if they push the product (advertising) they will accrue more data users. Less technical users will believe that the only way to use it is via Safaricom…
May 21, 2010 at 11:18 am
If you ask me, 10% of revenue is better than no revenue. Salim, do the math.
May 22, 2010 at 3:05 am
I remember an article by @whiteafrican where he proposed the adoption of the Israel model in ‘siliconizing’ local solutions. Develop locally, seek outside funding. Lets face it, local investors are still shy of investing in local solutions, to their own peril in the end. The US/EU/Asia are bubbling with investors who are more than ready to support innovative ideas because they know the rewards accrued from these investments. Find them! Forget Safaricom, Equity or whoever else doesn’t care about Local developers. @Salim, Njihia In my opinion, Symbiotic should not still be complaining about funding. They have a great product whose reach should have gone viral by now. Why make 5 million if you can make 10% of 1 billion? Just a thought.
May 22, 2010 at 4:49 am
There is a Kikuyu saying that goes:
“You can’t compete with an elephant to shit”.
Safcom is the elephant. And if you want to compete with them in their own space, you’ll die.
@ Ssembonge – I’m in with Symbiotic on this because of the belief in their product and themselves. We know that if one goes for 10% with Safcom, it will NEVER improve. In fact expect to be replicated and spat out or swallowed. The sadness is that “we” believe Safcom’s lie that “we” should build Kenya “ourselves”. Though Zain has a regional presence and a collaboration with them would be cross-border, i.e. larger numbers, their “foreign” culture is harder to get past, and they have not communicated clearly what their data+developer engagement plans are. In fact now that they are AirTel, expect an Indian bias to products and solutions.
But on the issue of “A tenth loaf is better than none”, I can see what you are saying, but to do this you sell your soul and waking up in the morning is no longer fun. This is the dilemma.
If we believe our own hype that “Data is the future”, then clearly we need to look at Mobile Web solutions, not Network based solutions.
Moving on, sadly most of the developement on a regional scale is social-development based, because that’s where the funding is. The ones of us who have the coding chops and don’t want donor funds need to think of Mobile Web solutions targeting a regional to pan-African scale because that’s the next step.
As Hash told me last night, what we don’t have are plans with exit strategies for VC. And neither are we looking at 120 mil Swahili speakers in EA, clearly focused on English based solutions that we “might” interest “foreign” partners. As we are whining and whinging about lack of VC, we haven’t REALLY worked on our own projects, either built a large regional following (our numbers – “umati”) or shown such innovation that the said funding comes running (their numbers – “ka-ching”). And obviously, we love our projects to death that none of us thinks of going for the IPO and exiting either for ourselves or for the VC.
So this is my position, we need to close the door to Safcom in our minds, do “corporate” work to make ends meet and hack at the ideas proper. When we are ready, we either “bootstrap” the project in line with the 10 lessons, or create a world-class business case with IPO and licensing included and talk to the “Rainmakers”.
My hope for the iHub is to bring this kind of culture here, where we push each other to the extent that by the time VCs check in, we are laughing all the way to the bank.
This pond is bigger than the fish called Safcom.
May 22, 2010 at 6:05 am
I think your piece is spot on.
Here’s my 5 cents on the whole deal.
Safaricom actually has 2 revenue streams off Mxit – the data consumption and a revenue share on the mxit virtual currency.
On the data consumption: Chat is the bait…full multimedia sharing is the hook. Safaricom is hoping to leverage its client base to go beyond the basic chat….share a picture with your friends…then share a video. Revenues generated from adoption and incremental use of the application would be huge…
Moola: This is where the immediate cash flows come in. Users can buy Moola using Safaricom credit—> definite revenue share! So Safaricom has effectively increased the amount of billable content that they can monetize…without the hassle of having to source it themselves.
Viewed from this angle, i think the value proposition is very clear. I like where the lads at symbiotic are headed. you have 90% of the components required to be the next big thing. The remaining 10% is more a strategic Find the right bait and the rest will come through.
@Afrowave – Thanks for the 10 lessons. That is a brilliant piece.
May 22, 2010 at 1:58 pm
If there is any lesson I learnt during the Mobile Web East Africa is that Kenyan developers have to stand on their own and stop whining about Safaricom. Brett StClair, a South African told developers to take Safaricom head on…â€You can be bigger than themâ€. Read more about that here http://www.kachwanya.com/2010/02/05/ten-conclusions-from-mobile-web-east-africa-conference/ I understand Mbugua and Salim’s sentiments but the question i have been asking myself since the time i read about the deal is If i get a good deal or the same opportunity to partner with A South African Firm will i leave it? I guess few will leave such a deal including Mbugua or Salim himself.
So guys i think it is time to soldier on and such happening should be a lesson to all the developers and entrepreneurs in Kenya.
May 22, 2010 at 4:50 pm
Great article and discussion.
As Hash mentioned, I think that local developers have to focus on building the numbers. The problem as it stands is that local developers may have incredible quality products but too few users. With such few local users, you can’t scale.
Though the coding might be above par, the strategy needs to focus more on getting Kenyans who are online onto these platforms. If these platforms had enough Kenyans on them, Safcom would be coming to you instead of Mxit. And you could slap them with the 10% revenue they were offering.
Point is, as long as Kenyans keep logging onto global social networks and having a hard time even placing local social networks, the ball will remain in the Sharks court.
The question then becomes – how do you build the numbers?
May 23, 2010 at 2:23 am
Well discussed. Thank you all.
My apologies to all who find my language foul.
According to Seth Godin, building a following or tribe around the product i.e. Sembuse will help making it something to wanna get. Shumpeter has written that only innovation will upset the market and create a new dominant player, however it’s for a moment before other players imitate, unless entry costs are prohibitive.
I was unable to use sembuse on my nokia 6288 because of an “out of memory error”, haven’t thought about it again. The reason is:
there were no known friends who had ever had of the app in december 2005, therefore no motivation to keep trying. I got to sembuse by curiously following an email footer link that said nothing about a j2me app, i just stumbled upon it. I wonder how many potential users visit tech forums where they’ll stumble upon it like me.
I have been to remove high schools like in iten, and young people know mygamma, ebuddy and nimbuzz. Thats What they use and mostly mig33 which has virtual currency and has been quietly getting sale agents all over kenya. Please get your product where its visible e.g. Getjar, bwap, safaricom.com, and on breakfast and 8pm radio. If you haven’t reached me a heavy chat user, how you getting the newbe.
May 23, 2010 at 2:28 am
My bad, on an earlier comment. I meant to say:
december 2009.
Sorry.
May 26, 2010 at 4:54 pm
I’ve sincerely enjoyed this article and following discussions and thought I’d share my thoughts and echo Afrowave’s comment that bootstrapping is the key. VC funding (although limited) is out there for the right African tech start-up, I feel the bottleneck is the quality of innovative business plans/models and the lack of “mature” or experienced entrepreneurs. After spending the better part of 2 months trying to work with Makerere ICT students on mobile start-ups (sorry, was not able to make it Nairobi), I found many showing the traits of an amature entrepreneur, key of which is not investing a sizable amount of your own time, effort or limited funds in bootstrapping the venture.
If you can bootstrap your venture and show some succcesses (prototype, active users, compelling partnerships, reasonable revenue projects – along with some justification of assumptions), I do not think you should have too much trouble finding equity financiers.
Another great resource on bootstrapping is Guy Kowasaki’s blog post: http://blog.guykawasaki.com/2006/01/the_art_of_boot.html#axzz0p4KkPnLP
May 26, 2010 at 4:56 pm
forgot to add my email address if anyone would like to discuss “off line”amol.jadhav@gmail.com
May 28, 2010 at 2:01 am
And now Safcom has Kipokezi, IM Messaging by http://www.forgetmenotafrica.com. The funny thing is that this Forget Me Not Africa is actually based in Hong Kong. Its basically chat & email on SMS, Mxit on SMS.
May 28, 2010 at 5:37 am
I finally wrote my take on this issue here http://bit.ly/9jrk2c Why Zain could be the one that finally builds the APP store.
September 8, 2010 at 4:14 pm
Dont we Africans love to whine….In Kenya you guys whine about lack of funding and the Big Players from South African…In South Africa we whine about lack of funding and Big Players from the US. The common denominator above is wait for it-Whining. We seriously need to cut that crap and make things happen .Africa is so open for anyone to play in its not even funny.
Im sitting here thinking wtf were yall doing before Mxit came along.Im Thinking maybe the creators of Sembuse created the product and experted it to blow up with out effort.At the end of the Day in Africa you still have to promote an online product offiline if you want it to catch fire and you have to be contravesial.
and like the poster above said…Bootstraping is the way forward and also learning from Asian counterparts because its basically the same type of market as us but we 6-7 years behind.
Ps
Stop Whinin!!!!
The next time i will be on this blog will be for an interview
March 19, 2011 at 7:37 am
nothing new… nothing unexpected from safaricom. they started this kind of nonsense waaaaaay back… just ask Paul Kukubo about “Life in Green”… and yes, the same Kukubo who is current ICT Board CEO and founder of 3mice…
all i can say is NKT! And bwahaha on Idd’s comment… serves them right this time 😀