The golden thread through nearly all of the current wave of African start-up investment is that it's tech-enabled. Therefore the key question - particularly for B2C operators is how many customers are really out there. Author of a new report on this topic Russell Southwood describes the areas it looks at and gives a peek at some of its findings.
The report's overview covers the following across all of Sub-Saharan Africa: the Main Platforms Used and Advertising revenues; Social Media Platforms; Voice and Messaging Services; Media Platforms; Audio-Visual Service; Music Services; Payment and e-commerce Services; and Other Digital Services (including online games, sharing sites; taxi hailing services, classifieds; and e-publishing). There are individual country profiles for the 11 leading digital markets: Nigeria, South Africa, Kenya, Tanzania, Ghana, Ethiopia, Cote d'Ivoire, Angola, Senegal, Cameroon and Uganda.
This report provides price breakdowns for all 11 focus countries covering games, music streaming services and Video-on-Demand (VoD) platforms and compares the daily cost of each service for daily, weekly and monthly use. The report seeks to tackle three key questions:
- How many data subscribers are actually using data and at what level?
- What they're doing in terms of online behavior (content and service preferences)?
- How many people are paying what for online products?
With over 1,000 data points, many from completely new sources, it allows all those involved in the digital ecosystem - whether mobile operators, ISPs, media and broadcast companies, brands and advertising companies, investors, banks or digital content and service companies - to understand overall patterns of behavior across the continent and in 11 of the largest digital markets.
Daily internet use in the top 11 digital markets in Sub-Saharan Africa has grown considerably in the last five years but is still 20-30% behind levels found in Europe and the USA. Likewise, using e-commerce (or buying goods online) has also increased significantly but is a great deal further behind in Sub-Saharan Africa than in other more comparable markets like India, where 28% have used e-commerce in the last 12 months. To what extent is digital behavior in Sub-Saharan becoming both more frequent and more complex? This report brings a wealth of new data to try and answer this question.
There are no accurate statistics for internet users in Africa: the large numbers often quoted are not a helpful guide for anyone trying to work out the number of online users in key markets. The number of internet users is often limited by issues of language and literacy which are clearly detailed in the report.
A key metric for tracking online behavior in Sub-Saharan Africa is identifying the number of active data users. A great deal of data subscribers use either little or no data. The report section uses operator data to spell out the following: what level of subscribers are actually using defined amounts of data; how many own smartphones; what proportion use smartphones for data activities; the average amount of data that subscribers are using; handset affordability; the use of PCs and tablets; and the number of broadband and Fibre-To-The-Home (FTTH) subscribers. The report compares the average country price per 500 MB for the 11 focus countries to prices found in Sri Lanka, the UK and France and looking at these prices as a percentage of daily GDP. It concludes by comparing monthly average data use with the amount and cost of data for a range of digital activities.
Using a small number of available metrics, the report looks at how potential service operators and investors can define more carefully the potential number of online users for a particular service in a given country. It looks at how app installs and local visit data can be used to define particular markets, both for pay-for and free-at-the-point-of-delivery services. The methodology is illustrated using data for three countries: Nigeria (anglophone), Cote d'Ivoire (francophone), and Angola (lusophone).
This section looks at how the metrics used in the sections above and other data can be used to make growth projections for online behavior in Sub-Saharan Africa. It looks at the market at its widest (active mobile data subscribers) and its narrowest (FTTH subscribers) points. At its widest point, it uses app installs and local views to show how these might translate into online use patterns. The report draws out the implications of the patterns of growth that might happen and offers conclusions on how this might affect Africa's digital markets.
A big takeaway for start-ups and investors? App download figures given by most start-ups are meaningless. The active users are a much smaller proportion of that number. So for example, a start-up I spoke to recently had just over 30% active users from a pretty large base of app downloads. Now imagine how many active users you get out of 10,000 downloads.
The other impact of this relatively low conversion rate is inevitably the high cost of customer acquisition. Put simply, you have to recruit a million people to download the app in order to get 200,000-300,000 people who will actually use it on a regular basis.
Balancing Act has just published a 148 pp report called Sub-Saharan Africa's Digital Landscape and its Top 11 Markets - data prices, smartphones, digital content and services and e-commerce. After four year's research, it's my analysis of how big Sub-Saharan Africa's online activity really is; who's actually paying for anything; how they're paying for it; and what they're doing in terms of online behavior (both content and services). It has over a thousand data points in it, many from completely new sources. I think you and your colleagues will find it very interesting and useful. The report is now published and the price is GBP1,650.
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