Mobile apps at the base of the pyramid nigeria by infoDev

Mobile at the Base of the Pyramid: Nigeria

Growing Innovation ÂŠ2014 infoDev / The World Bank | 1818 H Street, NW | Washington DC, 20433 Email: info@infoDev.org | Tel + 1 202 458 8831 | Twitter: @infoDev www.infodev.org

Mobile

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Mobile at the Base of the Pyramid: Nigeria

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© 2014 International Bank for Reconstruction and Development / The World Bank Mailing Address: MSN I9-900 1818 H St. NW, Washington D.C., 20433 USA Telephone: (+1) 202-458-4070 Website: www.infoDev.org Email: info@infodev.org Twitter: @infoDev Facebook: /infoDevWBG Some rights reserved. This work is a product of the staff of infoDev / World Bank. Note that the World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the donors of infoDev, The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Nothing herein shall constitute or be considered to be a limitation upon or waiver of the privileges and immunities of The World Bank, all of which are specifically reserved. All photographs courtesy of The World Bank.

Rights and Permissions This work is available under the Creative Commons Attribution 3.0 Unported license (CC BY 3.0) http:// creativecommons.org/licenses/by/3.0. Under the Creative Commons Attribution license, you are free to copy, distribute, transmit, and adapt this work, including for commercial purposes, under the following conditions: Attribution—Please cite the work as follows: infoDev. 2014. Mobile at the Base of the Pyramid: Nigeria. Washington, DC: World Bank. License: Creative Commons Attribution CC BY 3.0 Translations—If you create a translation of this work, please add the following disclaimer along with the attribution: This translation was not created by The World Bank and should not be considered an official World Bank translation. The World Bank shall not be liable for any content or error in this translation. All queries on rights and licenses should be addressed to infoDev, The World Bank, MSN: I9-900, 1818 H Street NW, Washington, DC 20433, USA; email: info@infodev.org

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Acknowledgments

This study, Mobile at the Base of the Pyramid, was commissioned by infoDev, a global technology and innovation program at the World Bank. The study was carried out under the supervision of Maja Andjelkovic of infoDev, and prepared by Research ICT Africaâ&#x20AC;&#x2122;s lead researchers Steve Esselaar and Christoph Stork. This report was made possible by the support of the Swedish International Development Cooperation Agency.

iii

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Table of Contents

List of Acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 BoP in Nigeria. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Evolution of App Adoption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Smart and Feature Phone User Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Business Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Basic Business Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Freemium Business Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Multi-Sided Platform Business Models . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Revenue Sourcesâ&#x20AC;&#x201D;Paths to Monetization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 USSD/SMS-Based Content or Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 App Purchase, App Upgrade and In-App Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 In-App Advertisement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Freemium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Subscriptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Other Revenue Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Payment Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Premium SMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Airtime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Direct Carrier Billing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Mobile Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Vouchers and Scratch Cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

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Platform Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Distribution Channels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Operator App Stores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 OS App Stores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Handset App Stores . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Third-Party App Stores and Websites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Conclusion and Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Annex A: Mobile Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

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List of Acronyms

API App BoP CPC CPM DCB ICT IFC IP MEST MNO OS RIA RoP SMS USSD VAS VAT

Application programming interface Mobile application Base of the pyramid Cost per click Cost per thousand impressions Direct carrier billing Information communication technologies International Finance Corporation Internet protocol Meltwater Entrepreneurial School of Technology Mobile network operator Operating system Research ICT Africa Rest of the pyramid Short message service Unstructured supplementary service data Value-added services Value-added tax

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Introduction

Apps can be used as standalone applications or to support or complement products or services. Another use is for content delivery. Products and services offered via mobile phones are further differentiated as mobile services, mobile applications, and the mobile web. • Mobile services include premium short message service (SMS), unstructured supplementary service data (USSD), and voice services, which can be offered to any mobile user including basic phone users. These services are in the scope of this study as they cater to 80 percent of base of the pyramid (BoP) users, who mostly use basic phones. These services can be integrated with mobile apps and mobile web services.

• Mobile applications (apps) are software packages that run on feature and/or smart phones with associated operating systems (Symbian OS, Android, iOS, etc.). All three services—mobile services, mobile web and mobile applications—can be combined in a set of products. For instance, customers can send requests via premium SMS to have analytics delivered to their businesses via a mobile application or mobile web. Mobile web, as such, is outside the scope of this study. It is included where it is used in the context of mobile apps or services. Most websites have a mobile web view, but including mobile web in this mobile app study would mean including most e-commerce sites.

• Mobile web services are services provided through mini browsers such as Opera Mini.

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BoP in Nigeria

This section draws on nationally representative households and a survey of individual access to and use of information communication technologies (ICT) by Research ICT Africa (RIA) in 2012 in Nigeria.1 For the purposes of this report, BoP refers 1 Research ICT Africa. 2012. Household and Small Business Survey. Available at www.researchictafrica.net

to the infoDev definition of persons who earn less than $2.50 per day.2 Individuals over 15 years were considered adults, and were classified according to average household incomes, that is, household income divided by household size. Less than a quarter (22 percent) of BoP individuals has access to bank accounts and 61 percent own

2 infoDev, Mobiles at the Base of the Pyramid, infoDev Project Concept Note, August 2011, available at http://www.infodev.org/infodev-files/resource/ InfodevDocuments_1114.pdf

TABLE 1: Nationally Representative Survey Results for Nigeria at the Beginning of 2012 Nigeria %

BoP

Do you have a bank account (bank or Post office)?

30.5

27,670,071

21.8

13,705,994

Do you own a mobile phone?

66.4

60,129,385

61.1

38,368,985

59,550,759

98.7

37,885,970

Is your mobile phone capable of browsing the Internet?

22.7

13,642,532

14.4

5,541,742

Facebook, Twitter, MXit, or other social networking

15.8

9,494,358

10.9

4,166,130

9,608,794

10.2

3,904,535

18.4

16,704,352

8,816,169

First accessed the Internet on a mobile phone

54.8

7,549,519

63.2

3,248,483

First accessed the Internet on a computer or laptop

45.2

9,154,833

36.8

5,567,686

Accessed the Internet on a mobile

74.9

12,513,407

76.8

6,766,482

Accessed the Internet at work

29.3

3,259,657

20.8

1,152,946

Accessed the Internet at place of education

19.6

2,180,193

1,546,226

Accessed the Internet at Internet cafe

45.1

5,009,797

43.7

2,415,285

8,310,229

44.5

3,923,417

Among 15+ mobile phone users

Prepaid

Browsing the Internet Do you ever use the Internet? (Gmail, Google, Facebook, MXit, email)

Among 15+ Internet users

Signed up for any online social network (Facebook, etc.)? Source: Research ICT Africa

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mobile phones. Of those who own mobile phones, more than 99 percent are prepaid. Of those with mobile phones, only 10 percent use them to browse the Internet. Around 14 percent of BoP users access the Internet, which includes nonmobile Internet use. 63 percent first accessed the Internet on mobile phones. What does this mean for mobile application development? â&#x20AC;˘ In 2012, 14 percent of BoP mobile users had handsets capable of browsing the Internet and about 10 percent actually used it to browse. These figures may have increased since as both smart phone and feature phone prices have dropped considerably. An entry level smart

phone is available now for as low as $70,3 with prices likely to fall further. â&#x20AC;˘ Mobile money was not available at the time of the survey and its use could not be assessed. What is clear, however, is that about 78 percent of people at the BoP do not have bank accounts. SMS or airtime-based payments are the only feasible way, at this stage, for BOP users to pay for apps or services.

3 Margaux, 2013. What a $70 smartphone means for mobile in Africa, available at https://medium.com/what-ilearned-today/99674f8d4f6f

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Evolution of App Adoption developers around 37 percent of nominal SMS values.

Generally, app adoption takes place over three stages for BoP individuals. • Stage 1—Basic Phones: Here, services can only be provided via SMS or USSD.4 About 85 percent of BoP mobile phone users in Nigeria use basic mobile phones that cannot be used to browse. The distribution platforms for basic phones are entirely under the control of the mobile network operators (MNOs). MNOs, together with third party facilitators, take up to 60 percent of after-tax SMS values, leaving 4 USSD stands for Unstructured Supplementary Service Data. USSD is a protocol used by GSM cellular networks to communicate with MNO servers. The most common use of USSD is for mobile money services. Unlike SMSs, USSD messages create a real-time connection to the server during a session that remains open, allowing a two-way exchange of a sequence of data.

• Stage 2—Feature Phones: The increasing prevalence of feature phones in this stage weakens MNO control as it opens up the possibility of third-party app stores such as the Nokia Ovi Store, which targets feature phone users. Third parties are able to negotiate better payment terms with operators by aggregating volumes via app stores. Prices of feature and smart phones are dropping and their penetration into the BoP is increasing. Feature phones also open up another potential revenue source: web-based services are available through mini browsers, such as Opera Mini. In stage 2, the developer has the advantage of having more control over distribution and, therefore, revenue flows. But control over revenue flows depends on the availability of payment mechanisms such as mobile money, where developers no longer have to pay the high rates MNOs charge for airtime payments. Mobile web services typically charge via

FIGURE 1: Evolution of App Adoption In Nigeria Stages

Stage 1: Mobile voice & SMS

Stage 2: Mobile voice & data

Stage 3: Mobile computing

Revenue sources: Mobile operators

Airtime Share of premium SMS Share of mobile money fees

Revenue sources: Developer

Share of premium SMS

Web Share of premium SMS Share of mobile money fees

Share of app sales Mobile money revenue Web Share of premium SMS

Revenue sources: Third Party

Share of premium SMS Share of mobile money fees

Share of app sales Share of premium SMS Share of mobile money fees

Distribution channel

Mobile operators

Mobile operators Web

Mobile operators Web App stores

Technology

Basic mobile

Feature phone

Smart phone

Nigeria:

approx. 85% of the BOP

approx.14% of the BOP

approx. 0–5% of the BOP

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PayPal or credit cards. Advertisements on the mobile web are limited by small screen sizes. Varied screen sizes also make it difficult for developers to program apps for feature phones. â&#x20AC;˘ Stage 3â&#x20AC;&#x201D;Mobile Computing: Smart phones open up a third revenue stream for developers: app sales, in-app sales, and in-app advertisements. Some MNOs operate app stores, but the most popular are the ones linked to the operating system (OS), such as Google Play, iTunes, and BlackBerry stores. App stores usually take a 30 percent share, leaving developers with 70 percent, a major improvement over premium SMS. Smart phones in stage 3 give developers the widest choice for revenue collection and distribution. Smart phone penetration among BoP mobile

phone users in all four countries is still very low, below 5 percent, but is expected to increase with Android-based smart phones priced at $70 or less coming into the market. The wider ecosystem in stage 3 includes additional players in the form of Google Play and Facebook. However, app developers targeting BoP customers need to consider that between 77 and 85 percent of BoP mobile phone owners are still in stage 1. The RIA survey showed that only 14 percent of BOP mobile phone owners in Nigeria had handsets capable of browsing the Internet in 2012. This is changing rapidly, but the transition to stage 2 and 3 will take time. Operator app stores that link to iTunes and Google Play could take a higher revenue share to cover operating expenditure and app store marketing costs.

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Smart and Feature Phone User Survey TABLE 2: Mobile User Survey Among Smart and Feature Phone Users in Nigeria

This section draws on a survey of 800 mobile users conducted by the research firm Jana5 in Nigeria. The survey was done entirely online. Users accessed the survey page via mobile phone, desktop, or tablet. The details of respondents are displayed in table 2. The survey was not representative because participation was based on self-selection; users could decide to participate or not and there was no random selection. Only the first 800 responses per country were used. The majority of respondents were male, the average age was 23 to 24, and about 93 percent had already downloaded applications for their phones. Thus, respondents could be classified as early adopters and indicative 5 Jana is the worldâ&#x20AC;&#x2122;s largest mobile research and rewards platform covering 237 mobile operators. Registered panelists log in to mCent, see a list of surveys and offers available. If they participate, they earn airtime. Respondents can access the survey via any meansâ&#x20AC;&#x201D; computer, tablet, or mobile phone.

FIGURE 2: Preferred Payment Method for App-Downloads and In-App Payments by Feature and Smartphone Users 66% 15% 13% 6% Airtime deduction

Credit card

Mobile money

Premium SMS

Responses

800

Share of female respondents

30.3%

Average age

Minimum age

Maximum age

Share of rural responses

24.3%

Installed mobile app

92.9%

App stores previously used

Google Play

52.4%

Nokia Ovi

39.5%

MTN App Store

23.1%

Samsung app store

6.5%

Other

of a future trend. 52 percent used Google Play to download apps, indicating that more than half of respondents were smartphone users. 66 percent of users in Nigeria preferred airtime deduction to pay for apps. In other words, direct carrier billing (DCB). This highlights the low popularity of premium SMS, which only scored 6 percent. Because these were early smartphone adopters, it indicated that premium SMS is best to target basic and feature phone users. As people transition towards smart phones, new payment methods such as DCB and mobile money are vital to support innovation in the app ecosystem.

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Business Models FIGURE 3: Overlap of Choices

Entrepreneur, software developer, and business school professor Tomi Davies, during an interview6 in Lagos, defined a business as an entity that must solve a problem, make a profit, obtain customers, and keep them. Applied to app development, a developer has to choose a problem to solve and think about how to make money from solving it. Revenues need to exceed costs. The first important consideration is revenue sources. Obtaining customers is about choosing the right distribution channels and using suitable payment channels. Keeping customers is about continuously delivering value. Decisions on distribution channels, revenue sources, and payments are intertwined. Most developers choose several combinations, either sequentially or simultaneously.

Distribution Channel

Payment Facilities

Revenue Sources

free services are offered alongside premium paid services. The key feature of a multi-sided platform is that it facilitates transactions between two (or more) distinct yet interdependent customers.

• Revenue sources: Fees and subscriptions, in-app advertisements, pay-per-download of content or apps, in-app purchases, and upgrade of free apps to paid feature-rich apps.

Basic Business Models

• Distribution channels: Via app stores or directly to MNO subscribers as value-added services (VAS).

App Store

• Payment options: Premium SMS, mobile money, airtime, credit or debit card, and cash or checks. The combinations of these determine the business models available to app developers. Broadly, there are three categories of business models in order of complexity: basic, freemium, and multi-sided platforms. The basic business model includes three versions: app store, VAS provider and content provider. The key feature of the freemium business model is that it is a blended model:

6 Tomi Davies is CEO of TechnoVision Communications and a visiting professor at Lagos Business School. He was interviewed by the author on October 23, 2013.

The three basic business models are displayed in figure 4.

The key feature of the app store model is that content or services are sold by app stores such as Google Play or Nokia’s Ovi Store. The developer gets a share of the value of the app. For example, in the Google Play store, a developer receives 70 percent and Google Play 30 percent. This applies to in-app purchases too.7 With this business model, these are the key questions that developers should ask: • How does the developer gain visibility in the app store?

7 Google Play, 2013. In-App Billing Availability and Policies, available at https://support.google.com/googleplay/ android-developer/answer/1153481

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FIGURE 4: Basic Business Models

App purchase

Revenue Developer

App Store

Customers

in-App purchase

Monthly Businesses

Bulk SMS VAS Provider

Customers

subscription

Content Provider

Premium SMS Bulk SMS

Customers

• What is the payment mechanism? Google Play does not allow a business in any African country to register as a merchant, so developers will have to go to other countries that act as intermediaries with Google.

Igbo language. Igbo for Travellers is sold on iTunes for $2.99. Revenue share is 70/30, with 70 percent going to the developer.

• What is the revenue share with the app store? The MTN App Store in Nigeria has a revenue share of 40/60, with 40 percent going to developers. In comparison, the revenue share for Google Play is 70/30, with 70 percent to developers.

The key feature of the VAS provider model is that content and/or services are distributed by bulk SMS, which is paid for by businesses or institutions. In this model, the distribution channel is not an app store, but the mobile network operator (MNO) network. Here, these are the key questions that a developer should ask:

• Are there any particular benefits of each app store and/or conditions of exclusivity? For example, local app stores may promote apps but require exclusivity in return. An example of the App Store business model is Igbo for Travellers. This is an app that teaches the

VAS Provider

• Does the client provide the subscriber database or is it from a third party? • How do developers market their services to businesses? Where do they find businesses

FIGURE 5: Igbo for Traveller’s Business Model

Revenue share

OS store purchase App store

Customers

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FIGURE 6: VConnect Business Model

Free listing Business

Free app

User

Bulk SMS

that are interested in sending bulk SMSs to the developer’s customer base? An example of the VAS provider business model is VConnect, the most popular local search engine in Nigeria. VConnect provides information about local businesses, products, and services and has more than 800,000 businesses listed. Searching VConnect for local services is free for consumers. Listing a business is also free. VConnect is available on iOS, Android, and feature phones via WAP. VConnect makes its money by providing a large subscriber base that businesses can target with bulk SMSs, and in-app and online advertisements.

Content Provider The key feature of the content provider model is that customers pay for content and/or services through premium SMS or interactive voice response (IVR). Premium SMSs are distributed via the MNO network. The content provider receives a small revenue share of the premium SMS value, but the main portion goes to the MNO. These are key questions that developers should ask:

• Is marketing done by the MNO? If not, how will developers ensure that customers are aware of their content or services? An example of the content provider business model is Exam Success Points. This is a mobile application providing learning notes for O-level examinations in Nigeria. The notes are available for English, physics, chemistry, biology, and economics. The application is available for feature phones and Android phones, but not through Google Play. The Android version is downloaded directly from the publisher Greenspek’s website. Greenspek initially allowed payment through airtime. When subscribers grew concerned that airtime would be charged and no download would be received, it switched to a premium SMS model. Exam Success Points has a 60-second free trial after which subscribers have to pay Nigerian naira 100 ($0.63) via premium SMS. Of this, Greenspek receives between Nigerian naira 20 ($0.13) and 40 ($0.25) depending on the operator. On an average, Greenspek receives Nigerian naira 25 ($0.16) per Nigerian naira 100 ($0.63) across Nigeria’s three major networks. Exam Success Points had been downloaded 47,250 times at the time of this survey.

• What is the revenue share between MNO and developers?

FIGURE 7: Exam Success Points Business Model

Greenspek

25 Naira per premium SMS

App download

75 Naira per premium SMS

100 Naira per premium SMS

User Mobile Operators

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Danfo Reloaded II reportedly has 100,000 subscribers, of whom about 15 percent spend an average of Nigerian naira 45 ($0.28) per month, of which the developer gets about 37 percent. In this model, 15 percent of subscribers subsidize game access for the 85 percent free subscribers.

Freemium Business Models A layer of complexity is added in freemium business models. They are often used in conjunction with other business models, such as content provider models. This is a blended model: free services are provided along with paid premium services. Generally, there is a large user base for the free app, which is cross-subsidized by a smaller user base of the paid version. Paid users often comprise 10 percent8 of all users. Paid subscribers access both free and premium services, hence the name freemium. Here are the key questions that developers should ask:

Multi-Sided Platform Business Models

• What is the cost of providing content or services to free users? • Do fees charged to paying customers cover free content and cost of operation? • How many paid subscribers does the application need to break even? • How quickly or often do free subscribers convert to paid subscribers? An example of the freemium business model is the game Danfo Reloaded II, which is available for feature phones via Java, the BlackBerry App store, and Google Play. Realizing the need for a payment mechanism, the game’s developer Pledge51 launched ChopUp, a social platform that allows players to interact based on in-game achievements. Revenues are collected entirely via ChopUp Coins, which are paid for by premium SMS. Players purchase ChopUp Coins to move from one level to the next. Coins are in Nigerian naira 30 ($0.19), 50 ($0.32), and 100 ($0.63) denominations.

8 Osterwalder, A. & Pigneur, Y. Business Model Generation. John Wiley & Sons.

Multi-sided platform business models contain complex combinations of all three dimensions: distribution channels, payment facilities, and revenue sources. Newspapers are a simple example of a multi-sided platform. Newspapers can be sold below cost to attract more readers, but can charge more for advertisement space, effectively cross-subsidizing the newspaper for its readers. The key features of a multi-sided platform business model are: • Network effect—the platform’s value is dependent on the number of users on each side. The larger the number of users on one side, more the value for users on the other side. • Facilitator—a multi-sided platform facilitates transactions between different customer bases. • Distinct customers—the business model can differentiate between different customer segments, charging distinct prices within each segment. • Interdependent prices—prices are interdependent, lowering the price on one side allows an increase in price on the other side. • Prices are independent of cost—allowing free downloads of apps is less than the cost of developing apps. Revenues to cover costs are generated from the other side.

FIGURE 8: Danfo Reloaded II Business Model

Download free app

Gamers In-app purchases via ChopUp Coins

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FIGURE 9: Multi-Sided Platforms

Monthly

Businesses

subscription

Businesses

Multi-sided platform

There are two variations in the multi-sided platform business model. In the first version, customer segment A gets services for free (or heavily subsidized) while customer segment B pays for the services. In the second version, customer segment A pays to advertise to customers of segment B (usually consumers), thereby allowing the platform to subsidize content to consumers. Here are key questions that developers should ask: • How can developers attract sufficient A and B customers? • Which side (or segment) is more price sensitive? • What is the optimal pricing for interdependent markets? Free or low payment for one side and higher charges for the other, or more balanced payments?

Example 1: mPedigree An example of a multi-sided business model is mPedigree, which operates in Ghana and Nigeria. mPedigree is a verification service that allows users to send a free SMS to verify that a pharmaceutical drug is genuine. The cost of the SMS and the service mPedigree provides is paid for by pharmaceutical companies who have an interest in ensuring that the drugs that people use are genuine and not counterfeit. In this variation

Premium SMS or free SMS Customers Bulk SMS

Free App

Customers

of the multi-sided platform business model, the service to the consumer is free.

Example 2: mPawa mPawa is a job-matching service targeted at blue collar workers in Africa. mPawa bridges a gap that exists in the current blue collar recruitment space and is free for workers. Workers register online or via SMS (mPawa therefore works on all phones) to receive notifications whenever prospective employers require their skill sets. mPawa’s main differentiating feature is that, over time, a worker can build a strong resume based on prior work and employer recommendations. The recommendation system reduces time needed to find appropriately skilled workers. Workers are informed by SMS or on the mPawa website to see if they have been selected for a job. mPawa charges employers and not workers, based on a percentage of the worker’s salary. Pricing ranges according to the period of employment. A short-term job (from one day to three months), costs 10 percent of the worker’s first month’s pay. A long-term contract (from three months to one year) costs 25 percent of the worker’s first month’s pay. A permanent job (above one year) costs 50 percent of the worker’s first month’s pay.

Example 3: Efiko Efiko began as a pilot with a $282,000 grant from the MacArthur Foundation to test the appeal of

FIGURE 10: mPedigree Business Model

Pharmaceutical company

Subscription

Free SMS with drug code Patient Vertification SMS

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FIGURE 11: mPawa Business Model

10â&#x20AC;&#x201C;50% of first month salary

Posting availability Blue collar worker

Company Posting of jobs learning through a mobile application. A condition of the grant was that the Efiko mobile app be provided free to students. The educational content is linked to the national senior secondary school curriculum. Students learn by answering multiple choice quizzes. Answers are provided at the end of each quiz. Students with the highest score in each subject win prizes. Efiko is available on feature phones through GetJar, Android through Google Play, the Samsung Nigeria store, and also via the mobile web. Efikoâ&#x20AC;&#x2122;s long term strategy is a classic multisided business model: donors, government, and education NGOs pay for the application, which students receive free.

Conclusions The best combination of payment facilities, revenue sources, and distribution channels will depend on actual choices available in a country, the target audience, and nature of products and

Job offers via SMS services offered. Most potential customers still use basic phones. Feature and smart phones make up only 15 to 20 percent of the mobile subscriber base. Smart phones apps need to generate enough revenues to sustain app development from a smaller number of subscribers when compared to apps developed for feature phones. A multi-sided platform is the most promising business model for apps, particularly in countries where payment facilities are limited or uneconomical. There are several examples of multi-sided platforms from Nigeria. Danfo Reloaded II exemplifies an innovative approach to the freemium business model. In Danfo, level one of the game is free. If gamers want to move to the next level, they have to purchase ChopUp Coins (a virtual currency) using premium SMSs. Advertising could become a second revenue source if it builds up a large subscriber base, which would make it a multisided platform as well.

FIGURE 12: Efiko Business Model

Donor

Free app

Students

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Revenue Sources—Paths to Monetization Developers in Nigeria have, in principle, the same choices as anywhere. However, they are constrained by various market factors that limit their choices and their ability to raise revenues when products and services target Nigerian audiences: Generation of revenues is at the heart of any business model. App developers have to make a choice about how they will make money from their products and services: fees and subscriptions, inapp advertisements, pay-per-download of content or app, in-app purchases, or the upgrade of a free app to a feature-rich paid app. Globally, advertising and app purchases are the dominant mechanism for revenue generation (see chart on the following page). The trend in 2013 also shows a shift towards advertisements, in-app purchases, and freemium models. Mobile advertising in Nigeria has seen explosive growth: one global advertising network has seen advertising impressions grow from 473 million in the first quarter of 2011 to 2.7 billion in the third quarter of 2013.9

9 BuzzCity, 2013. The BuzzCity Report: A Quarterly briefing on the mobile Internet. Vol. 3 Issue 4: October 2013, available at http://www.buzzcity.com/l/reports/TheBuzzCity-Report-Vol-3-Issue-4.pdf

• Smart phone penetration is still quite low in Nigeria. • MNOs own the distribution channels—via their SIM cards—to subscribers and take revenue shares of between 60 and 70 percent for content delivery. • Local app stores have limited subscriber bases or are just entering the market. The various revenue sources are discussed in the sections below.

USSD/SMS-Based Content or Services Value-added services such as ringtones, wallpapers, and daily horoscopes have been offered for many years. Any developer considering providing services or content via this channel needs to be aware that subscribers, networks, and payment facilities are all in the hands of MNOs. The revenue share for developers is relatively

TABLE 3: Types of Revenue Sources In-app advertisements

Advertisers pay app developers to place advertisements within the app, for example, at the bottom of the screen.

Pay-per-download

The most common model, where subscribers pay a fee to download the app

In-app purchases

Downloading the app is often free but users have to pay to access various functions and/ or content.

Freemium

Basic services are free. Advanced services (such as additional features) are charged. The freemium model is a form of in-app purchase.

Subscriptions

Frequent, regular payments to app developers to continue using the apps.

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FIGURE 13: Revenue Sources (%) for Global Mobile Developers (n = 2,167)10

38% Advertising

33%

32% Pay per download

34%

26% In-app purchases

19%

25%

Freemium

18% 12% 12%

Subscriptions 2013

2012

small. At the same time, this is the most effective channel to reach large numbers of BoP customers. Apps using this channel should try to ensure that premium SMS is not the only revenue source and that it is complemented by others.

its revenue split of 70/30 in favor of developers and relatively straightforward and transparent procedures for registering apps. The application programming interface (API) for the MTN Nigeria app store is only available on request and revenue shares need to be negotiated.10

App Purchase, App Upgrade, and In-App Purchases

Though the Google Play store is popular, the list of countries in which developers may register as merchants does not include a single African country.11 This means that developers are either

The mechanics are the same when launching products through Google Play, Facebook, iTunes, etc., independent of the developerâ&#x20AC;&#x2122;s location. However, in practice, there are limitations. By far the most attractive platform for African app developers is the Google Play store because of

10 Visionmobile, 2013 11 Google Play, 2013. Supported locations for merchants, available at https://support.google.com/googleplay/ android-developer/answer/150324?hl=en&ref_ topic=15867

FIGURE 14: TwinPine Business Model

Advertisers

0.13 USD per click

60% of advertisement revenue

m-app Developers

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restricted to free apps on Google Play or have to work through partners registered as merchants on other continents. Another option is to sell through an operator app store such as MTN Nigeria. Multinational operators may have agreements with Google to act as merchants in all countries they operate in. Payment is then made from the user to the operator and from the operator to the developer. The revenue share is thus likely to be lower compared to directly selling through the Google Play store. In addition to selling an application, revenues can be generated by selling upgrades with more features or allowing in-app purchases.

In-App Advertisements In-app advertisements represent a promising source of revenue for app developers in Africa. The advertising model generally requires an intermediary to match advertisers with app developers or publishers. The attractiveness of a publisher to an advertiser depends on the size of subscriber base. This is the key characteristic of a multi-sided platform. TwinPine Networks facilitates interactions between advertisers and publishers, where the publishers—such as Vanguard News Nigeria and Punch, both popular news sites—have the subscribers and advertisers want to promote their products to the subscribers. TwinPine Networks has chosen a CPC model rather than a CPM model. The advantage of the CPC model is that an advertiser only pays for people that have actively chosen to learn more about the advertisement. In comparison, in the CPM model the advertiser pays for the number of impressions served, regardless of the click-through. TwinPine Networks charges an advertiser between $0.13 and $0.11 per click, depending on discounts offered to the advertiser. TwinPine is trying to drive increased advertising traffic and offers discounts to large advertising agencies to attract business. TwinPine keeps 40 percent of the revenue while the app developer gets 60 percent.

Freemium The freemium model provides a basic service for free and then encourages consumers to purchase additional features for a price. The

freemium business model reduces risk by allowing consumers to test out the product or service and then decide whether they want to purchase more features. This model is most commonly used by farm information services, pioneered by apps such as Esoko, which originated in Ghana. In Nigeria, Danfo Reloaded II has an innovative adaptation of the freemium model where gamers use a virtual currency called ChopUp Coins to purchase access to the next level. Subscribers download the app for free—the first level is also free—but need to buy ChopUp Coins using premium SMS to advance to the next round.

Subscriptions Monthly subscriptions are an attractive revenue source because of the stable cash flow they provide. Companies pay for a range of services, such as delivering bulk SMSs to their customers, allowing customers to request information, and informing farmers about market prices.

Other Revenue Sources Revenues can be generated by several other means. Apps can be commissioned by public institutions such as schools, clinics, or companies. These kinds of contracts can subsidize the development of other applications. Apps can be designed to support business processes, manage information, and/or receive and make payments. Revenues are thus generated by the supported business processes and not by the apps. Several app developers that were interviewed said contract work ensured their continued survival or was the mechanism to earn enough to be able to develop apps. For the developers of Danfo Reloaded II, 90 to 95 percent of company revenue originally came from consulting—developing customized apps for clients—and project management.

Conclusions Internationally, there is a shift towards advertisements, in-app purchases, and upgrades as sources of revenue. In-app purchases and advertising are the two most promising revenue sources in Nigeria. Innovative games, such as

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Danfo Reloaded II, are experimenting with different ways to encourage subscribers to spend money within the app by converting premium SMS into a platform currency. While mobile advertising is nascent, it represents an exciting potential market as app developers build large subscriber bases.

supplement their incomes through contract work to cross-subsidize app development. There are several revenue sources available, but few are practically possible because of the lack of payment facilities. The challenge is to match revenue sources with available payment facilities.

The path to monetization in Nigeria is extremely challenging. Several app developers have to

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Payment Facilities

There are four main payment options for app developers to collect revenues: operator-based, mobile money, bank-based, and others. Operatorbased payment facilities include premium SMS and airtime transfer. Mobile money can be operator-based or bank-based, depending on regulatory frameworks. Bank-based payments are electronic transfers, checks, or debit and credit cards. A fourth category, that is not bank or operator-based, comprises scratch cards and vouchers. The cost of collecting revenues and degree of availability varies, depending on the facility.

The upper limit, in terms of number of potential customers, that an app developer can target is 66 million, which is the number of Nigerians, 15 years or older, who owned mobile phones in 2012. This figure will steadily increase. Using formal banking facilities, apart from being less convenient compared to just sending SMSs, will decrease the customer base sharply, since only 27.6 million people have access to banks (including post office bank accounts). The number of Nigerians with credit or debit cards could not be reliably established, but it is significantly lesser than those with bank accounts. Vouchers and scratch cards potentially target the entire mobile user base but distribution channels would need to be built up from scratch. The actual target market for this would be local unless vouchers are distributed

FIGURE 15: Payments Facilities in Nigeria Payment options

Nigeria

Operator Based:

Operator-based:

Premium SMS

Developer revenue share: 37% Customer base 15⫹: 66 million

Airtime transfer

Developer revenue share: 85–90% Customer base 15⫹: 66 million

Mobile Money:

Mobile money:

Mobile money

Developer revenue share: >95% Customer base: 1.5 million (active)

Bank-based:

EFT/check

Developer revenue share: >95% Customer base 15⫹: 27.6 million

Credit/debit card

Developer revenue share: >95% Customer base: unknown

Other:

Vouchers/ scratch cards

Developer revenue share: >95% Customer base 15⫹: 66 million

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through airtime channels of operators, which would mean a significantly lower revenue share.

Premium SMS Premium SMSs are similar to ordinary SMSs. However, instead of content they contain a payment instruction. When a subscriber sends a premium SMS, her/his airtime is reduced by a specified value, usually higher than the cost of a standard SMS. Because these messages involve a premium fee, they incorporate a special number (known as a â&#x20AC;&#x2DC;short code,â&#x20AC;&#x2122; consisting of 4 to 8 digits). In some countries, using premium SMS is restricted and is therefore controversial. In Zambia, the regulator charges developers or aggregators an initial $3,000 for the use of a designated short code in an attempt to control content delivery. In Mozambique, short codes are allocated largely to MNOs, making it difficult for app developers to access.

Premium SMS is the most attractive payment facility because the target market consists of all 66 million mobile users.12 The economics of premium SMS makes it difficult to make money for new entrants unless the app attracts significant volumes. If an app does attract a substantial number of users (such as Danfo Reloaded II), then premium SMS rates are negotiable and revenue shares of up to 60 percent for developers have been reported.13 Unlike the Ghanaian market, which has only 8.8 million mobile subscribers, app developers in Nigeria are better placed to negotiate revenue shares. The premium SMS economic model explains why premium SMS generally remains the preserve of mobile operators and few app developers use it. While the number of subscribers may seem attractive, the need for massive volumes limits its use as a potential business model.

12 RIA household survey, 2012. 13 Author interviews

TABLE 4: Premium SMS in Nigerian Naira Based on MTN Nigeria Nigerian Naira 20

Nigerian Naira 50

Nigerian Naira 100

Nigerian Naira 500

Premium SMS

20.00

50.00

100.00

500.00

VAT: 5 percent

1.00

2.50

5.00

25.00

Communication tax (NCC): 2.5 percent

0.50

1.25

2.50

12.50

After tax revenue

18.50

46.25

92.50

462.50

Operator share: 60 percent

11.10

27.75

55.50

277.50

Developer share: 40 percent

7.40

18.50

37.00

185.00

Developer share of nominal SMS value

37%

105,405

42,162

21,081

4,216

Premium SMS received to raise Nigerian naira 780,000 ($5,000) Source: Author interview & calculations

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FIGURE 16: MPESA’s Agent and Subscriber Growth14 17,100,000 14,910,000

14,010,000

65,547

9,480,000 39,401 6,180,000

26,948 17,663

2,075,000

8,650

2,329 2008

2009

2010

2011

Agents

2012

2013

Subscribers

Airtime14 Airtime is, theoretically, an alternative to premium SMS as a payment facility. It has the same appealing features: a potential subscriber base of 66 million and a payment method with which all subscribers are familiar. However, there are two challenges: first, it cannot be easily integrated into an app but requires a separate transaction where the buyer has to send airtime to the seller and assume that the seller will honor the transaction. Second, mobile operators oppose the use of airtime as a payment mechanism15 and very few developers have integrated airtime as a payment facility in any of the four countries.16 Also, airtime as a payment facility involves the challenge of cashing out: the accumulated airtime has to be resold for cash.

Direct Carrier Billing Direct carrier billing (DCB) is the direct deduction of mobile airtime when a consumer buys an app. When compared to premium SMS, DCB offers greater flexibility—payment can be deducted in-app rather than by sending or receiving an SMS. Also, DCB is integrated directly into the 14 Source: Safaricom Annual Reports 15 One of the reasons mobile operators oppose using airtime as a payment method is that central banks tend to discourage it as it can potentially become an alternative currency and can hide money laundering. 16 Greenspek, developer of apps such as Exam Success Points, My Abuja, and First Aid, initially started using airtime as a payment facility, but reported that users were reluctant to pay because they were concerned that their airtime payment would disappear and the app download would not take place.

MNO’s billing platform. DCB is not available on all networks in Nigeria yet. Airtel is launching direct carrier billing but it has not yet been integrated as a payment facility into apps. In terms of revenue share, DCB is far more attractive than premium SMS as operators typically receive between 10 percent and 20 percent of revenues rather than the 60 percent to 70 percent, which is typical of premium SMS.

Mobile Money Mobile money has the potential to be a major payment facility for mobile applications but has not been realized in Nigeria17 because MNOs are not allowed to lead mobile money initiatives. There are approximately 1.5 million active mobile money subscribers in an official population of 150 million, representing a penetration of 1 percent. In comparison, premium SMS is available to all 66 million mobile subscribers. The size of m-money agent networks is an important factor and indicator of mobile money adoption in a country. These networks generally include shops, street vendors, and pre-paid airtime voucher resellers that provide cash-in, cash-out services, educate subscribers, and build trust. A rapidly growing agent network strongly correlates with a rapidly growing mobile money subscriber base. The success of MPESA in Kenya is directly related to its wide agent network: the

17 IFC rates Nigeria as one of two countries in the world with major mobile money potential (the other being Pakistan)—see CGAP, Mobile Money Market Sizing Toolkit, available at http://tinyurl.com/onv8q8c

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increase in MPESA subscribers mirrors the growth of MPESA agents.18 Paga, the largest mobile money provider in Nigeria with over one million subscribers,19 has an agent network of 3,500,20 which is tiny in comparison to MPESA in Kenya, which has over 65,000 agents for a population of 43 million. The number of mobile money agents in Nigeria is very small because agent networks have to be built from scratch, rather than rely on already established MNO networks. This is because MNOs, with large networks of agents, are not allowed to lead mobile money initiatives or brand mobile money. Instead of MTN Mobile Money or Airtel Money, mobile money is branded by banks or third parties. Three mobile money models are allowed in Nigeria: • Bank-focused—A financial institution is the lead initiator • Bank-led—A bank must take a lead role within a consortium of m-money providers • Non-bank-led—A corporation (as long as it is not an MNO) is the lead initiator. A bank is required as a participant in the consortium, but does not need to have a role in the daily operations.21 Mobile operators are required to form a consortium with a bank or non-bank partner taking the lead. From the perspective of a mobile money operator, this means the lead partner reaps all the benefits of the MNO’s agent network without any of the costs associated with setting it up. As a result, MNOs have very little incentive to participate in mobile money initiatives. Thus, the primary obstacle in Nigeria is the regulatory framework. If the Central Bank of Nigeria eases the regulatory rules governing mobile money, it may become a viable payment facility for mobile applications. It is anticipated that the regulatory requirement that MNOs cannot lead a mobile

18 M-PESA: Agents are the Key to Mobile Money Transfer, available at http://www.telco2.net/blog/2009/09/mpesa_ agents_are_the_key.html 19 Paga, 2013, available at https://www.mypaga.com/ paga-web 20 Author interviews with Paga 21 Central Bank of Nigeria, 2010. Regulatory Framework for Mobile Payments in Nigeria, available at http:// www.cenbank.org/OUT/CIRCULARS/BOD/2009/ REGULATORY%20FRAMEWORK%20%20FOR%20 MOBILE%20PAYMENTS%20SERVICES%20IN%20 NIGERIA.PDF

money initiative will be changed in 2014. Until that happens, however, mobile money is not practical in terms of mass adoption. Nevertheless, there are two major mobile money service providers, which are discussed in the sections below.

Paga Paga is a financial services company. It provides mobile money services on all phones, including basic and feature phones. Paga’s core offering is a money transfer service but it also offers several other products such as airtime purchases and bill and retail payments. Paga has around 3,500 agents and over one million subscribers.22 It is connected to eight major banks in Nigeria and carries out about 400,000 transactions per month.23 Paga Connect is a product that Paga is developing that targets mobile applications. It was in pilot phase and yet to be released publicly at the time of the survey. Paga Merchant Services allows businesses to integrate a payment gateway into their own websites. Businesses can also access the Paga agent network to collect payment for goods and services or allow customers to pay via SMS or online at Paga’s customer portal. For merchants, Paga’s charges a 1 percent transaction fee plus Nigerian naira 20 (US$ 0.12) for transactions above Nigerian naira 500 (US$ 3.1). Transactions below Nigerian naira 500 (US$ 3.1) are charged 5 percent of the value of the transaction plus Nigerian naira 5 (US$ 0.03). Very few people actually process payments of less than Nigerian naira 500 (US$ 3.1) on Paga’s platform; volumes of transactions below Nigerian naira 500 (US$ 3.1) are insignificant. Paga’s charges for consumers are displayed in table 5. Merchant payments are free and payments may range between Nigerian naira 1 (US$ 0.01) and 200,000 (US$ 1,240). The merchant model is set up as a multi-sided platform and makes Paga mobile money an attractive way to collect revenues for app developers (assuming that they are also registered as Paga merchants). This is because it allows users to pay for services at significantly lower rates when compared to cash transactions, and receive payments at lower fees when compared to checks and credit cards. App developers need to register as merchants to use this facility. For consumer payments (in contrast to merchant services described above), the minimum transfer 22 Paga website, 2013, https://www.mypaga.com/pagaweb/start.paga 23 Author interviews with Paga

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TABLE 5: Mobile Money Charges (in Nigerian Naira): Paga Transfer to Non-Paga Customer Transfer amount

500 ($3.1)

2000 ($12.4)

10000 ($62)

100,000 ($620)

500 ($3.1)

2000 ($12.4)

10000 ($62)

100,000 ($620)

100 ($ 0.62)

150 ($0.93)

20 ($0.12)

250 ($1.55)

80 ($0.5)

130 ($0.81)

180 ($1.12)

230 ($1.43)

80 ($0.5)

130 ($0.81)

180 ($1.12)

230 ($1.43)

180 ($1.12)

280 ($1.74)

200 ($1.24)

480 ($2.98)

80 ($0.5)

130 ($0.81

180 ($1.12)

230 ($1.43)

0.48

6.5

1.8

0.23

Cash in Transfer fee

Transfer to Paga Customer

Cash out at agent

Total cost cash-tocash

Total cost cash-to-cash in percentage Nigeria naira to US$ exchange rate: 0.006224

Source: Paga website and author calculations

FIGURE 17: Paga Merchant Model

Below 500 Naira: 5% + 5 Naira Merchants

Free merchant payments

Customers

Above 500 Naira: 1% + 20 Naira amount between individuals is Nigerian naira 500 (US$ 3.10). The transaction costs of 36 percent are too high to make it a feasible micropayment transfer mechanism. 24

($1.55). When subscribers cash out at an agent or bank, they are charged Nigerian naira 100 per transaction. Transaction fees for pay-asyou-go and the monthly subscription options are summarized in table 6.

PocketMoni PocketMoni is a mobile money product from eTranzact, an electronic switching and payment processing platform. PocketMoni has 500,000 mobile money subscribers, of whom approximately 10 percent are active, with average revenue per user of Nigerian naira 100 ($0.62). PocketMoni has over 4,000 mobile money agents, of whom around 1,000 are active. Subscribers to PocketMoni have two options: a flat monthly rate or pay as you go. The flat monthly rate is Nigerian naira 250

24 Average exchange rate for 2013 (Jan to December) from Oanda.com

From a merchant perspective, the PocketMoni revenue model has two different streams: â&#x20AC;˘ The first revenue stream consists of large-value merchant payments such as bill payments and DSTV (satellite TV network) subscriptions. Payment made through the PocketMoni payment gateway (using PocketMoni as a standalone application) are charged 1.25 percent of the transaction amount with a minimum fee of Nigerian naira 100 (US$ 0.62) and a maximum transaction amount of Nigerian naira 2,000 (US$ 12.40). Alternatively, an annual rental fee is charged if integrated with the eTranzact

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TABLE 6: PocketMoni Transaction Fees in Nigerian Naira Flat

Pay as You Use

100

500

5,000

Average value of transaction

100 ($0.62)

Transaction volumes

500

10,000

50,000 500,000

Cost per transaction between PocketMoni users

Monthly transaction costs

Cash in

Monthly subscription

Number of transactions per month

10,000

100

500

5,000

10,000

100 100 ($0.62) ($0.62)

100 ($0.62)

1,000,000

500

10,000

50,000

500,000

1,000,000

20 ($0.12)

100 ($0.62)

2,000 ($12.4)

10,000 ($62)

100,000 ($620)

200,000 ($1240)

100 ($0.62)

250 ($1.55)

Cost of a monthly cash out at agent

100 ($0.62)

100 100 ($0.62) ($0.62)

100 ($0.62)

Total cost cash-tocash

350 ($2.17)

2,200 ($13.64)

10,200 ($63.24)

100,200 ($621.24)

200,200 ($1241.24)

Total cost cash-tocash in %

70%

3.50%

0.70%

0.07%

0.04%

22%

20.40%

20.04%

20.02%

300 ($1.86) 60%

Nigeria naira to US$ exchange rate: 0.006225

Source: Author interviews & calculations

back-end, which depends on volume of transactions. For example, a rental of $2,000 per year covers a maximum of 10,000 transactions. Every transaction over this is charged $0.25. All these fees are payable by merchants and not customers.25

25 Average exchange rate for 2013 (Jan to December) from Oanda.com

â&#x20AC;˘ The second product stream is for micropayments. The standard pricing is, on average, 5 percent of the value of the transaction. Again, the fee is not charged to the user but to the merchant. PocketMoni is available on USSD, J2ME, SMS/ IVR, mobile web, and the Google Play store. Mobile developers can become registered merchants for micro-payments. The fees payable will depend on

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FIGURE 18: PocketMoni’s Business Model Regular Payment 100–200 Naira: 1.25%

Merchants

Micro Payments 5% 2,000 USD for 10,000 transaction

Pay as you go free per transaction

Free for per month subscription

Naira 250 per month subscription

Customers

transaction values, but will not exceed 5 percent of transaction values. For higher denomination transactions, the annual fee of $2,000 (Nigerian naira 300,000) could be an option. PocketMoni, like Paga, is unlikely to experience massive growth in the near future unless it changes the fees for transfers between users. Incentive structures of payment platforms need to facilitate high volumes for the platforms to be successful. On-net transfer fees and flat rates are aimed at different customer segments, but both are likely to be disincentives.

Vouchers and Scratch Cards Vouchers and scratch cards are ideal for local prepaid services. Apps in Nigeria do not use vouchers. While not necessarily suitable for app stores, vouchers can be sold to activate subscriptions to mobile services that target mobile users in particular locations, such as farmers requiring specific market prices.

Platform Currency The only platform currency available in an app is ChopUp. ChopUp is a social platform, created by Pledge51, the company that launched the games Danfo and Danfo Reloaded II. ChopUp allows players to interact based on in-game achievements. ChopUp captures the various conversations players have while playing games such as Danfo Reloaded II and is available

across multiple platforms, including Android, iOS, and Java. Features include real-time online leaderboards, recognition of in-game achievements online, and a virtual currency called ChopUp Coins that can be used across and within games. ChopUp also provides a platform for advertisers to reach Danfo Reloaded II subscribers. Advertising revenue is insignificant, compared to in-app purchases of ChopUp Coins, but could provide more revenues as subscriber numbers increase.

Conclusions Premium SMS is the most viable payment facility in Nigeria due to the market size in general and the large number of subscribers who still use basic phones. Revenue shares can be negotiated with operators, depending on subscriber volumes. Third party app stores, such as Nokia’s Ovi Store, have a role to play in aggregating volumes and negotiating better terms with operators in the short to medium term. The spread of smart phones will reduce the importance of premium SMS in favor of app stores such as Google Play. Experimental payment facilities, such as ChopUp Coins, are worth investigating if an app developer is unable to negotiate good terms with an MNO. Virtual currencies can be reloaded through various payment options including mobile money, which provides greater flexibility compared to premium SMS. Direct carrier billing is an exciting possibility, but is yet to be implemented in Nigeria.

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Mobile money as a payment facility is still developing and penetration will continue to be slow until regulatory obstacles can be addressed. Outside of regulatory obstacles, mobile money providers do not cater to micro-payments because transaction fees are extremely high for small

transfer amounts. The focus of mobile money remains on person-to-person transfers and basic bill payments. Small value payments for apps using mobile money will depend on both commercial and regulatory obstacles being addressed, unlikely in the short term.

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Distribution Channels

The availability of mobile applications depends on distribution networks. Distribution can take place through app stores, mobile operators (through USSD services, for example), through local distribution networks. The advantage of using USSD or SMS-based services to deliver content is that the distribution channel is already in place through mobile networks. This is the main justification given by operators for their high revenue shares. In addition, operators actively market VAS content on their platforms. App developers also have the choice of operator app stores, operating system (OS) app stores, independent app stores, or local app stores. Globally, the most common platforms are Android and iOS (see table 7). BlackBerry is dropping behind Windows phone as its user base declines.

increase the range and relevance of apps by hosting the MTN App Developer Challenge, an app competition. MTN splits revenues 60/40, with MTN receiving the larger share. In comparison, the Google Play store splits revenues 70/30, with the app developer receiving the larger share. MTNâ&#x20AC;&#x2122;s justification for the larger revenue share is that it promotes local apps via its network, something that Google Play is unable to do. The MTN App Store is new and needs time to build up a loyal user base.26 The most downloaded app in the store is Chat with Annabel, an automated chat service targeted at males. Akpos Jokes is the second most downloaded app in the MTN store; it is a forum to share jokes with friends. Hardly any apps have payment facilities, so revenue share is a moot point. The 40/60 share ignores the fact that the app ecosystem is characterized by different mechanics, where the value chain is no longer fully controlled by MNOs. MTN will need to adjust its revenue share to global standards in the medium term or lose this business altogether. Other mobile operators in Nigeria have not launched app stores.

Operator App Stores In Nigeria, MTNâ&#x20AC;&#x2122;s app store has been operational for only a few months. MTN is attempting to

TABLE 7: Primary Platforms Used by Mobile Developers Platform

Percentage of Developers

Android

34.4

iOS

32.7

HTML5 mobile

17.3

Windows Phone

4.5

BlackBerry

4.2

Others Source: Visionmobile, 2013

OS App Stores International stores such as Google Play and BlackBerry World are the primary distribution platforms for the smartphone market. Uploading on Google Play is free and revenues are split 70/30. Payment facilities are not available on the African continent for Google Play, so apps that target Africans are generally free. However, developers can enter into agreements to work through partners registered as Google Play merchants on other continents. BlackBerry World (formerly BlackBerry App World) is the app store for BlackBerry devices. BlackBerry World has 120,000 apps and payment

26 MTN app downloads are extremely low, but the actual numbers have been removed due to confidentiality concerns.

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TABLE 8: MTN App Store Top 10 Downloads

Platform

Date of Submission

Chat with Annabel

Android, Java, BB

August 6, 2013

Akpos Jokes

Android, Java, BB

August 5, 2013

Nearest Locator

Android, Java, Symbian

July 2, 2013

ATM LOCATOR

Android

August 2, 2013

TRACKMYCASH

Android

July 2, 2013

HEALTH TIPS

Android

August 12, 2013

1999 Constitution Amended

Android, Java, BB

September 3, 2013

HNICS’s Maths Table

Android

September 24, 2013

MTN Info App

Android

August 11, 2013

AndroTUBE—YouTube Downloader

Android

June 9, 2013

Source: MTN Nigeria

can be made by credit card and PayPal. In some countries, payment can be made through carrier billing, but this is not available in any of the four countries surveyed. BlackBerry World is the third largest app platform in the world, after iOS and Google Play.27 Due to its efficient compression technology—resulting in lower bandwidth use— BlackBerry is a popular smartphone in Africa and is still seen as a viable development platform despite its declining user base in Europe and North America.

Handset App Stores The Nokia Ovi Store is one of the largest app stores and is targeted only at Nokia feature phones. Nokia has a separate app store targeted at its range of smart phones, Asha and Lumia.

27 VisionMobile. Developer Economics 2013. Developer Tools: The Foundations of the App Economy.

The revenue share for paid apps is 70/30, with 70 percent going to the app developer. In-app payment is made primarily through premium SMS. So MNOs play a critical role in payments. Nokia has rapidly expanded operator billing but this is not yet available in Nigeria. Because of the importance of premium SMS, Nokia has negotiated better revenue share terms with the MNOs by aggregating app payments via its Ovi Store platform. In Nigeria, Nokia started with a 40/60 revenue share with MTN (MTN taking 60 percent) but has negotiated the split down to 50/50.

Third-Party App Stores and Websites GetJar is a major third-party OS store in Nigeria. It is independent of handset operators (such as Nokia) and OS stores (such as iTunes, Google Play, and BlackBerry World). Uploading apps on to GetJar is free and there are no revenue share

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FIGURE 19: Waptrick Website

requirements. This is an attractive option for developers from a revenue sharing perspective. GetJar and wireless application protocol (WAP) sites (such as sefan.ru) are more popular among BoP consumers than Google Play and BlackBerry World, since most use feature phones.28 There are also websites that act as content aggregation platforms and users can log on to get apps, music, and videos. Examples include www .waptrick.com and www.sefan.ru.

Conclusions There is only one operator app store in Nigeria (MTN), which was recently launched. If they build subscriber numbers and brand loyalty, app developers could negotiate better revenue splits. Competitions, such as the App Developer Challenge from MTN, offer a means to increase the supply of apps, but one-off competitions are unlikely to generate dramatic changes in the availability of apps and number of downloads. The challenge is that too few apps use available payment facilities, such as premium SMS, because

28 Comments from Zubair Alhaji Abubakar, co-founder of Pledge51

of the perceived inequity in revenue share. The universal complaint among app developers is that revenue shares are unfair and that payment, when it does take place, is often delayed for months. Operator app stores suffer from the archetypal causality dilemma: if app developers have a viable business model, then MNOs will offer better terms. If MNOs offer good terms, then app developers will develop apps. MNOs require the app developer to submit business plans to even get the APIs. App developers distrust MNOs and feel that they are not being treated fairly. The net result is inaction. But MNOs are prepared to negotiate and there is a way that all parties can profitâ&#x20AC;&#x201D;it requires communication and commitment from both sides. Handset app stores, such as the Nokia Ovi Store, could be the best way to distribute an app, depending on target markets. The Ovi Store is attractive as an intermediary with MNOs because its domination of the feature phone app market gives it the power to negotiate with MNOs. A single app developer, in contrast, has limited negotiating power. Google Play is currently an option only for free apps, where revenues come from advertisements or other means.

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Conclusion and Recommendations Recommendations for app developers include:

The app environment in Nigeria, as in Ghana, is constrained. While innovation occurs both at revenue model and distribution channel levels, the primary obstacle is the lack of viable payment facilities. However, there are important differences between Nigeria and Ghana: in Nigeria, premium SMS rates are more likely to be negotiated; and handset app stores, such as Nokia’s Ovi Store, play a role in aggregating volumes and negotiating better revenue shares with operators. The size of the market also means that user numbers required for sustainable business models, based on premium SMSs, are more attainable than in Ghana. One way to improve the app ecosystem would be to push for direct carrier billing (DCB). DCB has a five times higher conversion rate than credit cards29 and offers more security and flexibility than premium SMS. DCB as a payment facility has seen 300 percent year-on-year growth rate on Google Play30 and has the potential to transform the app economy in Nigeria. The app environment in Nigeria is highly fragmented, with nobody representing the stakeholders. In Ghana, app developers are represented by the Wireless Application Services Providers’ Association of Ghana (WASPAG). Its purpose, among others, is to ensure that industry stakeholders earn a fair return on their investments. There is need for something similar in Nigeria, particularly to address issues such as consumer protection, direct carrier billing, payment facility transaction fees, and developer education and skills. 29 Mobile Payments Today, 2010. Available at http://www .mobilepaymentstoday.com/blog/11377/Direct-CarrierBilling-The-world-s-most-popular-mobile-paymentInfographic?rb=false 30 Mobile Payments Today

• Premium SMS is the most viable payment facility available in Nigeria and provides access to 66 million subscribers. Depending on volumes, operators are prepared to offer substantially better terms than the common 70/30 split. Developers with significant subscriber numbers can negotiate directly with operators to achieve better revenue shares. Nigeria offers the most favorable conditions to deploy premium SMS because of its market size, low VAT, and an MNO revenue share of 60 percent off a massive subscriber base. Some app developers have reported revenue shares of 40/60, with 40 percent going to MNOs and 60 percent going to app developers. Recommendation: Negotiate with operators on premium SMS. • The Nokia Ovi Store is the largest feature phone app store in the world. Nokia is able to negotiate with operators to get better revenue shares for apps featured in its store. Currently, the Nokia Ovi Store has a revenue split of 50/50 with MTN. For new app developers without significant subscriber bases, distributing via the Ovi Store gives them access to the revenue share that Nokia has negotiated on their behalf. As their subscriber base grows, app developers could get better terms than Nokia can negotiate. For app developers that don’t have large subscriber bases, aggregating with other developers or with third parties is the best way to enhance their negotiating power with MNOs. Incubators or hubs can play a role in aggregating demand for premium SMS and further reduce the power of MNOs. At present, there is a high level of distrust between MNOs and app developers. Creating better communication channels (through incubators, third party aggregators, and stakeholder associations) could reduce the levels of distrust. Recommendation: Use aggregators, such as the Nokia Ovi Store to get better revenue shares.

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• The freemium model is an attractive approach. Danfo Reloaded II is one of the more successful app games in Nigeria with over 350,000 downloads. Initially, Danfo was offered as a paid app in the Nokia Ovi Store. Once it was offered for free, subscriber numbers rocketed. Subscribers pay to move to the next level within the app. While a payment facility has to be built into the business model, allowing subscribers to experience the value of an app is likely to result in higher subscriber numbers and greater revenues than a direct app purchase model. The primary benefit of the freemium model is that the risk to subscribers is lowered by offering the basic app for free. Recommendation: Use in-app purchases or freemium models. • Advertising is potentially profitable and is growing rapidly—advertising platforms such as TwinPine Networks are indicative of the potential of the market. Building a subscriber base (that is attractive to advertisers) by

providing a free app on Google Play, for example, is one approach. Once a critical mass is reached, businesses or thirdparty advertisers can be approached for ad placements. As apps collect data about their subscribers and the retail sector continues to expand, there is a potential match between advertisers (such as retailers) and app developers. In the short term, the advertising model in Nigeria is a significant challenge— nearly all app developers have reported insignificant revenues from advertising. But in the medium to long term, advertising shows great potential. A few publishing houses, such as Pledge51, the makers of Danfo Reloaded II, are ahead of the curve and are investigating advertising as a potential revenue stream and incorporating it into their long-term business plans. Recommendation: Experiment with alternative revenue sources such as advertising.

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References

Airtel Nigeria website, accessed in November 2013, available at http://africa.airtel.com/wps/wcm/ connect/AfricaRevamp/Nigeria/. BuzzCity, 2013. The BuzzCity Report: A Quarterly briefing on the mobile Internet. Vol. 3 Issue 4: October 2013, available at http://www.buzzcity.com/l/reports/The-BuzzCity-Report-Vol-3-Issue-4.pdf. Glo website, accessed in November 2013, available at http://www.gloworld.com. Google, 2013. In-App Billing Availability and Policies. Available at https://support.google.com/ googleplay/android-developer/answer/1153481. Google Play, 2013. Supported locations for merchants. Available at https://support.google.com/ googleplay/android-developer/answer/150324?hl=en&ref_topic=15867.

infoDev. Mobiles at the Base of the Pyramid, infoDev Project Concept Note, August 2011, available at http://www.infodev.org/infodev-files/resource/InfodevDocuments_1114.pdf. Margaux, 2013. What a $70 smartphone means for mobile in Africa. Available at https://medium.com/ what-i-learned-today/99674f8d4f6f. Mobile Payments Today, 2013. Direct Carrier Billing: The worldâ&#x20AC;&#x2122;s most popular mobile payment. Available at http://www.mobilepaymentstoday.com/blog/11377/Direct-Carrier-Billing-The-worlds-most-popular-mobile-payment-Infographic?rb=false. MTN Nigeria website, accessed in November 2013, available at www.mtn.com.ng. Osterwalder, A. & Pigneur, Y., 2010. Business Model Generation. John Wiley & Sons. Research ICT Africa, 2010. Household and Small Business Survey. Confidential Report. Research ICT Africa. 2012. Household and Small Business Survey. Available at www.researchictafrica.net. Visionmobile. 2013. Developer Economics Q3 2013: State of the Developer Nation. Available at http:// www.developereconomics.com/reports/q3-2013/. Visionmobile. 2013. Developer Economics 2013. Developer Tools: The Foundations of the App Economy. http://www.visionmobile.com/product/developer-economics-2013-the-tools-report/. World Bank, 2012. Global Financial Development Database (GFDD). Available at http://econ.worldbank .org/WBSITE/EXTERNAL/EXTDEC/EXTGLOBALFINREPORT/0,,contentMDK:23492070~pagePK:641 68182~piPK:64168060~theSitePK:8816097,00.html.

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Annex A: Mobile Applications This section lists each mobile application with its distribution channel, payment facility, platform, and revenue model. While the various OS app

stores are a major distribution platform, nine of the 16 apps highlighted bypass formal app stores and are distributed independently. Eight of the 11 use formal banking facilities, that is, payment does not occur in-app but separately. The revenue model for seven of the 16 is SMS-based content or services.

TABLE A: App Summary Distribution Channel

Payment Facilities

mPedigree

Independent

PharmaSecure

VConnect

Platform

Revenue Model

Formal banking facilities

SMS/USSD

USSD/SMS-based content or services

Independent

Formal banking facilities

SMS/USSD

USSD/SMS-based content or services

OS app store

Formal banking facilities

iOS

Subscription

Android

In-app advertisement

Mobile web/web Third-party app store Saya

WeCyclers

Jobs in Nigeria

OS app store

Independent

OS app store

Feature phones Mobile money

iOS

Formal banking facilities

Android

Vouchers or scratch cards

SMS/USSD

Formal banking facilities

Feature phones

In-app advertisement

Feature phones Non-app related revenue Other Subscription Other

Android BlackBerry

Nigerian Constitution App

OS app store

None

Feature phones

Freeâ&#x20AC;&#x201D;potential for in-app advertisement

Android BlackBerry

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Efiko

Distribution Channel

Payment Facilities

Platform

Revenue Model

OS app store

None

Android

Other

Third-party app store

Feature phones

Mobile web/web ChopUp

OS app store Third-party app store

Formal banking facilities

Feature phones

Premium SMS, experimenting with advertising

BlackBerry

Mobile web/web Exam Success Points

Independent

Premium SMS

SMS/USSD

USSD/SMS-based content or services

My Abuja

Independent

Premium SMS

SMS/USSD

USSD/SMS-based content or services

MoBiashara

Mobile web/web

Formal banking facilities

SMS/USSD

Other

Formal banking facilities

BlackBerry

In-app purchases

Mobile money Danfo Reloaded

OS app store Independent Third-party app store

Feature phones

Mobile web/web First Aid

Independent

Premium SMS

SMS/USSD

USSD/SMS-based content or services

Lagos Island Street Map

Independent

Premium SMS

SMS/USSD

USSD/SMS-based content or services

1999 Constitution of the Federal Republic of Nigeria

Independent

Premium SMS

SMS/USSD

USSD/SMS-based content or services

My Abuja My Abuja is a mobile application tour guide and mini business directory for the city of Abuja. It contains details and facts about Abuja, tourism in Abuja, the Abuja Carnival, pictures, as well as locations and places of interest within the city. It also has a database of tourism-related businesses which is useful for visitors as well as residents.

My Abuja is available on feature phones and has an Android version but is not distributed through the Google Play store. It is available on the publishersâ&#x20AC;&#x2122; website. Greenspek (the company developing My Abuja) initially allowed payment to be made using airtime, but subscribers were concerned that the airtime

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FIGURE 20: My Abuja Business Model

Greenspek

25 Naira per premium SMS

App download

75 Naira per premium SMS

100 Naira per premium SMS

User Mobile Operators

would be charged and no download would be received, so it switched to a premium SMS model. My Abuja has a 60-second free trial after which the subscriber has to pay Nigerian naira 100 (US$ 0.62). Of this, Greenspek receives between Nigerian naira 20 (US$ 0.12) to 40 (US$ 0.25) (20 percent to 40 percent revenues). On average, Greenspek receives Nigerian naira 25 (US$ 0.16) per premium SMS. My Abuja has been downloaded 104,541 times to date.

First Aid This application contains over 20 detailed directions with diagrams on how to carry out first aid procedures such as artificial respiration and cardiopulmonary resuscitation (CPR). First Aid is available only on feature phones. Here too Greenspek (the company developing First Aid) initially allowed payment to be made with airtime. Following subscriber concerns that airtime would be charged and no download would be received, it switched to a premium SMS model. First Aid has a 60-second free trial after which the subscriber has to pay Nigerian naira 100 (US$ 0.62). Of this, Greenspek receives between Nigerian naira 20 (US$ 0.12) to 40 (US$ 0.25)

(20 percent to 40 percent revenues). On average, Greenspek receives Nigerian naira 25 (US$ 0.16) per premium SMS. First Aid has been downloaded 26,880 times to date.

Lagos Island Street Map Lagos Island Street Map is a mapping application covering Lagos Island, Victoria Island, Lekki, and Ikoyi. The map includes hotels, emergency response locations, and entertainment venues. The app provides directions from one location to another and operates offline. It is available only on feature phones. Greenspek (the company developing First Aid) initially allowed payment to be made with airtime. Following subscriber concerns that airtime would be charged and no download would be received, it switched to a premium SMS model. Lagos Island Street Map has a 60-second free trial after which the subscriber has to pay Nigerian naira 100 (US$ 0.62). Of this, Greenspek receives between Nigerian naira 20 (US$ 0.12) to 40 (US$ 0.25) (20 percent to 40 percent revenues). On average, Greenspek receives Nigerian naira 25 (US$ 0.16) per premium SMS. Lagos Island Street Map has been downloaded 55,133 times to date.

FIGURE 21: First Aid Business Model

Greenspek

25 Naira per premium SMS

App download

75 Naira per premium SMS

100 Naira per premium SMS

User Mobile Operators

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FIGURE 22: Lagos Island Business Model

Greenspek

25 Naira per premium SMS

App download

75 Naira per premium SMS

100 Naira per premium SMS

User Mobile Operators

1999 Constitution of the Federal Republic of Nigeria This mobile application provides the 1999 Constitution of the Federal Republic of Nigeria (2nd Amendment), and also installs the Nigerian national anthem as a ring tone. Greenspek (the company developing First Aid) initially allowed payment to be made with airtime. Following subscriber concerns that airtime would be charged and no download would be received, it switched to a premium SMS model. The Constitution app has a 60-second free trial after which the subscriber has to pay Nigerian naira 100 (US$ 0.62). Of this, Greenspek receives between Nigerian naira 20 (US$ 0.12) to 40 (US$ 0.25) (20 percent to 40 percent revenues). On average, Greenspek receives Nigerian naira 25 (US$ 0.16) per premium SMS. The Constitution app has been downloaded 234,559 times to date.

MoBiashara The MoBiashara platform allows business owners to quickly and easily build mobile storefronts and begin selling their products online using their own brands. The mobile storefront works on any device,

including feature phones. The storefront includes a unique website address (for access via the mobile web) and a branded SMS storefront using a dedicated SMS short code. Three clients use the MoBiashara platform: Farafina Books, terrafood (offering local Nigerian cuisine) and the ViaCasa Boutique Hotel. On the mobile web, goods are paid for with credit cards, mobile money, or Verve cards (these transfer funds across all payment channels in Nigeriaâ&#x20AC;&#x201D;ATM, point of sale, web, mobile, and kiosk). With feature phones, goods are paid for by premium SMS. MoBiashara charges Nigerian naira 30 per transaction. The mobile operator takes 70 percent of this leaving MoBiashara with the remaining 30 percent (Nigerian naira 9). MoBiashara keeps the entire amount. The businesses benefit from the exposure and the ability of customers to conduct transactions via mobile phones. MoBiashara is in the beta phase with a limited number of transactions.

FIGURE 23: 1999 Constitution of the Federal Republic of Nigeria Business Model

Greenspek

25 Naira per premium SMS

App download

75 Naira per premium SMS

100 Naira per premium SMS

User Mobile Operators

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FIGURE 24: MoBiashara Business Model

Business

Storefront

30 Naira

User

premium SMS

FIGURE 25: WeCyclers Business Model

Recycle Processor

150 Kg WeCyclers points 33 USD

via SMS

Households

recycle material Servers are being updated via m-app

WeCyclers WeCyclers uses a fleet of low-cost cargo bicycles to offer a convenient household recycling service in densely populated low-income neighborhoods in Lagos. Families are motivated to recycle plastic bottles, plastic sachets, and aluminum cans through an SMS-based incentive program. The families receive redeemable WeCyclers points over their cell phones for every kilogram of material they recycle. Families can redeem their points for goods such as airtime, basic food items, and household goods. The material collected by WeCyclers is sold to local recycling processors. WeCyclers has 3,500 households representing 19,000 individuals participating in the program. WeCyclers’ revenues come from selling recycled goods to local recycling processors. Each bike collects an average of 150 kilograms of recycled goods, earning $33 with a profit of $11 each day. In addition, corporations can sponsor incentive

Bicycle collectors

programs, covering the costs of service provision to households.

Jobs in Nigeria Jobs in Nigeria is a mobile application linking employers and job seekers. It has over 80,000 members and is available on feature phones, Android (via Google Play), and the Blackberry App Store. It is free to job seekers. Employers pay a tiered monthly subscription depending on the number of job postings, ranging from Nigerian naira 5,000 (US$ 31) to 10,000 (US$ 62) per month. Revenues in September 2013 were between Nigerian naira 80,000 (US$ 496) and 90,000 (US$ 558). In addition to subscriptions, Jobs in Nigeria edits résumés. Charges vary: Nigerian naira 2,500 (US$ 15.5) for entry level résumés, Nigerian naira 5,000 (US$ 31) for mid-career résumés, and Nigerian naira 10,000 (US$ 62) for senior management résumés.

FIGURE 26: Jobs Nigeria Business Model

Businesses

Monthly

Free app

subscription

Free job search

Job seekers

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FIGURE 27: Nigerian Constitution App Business Model

Donor

Nigerian Constitution App The Nigerian Constitution is a mobile application that makes the constitution readily available to Nigerians. It is available on Android, Blackberry, and Nokia, as well as feature phones. It has over 900,000 downloads. Users can share parts of the constitution with other subscribers via Facebook. It is sponsored by the Indigo Trust and supported by ccHub Nigeria.

Other Apps Worth Mentioning • Amebo—Amebo brings you the latest news and gossip from across Nigeria. Users can read YNaija, OMG, 360nobs, InformationNG and easily share to Facebook and Twitter. It is available at the Nokia Ovi Store, and has a 70–75 percent retention rate among those that download the app. • Kuluya—Just six months after launch, in May 2013, Kuluya announced that it had been valued at $2 million after the seed-investment round. The company is primarily focused on its catalog

Free app

Users

of 65 online games31 but is now developing mobile games and has a catalog of four mobile games. Its bestselling mobile game is Oga @ the Top. • Dobox—Dobox is an entertainment on-demand movie and TV series app available on Android. Users can rent movies and TV series. Dobox has just been signed up by MTN. Subscription rates are $2 per week. • Jandus—Jandus Radio is a mobile application that allows you to listen to Nigerian radio and other African radio stations on mobile phones. It has received a $200,000 capital investment from the Lagos Angels Investors’ Network. • Quickteller—This is a bill payment app being developed by Interswitch, Nigeria.

31 Ventureburn, Kuluya kicks off Nokia partnership with launch of ‘Oga @ the Top’ mobile app, available at http:// ventureburn.com/2013/11/kuluya-kicks-off-nokiapartnership-with-launch-of-oga-the-top-mobile-app/

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Mobile at the Base of the Pyramid: Nigeria

Growing Innovation ÂŠ2014 infoDev / The World Bank | 1818 H Street, NW | Washington DC, 20433 Email: info@infoDev.org | Tel + 1 202 458 8831 | Twitter: @infoDev www.infodev.org

Mobile

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