The developers' dilemma: Why more smartphones won't necessarily mean more profits
Africa's technology sector is booming, and it's being largely driven by the wholesale adoption of mobile phones. The last several years have seen hubs of mobile innovation emerge everywhere from Lagos to Kampala, all filled with developers eager to solve the continent's problems through technology, one application at a time.
The m:lab in Nairobi is an incubator for Kenyan developers, and the birthplace of hundreds of apps for everything from agriculture and the health sector to personal finance. James Nakola, who works at m:lab, has created dozens of such apps over the past two years alone. His most recent project, Toto Health, helps mothers keep track of their child's development.
But like nearly all of Kenya's most successful apps, Toto Health doesn't require an internet connection; it is SMS-based, and designed to be used on a feature phone. Nakola says that for the moment, this is the only way to reach the masses. "Not many people in Kenya have smartphones," he adds.
But most tech watchers agree that this situation is about to change.
In January, carrier MTN launched a smartphone in South Africa that cost less than $50, and in early November Mozilla announced plans to bring the first Firefox OS smartphones to Africa, which, judging from prototypes, may eventually sell for as little as $25.
These are the first ripples of what analysts say will soon be a tidal wave of cheap smartphones that will transform the continent, giving millions of people access to the internet for the first time. In its Africa Telecoms Outlook 2014, Informa Telecoms and Media predict that mobile date revenues will nearly triple by 2018, and mobile broadband subscriptions will more than quadruple.
Cheap smartphones change lives
Cheap smartphones will undoubtedly change the lives of African consumers, but according to m:lab's Sheilah Birgen, they could transform the homegrown tech industry as well. "For app developers it's huge, because now you can make apps for your people, for the challenges we have locally, as opposed to maybe white-labeling or trying to customize something from somewhere else," she says. "Now they can make apps for this market, and get a good user base."
Nakola has already seen the writing on the wall. "Developers now are trying to move to smartphones as opposed to SMS, because you can see the change in the market," he says.
But they may not have seen it quickly enough. Speaking at a conference in Lagos in July, Gareth Knight, the founder of Tech4Africa, sounded a warning. "Why don't I see a lot of apps from Africa?" he asked the audience. "Do we want the Germans coming to our shores and eating our lunch?"
Although Africa is filled with developers churning out apps, he added, almost none of them are scalable and very few are profitable. The $50 smartphone may be just around the corner, said Knight, but unless something changes African developers won't be making much money from it.
This is a trend that is already visible; even among Africa's current smartphone users, m:lab's Nakola admits, very few of the apps in use were developed locally. "Penetrating the local market is a big challenge," he says. "Most people want to use those applications that are already trending, that are already famous." And, he adds, all the most popular apps were developed in the West.
Building business-savvy
It's a difficult market for late arrivals, says Nakola, and Africa's technology sector is still relatively new - and few developers understand the importance of marketing their creations. "You find someone working on their own, they have no experience in business, they don't know how they can grow this out to the market and make something profitable from it," he says.
"They didn't do any research; they thought intake would just be automatic," adds m:lab's Birgen, who says that not enough developers see themselves as entrepreneurs or think of their creations as businesses. "They just want to make an app and say, 'I have 15 apps in the Android store'. I think that's changing, but that was one of the reasons why it was not scalable," she says.
A number of organizations, including m:lab, are trying to train local developers in how to make their apps competitive and profitable. They run business training and networking events, and even have a testing room so developers can see how consumers interact with the products.
But at the end of the day, says Birgen, the problem may simply be that despite several years of vigorous technological growth in Africa, people like Nakola still represent the continent's first generation of app developers who haven't seen examples of successful, profitable exits from within their ranks. The idea of growing to the point of going public or selling to a larger company simply isn't on the horizon, she says, because no one has seen it happen yet.
But, she adds, it almost certainly will. "Our ecosystem is very young, and ours is a mobile ecosystem. What will come from this market... will be huge globally, will be mobile," she says. "The moment we start having exits, it will happen."
Local apps on the up
It might already be happening. A handful of locally-developed apps have managed to scale up, and even to expand regionally; one example is Kopo Kopo, a mobile payment tool for merchants, which has partnered with Safaricom in Kenya and is moving into markets across East Africa.
Then there are the apps which make no attempt to solve real-world problems. Ma3Racer, a game in which Kenya's notoriously wild public minibuses (called matatus, or Ma3's) dodge obstacles on the road, has been downloaded over a million times, says Birgen. Most of these downloads are from outside Africa, where people have never seen an actual matatu.
m:lab's Nakola is confident that African ideas are good enough to spread. "We are unique. We have our own story to tell, we have our own way of living, and I believe we can come up with solutions that can be used globally," he says. "We'll get there."
But whether that will happen in time to take advantage of the $50 smartphone is another question entirely.