Rachel Keeler attended Google’s Nairobi get-together to introduce Stefano Hesse, their new head of corporate communications for Africa, and wondered what the grand plan was since it doesn’t appear to be making money, not for a while at least.
I’ve always found it difficult to keep a straight face when corporate execs tell me they are not interested in making money. This happens all the time in Africa, and the subtext I suppose is that “good” companies do not publicly chase bottom lines in poor places. Sometimes they are lying and sometimes they are not, and I really can’t figure out which one is worse. But they both make me cringe, and while I understand it will take time to overcome the legacy left by truly rapacious resource extractors in Africa, I would argue that other companies operating here need to give profit a chance.
The latest example comes from Google. The American search engine giant set up offices in Kenya two years ago, and now also has operations in Ghana, Uganda, Nigeria, Senegal and South Africa. Like everyone else, Google is interested in Africa’s rapidly growing mobile phone penetration. The company recently rolled out a suite of SMS services in Uganda, where mobile users can now buy and sell everything from cars to chickens on “Google Trader”, and obtain health and agriculture tips, news, weather and sports, all from the cheapest Nokia handset on the market. There is also the minority stake bought last year in Mobile Planet, a Kenyan business that has grown from a lucrative contract to provide mobile content to Safaricom. That investment has been a good one for Google. But the truth is, outside of its sales in South Africa, the company is losing money on most of what it does on the sub-continent.
So - there must be a plan to make money eventually, right? I posed this question recently to Google’s Nairobi staff, who had invited the media out for drinks and to meet Stefano Hesse, new head of corporate communications for Africa. The answer I got was basically: yes, Google is “not a charity”, so there is the expectation of profit, but in a very long-term, ‘someday’, vision kind of way. And this is made possible by the fact that Google simply has more money than it knows what to do with (Google’s 2008 net income was USD4.2bn - slightly less than a third of Uganda’s 2008 GDP, and a good billion more than the country’s annual budget), and is interested in spending that money in humanistic ways.
Google corporate culture has refreshingly always been just as much about quality of life and innovation as it is about profit. And the company has made a business out of democratising access to information around the world. So it is not surprising that investing in information platforms in Africa would be a priority regardless of the immediate revenue streams involved. It will also be a long time before Google’s classic business model based almost entirely on online advertising can work in Africa. For online advertising to thrive, a lot of things have to happen at once: solid consumer demand, high internet penetration (which entails access to expensive hardware and electricity), local content, decent literacy rates, and a culture for e-commerce that includes prevalent credit card use. It could be decades before all of these factors come together, even in a relatively advanced economy like Kenya’s.
The Googlers say they are prepared to wait it out while implementing a “product-driven strategy” in the meantime. Helping people access services and entertainment through mobile phones is step one, along with training local application and software developers. But the ultimate goal is to inculcate a culture of internet usage by linking mobile services to websites and showing people how they can access jobs and education and money-making opportunities online. The idea is that when Africa eventually comes online, Google will benefit from the investments it makes now.
As a very very long-term perspective, this makes sense. But why not explore the seemingly obvious money-making opportunities surrounding the mobile content services Google provides now? If Africans are looking more and more to their mobile phones as sources of information (whether it’s how to grow maize or football scores), surely they might be willing to pay a few shillings extra for those services. Or surely the prospect of reaching millions of mobile users might appeal to advertisers. Google managers on the ground cite limits to the average African’s disposable income. And the underlying expectation is that mobile advertising will face many of the same constraints, especially concerning consumer demand, as its online cousin. But devising innovative business models along these lines does seem like a good way for Google to keep itself busy as it awaits the online “revolution”, especially considering that the way internet use will evolve in Africa remains quite difficult to predict.
So why ignore all of these immediate options? I can only describe the answers I received to these questions as somewhat lofty. One Googler argued that SMS-obsessed Africans deserve more than they think to demand: a broader information experience that can only come with full access to the internet. We just have so much money, another said. May as well take the time to research the markets and build really great products before worrying about a measly little thing like revenue.
As long as Google has other motives for doing this, I suppose Africa will benefit from free access to new services. But that is not the way to build up an industry that lasts. Swooping in with piles of cash and offering free goodies has been tried before in Africa - see the aid industry. Google will undoubtedly go about this more professionally than aid agencies. However, a point to consider is that the telecoms and ICT industry is actually vibrant and growing rapidly – and on a commercial basis. So how can those local entrepreneurs who want to enter this market to earn a living compete against the mighty G who don’t have to worry about pricing their products to cover costs, let alone make a profit? The opportunities for profitable enterprise in technology and telecoms in Africa are huge. But the industry will only grow, diversify, create jobs, meet real instead of imagined demand, and ultimately be sustained through competition and profit. Maybe Google and others need to drop the label (and attendant perception) ‘the poor’ for the low-income part of their demographic. Safaricom with its M-PESA money transfer product, for example, has shown that people form every income bracket will pay a substantial transaction fee for a service they consider useful.
|
Subscribe to this comment's feed
Show/Hide comment form
USD 
GBP
EUR 
AUD
CAD
JPY