Top of The BOPs - Observations from
doing online business in Africa
          By Stefan Magdalinski
               @smagda...
What am I doing here?
• Mocality is a mobile (J2Me, WAP,
  iPhone, Web) Mobile Business
  Directory for sub-Saharan Africa...
What am I doing here?
• Hunger, corruption, war, poverty?
• Like the early days of the web in Europe
• Arrival of SEACOM e...
Opportunity
 "The arrival of SEACOM is as important a
 development for my generation as
 independence was for our parents"...
Internet in Kenya
What's different about the Kenyan market?
What's different about the Kenyan market?
What's different about the Kenyan market?
PC penetration is growing rapidly
• 250 dollar netbooks with interest free credit and a subsidised
  dongle
• sub-100 doll...
Theory at the bottom of the pyramid
• C K Prahalad (1941-2010)
• The bottom 4 billion is actually
  a huge consumer market...
4 characteristics of successful BOP businesses
•   Scalability
•   New price/performance envelope
•   Modern technologies
...
Mocality at the BOP
• Scalability - uses technology to both acquire and distribute
  listings
• Affordability - basic serv...
M-PESA
 •   send cash via SMS
 •   launched April 2007
 •   9.5 million users
 •   18,000 Agents
 •   370 million USD/mont...
M-PESA


 4.4 billion US dollars transferred (annualised)
M-PESA


 4.4 billion US dollars transferred (annualised)

         14% of 2009 GDP (estimated)
Why is mobile banking important at the BOP?
• Productivity - previously remittances to the rural areas
  were taken by han...
Using M-Pesa for savings
• 19% of users use M-PESA to store value
• 30%+ in Kibera
• still worthwhile even though M-PESA d...
M-PESA and e-commerce
• Spending
   – Kalahari.net
   – Bill payments (electricity, water, 70 others)
   – taxis, airtime,...
Mocality and M-PESA
• Using M-PESA to pay people in Nairobi to crowdsource
  business listings.
• Launched on 3rd May
• An...
Users in Kenya
• Open-minded
• Mobile power users
• Multi-modal access, always online
Users in Kenya
•   Facebook is king
•   21% online penetration
•   Different usage patterns
•   FBO vs SEO
•   Facebook ar...
Users in Kenya
•   Facebook is king
•   21% online penetration
•   Different usage patterns
•   FBO vs SEO
•   Facebook ar...
Conclusions
• Africa is a fantastic opportunity
• South African technologists are way better placed than British
  imports...
Further Reading
• The Fortune at the Bottom Of the Pyramid - C K Prahalad
• http://www.mmublog.org
• http://www.cgap.org

...
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Top of the BOPs: Observations from building online business in Africa - by Stefan Magdalinski

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  • tomorrow is the anniversary of our launch!
  • like the early days of the web in the UK, which was also an emerging market - first just geeks, then geeks and young people, then geeks and young people and old people, and then 'everyone except my customers' - so many organisations were left scrambling behind their audiences.
  • was in Mombasa the day SEACOM went live. BBC introduced the report with some girls singing a traditional song, and I remember thinking "the sound of Mombasa is RnB and Hip Hop, like the rest of the world"
    but this guy
  • Kenyan market much more developed than I expected (remember, based on BBC vision of Africa as 'hunger, corruption, war, poverty')

    These images all taken on a half hour drive across Nairobi
  • btw, I think that's unlimited, unshaped broadband for about R150 and they had it before South Africa did
  • If HP are engaging in brand-protection advertising, indicates a sophisticated market
  • Stats hard to come by, but advertising is a good indicator
    at that point Moore's law will have fulfilled Nick Negroponte's OLPC dream
    Not everyone agrees with me, but my hunch is that netbook based access is going to be way bigger than people think in Africa.

  • Scalability: (low margin, high volume) - 20 dollar phones not 600 dollar smartphones -Nokia vs Apple
    Affordability: (price - profit =cost, not cost + profit = price)
    Modern technologies (can't deliver first 2 without)
    International standards of quality, sustainability and aesthetics - BOP consumers are discerning and brand conscious
  • affordability- I only want to charge Kenyan entrepreneurs when we can demonstrate VALUE (i.e. using us makes them richer, more efficient, more competitive)
    modern tech - not a big yellow book


  • I have to tell you about M-Pesa - it's critical for Mocality, but also I just love it
    can't really talk about Kenya without it
    March 2010 numbers
    just under 50% of Kenyan adults have M-PESA (20% have bank accounts)
  • So that's not all existing GDP, reflects a large portion of economic activity that wasn't previously being counted
  • Remittances make up the bulk of M-Pesa transactions
    transparency - people trust Safaricom more than banks (which have been prone to crashes in the past)
    safer than 'under the mattress'
    Work may be intermittent and unreliable, makes managing peaks and troughs easier
    Personal income increased by 5-30%, relative to a similar non-M-PESA user
  • By being a money transfer only service avoids stricter banking regulation
  • M-PESA has turned 50% of Kenyans into e-commerce enabled consumers (although not all are transacting yet) in 3 years.
  • people in the middle of the pyramid want to get paid quickly.
    M-PESA is the substrate that makes this possible for us

  • Openness - people will try (and persevere) with anything that will help them get on
    power users - phones are their primary device, way more sophisticated than in the UK (means can build more complex apps)
    multi-modal -mix phone access with cyber access


  • surprise!
    I think that 21% number is way too low, especially in Nairobi
    People reload their inboxes to use it like an IM client
    Any site launching strategy in Africa needs to consider FBO as well as SEO


  • mmublog and CGAP - largely focussed on Mobile Money but lots of great research and analysis on developing markets
  • Top of the BOPs: Observations from building online business in Africa - by Stefan Magdalinski

    1. 1. Top of The BOPs - Observations from doing online business in Africa By Stefan Magdalinski @smagdali stefan@mocality.com
    2. 2. What am I doing here? • Mocality is a mobile (J2Me, WAP, iPhone, Web) Mobile Business Directory for sub-Saharan Africa • As well as listings, we provide additional tools and services for entrepreneurs • based in Cape Town, offices in Nairobi
    3. 3. What am I doing here? • Hunger, corruption, war, poverty? • Like the early days of the web in Europe • Arrival of SEACOM et al provides fantastic opportunity
    4. 4. Opportunity "The arrival of SEACOM is as important a development for my generation as independence was for our parents" - Tony Ndungu, September 2009
    5. 5. Internet in Kenya
    6. 6. What's different about the Kenyan market?
    7. 7. What's different about the Kenyan market?
    8. 8. What's different about the Kenyan market?
    9. 9. PC penetration is growing rapidly • 250 dollar netbooks with interest free credit and a subsidised dongle • sub-100 dollars within 2 years? • competitive with the top end of the phone market? [get stats]
    10. 10. Theory at the bottom of the pyramid • C K Prahalad (1941-2010) • The bottom 4 billion is actually a huge consumer market • engaging in trade increases wealth here • More discerning, brand aware, not less • but needs products tailored to its economics Copyright (cc-by-sa) © World Economic Forum (www.weforum.org/ Photo Eric Miller emiller@iafrica.com)
    11. 11. 4 characteristics of successful BOP businesses • Scalability • New price/performance envelope • Modern technologies • International standards of quality, sustainability and aesthetics
    12. 12. Mocality at the BOP • Scalability - uses technology to both acquire and distribute listings • Affordability - basic services free now, paid services later – reaches into the semi-formal and informal sectors, businesses that couldn't afford older forms of advertising • Modern technologies. • International standards: compliant code, simple clean design, transparent model. • targetting the middle of the pyramid
    13. 13. M-PESA • send cash via SMS • launched April 2007 • 9.5 million users • 18,000 Agents • 370 million USD/month (50% y/y growth) stats: http://tinyurl.com/32qwsps
    14. 14. M-PESA 4.4 billion US dollars transferred (annualised)
    15. 15. M-PESA 4.4 billion US dollars transferred (annualised) 14% of 2009 GDP (estimated)
    16. 16. Why is mobile banking important at the BOP? • Productivity - previously remittances to the rural areas were taken by hand • Transparency • Safety • Regularises income, protects from shocks • 'Rainy day' or investment saving becomes easier
    17. 17. Using M-Pesa for savings • 19% of users use M-PESA to store value • 30%+ in Kibera • still worthwhile even though M-PESA doesn't pay interest
    18. 18. M-PESA and e-commerce • Spending – Kalahari.net – Bill payments (electricity, water, 70 others) – taxis, airtime, ATM withdrawals etc etc – school fees – sports betting • Earning – salaries – txtEagle – Mocality
    19. 19. Mocality and M-PESA • Using M-PESA to pay people in Nairobi to crowdsource business listings. • Launched on 3rd May • Anyone with a WAP-enabled phone can start earning immediately • multi-phase commit - checks and balances to prevent spamming and fraud • payments daily as soon as an agent reaches ~R100
    20. 20. Users in Kenya • Open-minded • Mobile power users • Multi-modal access, always online
    21. 21. Users in Kenya • Facebook is king • 21% online penetration • Different usage patterns • FBO vs SEO • Facebook aren't driving this November 2009 - May 2010
    22. 22. Users in Kenya • Facebook is king • 21% online penetration • Different usage patterns • FBO vs SEO • Facebook aren't driving this November 2009 - May 2010
    23. 23. Conclusions • Africa is a fantastic opportunity • South African technologists are way better placed than British imports to capitalise on it • Spend more time looking at the opportunities at home and next door than looking to London and San Francisco
    24. 24. Further Reading • The Fortune at the Bottom Of the Pyramid - C K Prahalad • http://www.mmublog.org • http://www.cgap.org stefan@mocality.com @smagdali
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