Africa’s Platforms become the new channels and jostle to become the platform of choice

11 November 2016

Top Story

The shift to digital means that there are now several different platforms competing for killer services and content. Among them is Opera that announced this week that it has 100 million users in Africa. Russell Southwood looks at the competition between platforms and what they will have to do to win.

One part of the shift to digital is that there are now different platforms that services and content need to use. A platform can be an OS on a smartphone (Android and iOS being the main ones in Africa), an Internet platform like Facebook, What’s App or Opera or the platform mobile operators have with their clunky, largely analogue, content distribution (through SMS) and payment systems.

Anyone wanting to get to market has to deal with these platforms or risk not getting to customers. These platforms are either supported by advertising revenues or are paid for by users. In some countries like Kenya and Senegal, the mobile operators have a strong, almost monopoly gateway position that is slowing down the development of the market for reasons I’ll go into below.

The platforms have the customers so although Twitter is very popular in some African countries, people tend to use Facebook and What’s App on a mass basis. In Kenya, Facebook has become almost an e-commerce platform as people buy and sell off of it. What’s App groups are the communications platform of choice for a large number of families.

Platforms of this kind started out by doing a single thing well. For example, You Tube does video. But in an effort to compete and get higher levels of use (and thus advertising revenues), every platform wants to add the functionalities of its competition. So Twitter tried to do video with Vine and Facebook offers video to its users. In addition, everyone wants to be able to do payments through their platform. Uber starts with taxi services and goes into delivering food through UberEats.

Almost without exception, all of these platforms are international and largely American. Elsewhere in the world there have been regional social media platforms (often in vernacular languages) that compete but with Africa’s tower of babel language distribution, this has not happened. The death of Mxit and the uncertain survival of 2Go, leaves only Lithuanian-owned Eskimi as the outlier in this argument.

Alongside these Over-The-Top (OTT) platforms are the platforms offered by the mobile operators themselves. They have scrabbled to make sense of a world in which other people run profitable services on their platform and they don’t take a cut. Someone recently told me of the case of a large online services company where the mobile operator had tried to charge them for running their service on the Internet. They have taken elaborate precautions to disguise their data activities.

Kenya is a good case to look at in terms of how the mobile platform measures up against all these competing platforms. As we have already noted, Facebook and What’s App are firmly entrenched. More strikingly, it took Uber only 12 months to get to 100,000 users with a business model that does not involve it in having to be part of the Safaricom platform. The mobile operator’s VC fund Spark has invested in Little Cab but the initiative so far is with Uber.

Nevertheless, Safaricom has a near monopoly position in relation to access to its customers and in terms of the mPesa payment platform. The problem with this is that anyone who wants access to the platform has to sit with Safaricom’s product and services staff and share what they want to do.

Not surprisingly, there are many tales of ideas ending up as Safaricom services: there is almost no way of knowing how true any of this is. In addition, Safaricom has used some surprisingly sharp elbows to try and protect its monopoly: look at its behavior in relation to Equitel and other smaller start-ups in the m-money space. It doesn’t just provide the platform, it actively gate keeps who can do what.                

But it also stands as a barrier to innovation in the market because this “we need to do it” approach to services competes with external operators taking their chances and succeeding or failing. To give its CEO Bob Collymore his due, he has been more honest than most mobile company CEOs about the limitations of the company as a platform for launching innovative services.

As he said at an iHub event in May this year:“On a scale of one to ten for innovation, I would give us a two,” said Collymore, much to the surprise of the audience. “We’ve only really done three really innovative things – one is obviously M-Pesa, the other is M-Shwari [that allows customers to access loans on their mobile accounts]. The third is basically tinkering with small products here and there, like advances on mobile airtime.”

M-Pesa was developed by a company in the UK with DFID funding and was launched by Safaricom. Advances on airtime is a service offered by many providers. Safaricom’s only role is really in picking winners and losers at this level.

M-Pesa was launched as a simple product to make mainstream the existing practice of people sending each other airtime as a way of transferring money. It was never meant to be something that became the main payment transfer system for a whole country: 43% of Kenya’s GDP goes through it.

Speaking to a US event in October, Bob Colleymore said that it needs to transform M-Pesa from a service’s “clumsy” technology into something more efficient, innovative, and collaborative. He said it was “far from elegant” when compared to other products. He acknowledged Safaricom was “a little bit more open than we used to be” when it comes to developers plugging into their system, and said he hoped to make M-Pesa into a platform for innovation.

Here lies the nub of the argument. Safaricom needs to open up its API’s so that innovators can build services that will intensify and deepen what you can do in payment terms. Many of the online content players (for example, those doing music) I have spoken to point out that the payment process is by no means simple for the user and that the advantageous amount the mobile operators take through carrier billing, robs them of their margins.

By contrast, competitor Equity Bank runs its own platform Equitel. According to its CEO Dr. Mwangi, developers will take the APIs for free and will not be charged any money for doing business with the APIs until they hit the KES100million mark and even then, they will only be required to remit only 5 percent of the revenue generated. He said the details of the APIs can be accessed from the bank’s IT section.

These arguments are not just about mobile operators’ platforms although inevitably that is where there are currently the most barriers in the market. Anyone who has done business with the OTT players in Africa knows how hard it is to have a conversation with someone. Most of them do not have staff on the continent and some seem to actively hide themselves away.

But the bigger lesson is that the mobile operator platforms must be places that foster new services and content providers. Whatever the shortcomings of mPesa payment platform and Safaricom’s attitude to those who have built services on it, there has developed a payments ecosystem that marks out Kenya as a leader. But for that leadership to continue, now is the moment for Safaricom to open its API’s and be the beneficiary of all the traffic that flows from that process.

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