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What does Mxit's shut down mean for African startups?

Big South African social media player, Mxit has caved in under influx of global competition in the African market space. The company announced recently that it would be retiring its commercial business and become dedicated instead to supporting its eLearning program, under The Reach Trust.

Media around the continent went into frenzy with the news that Mxit might be on the brink of shutting down its operations.

“Whilst Mxit overall has seen a decline in activity and engagement over the past 18 months, the use of services offered by The Reach Trust on Mxit has been stable and in many cases show an upward trend,”  Francois Swart, outgoing CEO of Mxit said.

“After three years of extensive commercial innovation and through-the-line marketing efforts in key markets such as South Africa, Nigeria and India, the shareholders believe that essential Mxit assets can be used more meaningfully for social good in Southern Africa,” Mxit announced.

This would effectively mean the company would also shut down its commercial operations in India and Nigeria.

On his part, former chief executive officer of First National Bank (FNB), Michael Jordaan, the chairman of Mxit said on his Twitter account that Mxit had not shut down and that users can still access and download the application.

“Mxit is not shutting down. The tech transfer is a business innovation for social good @TheReachTrust,” Jordaan tweeted.

In an exclusive interview with Fin24, Jordaan had his own regrets. He explained the decrease of users on the platform was due to the popularity of WhatsApp that currently has nearly one billion users across the globe, and has concentrated its business in emerging markets.

“Reach will use key Mxit features such as the messaging service and the app publishing framework to sustain engagement with users, including more than 500 000 learners who continue to access educational apps on the platform every month,” the company said.

What went wrong?

Even though African users’ numbers for WhatsApp are not high, Statista reports that South Africa was number one for WhatsApp use globally by the end of 2014. “Overall, South Africa was ranked first with a 78% WhatsApp adoption rate,” the report said. This rate was based on total mobile web users in the country.

According to World Wide Worx, a research company in South Africa, the country had over 10 million WhatsApp users in 2014.

Mxit said it still has close to 100 million registered users globally and recorded over 17 million unique app downloads in 2014 alone. But active monthly users’ data tells a different story. In 2013, there were 7.5 million active monthly users, a number which had dropped to 1.2 million monthly active users by July 2015.

For a company that is said to be one of the first mobile messaging platforms, opportunities seemed to have slipped through Mxit’s hands. Firstly its proposition to establish itself in the feature phones era was good but the company couldn’t morph quickly enough into the smartphone era according to Leonard Kore, a research analyst for Telecoms and Media, East Africa with IDC.

“The smartphone revolution was not a blessing for Mxit as its foundations were laid in feature phones. Mxit enjoyed tremendous success during the feature phone era and when the evolution started to smart devices, the company did not adapt fast enough,” Kore told IDG Connect.

Kore said that the entry of applications such as WhatsApp, WeChat, Viber and Line on the continent thanks to the smartphone revolution, should have acted as a wakeup call for the company to shift its business focus.

Kore also adds that, distorted or unclear value proposition led to a low adoption. “Mxit went from being a premium messaging service to encompass a variety of features such as newsfeeds, public chatrooms and community engagements – compare that to the minimalistic functionalities of WhatsApp. This also confused users quite a bit.”

It is obvious that Mxit was not aggressively trying to capture the African market. Although the application was widely used in South Africa and Nigeria, there were little effort to introduce it to countries in East Africa which are now growing users of mobile chat apps such as WhatsApp and Viber.

What it means for African mobile start-ups?

It is of course not good news for local entrepreneurs if local innovations fall prey to international players. In this age of fast speed internet, many are adopting foreign applications faster than local ones.

“For some innovations, especially on the app ecosystem, to truly succeed and go mainstream it has go beyond a country`s borders, the microcosmic nature of some of Africa`s solutions limits their own potential for growth,” Kore said.

“This is because in some African countries mobile penetration is already low and consequently smartphone penetration is lower meaning they are dealing with small user base. Innovations that target regions e.g., Eastern Africa, Western Africa or Africa as whole have a much better chance as is the norm in Asia. Countries such as India or China have large populations hence it is easier to do this.”

Kore stated that local entrepreneurs must forge a bond with telecoms and device manufacturers to push their products faster to the market.

“[African innovators] should establish strong partnerships with OEMs or smartphone manufacturers when shipping to Africa. This can help them push pre-installed apps in devices,” Kore advised.

Positive iteration of a product by adding new features can also appeal to users. This new re-discovery can push the adoption of an old product in a new season.

Kore gave an example of WeChat, an Asian chat app which has included a payment system, mobile money transfer and credit card bill management, within it. African applications should also look at such trends.

“Although difficult there is space for Africa-centric social media platforms. Players in this space must really show the true value of these apps with localised nuances and a different proposition from global players such as WhatsApp,” Kore concluded.

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Vincent Matinde

Vincent Matinde is an international IT Journalist highlighting African innovations in the technology scene.

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