This post continues on the challenges of estimating size and value of an untapped market in the developing world – in our current case, it is the cyber cafe industry in Kenya. A critical aspect of this exercise will include assessing the impact of a variety of market forces acting on the industry in the present day as well as exploring the impact of trends on the near future.
Its only too easy to say that mobile phones will threaten the future of this industry as this June 2011 article does, but how valid is this assertion, really? Complicating the situation is the extremely rapid pace of change – for example the number of internet users in Kenya more than doubled in less than a year, from the end of 2009 to the third quarter of 2010, most via their mobile phones.
Yet, the results of a recent survey found on this Afrinnovator post by Mark Kaigwa in May 2011, contradict the dramatic headline of the June 2011 article:
Kaigwa says: To unpack that a little further, the emerging trend is that the first experience of the internet has become mobile. This still doesn’t rule out the cyber cafe as the mobile experience on feature phones still cannot replace the “full-qwerty-keyboard-got-my-flashdisk-upload-that-document-and-email” use of cyber cafes but as far as social networking and general browsing, the mobile is the device of choice.
And previously in May 2010, Oluniyi Ajao asked from Accra, Ghana “Are mobile phones pushing cyber cafes out of business?“, where he ends confidently with:
It is clear that mobile phones, are pushing cyber cafes out, the same way public phone booths and “communication centres” have become endangered species. What waits to be seen is how long the few cyber cafes that remain would last. Would they close shop or evolve their business model? Time would tell.
but just a few months before in Sept 2009, Wayan Vota wrote Cybercafes: Still a vibrant and viable business model with some thoughtful reasons supporting his argument:
Growing, not shrinking, need for public access
Miguel’s point I most disagree with is the suggestion that there is a decreasing need for cybercafes in Africa because of 4P Computing:
Outside of tourists locations, they seem to be drying up everywhere to some degree as more and more of us travel with laptops or at the very least, wifi/highspeed data enabled phones that can do simple browsing anywhere we go.
While he and I may travel with netbooks and iPhones, the majority of Africans do not have such electronica, nor are they buying the expensive data plans that allow for mobile web access. They closely monitor their communication expenses, budgeting for Internet access out of meager daily wages.
Yet more and more business and government services, and professional social capital is moving online. Stores like Rachels’ Bargain Corner and Kenya’s eGovernment initiatives require full-screen Internet access. And with Facebook driving ICT use in Africa, the next professional networks will be virtual, not in person.
So as high-speed Internet and cool new gadgets increase usage by elites, there will be even more need for average Africans to get online, economically, through public access cyber cafes offering Internet access in multiple formats.
More than decline, this is the time to invest in African cybercafes!
So, the question remains unanswered, will the industry shrink or grow in Kenya?
Like any industry, cyber cafes are not all the same. Location matters as does size, speed and the variety of services on offer. This background work helps us to frame the broad questions we need to uncover answers to, so as to find the patterns that will help us evaluate the influence and impact of these market forces.
What does that mean? In this specific case, where if we are faced with conflicting information, then one of the key issues to find out will be the cost and ease of access to substitutes i.e. internet enabled mobile phones, cost of data and the patterns of usage behaviour, prevalent in the locale serviced by that cafe.
We’ll also need to dig up the CCK’s research results and then evaluate whether these substitutes are having a greater impact on the highly visible urban locations or is this threat a longer term trend and one that will affect a cybercafe regardless of whether its rural or urban. And finally, we’ll have to actually get out there and take a closer look in order to understand what is really happening. This is just one part of what Semacraft Consulting Partners will be doing over the coming weeks in order to answer these questions and more.
Thanks for the mention, Niti.
Good insights and I’m keen to hear your research and take on the case for the cyber cafe.
I think Kenya is unique for its hypercompetitive market and this has led to data and data-enabled handsets being pushed by Mobile Network Operators. I’ve seen many a cyber cafe change up over the past five years because the margins aren’t as good as they were, as alternatives grow and options as far as netbooks and financing options (Re: Equity & Safaricom offer where you get flexible payment plan)
Safaricom’s retail and distribution chain has seen them become the largest distributor of laptops in the country as well as one of the largest in consumer electronics.
There’s a number of factors that play into this, but I can say that investing in a cyber cafe’s time has passed in Kenya. Now they prop up by offering a number of compelementary services such as printing, binding, photocopying, typing, teaching (how to use the internet, etc)
I think for other African markets it is certainly different and I would be interested to hear your conclusions.
Hi Mark,
Thank you for sharing your insights in your comment. Hopefully we can meet up in Nairobi next month and explore this further in our conversations.
Would you say that the same pattern of impact on cybercafes is seen in upcountry locations or is this primarily an urban phenomenon? I have some data from the CCK’s site that seems to show a significant difference in usage patterns. Although I’ll agree that the situation is changing so fast (Android anyone?) that the information may be outdated by the time the reports come through.
Also, we’re not looking at investment into cyber cafes per se so much as conducting research for Village Telco in order to evaluate whether cafes might make a good target market for their Mesh Potato product.
An additional thought that comes to mind after reading your comment, and something I’d explore further, is whether, given the increase in numbers of personal ownership of laptops and affordable data connections, there’s scope for urban cybercafe’s to evolve into support centers [including all the peripheral office services you mention such as printing, scanning, training etc] ?