Dr KF Lai (South Africa) - The Forces Driving Mobile Commerce

Dr KF Lai, CEO of mobile ad network BuzzCity, discusses the growth of the mobile web in South Africa, and the array of opportunities in mobile commerce that accompany this expansion.

South Africa is one of the most advanced mobile advertising markets in the world.  It served over 1.1 billion ads in the fourth quarter of 2011, to an audience of just under 10 million unique users each month, thereby joining the ‘Billion Club’ along with nine other countries serving at least one billion ads a quarter.

What’s changing?

In the middle of 2011, we saw a price war erupt in South Africa, initiated by mobile operator 8ta. The cost of access settled at a lower price point, and that disruption affected all carriers.

Cheaper data led to an increase in internet traffic across the board, and brought entirely new users to the fold. Meanwhile, cheaper phones, with better usability and bigger screens have steadily delivered a better and more rewarding web experience to mobile users.

Of particular note is the widespread availability of cheap ‘white box’ handsets (both smartphones and feature phones), available for a fraction of the cost of their branded equivalents.

Add to this the final ingredient of a growing array of locally relevant mobile web content and services, and you get a very vibrant mobile web ecosystem.

Handsets, demographics

Smartphone growth has been strong and led by Blackberry, and Nokia remains the dominant handset brand overall.

New users are predominantly younger males, although female adoption continues to grow. According to our recent report there are nearly as many women as men using the mobile web in South Africa (40%).

Age demographics reveal two surprises. Firstly, while under-20s still make up a large share (28%) of mobile internet users globally, this group makes up just 13% of the South African market.

Secondly, mature users are the fastest growing demographic in South Africa, now making up over 20%  of users. That means that South Africa joins France, Germany, UK and the US – all countries with over 20% of users above 35 years old.

And here’s the key point: the influence of these more mature users is disproportionately high when mobile purchases are made. Over-35s made 19% of travel-related purchases, 23% of grocery purchases and 21% of household utility payments globally in the past six months.

A step in the right direction

So, while 28% of South Africans are already using their mobile to shop, there are still plenty of opportunities. The highest m-commerce growth potential in South Africa lies in gadgets, physical media (books, music and movies for delivery) and travel – based on existing behaviour and intent to purchase.

Already, 20% of South Africans make some form of transaction on their phones (from checking a balance, to making a transfer, to buying airtime) at least once a day.

Where next?

We’ve already seen high levels of consumer interest in mobile commerce when it comes to buying virtual goods such as ringtones, but in a relatively short space of time there has been growing interest in the range of physical goods and real-world services that people are happy to buy with their phones.

The biggest barrier to mainstream mobile commerce, however, is the lack of awareness of the tools and services already available, with 35% of users unaware of the basic mobile transactions available. Add to this the fact that of those who are aware of the commercial platforms, 21% find the services “too complicated”, and 27% are worried about security.

The data proves that businesses need to begin by educating consumers about the services already available, and reassuring them from a security perspective, so that they feel comfortable enough to take advantage of the explosion in mobile commerce, leading to increased sales and revenue for advertisers.

By Dr KF Lai, CEO, BuzzCity