Posts Tagged ‘cyber cafe’

Impact of mainstreaming and commodification of cyber cafe services

Around 2007, the urban cyber cafe industry began to display signs of maturing as the market saturated and the services specific to internet access underwent a process of commodification.  As it came to be perceived as no different a business than setting up a corner kiosk or hot dog stand, there was a shift in the profile of owner/operators. Many employed professionals such as doctors, teachers, accountants et al purchased going concerns as a means to increase their income streams, considering it no different from owning any other type of  shop which could be manned and run by employees during the day.  While computer literate, few in this new segment of owners were the computer savvy technical specialists or hobbyists who’d originally set up internet operations as a business nor were their employees for the most part.

Given this context, Mathew, who runs a thriving cyber cafe business spread over three towns a couple of hours north of Nairobi, articulated three reasons why many cybers were seen to have shuttered their business:

1. Gaining a reputation for unreliability – Inexperience and/or lack of knowledge on basics like virus management, maintenance or even not knowing how to make all the equipment work meant that systems were often down or not working properly quickly leading to customers avoiding the shop.

2. Quality and training of staff – There would be a difference in operations if the owner were to check in with the business and dealt with issues as they arose rather than showing up once a week for example. Finding qualified people to manage the cafe in the meantime, ensuring that at least one person with the requisite technical knowledge was at hand or on call was imperative to ensure the smooth running of the operations and gaining customer confidence regarding the quality of services offered.

3. Customer relationship management – Thus, building relationships with customers, ensuring loyalty and repeat returns over the long term was of importance to sustain the business.  Mathew himself had a sophisticated customer loyalty program in use across his three cafes – a smart card which could be purchased for differing amounts in advance and printed with the customer’s photograph. He had set up a system by which his staff could monitor and track minutes used by this user base across the three different locations. It ensured loyalty as well as provided an upfront cash payment that is one of the benefits of a prepaid business model.

Perhaps this was why the decline was being seen so obviously in urban locations accustomed to having a cyber at every corner. In Mombasa, one of our interviewees mentioned that it felt like there was one in every building.  The urban industry had matured to the point that a cyber was as ubiquitous as an MPesa dealer or Coca Cola kiosk with the subsequent assumption by many that it could be run as easily as any other business. This aspect does not diminish the impact of other market forces such as internet enable mobiles and affordable data plans and modems but does help explain why we kept hearing that business was growing whenever we stepped out of the city.

As technology diffuses outward from the urban metros, the cybers are seen in ever smaller market towns and highway crossroads, that is, the industry is still in its growth phase, though certainly not in its infancy. A short conversation with a small town mobile shop assistant informed us that they were selling an average of 5 broadband modems a month and she herself found it cheaper and more convenient to browse via her phone. Another young man employed by a national operator observed that education was a critical factor as well – not in terms of the basics, as the region he supported had a very high literacy rate, but in terms of locales where more young people were going off to college and university, being exposed to the potential of this new technology then bringing it back home for it to spread further.

What this seems to imply is that its the casual or social browser – the chatting on IM, the Facebooking, the occasional email – who seems to have cut down on their cyber visits, and this is often the largest segment of people going online. The hard core enthusiasts, the business users or anyone who has not yet invested in their own set up but prefers the “comp” to quote one young man, aren’t abandoning their trips.

What is happening however to the industry as a whole is a natural evolution. In the city, its the innovators who are thriving even as the basic shops decline – a case of may the fittest survive. None among the knowledgeable IT savvy owner operators ever even considered the mobile as a threat to their business, perceived or otherwise. The only constant response to the subject was that of the pricing plans mentioned earlier.

While the answer to the question of whether its mobiles that are pushing the cyber cafes out of business seems to increasingly be a No, our exploration of market forces acting on the industry is still throwing up factors that we had not taken into consideration when we began.

The role of the cyber cafe: Assisted entry ramp onto the information superhighway to use a cliche

Monica’s cyber in the small town of Maai Mahiu, a market for a primarily rural area, is now the only such facility available. There was another cyber on the other side of the main highway, she said, but it closed within its first year of operation.  Internet access in this locale is available only through 3G and its a poor signal with spotty data performance.  JamFram Cyber Cafe offers the town its only source of business support services – photocopy, lamination, binding, secretarial services as well as 6 desktop computers networked on a 3G router.  When we were there, the electricity was out across the town and she was happy to talk while waiting for the lights to come back. In the half hour we were there, only two customers walked in – one asking for a photocopy, the other to check on his documents given for typing.  The cyber business was slow though she’d noted that mobile requests were increasing – the local phone dealer sending new owners of data enabled phones down to her to help them set up an email account and a Facebook page as well as the settings to permit browsing.

So why would the townspeople call her when she took a slightly longer Christmas holiday earlier this year, making her cut short her intended holiday until the middle of January and return to open shop by the 3rd? Why were they concerned that she might have decided to shut shop like the other cyber which gave up after 5 or 6 months? We were left with the impression that the townspeople would support her business bureau’s continued existence than lose access to her range of services.
We found that the cyber cafe has a role to play in the local community beyond the simple service of walk in to browse the internet.

Broadly the roles can be clustered under these main categories:

The cyber as intermediary across the digital divide (ICT)


In people’s minds, ‘Internet’ was associated with the cyber cafe. We heard this over and over from cyber cafe staff that various telco dealers would send across customers facing challenges with the setup of their data enabled phone over to the cyber for help. Or after making the purchase of an internet enabled phone, people would come over to the cyber first – since you cannot set up an email account then make a Facebook page without a computer. Even someone like Jacqueline in Kagumo who was working at the local phone dealer and was saving up for her own laptop and browsed primarily through her phone had to visit the cyber first.

In Malindi, a significant proportion of Salmatech’s customers were the beachboys whom market forces (their international tourist clientele) were forcing onto the internet via email, Skype and Facebook. Necessity drove them to learn how to use the basics of the computer enough so that they could respond to inquiries, communicate and make bookings in advance of the high season – this was critical enough that they would often trade off topping up airtime minutes on their mobiles in order to have money for the cyber’s minutes of use. Here, the cyber was the go to place, even if some of them already owned laptops gifted by tourist friends, to learn and be informed about the hardware, the software and critically, the utility of the internet.

Most cybers offered customers the Kenyan Revenue Authority (KRA) online services for a fee – the facility to get PINs and submit VAT returns online being one of the first egovernment services rolled out nationally. Other such services offered were US Greencard lottery applications, visa application services, registrations for national examinations, even bus ticket bookings when offered online.
But the mediation was not simply between the customer and the internet. Cyber cafes whose operators had a technical background also tended to be full of spare parts and supplies, many offering maintenance and support for hardware in addition to basic services like virus removal, software updates and configuration.

We also found some cybers, particularly those with fixed unlimited access (such via WiMax or DSL), acting as micro ISPs – running cables out to their neighbours for a fixed monthly rate (usually much lower than what the service cost) in order to mitigate the risk of being unable to cover the cost since incomes were otherwise irregular and often unpredictable. But this behaviour, imho, has less to do with their role as an intermediary – though in fact that is what it could said to be – and more to do with coping mechanisms to help manage expenses on volatile cash flows.

The cyber as a training ground

Whether its formal classes offered in basics of computer use or simply the help received from a friendly generous cyber cafe staff or owner, the cyber is most often where learning and practice both online and on the computer takes place.

The cyber as a social place

Primarily seen in locations where there were many young college students, the cyber seems to have become the local hangout. Boy and girls were seen waiting outside for their turn at email or Facebook, chatting with friends, relaxing and mingling with no hurry to get anywhere or do anything in particular. One newish cyber in Kilifi even had an ice cream parlour with cozy tables and chairs in the front half of the spacious store, all decorated in bright colours and visuals.

The cyber as a business bureau

The majority of cybers tend to offer at minimum printing services along with scanning and photocopying depending on their choice of equipment. Most however offer lamination, binding, a variety of typing and basic typesetting services as well. Photo printing, passport photos and mPesa or airtime sales can also be added to increase sources of income but the basic concept of support services tend to default to the local cyber. This role perhaps explains why Monica’s clients were concerned enough to encourage her return to work even if browsing the internet may not have always been their choice of service.

Typesetting or typing services have expanded to include helping students with their research online in some cases, and in places where the internet was not a popular enough service, this facility offered the opportunity to develop a regular clientele of small businesses, local government offices and students to sustain the business.

Our two shillings worth on the Kenyan ICT revolution

The World Bank’s Wolfgang Fengler has recently written a blogpost titled “Learning from the Kenyan revolution” referencing the penetration and use of not only ICT devices but also mobile money services. He makes optimistic predictions for the futures, viz.,

What are the lessons of Kenya’s ICT revolution for the broader economy of Kenya and for other countries? First, this revolution is not just for the young tech-savvy programmers that huddle at iHub. ICT is no longer a niche sector of the economy. It has become mainstream and affects virtually every actor and every sector of the economy. It’s misleading to talk about a so-called “new economy” because it has in fact changed the way the old economy is operating. Over the next years, the biggest innovations will probably come from the incubation of technology in “traditional” sectors. The financial sector is already in the midst of this transformation, with mobile money as the most visible sign.

This is truly a revolution on many levels observable and prevalent across socio economic strata – those who may choose set a different bar – without contextual understanding of the local landscape – are welcome to miss the boat when its left the harbour.

From small market towns in rice growing districts (where we’re told 3-5 mobile broadband modems are sold each month) to urban metro malls piloting pay as you surf (by mobile money) wifi hotspots in cafes and restaurants, the internet landscape (the ICT or even mobile landscape even) is rapidly evolving so much so that different parts of  the country display a fragmented distribution on the market maturity curve.

The two urban metros of Nairobi and Mombasa have plateaued (wrt to cyber cafes as the key access point thus leading indicator given their role as gatekeepers to access) and are showing signs of decline even as the number of personal computing devices imported into the country show 100% growth year on year. Increasing policy driven digitization of government and educational services – from tax return pin numbers to examination registration or even booking bus tickets – mean that the smaller population centers are now steeply on the growth curve, with signs in certain provinces that this diffusion will only spread further outward.

Couple this with more and more affordable and ubiquitious smartphones and data enabled handsets, those who otherwise wouldn’t require either computers or the internet for their work, are now going online due to the pull of social networks like Facebook. For an extremely socially connected and communicative society, this fact alone is driving data sales for mobile operators as the Facebook generation goes online – Kenya has an 85% literacy rate and the median population is in their mid teens.

Is it changing the way people do business or is it a revolution quite unlike one that could have emerged from Silicon Valley or Bangalore? I do believe so – as the critical mass of mPesa users as well as dropping costs level the playing field, enterprise level solutions traditionally the purview of large corps like an Oracle or a SAP such as payroll management and real time inventory control, are migrating – cheaply and effectively – on to the mobile platform, able to reach the hitherto unconnected or unbanked on irregular income streams such as manual laborers or the tiniest village kiosk.

It is this shift where the mobile platfom innovation will truly revolutionize – it has yet to occur in a more “tech” oriented India, but it won’t be long before these cost effective and technologically relevant solutions to securely pay farm labour by phone without trucking cash into fields yet being able to manage wages for 5000 or more migrate to the Indian environment. The solutions make too much sense not to consider them, perhaps the next leapfrogging will be over the desktop/mainframe divide.

The caveat however is that we should not assume that people will go online the same way we do in our broadband nations with unlimited bandwidth and years of contextual knowledge not to mention the plethora of relevant content, nor should we assume that the observed ICT revolution would necessarily follow any previously mapped trajectory of other regions or technology clusters. The environment is in extreme flux yet it is this plasticity that also makes it an extremely inviting opportunity for innovation in services , with all the potential for positive change that yet-to-be crystallized environments imply.

In conclusion: Lessons from The Village Telco project in Kenya

We’ve finally reached the point in our work for Village Telco where there’s been enough time for some reflection after the intense weeks of travel and observations across Kenya.  I can cluster our learning into three broad areas: our approach, methodology and team work; Kenya’s people and the informal economy; and finally, the role of the mobile phone and the internet across the country.

Facebook
Top of mind, what I would really like to do is take a deeper look at all the factors Why a social networking site like Facebook has become so popular – is it like Mxit, a far more affordable and convenient way to stay in touch with extended social networks or are there reasons beyond the obvious?  Given the variance in socio economic backgrounds and education among all those who were active on this platform, I wonder whether there are learnings of value for the larger goals of what ICT can do to enable social and economic development. Instinctively I feel its not Facebook per se that is the critical factor, like a Mxit in South Africa or an Orkut in Brazil, it simply happened to be there. However, given my approach to increasing understanding of a particular demographic or validating a hypothesis, my first principle is to question my own instinct and subsequent assumptions.

Mobile Phones and the Internet
Our assumptions and inferences from the surplus of information and data available on mobile phone use in Kenya, for both online use as well as regular use, were seriously jolted. You could say we had the veil torn from our eyes.  A future post that has been percolating is one that turns my entire thinking about the Mobile and the BoP upside down, from the point of view of “the mobile as a platform for social and economic development” for the individual.

A big realization was that it was technically impossible for people to go online  – if it wasn’t just  the initial peek at Google or Yahoo or what have you – from their mobile device without visiting a cyber cafe (or using a computer) first. If you are a first time internet user and plan to use the mobile as your primary device to check your email and update your status in Facebook, you are unable – at this moment in time – to create your email account, and subsequently your Facebook page, without the use of the personal computer.

The second was that very few of these new internet users were cognizant of the way mobile operators structure the cost of browsing and data bundles. Safaricom, the country’s largest operator, had at least 3 different prices that I’d seen on their billboards and posters – Ksh 4 per minute if you simply went online, Ksh 2 per minute if you sent an sms for data conversion and finally, purchasing a data bundle or browsing package (unlimited by the day or bundle) which brought the cost down further. Thus many reverted back to browsing at cyber cafes where at least one knew what one’s cost would be or could estimate it in advance. Consumer education will be more critical for the uptake of the mobile internet since it is currently not to the benefit of either the operators or the cyber cafes to inform users about their cheaper options.

Kenya is different
We sensed this, we discussed it with Steve Song and we also heard it from others with years of experience of doing business in Sub Sahara. Kenya, as a representative sample of Sub Sahara or even East Africa, is a very different kettle of fish, all in a good way. It wasn’t just luck that most of the cyber cafe owners we met around the country were enterprising, articulate and opportunistic. Neither was it chance that very rarely was I unable to communicate – at least the basics – in English, no matter where we went.

Internet costs, mobile data and voice costs are significantly lower than in most countries and this factor, taken together with the maturity of the urban cyber cafe market and penetration of computing devices – laptops and desktops – meant that this was a very sophisticated market regionally. One cannot generalize our findings for other countries, in fact one would hesitate to do so. Rather, as we discussed with Steve, we’ll take Kenya as a leading indicator of shifts to come in the near future for the rest of the region. For example, VoIP as a service has atrophied into two or three neighbourhoods ever since international calling rates have stabilized at around Ksh 3 a minute (USD 3 cents or thereabouts) on the other hand, wifi is slowly demonstrating its future ubiquity.

However, some other factors would also play a part in this – literacy is at 85% here; what kind of difference does that make when it comes to uptake and popularity of text based communication mechanisms such Facebook, email and of course, the SMS.  Education makes a difference, since most of the time, even when passing by some of the technically most impoverished parts of the country, I kept feeling that it was in far better shape relative to similar locales in India. This is all good and bodes well for the future of the nation and the region – if I had to launch a wholly new product for the Sub Saharan market, I’d select Kenya for an environment with the lowest barriers to the adoption of innovation. The BoP market is sophisticated and mature while still demonstrating the core values and buyer behaviour seen everywhere else I’ve been.

In conclusion
We now have an innate sense of the Kenyan landscape when it comes to ICT: the technology, the internet and the phone. A gut feel for the where and how and why the diffusion is taking place, outward from the urban metro that is Nairobi and an instinct for the pulse of the country’s progress. The critical role of the cyber cafe was made apparent by the focus of this project and our philosophy and methodology in approaching this problem to be solved – answering Steve’s questions – has been validated and refined. For example, we found that the figure for our estimate for proportional penetration of internet between two regions differed from the Kenya ICT Board’s Access Gap Analysis data only by 0.2

We learnt that no two projects will ever be alike and the only certainty is uncertainty. There are no prepackaged ready made solutions or processes for the challenges we’ll face in our chosen line of work, however we’re on the right path for discovering the ways and means to use the tools available at our disposal in order to best address them.

Today, we’re confident enough to put it in writing that if you’re seeking answers to the unknown, in untapped or overlooked markets and when none of the regular methods and frameworks for addressing your marketing, strategy or design needs seem to work – give us a call or drop us a line. I believe we can help you.

At the inflection point of high growth to mature plateau

Focus Cyber - the largest one in town, Wote, Kenya 1st Nov 2011

The only other cybers we’d seen this packed till now had been those in Nakuru – a veritable boom town for the industry- since in the past 5 years, the numbers had grown from 10 cybers to the current 77 not including the ones in the process of opening.  Focus Cyber in Wote, in an entirely different province on the other side of the country was the largest among the 5 or 6 cafes in this town among a mostly rural area thats more economically challenged than the other places we’ve seen.

Alex the manager mused upon the future of his business –  it actually struck him during the course of our conversation that the boom had begun suddenly in late 2009, gone on for a while and he felt that it had begun to taper out earlier this year around April or May. In fact, he conjectured, would next year be as good as this one and was the boom period over the business?

This observation inspired us to take a closer look at Wote’s ‘cyber boom’ aka the growth phase on the industry growth curve – here, it was less to do with increasing numbers of cybers the way it was in Nakuru. The push towards increasing use in internet – Alex’s cyber had been the first in town, opening its doors back in 2007 – had been impelled the increasing digitization of Kenya’s institutions – both government offices as well as educational institutions.  A recent spike in business seen by cybers in Wote (we’d also visited another location in town) was in September, just before the national examinations.  Now that examination registration for high school students could only be done online (just like KRA pins and VAT submissions) even teachers were coming into town from remote rural locations to register their students. The town itself had seen parents, students and teachers – the educational system as a whole – go online for a variety of reasons such as exam prep, registration and research, during this period.

Now though there was  directive from on high that all schools were to obtain their own computers and this factor was what made Alex ponder the future of his cyber traffic.  In a very different way from the urban digital plateau and decline seen by the industry in Nairobi, Wote was reaching a saturation point in that anyone who wanted to go online was already going online and there were enough cybers to support the existing business.

Single computer outpost off tarmac on the way to Wote, 1st Nov 2011

In way this could be said to be an inflection point for internet awareness in this region – Elizabeth from the other cyber cafe felt strongly that mobiles were not at all having an impact on their business. Her rationale was that customers found going online with the phone too expensive, approximately 4 Ksh a minute versus the 1 Ksh a minute that was standard in Wote. Only those who came in to town from remote locations were using the phone to browse – they’d stop by the town’s cyber to set up all their browsing needs.

Neither cyber cafe had observed any increase in ownership of personal computers or other devices. The computer and the internet seemed to have found its place in the community, allowing cyber cafes to continue their roles as intermediaries across the digital divide as well as business bureaus and office support services.

The role of the cyber cafe

The only place in town, Maai Mahiu, 24th October 2011

Monica’s cyber in the small town of Maai Mahiu, a market for a primarily rural area, is now the only such facility available. There was another cyber on the other side of the main highway, she said, but it closed within its first year of operation.  Internet access in this locale is available only through 3G and its a poor signal with spotty data performance.  JamFram Cyber Cafe offers the town its only source of business support services – photocopy, lamination, binding, secretarial services as well as 6 desktop computers networked on a 3G router.  When we were there, the electricity was out across the town and she was happy to talk while waiting for the lights to come back. In the half hour we were there, only two customers walked in – one asking for a photocopy, the other to check on his documents given for typing.  The cyber business was slow though she’d noted that mobile requests were increasing – the local phone dealer sending new owners of data enabled phones down to her to help them set up an email account and a Facebook page as well as the settings to permit browsing.

So why would the townspeople call her when she took a slightly longer Christmas holiday earlier this year, making her cut short her intended holiday until the middle of January and return to open shop by the 3rd? Why were they concerned that she might have decided to shut shop like the other cyber which gave up after 5 or 6 months? We were left with the impression that the townspeople would support her business bureau’s continued existence than lose access to her range of services.

We found that the cyber cafe has a role to play in the local community beyond the simple service of walk in to browse the internet. Broadly the roles can be clustered under these main categories:

The cyber as intermediary across the digital divide (ICT)

In people’s minds, ‘Internet’ was associated with the cyber cafe. We heard this over and over from cyber cafe staff that various telco dealers would send across customers facing challenges with the setup of their data enabled phone over to the cyber for help. Or after making the purchase of an internet enabled phone, people would come over to the cyber first – since you cannot set up an email account then make a Facebook page without a computer. Even someone like Jacqueline in Kagumo who was working at the local phone dealer and was saving up for her own laptop and browsed primarily through her phone had to visit the cyber first.

In Malindi, a significant proportion of Salmatech’s customers were the beachboys whom market forces (their international tourist clientele) were forcing onto the internet via email, Skype and Facebook. Necessity drove them to learn how to use the basics of the computer enough so that they could respond to inquiries, communicate and make bookings in advance of the high season – this was critical enough that they would often trade off topping up airtime minutes on their mobiles in order to have money for the cyber’s minutes of use. Here, the cyber was the go to place, even if some of them already owned laptops gifted by tourist friends, to learn and be informed about the hardware, the software and critically, the utility of the internet.

Most cybers offered customers the Kenyan Revenue Authority (KRA) online services for a fee – the facility to get PINs and submit VAT returns online being one of the first egovernment services rolled out nationally. Other such services offered were US Greencard lottery applications, visa application services, registrations for national examinations, even bus ticket bookings when offered online.

But the mediation was not simply between the customer and the internet. Cyber cafes whose operators had a technical background also tended to be full of spare parts and supplies, many offering maintenance and support for hardware in addition to basic services like virus removal, software updates and configuration.

We also found some cybers, particularly those with fixed unlimited access (such via WiMax or DSL), acting as micro ISPs – running cables out to their neighbours for a fixed monthly rate (usually much lower than what the service cost) in order to mitigate the risk of being unable to cover the cost since incomes were otherwise irregular and often unpredictable. But this behaviour, imho, has less to do with their role as an intermediary – though in fact that is what it could said to be – and more to do with coping mechanisms to help manage expenses on volatile cash flows.

The cyber as a training ground

Whether its formal classes offered in basics of computer use or simply the help received from a friendly generous cyber cafe staff or owner, the cyber is most often where learning and practice both online and on the computer takes place.

The cyber as a social place

Primarily seen in locations where there were many young college students, the cyber seems to have become the local hangout. Boy and girls were seen waiting outside for their turn at email or Facebook, chatting with friends, relaxing and mingling with no hurry to get anywhere or do anything in particular. One newish cyber in Kilifi even had an ice cream parlour with cozy tables and chairs in the front half of the spacious store, all decorated in bright colours and visuals.

The cyber as a business bureau

The majority of cybers tend to offer at minimum printing services along with scanning and photocopying depending on their choice of equipment. Most however offer lamination, binding, a variety of typing and basic typesetting services as well. Photo printing, passport photos and mPesa or airtime sales can also be added to increase sources of income but the basic concept of support services tend to default to the local cyber. This role perhaps explains why Monica’s clients were concerned enough to encourage her return to work even if browsing the internet may not have always been their choice of service.

Typesetting or typing services have expanded to include helping students with their research online in some cases, and in places where the internet was not a popular enough service, this facility offered the opportunity to develop a regular clientele of small businesses, local government offices and students to sustain the business.

The increasing importance of user experience for cyber cafes

Cake Plaza, near Prestige, Ngong Road, Nairobi June 2011

This idyllic garden paradise is our favourite hangout and interestingly enough, our cyber cafe, in the literal sense of the words, since it provides free wifi along with your coffee and butter cream cake. Given our recent single minded obsession with internet access and cyber cafes, it was only natural to fall into a conversation with Cake Plaza’s personable young manager, Ken about his wifi set up and his observations. Ironically (or naturally) this short exchange gave us much food for thought.

In summary, the free wifi is part of Cake Plaza’s marketing budget and it was installed exactly one year ago. In this time, Ken has noticed more people using their phones to browse – they have to request the password for wifi access but he’s also noticed an increase in people coming in with laptops – his thinking is that people enjoy the sense of space and privacy offered by sitting at one of the tables over the conventional cramped cyber experience. In fact, there are groups from out of town who’ve taken up the private room by the week as a temporary work space, paying 1000 Ksh (approx US$ 10) a day for the privilege of reserving it for their use.

Individuals tend to come in the evenings after work, may or maynot have their own mobile broadband modem but it seemed as though after the work day was over, this was where they relaxed with personal browsing for an hour or two before heading home for their dinners. He does have a policy of switching off the internet access for those customers whom the waitrons notice don’t order anything from the menu.

It was this last part that clicked with Muchiri, who, by the way, has the past experience of setting up a successful cyber and selling it as a going concern.  The fact that wifi usage is dependant on purchase implied a business model. While Cake Plaza is an excellent bakery (the owner is an experienced Korean chef) in its own right and not in the cyber business per se, it did have a policy (and password) for its excellent free wifi.

This meant that for many of the evening browsers  making the trade off  between spending a 100 Ksh on a cup of coffee for 60 minutes of browsing may often be a preferable choice to spending just 60Ksh in the local cyber. That is, it was the experience that was drawing the wifi seeking traffic – we can attest to that because we did it often enough ourselves, usually spending far more than we would have at a cyber for the equivalent amount of time.

This reflects back to what I wrote about Robert’s concept of a spacious business center in downtown Mombasa offering comfort and convenience to transient CNF agents and highly mobile urban professionals. As the industry has matured, Muchiri said, it was not about “The Internet” anymore but the customer experience.  Indeed, there may not be cybers in the traditional sense eventually but instead there’ll be business centers, work spaces, hot spots and coffee shops etc – just the way they are found in Singapore or San Francisco.  And if so, then this evolution has already begun here in Nairobi, Kenya.

Impact of mainstreaming and commodification of cyber cafe services

Central Business District, Nairobi, 6th October 2011

Around 2007, the urban cyber cafe industry began to display signs of maturing as the market saturated and the services specific to internet access underwent a process of commodification.  As it came to be perceived as no different a business than setting up a corner kiosk or hot dog stand, there was a shift in the profile of owner/operators. Many employed professionals such as doctors, teachers, accountants et al purchased going concerns as a means to increase their income streams, considering it no different from owning any other type of  shop which could be manned and run by employees during the day.  While computer literate, few in this new segment of owners were the computer savvy technical specialists or hobbyists who’d originally set up internet operations as a business nor were their employees for the most part.

Given this context, Mathew, who runs a thriving cyber cafe business spread over three towns a couple of hours north of Nairobi, articulated three reasons why many cybers were seen to have shuttered their business:

1. Gaining a reputation for unreliability – Inexperience and/or lack of knowledge on basics like virus management, maintenance or even not knowing how to make all the equipment work meant that systems were often down or not working properly quickly leading to customers avoiding the shop.

2. Quality and training of staff – There would be a difference in operations if the owner were to check in with the business and dealt with issues as they arose rather than showing up once a week for example. Finding qualified people to manage the cafe in the meantime, ensuring that at least one person with the requisite technical knowledge was at hand or on call was imperative to ensure the smooth running of the operations and gaining customer confidence regarding the quality of services offered.

3. Customer relationship management – Thus, building relationships with customers, ensuring loyalty and repeat returns over the long term was of importance to sustain the business.  Mathew himself had a sophisticated customer loyalty program in use across his three cafes – a smart card which could be purchased for differing amounts in advance and printed with the customer’s photograph. He had set up a system by which his staff could monitor and track minutes used by this user base across the three different locations. It ensured loyalty as well as provided an upfront cash payment that is one of the benefits of a prepaid business model.

Perhaps this was why the decline was being seen so obviously in urban locations accustomed to having a cyber at every corner. In Mombasa, one of our interviewees mentioned that it felt like there was one in every building.  The urban industry had matured to the point that a cyber was as ubiquitous as an MPesa dealer or Coca Cola kiosk with the subsequent assumption by many that it could be run as easily as any other business. This aspect does not diminish the impact of other market forces such as internet enable mobiles and affordable data plans and modems but does help explain why we kept hearing that business was growing whenever we stepped out of the city.

As technology diffuses outward from the urban metros, the cybers are seen in ever smaller market towns and highway crossroads, that is, the industry is still in its growth phase, though certainly not in its infancy. A short conversation with a small town mobile shop assistant informed us that they were selling an average of 5 broadband modems a month and she herself found it cheaper and more convenient to browse via her phone. Another young man employed by a national operator observed that education was a critical factor as well – not in terms of the basics, as the region he supported had a very high literacy rate, but in terms of locales where more young people were going off to college and university, being exposed to the potential of this new technology then bringing it back home for it to spread further.

What this seems to imply is that its the casual or social browser – the chatting on IM, the Facebooking, the occasional email – who seems to have cut down on their cyber visits, and this is often the largest segment of people going online. The hard core enthusiasts, the business users or anyone who has not yet invested in their own set up but prefers the “comp” to quote one young man, aren’t abandoning their trips.

What is happening however to the industry as a whole is a natural evolution. In the city, its the innovators who are thriving even as the basic shops decline – a case of may the fittest survive. None among the knowledgeable IT savvy owner operators ever even considered the mobile as a threat to their business, perceived or otherwise. The only constant response to the subject was that of the pricing plans mentioned earlier.

While the answer to the question of whether its mobiles that are pushing the cyber cafes out of business seems to increasingly be a No, our exploration of market forces acting on the industry is still throwing up factors that we had not taken into consideration when we began.

Innovation at the small enterprise level

Moses with Muchiri, MtoPanga, Mombasa Oct 10th 2011

I’ve never been left with such a strong sense of enterprise and innovative thinking as I have now after this past week in Coastal Kenya. In fact I asked Muchiri if he’d been specifying some high standards for the introductions made to various cyber cafe owners or was it that we just happened upon the amazing crowd of people that we did.

What blew me away was simply their quality and resourcefulness – Moses for example, shown above talking to Muchiri in his little workspace at the back of his second cyber cafe, was a biochemist by training with a penchant for fine arts. He had a thriving business around creative services – graphic design, screen printing, photo touch ups etc right down printing your choice of photograph onto a ceramic mug for you. This was in addition to his two cyber cafes and computer training classes. He was the first to dismiss mobile phones as the perceived threat to cybers, instead pointing out that it was mobile broadband modems that were having the real impact along with easily available cheap desktops.

The common thread running through the success stories of growing sustainable small businesses seemed to be centered around a willingness to question the limitations of conventional services, spotting opportunities centered around this investment in hardware, software and access and a sense of changing trends observed among their customer base.

Moses' Dibarts ICT Village at Vintage Plaza, Mtopanga, Mombasa

Moses actually mentioned that latter – almost articulating the basic idea of doing user research and incorporating the feedback into his business strategy. He calls it the number of ‘No’s he gets versus the number of ‘Yes’s as one of the drivers for his choice of services to offer.

The ones who felt the slowing down of business were more likely to be those who imagined that simply setting up shop would bring in the cash flow or had let the changes go by passively without responding.  The good old days of customers waiting in a queue for a limited amount of time at the computer have gone for good.  What’s emerging in the frontlines are solutions like Robert‘s in Cannon Towers in downtown Mombasa.

Business centre set up by Robert, Mombasa, Kenya 12 Oct 2011

Noticing that many of his cyber cafe customers were walking in piles of documents they were struggling to manage in the tiny space available in the traditional cyber cafe layout, Robert realized that there was a business opportunity in catering to their needs. The majority of his business came from shipping agents and such like, most of whom would not even be based in Mombasa but in town only long enough to release their goods at the nearby port. He threw out the cramped cubicles and replaced them with spacious work stations – in effect, offering hot desks rentable by the day, week or month by the transient business workers.

Robert's signage on the street level of Cannon Towers, Mombasa, Kenya

Now, with fewer computers he generates more revenue at his business center than he does at his original cyber cafe still operating at a different, yet more high traffic location surrounded by educational institutions. Naturally, he already has his expansion plans in place even as the traditional cyber next door has declining revenues due to market forces.

Pondering the sustainability of the cyber cafe industry and its future

Business is booming, Kilifi, Kenya 11th October 2011

Jomo, who runs a traditional cyber cafe in an office building near Mombasa’s busy port district, gave us a well framed and articulate argument on the challenge of running a sustainable business given the costs involved.  His key point was that the internet providers, particularly the mobile operators now actively competing with conventional ISPs, were pricing their products to suit the end users rather than the ‘channel distributors’ of the service i.e. cyber cafes. They leave little or no margins for cyber cafes and his own business had shown a 25% decline in the past three years with no end in sight for the steady downward trend.

On one hand, low cost access to voice and data has been an undeniable boon to the majority of Kenyans who can now call a friend or relative in the US or India for just 3 Ksh (USD 3 cents) a minute from their regular prepaid account.  Mobile broadband modems average 3000 Ksh and are a simple addition to small offices able to pick up refurbished desk top PCs for as little as USD 100.  In Mombasa city and its environs, this affordable combination has made the biggest impact on the neighbourhood internet cafe – be it in a lower income residential/market area or in the Central Business District.

But on the other, as we drove outwards from the city into the smaller towns and markets, where the cyber business is still booming if not showing a growth trend in some places, listening to the stories around the challenge and cost of maintaining sufficient internet access for more than one single personal computer, I wondered if this pricing trend is necessarily a good thing in the grand scheme of things.

I’m not talking about increasing the cost of access to data but whether there shouldn’t be a seperate pricing plan for the cyber cafe industry as opposed to offering them the same data bundles and packages as any other SOHO customer.  And why?

Right now there’s growth as increasing numbers of people go online at work or at home, with mobile phones or employer provided laptops and the future looks rosy for the industry as well as those who watch internet penetration in developing nations. But there will come a point after which there will be people for whom personal ownership or such employment will not be possible, nor make sense. For example, there are beach boys in Malindi who have been gifted with laptops by their tourist friends but continue coming to the cyber for their internet needs. Which beach shack is set up to support computer usage and does that investment in a mobile broadband modem actually make sense when so much assistance and support is required to navigate one’s way through the complexity that is the modern day OS and its software?

Once we sweep aside the veil of hordes of students going on Facebook with their phones, we see the need for egovernment services such as the KRA or even the convenience of booking bus tickets online. The cyber cafe’s role in enabling and supporting the accessibility to the world wide web, especially among the less educated or well off, is critical if these services are to reach everyone for whom they meant.  If the cost and pricing of the services and devices are increasing customer usage and growth in the now, they imply a death knell for cyber cafes struggling to make ends meet.

Yet the cyber is a much needed element of the value chain – they are the informal support system for all this technology. Nearly all mentioned that daily customers would come in seeking assistance in setting up the internet on their mobile phones. Or needing help in setting up their Facebook accounts. This mobile revolution we talk about isn’t happening by itself, but it might end up killing the midwife.