It All Began In Africa

I’ve just returned from my second trip to South Africa, but my first one for business – to attend in Tech4Africa in Johannesburg.

South Africa has proved to be a very promising territory for us and particularly our White Label Dating partners – in fact, we’re now generating around 10% of our revenues from South Africa which is pretty impressive given we’ve only been running out there for the past two years.

Although we’ve heavily researched the country, there’s nothing like the knowledge you gain from being on the ground and speaking with people who live and breathe the web every day.

So we decided to attend Tech4Africa to learn more about the web and opportunities for development in African countries, particularly South Africa. I also took the opportunity to meet some of our South African based partners. Whilst our partners can run sites in any country we support, it’s particularly interesting to learn how the strategy of in-territory partners differs from partners based in the UK running sites in South Africa.

In particular, it seems that Facebook is a very effective tool for our South African partners who can use the targetting tools at http://www.facebook.com/advertising/ to target potential customers by location, age, interests and crucially relationship status. Much more targetted than Google PPC!!

We learnt a lot from the Tech4Africa conference content – it was great to hear the plans for new undersea cables and fibre networks going into the large cities which will surely increase web use amongst Africans. In addition, it seems there is huge mobile penetration amongst the population and this will continue to grow. New cheap smartphones are coming onto the market (the latest is an Android phone for under 1400 Rand – about £120)

So this seems like great news.

Except there’s a problem.

The government, legislation and regulation.

A constant theme in my discussion with payment providers, mobile suppliers and developers was the issue of monetising the consumer in Africa. Whilst Kenya and Nigeria both have decent web connectivity and mobile use, there remains a real problem taking money from the consumer to pay for products or services.

In South Africa the maximum you can safely charge a consumer over mobile is R3-R5 per day – any charges over R15 require double opt-in by the customer (which means around 60% drop-off). To put this in context, if we wanted to charge more than £1.30 by mobile the user would need to double-opt in, we’d lose 60% of them at this point. And when we finally do receive the money, we’d have to pay around half to the network operator. Which means, to protect margins compared with sales by credit card, we’d have to charge twice as much for mobile payments.

The maximum we can charge in a single payment, even with double opt-in is around R50 – about £4.

In addition, the new Consumer Protection Act becomes effective on 24th October 2010 and will prohibit South African companies from auto-renewing a contract when it expires, even if the customer has agreed to this auto-renewal when joining. This could be problematic for some of our South African based competitors.

Consumer protection is generally a very good thing – but it needs to be balanced with the needs to make a market commercially viable for businesses to invest and operate in. South Africa is a great country with fantastic potential, but it’s still very much a developing market and doesn’t need such extensive legislation and industry regulation red tape which will certainly inhibit growth.

We met with a number of payment providers while we were in South Africa and will be introducing additional payment methods for our South African customers in due course – the demand for online dating in South Africa is growing and our partners have already gained tremendous market share. Even so, it’s at least 5 years behind the UK so is a great time to invest and gain market share as the category grows.

I’d love to know what you think – how are you finding the South African market? Let me know in the comments section below.

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http://www.joburgdating.com Joburgdating.com

You are too right, there is great opportunity within South Afica. within all online categories, not just the dating arena.

Mobile penetration is the highest in the world, and the new cable will literally plug the continent into broadband connectivity.

Also to consider: payment providers such as paypal will play an important part of a website / service sucess, as there is still a massive hesitation to use credit cards online…

All in all, it a great opportunity, and to get in there now, with the right product and offering would be a very good thing…

Thanks for the update!

Joburgdating
http://www.2plus3.co.za Johann du Plessis

Yep the government is pretty crazy when it comes to stuff like this. We’ve been dealing with legislation limiting the economy for so many years in SA, it’s just ridiculous. SA still has the most expensive broadband (ADSL) in the world: http://tinyurl.com/3689gcg. This is due to the government firstly assisting what was until 2002 the state-owned telecoms monopoly called Telkom, and then wrapping up any new telecoms providers in so much red tape that it took them years to find a foothold. You mentioned the effect of this: mobile usage in SA is off the scale. There’s currently more people accessing the internet using mobile phones and 3G modems than people who have landlines and ADSL. This is simply due to the legislation permitting cellphone companies to operate freely and as they wish, as they should be able to do in any normal economy.

Fortunately things are changing. The cellphone companies are ceasing the opportunity and have laid so much fibre-optic cables in and between the cities that they will very soon be able to offer true broadband to anyone who wishes. In addition to this, in two years there will be something like 10 undersea cables connecting SA to the rest of the world, compared to the one cable and one satellite link we had up to a couple of months ago (Telkom basically owns both and can dictate and price it wants). The little competition provided by the first new cable has already had a MASSIVE impact on the cost of broadband, more than halving the cost of international internet access.

And I just read that online gambling is now illegal in SA: http://tinyurl.com/3ayjjg2. Not our industry, but I really feel the pain of the guys who made huge investments of setting up online poker and other gambling operations in the country.

I honestly don’t understand why our government would limit the growth of businesses like this. It’s utter madness. SA has the biggest economy in Africa (hell, Gauteng province has the biggest economy in Africa), but we are still a developing nation and any limitations the government put in place now will severely effect the long-term growth of the economy.