Nigerian online content and services begins to make inroads despite the lack of affordable, reliable broadband

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Nigerian bandwidth is improving but ever so slowly. There is no sign of a broadband strategy to power this process forward. However, despite this unpromising soil for growth, there are a number of interesting start-ups in the online content and services space that are beginning to establish themselves. Russell Southwood tries to read the tea leaves in a country where data is hard to come by.

At STM1 level, international bandwidth is now down to US$225-250 per meg and will continue to drop once WACS and ACE become operational. There also some signs that up-times are improving on national routes, particularly as carriers fight it out to deliver international bandwidth from Glo and Main One.

Slow improvements on the data access front

However one operator who buys on this route says that carriers still only achieve around 95% up-time. Nigeria has three big cities where the Internet needs to establish a critical mass – Lagos, Abuja and Port Harcourt – which is which is why performance on routes like these is critical. Regular use will not become a fact of life if the service is not reliable to the customer.

The key barrier now is the high cost of delivering this bandwidth at a wholesale level. One operator told us that wholesale capacity delivered in Lagos cost US$500 against US$2,000 in due to high national backbone charges and the same story came back from a range of different people. There are five carriers on this route but magically they all seem to offer broadly similar rates.

Among others, Glo has bought down retail customer data prices by 50% over past year. Prices will continue to go down as volumes rise. One operator reported a 60-75% jump in data use and another told us that there had been a five fold increase in data requirements for a well-known smartphone. According to Main One, the University of Nigeria had bought a 45 meg connection and is already bursting out of it. But as one interviewee told us:”Internet is still a relatively expensive experience.”

The use of smartphones and feature phones continues to rise. One of the larger mobile operators already has 60% of its subscribers on S40/Java devices. Smartphones are no more than 10% but this is a small percentage of a huge number of subscribers.

60% of Glo’s 17 m  active and non-active users have S40/Java devices. Smartphones are no more than 10% and many are bought in the grey market. Another large mobile operator says it 25% of its subscribers on feature phones. Banky Ojutalayo, Executive Director, Starfish Mobile pointed out that:”People continuously change phones, maybe 2-3 times in 12 months for reasons of fashion and theft.” No right-minded middle class Nigerian has less than 2-3 phones.

Tablets? There are probably tens of thousands out there. In June of this year, I saw no tablets in a weeks interviewing in the tech community. This time I saw a much larger number. News channel Channels TV is doing an iPad app which will be launched shortly. But one person reported frustration at the bandwidth not being good enough to download Blackberry apps.

Local access delivery continues to be a weak spot. However, one operator is planning to roll out near ubiquitous Wi-Fi coverage in key urban centres in the next 12 months. Glo is testing LTE and waiting for spectrum to be allocated and MTN is provisioning its network in readiness for LTE.

Local access is still mainly through wireless: on 3G (which is much better than it was bit still not great) and Wi-Fi (which is again better but not really yet delivering You Tube streaming levels everywhere). You can get seamless You Tube streaming on parts of Victoria Island (VI) but not really elsewhere. And as Nigerians will be the first to tell you, VI is not Nigeria.

Able to stream video on VI but less well elsewhere. Afam Edozie, FiCres Capital, an investor in WiMAX provider Swift said: “The bottleneck is the last mile. Rolling out infrastructure (at this level) is challenging”.

Someone who attended a meeting with mobile operators in January this year says that with one exception, they all failed to spot the coming importance of data. There’s a mindset issue. In one of our conversations, the interviewee was at pains to point out that there were literacy problems that constrained data use. But it emerged that 70-80% of its subscribers used SMS.

Despite a steady trickle of stories in local paper Business saying that generating capacity was going up and service delivery getting better in Lagos, I met few people who few people who found that this had happened either in their business or at home. Getting regular energy is a key issue for an economy as large as this and the potential savings are enormous. One interviewee said he paid US$200 a month to the electricity company and US$1,000 in generator costs at home and US$2,000 a month on generator costs in his home.

Despite these difficulties, a much larger “critical mass” of Internet use is beginning to take hold and new content and services start-ups are beginning to take advantage of this new-found audience.

Jobberman begins to change how the jobs market

Jobs site Jobberman started in 2009 when the founders were still in College. As Ayodeji Adewunmi tells it:“It didn’t require much capital and we knew we had the technical skills to develop it. We knew the unemployment situation in Nigeria was particularly high amongst young people aged 25-45. We wanted a better user experience and to help people better their chances.”

People use the site not only to get new jobs but those in work use it to benchmark their salaries and take the opportunity to see whether they can get jobs outside their immediate experience.

And the business model? It makes money from the employer side as they pay a fee to post a job usually for 30 days and it is free for the job seeker. There are 1,800 jobs on the site at any one time that are live across all sectors and specialisations, both entry level and mid-career plus a couple of C level jobs. They don’t yet do blue collar jobs. Applicants can put their CVs on the site and when they apply, the company in question gets your CV. It can also do some basic filtering to cut down on unsuitable applicants.

There are currently 50,000 unique views a day, both from inside and outside but with 95% coming from inside the country. It is currently number 18 in the ratings.

And competitors? According to Adewunmi:” There are some newspapers and a couple of other job sites like Careers Nigeria who also do recruitment. We don’t do recruitment.” In our view, it will take advertising revenues from print media and the biggest of these is Tuesday’s copy of local paper, The Guardian. Its current print circulation is 50,000. Number of readers per copy? Unknown. However, 2-3 million people get news online in Nigeria so it probably has the platform to fight back.

Jobberman also has a mobile site which gets 60-65% of the views total. The more entry level job seekers use a mobile phone more than those already with jobs who browse using a PC in the office.

What was the attitude to online when it started:”When we started, it was hell but now a lot of employees now advertise both in a paper and Jobberman.” It is not yet breaking even but believes that it will do so in the not too distant future.

Spinlet – an iTunes for Africa?

Spinlet can best be described as an “i-tunes” for Africa optimized for the large base of mobile users on the continent. Nigerian investment company Verrod Capital met the Finnish developers of the technology Spinlet and bought into the company. Music distribution doesn’t really exist in Nigeria except through the pirate sellers.

(Waiting in the departure lounge for a flight to Abuja, one of the stall-holders was putting piles of pirated VCDs in front of people, trying to encourage them to buy. A well-dressed European business man declined politely pointing out they were all pirated and that he was in the business of protecting IP. There were no shortage of Nigerian buyers.)

In terms of handset manufacturers Spinlet has started with Nokia so it has had to get the platform to work on Windows. Also it has an office in San Francisco doing Blackberry and Android platforms. The platform can also work with basic Java phones.

It wants to sell Nigerian music to the rest of Africa and African music from every country across their home borders. You will be able to buy per song for something like US33-35 cents and by album for which they don’t want to go above US$5. They are doing deals with labels right now and want to have a million songs to sell. Music rights are general sold for South Africa and the rest  of Sub-Saharan Africa.

Marketing will be the key to whether it is successful and it has ambitious plans.  It is doing a concert on 19 November where it will bring out a Jamaican artist popular in Africa called Gyptian who will do a collaboration with a local Nigerian artist Ice Prince. It will be popular because there is an audience for reggae/dancehall in many African countries. It will go out on Channel O, MTV Base and Trace with product tie-ins on Spinlet. There will be 12 of these musical collaborations, with the main ones in Nigeria, South Africa, Kenya and Ghana. Music tracks exclusive to Spinlet will come from these collaborations.

According to Eric Idiahi of Verrod Capital Management:“We want to develop the music industry and create wealth for our artists. Our software has a DRM that can help curb piracy.” Their software will also allow musicians to upload their CDs on to the platform. Artists already with a strong fan base on Facebook or Twitter can push them over to Spinlet to buy their music directly.

‘We believe there are 8 million smartphone users (in Nigeria) using VAS services and would like to get 10% of that,” says Idiahi. It wWill break even with the hundreds of thousands. Because it will be primarily used on a mobile phone rather than an iTunes browser on PC or laptop, the service will keep you updated with new tracks to buy. Its soft launch in Nigeria is on 19 November and this will be followed by a later launch in South Africa.

The transition from SMS to online

As content transitions from SMS on mobile to online, the more thoughtful SMS aggregators are looking at what’s next. Starfish Mobile will launch an app-based mobile TV solution to stream content over 3G, which connects to central server over proprietary connection.  It is  building an internet content portfolio where you send an SMS to get online on its portal. Banky Ojutalayo, Executive Director, Starfish Mobile:“Payment will still be there and we’ll be fusing the SMS and Internet”. Other aggregators were more skeptical claiming that SMS would remain the platform of choice. The truth ids probably that the two will operate alongside each other as the handset devices change and habits change with them.

Besides these developments there are a slew of sites attracting significant traffic including: (a travel site offering air tickets and hotel offers like Expedia); Bella Naija (with pictures of Genevieve Nnaji and Africa’s Richest Man); directory sites like VConnect and Mocality and classified sites like Dealfish. In terms of everyday life, there is a company providing online vehicle registration in 19 states and 70-80% of vehicle registrations are now online.

Nollywood Love/Iroko Partners has only 35,000 users in Nigeria but millions elsewhere in the world. But it has huge numbers of search enquiries from mobile users not able to access their material effectively.

Payment services being put in place but no critical mass yet

One of the keys to successful online service use is payment and whilst things are beginning to gear up, they have not ye reached critical mass. Mitchell Elegbe, CEO, Interswitch says that there are three times as many payments online as through POS (Point of Sale) but this is to compare two relatively little used payment methods. That said, Interswitch wants to add 40,000 POS a year. It will soon also be able to offer a payment code to the unbanked so that they can take cash out of ATMs.

Local airline Aero Contractors apparently makes 60-70% of all its ticket sales online: anyone who has stood in a Nigerian queue waiting for service will know why.

The Central Bank of Nigeria has a cashless society initiative, insisting that banks have record of all transactions and that they charge for cash collections from companies to reflect the real costs. There are high levels of SMS from banks where customers are getting informed of transactions made (2-4 million daily through one operator) and this will increase.

In terms of m-payment, Nigeria has chosen to licence companies working with banks and not proprietary operator systems. One of these m-payment companies is Paga which has partnered with 6 banks. It has a range of channels including: SMS, online, agents, mobile apps, IVR and USSD. It wants to have 30,000 agents nationwide by 2015 and believes that 40% of mobile subscribers will be using m-payments by this date. It has signed an exclusive deal with DStv to take payment from its subscribers.

All of the above might seem faintly crazy in a week in which Naspers-owned MIH closed down its Kalahari e-commerce sites in Kenya and Nigeria. But the logic of where the market is going in Nigeria is clear and it remains a case of when not if.

On the Balancing Act You Tube Channel this week:

Nic Rudnick, CEO, Liquid Telecom on its Southern African Fibre Network

Future mobile content? Lippe Oosterhof, CEO, Livestation on live streaming for African news broadcasters and its mobile platform

Henk Kleynhans, Chair of WAPA on TV White Spaces proposals in South Africa

Steve Song, CEO, Village Telco
on the TV White Spaces Workshop

Richard Bell, CEO, Wananchi Group in Kenya on international fibre connectivity, local TV content for its Zuku bouquet and financing its vision:

Riyaz Bachani, CTO, Wananchi on its Wazi hot-spots partnership with Google

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