[AfrICANN-discuss] Nigerian online content and services begins to make inroads despite the lack of affordable, reliable broadband

[Anne-Rachel Inné]

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

http://www.balancingact-africa.com/news/en/issue-no-578/top-story/nigerian-online-cont/en


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 Alexa.com 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 a live streaming and TV on
demand. Solution provided by an Indian company Apalya. It will start with
Airtel and charge somewhere between US$9.40-12.57 a month, depending on
whether data is included.  There are plentiful opportunities for
broadcasters, particularly Free-To-Air broadcasters.

It is also 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: Wakanow.com (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.
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*On the Balancing Act You Tube Channel this week:*

Nic Rudnick, CEO, Liquid Telecom <http://youtu.be/4i7RYJrCw20> on its
Southern African Fibre Network

Future mobile content? Lippe Oosterhof, CEO, Livestation
<http://youtu.be/YlERrulKGZo>on live streaming for African news broadcasters
and its mobile platform

Henk Kleynhans, Chair of WAPA
<http://www.youtube.com/watch?v=6d_77734YdE>on TV White Spaces
proposals in South Africa

Steve Song, CEO, Village Telco <http://www.youtube.com/watch?v=9S9_HMXcPeU>on
the TV White Spaces Workshop

Richard Bell, CEO, Wananchi Group
<http://www.youtube.com/watch?v=AvKlj0tDkRM>in Kenya on international fibre
connectivity, local TV content for its Zuku bouquet and financing its
vision:

Riyaz Bachani, CTO, Wananchi <http://www.youtube.com/watch?v=bVkCCCGoC80> on
its Wazi hot-spots partnership with Google

Want up-to-the-minute breaking news? Balancing Act's Twitter feed provides a
combination of breaking news for telecoms, Internet and broadcast in Africa,
direct tweets from countries visited and access to the occasional rumours
circulating. You can follow us on:
@BalancingActAfr
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