Start lean and watch your expenses carefully – Interview with Simdul Shagaya on Nigerian Internet Market
Simdul Shagaya currently the MD, E-motion advertising based in Abuja, Nigeria and also runs various tech companies. He is a veteran web business man in Nigeria, he gained experience working with an IT company that served Fortune 500 companies, and he also worked with companies like Google, Real Network and Rand Merchant bank, South Africa. If you were at the last Barcamp Nigeria, you would have experienced, first hand his dept of knowledge about technology. He shares his experience and perspective with us about the Internet Market in Nigeria and how technopreneurs can get it right in the Country. He knows what he’s talking about, he’s been there, he has built stuff, and he has encountered both success and failure. Enjoy as you read through his mind-blowing revelations.
WTN: Can you give a brief overview of the Nigerian internet market in your of perspective?
Sim: The past few years have been marked by the growth of mobile telephony. We are now entering a period of explosion in mobile data (or more specifically, mobile broadband) services. In aggregate, the economic value of this new chapter will be even greater than the mobile telephony revolution but the mobile and internet service will have a lower share of the total revenues. Innovative application providers will make staggering amounts of wealth and create unprecedented amounts of value and may represent as much as 10% on entire industry revenues by 2015.
WTN: Can you brief us about your journey so far in the industry, how has it been?
Sim: In industry terms, I suppose I’m a bit of a veteran. My first job in information technology, in 1999, was with a company called MicroStrategy that mined massive amounts of data for Fortune 500 companies. I later spent some time with Real Networks (who basically invented streaming audio and video) and Google Inc. This was punctuated by some time with Rand Merchant Bank putting money in mobile operators and other infrastructure in Africa. I quickly learnt that banking was not for me. My first internet startup was in 2005 – inollywood.com which sought to distribute Nigerian movies over the internet. It failed for a number of reasons – probably most notably because of my inability to, at the time, accurately read the local context in terms of broadband availability, licensing and securing movies rights, billing, etc. We got as far as licensing a valuable catalogue of content from NTA including New Masquerade, Village Headmaster, Samanja and other Nigerian classic. This classic content, interestingly, did quite well but, at the end, the timing was not right. I certainly hope my sense of timing has improved since then.
WTN: The rate of clone startups (without unique local concept) we churn out in the country, what’s your view about it?
Sim: Cloning is a bonafide form of innovation. There is nothing really wrong with it in principle but local developers must be careful in certain respects. For example, some sites that are cloned are intrinsically global and to create them for a purely Nigerian or African market may not be viable. On the other hand, cloning without taking into account local nuances is just as likely to fail.
WTN: As an experienced person in this industry, what do you think is our major challenge in the country?
Sim: For entrepreneurs, the challenges are several folds. On an industry wide basis, one of the most daunting challenges is a dearth in technical skill. Also, our culture does not encourage risk taking. This is probably a consequence of a nation where most look to government in a paternalistic manner and youth has historically not been given adequate regard. On a micro level, challenges of monetization still exist on both the fronts of advertising and online commerce. Ad agencies and big brands have been slow to recognize the internet as an effective channel for advertising and this has stymied the flow of revenue to application developers. On the commerce side, paypal and other forms of online payments are simply not available in Nigeria. This may soon change however with the advent of mobile payments and micropayment schemes like Facebook Credits. In combination, these will allow for capital to flow into the industry in the form of revenues.
WTN: How do you think startups can package their ideas to attract funding?
Sim: Not to sound fatalistic but the availability of structured funding channels for web startups in Nigeria is basically zero right now. Look for angel investors – friends and family. These are people that obviously must believe in you. Start lean and watch your expenses carefully. Prioritize your features and roll them out as you get more funds in the form of either revenues or investor capital.
WTN: Global competitiveness can Nigerian startups reach that level?
Sim: Most certainly, but it will take a lot of hard work, creativity, time and capital. We have a potentially massive market and one that will be, by definition, mobile. This creates huge opportunities that cannot be ignored.
Sim: Lovebase is doing well. We can confidently say that it is the leading dating social network in West Africa. All revenues are derived from subscriptions as we made a choice not serve advertising on the site. It is profitable but not cash flow positive. This means that all profits are reinvested into the business and probably will continue to be for the foreseeable future. Gbogbo is a labor of love but has gained quite a reputation for being an effective way for Nigerians to buy and sell things and find local services.
Sim: The name change happened for several reasons. One was to have the brand appeal to a greater population of Nigerians in terms of ethnicity and age. As you know, Alarena means matchmaker in Yoruba. The brand now addresses an ethnically wider and younger crowd that may be looking for casual relationships in addition to those seeking marriage.
WTN: Still on lovebase.com, I discovered it’s got premium user package, what is the acceptance in the market and particularly the percentage of paid to free members?
Sim: Premium membership is a bit of a necessary evil. It is a way of establishing seriousness of romantic intent – meaning to communicate, you must first pay. If we don’t do this, then our members will be sent massive amounts of messages from unserious people.
Frankly we have been working to find other ways to make the site even more open while improving revenues. This sounds like a contradiction but it isn’t. We believe we may have found a way for people to communicate for “free” while still establishing seriousness of romantic intent. As mentioned previously, we have a healthy conversion rate and people actually go to GT Bank and make deposits to avail themselves of our premium services. We expect that revenues will jump substantially with the advent of mobile payments.
WTN: I must tell you this sir, we are following your footsteps, what new stuff should we expect from you soonest?
Sim: As you know, I co-founded an outdoor advertising business – E-Motion Advertising - that is doing quite well. E-Motion will be doing some pretty exciting things in the internet space over the next few months that I am not at liberty to speak of now but represents my most challenging (and gratifying) project so far.
WTN: Talking about the future of internet business in Nigeria, where do you see the industry in the next 3-5years?
Sim: Nigeria has a huge population and that will drive demand for online services that will then push out into larger Africa. This means Nigeria will probably be the nexus for many African services along with cities like Cape Town. Funding for developers will start to emerge in terms of capital investments (from large media companies like the mobile operators and other traditional media companies (like Naspers in South Africa which is making bold internet-related investments in emerging markets)). The internet will be almost purely mobile in nature in Nigeria. The next wave of innovation will be disruptive in its fullest sense. Incumbents like Microsoft and possibly Nokia will stall and possibly decline. New entrants like Facebook, HTC, Google/Android will take their place. Mobile internet will become an indispensible part of our lives. We will not understand how we lived without it. Huge fortunes will be made (and lost) during this disruption and Nigeria is not exception. Industries such as print news, financial services and Radio/TV will be massively disrupted.
WTN: In conclusion, what do you have for budding technopreneurs in the country?
Sim: Work hard, retain a childlike curiosity of the world for as long as you possibly can, and look to solve real problems of which there are many.
WTN: Thank you very much for taking time to talk to us.
Sim: You are Welcome.