9 January 2017

East Africa: Ad-Supported Music Platform Mdundo Gets 1 Million Users and Has Expanded Across East Africa, Further Expansion Planned

Unlike for African VoD platforms, there was a far less frantic pace of growth for African online and mobile music platforms last year. Most of them are now trying to figure out how to create a business model that competes with pirate download sites. One of those that is making some progress is Kenya-based Mdundo. Russell Southwood spoke to its CEO Martin Nielsen about its plans.

Launched four years ago in December 2012, Mdundo has stayed standing whilst others have quit the race. The last time we talked to its CEO Martin Nielsen was three years ago (https://www.youtube.com/watch?v=KM_uUb6nDII) and much has changed since then.

Nielsen told me about the growth it's had over the last 12 months:"It's been an interesting and exciting period of growth. It's been a lot around Tanzania and Uganda. We've had tremendous growth in Tanzania and gradual growth in Uganda".

One of things that has started to happen is that artists in one country are starting to attract listeners in another: for example, Kenyan artists are getting listeners in Tanzania and vice versa:"The most exciting thing about the last 12 months has been how entering new countries has created value for our artists in both Kenya and Tanzania by expanding their fans to new countries".

"The nature of African music is very domestic. Most platforms are very country specific. There are some exceptions but generally it's hard to break through to a bigger audience. We're excited that music users are starting to consume music from across the region. They're browsing the catalogue and listening to music from other countries." Mdundo's recommendation engine helps by bringing new songs from different countries to the users' attention.

The metrics are getting better. Based on use 4-5 times a year and active in the last 30 days, it has a total of 1 million users. This breaks down as follows: 400,000 each in Kenya and Tanzania; 100,000 in Uganda; and 100,000 in Africa outside of these countries. "There have been high levels of users engagement but the financial level has not been not so good. Tanzania has had a tough year in 2016 but it will come back."

The business model is that the user gets free use and the company is advertising supported. There's a premium version without advertising but it has not really picked up users:"It's not a current focus for us but it's important to have it there. The free version is extremely attractive and very good. If it wasn't there, users would jump ship to illegal downloads services and that's still the biggest part of the market. The main purpose is to get people away from them. If we look at Google Stats and trends, some of the bigger illegal sites have been in decline. The number of legitimate music services is having an impact".

Overall it has 37,000 artists on the platform, of which 25,000 come from the three East African countries: Kenya, Tanzania and Uganda. In the next 12 months it wants to get more artists on board from Nigeria, Ghana, Mozambique, Zambia and Rwanda:" We're starting to see growth on the platform from these countries and are actively reaching out to artists there".

So what are the revenues like for artists from the platform?:"Big artists might get US$1-2,000 a year. This is small compared to ringtones but it is primarily from an audience that is a new revenue stream".

65% of its traffic comes from Google searches. This year it's going to be pushing artists across their own market:"It's important an artist can reach out to a critical mass of people. Many musicians are struggling with that. We have ideas for what we can do (about this) next year. Royalties will grow year on year. This is the beginning".

He's been seeing much less competition from other music platforms in 2016:"2016 has been very quiet in terms of new platforms. There's lots of services trying to figure out how to succeed. They had expected more people to pay. There still challenges with payment... bit of shame. In 2017 we will see new services pushing out again. The question is how do we make sure the market matures? The more, the merrier, especially those with a Pan African view".

The growth of digital advertising in Africa is crucial to the business:"It's going up but it's still a bit uphill. It's not very consistent. People are still buying TV, billboards and radio. Digital is still very premature. It's mainly international brands who have guidelines to spend a percentage on digital. It is changing. You ask Google, Facebook and Twitter and I think they will say that they have seen the change this year. You can reach a lot of people and it is very price competitive".

It launched an Android app in 2016 and 20% of all users use it instead of the website:"You need to have enough storage on your phone. The upside is very visible for us. You have a lot more engagement and control. You can recommend songs and we've seen it working. Also on the ad side, we can continuously show ads every time they come in and this increases ad revenues and this has been a change for us this year".

So how far is the business from breakeven?:"We're far from the breakeven point and need continuing support from investors. We've raised capital every year since we started. We expected it to pick up faster on the revenue side. We're missing one or two pieces of the puzzle but we have high hopes for next year".

Part of these high hopes are for its expansion plans:"Mdundo has always looked at the whole of Africa. We want to see more countries like Tanzania and Uganda. We've tried to shape some partnerships in other countries and thesewill be our next steps. The first job is to reach out to the top 100-200 artists, start seeing some users and this will help us see whether to go there. New countries bring new ads from Google Ads and other ad platforms."

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