Tobie told BandwidthBlog how it all began.

Tell us about your first business experience?

Whilst I was in school in a little town called Worcester back in 2000, there was a big demand for heavy metal music, something that I was and still am very passionate about. I saw this as my first business opportunity. I had all the latest records and shared them with my friends at school. I carried around a portable tape player and at break times I provided kids on the terrain with some hard and loud tunes. The platteland had no exposure to this kind of music. I was fortunate enough to have access to Google in my bedroom. I would google where to find heavy metal music and eventually came across a site called Silent Screams. Back then it was run by female Bass player Jen Rooms from a Hard Core band in Cape Town called Neshama. I worked in my parents garden, washed the cars to get some money to buy the records from her. She had all the latest unheard bands, it was perfect to introduce it to the rock ‘n roll kids at school. So eventually I got orders and started selling CD’s then T-Shirt and Belt Buckles.

What lead you to settle in Cape Town?

I grew so fond of music that it got me to start playing the guitar, but there was one problem – it was Worcester, no one has ever played in a band and at school everyone was pretty much into rugby whilst I was into skateboarding. I met with a kid around the block and got him into guitar playing, he is now my best friend and is one of the most successful up ‘n coming internet markers in the country – Dawie Bester. I took over on vocals and became a singer. I told my father I was going to become either a bad ass rock star or a producer of a big ass rock band like Tool, Guns ‘n Roses or Motley Crue. My father said he would not pay for me to study music if I wanted to become like one of the guys in the posters I had on my bedroom wall. He wanted me to take over his Financial Services Practice but, since my band members graduated from high school and needed to go study we all had to move to Cape Town, so obviously I rebelled and left the town in pursuit of this rock star life.

How did you make the transition from music to finance?

Once I moved to Cape Town I no longer sold other bands, but instead created my own. Music was my greatest passion, I wanted to live it every second of my life. I got my first band going called Antipathy, we were the beez knees and played the majority of the largest Rock concerts in SA, released an album, made some money by organising our own shows which basically became like a full time thing until I was about 21.

I moved to Cape Town to make a name for myself and my band on the local scene. Pursuing a career in music is hard work and takes up most of the time you have. I was very dedicated to my band and the management of it and was therefore very involved in all areas including finances, touring, bookings etc. Although I did not have any other ‘running’ business at the same time, I kind of knew that I was destined for something bigger. So Financial Services become my Rock ‘n Roll. I became very passionate about the subject of money and how it influences people’s lives. I knew I had a purpose to serve and quit the band to go work in the industry full time.

From where did you gain your financial knowledge – Did you study at University?

No I didn’t study a degree after school. I started working at Old Mutual at age 21. Old Mutual was a great stepping stone for me, the guys working with me back then were much older and taught me a lot about the business. But it still wasn’t enough to make it in the new generation. People wanted variety, access to information and they wanted it with speed and simplicity, no matter how hard I tried convincing them there are other opportunities out there, they still just wanted to stick to their old ways. As fun as it was, I had to leave. The corporate environment left me with very little room for innovation and I knew there were better ways to capture the new generation consumer. I also wanted to make something of myself and I knew if I was dedicated enough I would find my own way up. I have always had a great intuition in regards to financial management. My father was a huge influence on me. As a young kid, he taught me that business was all about relationships and the goal of a financial advisor is to walk the path with the client, delivering on your clients goals and ensuring that they be financially sound and taken care of in their old days.

What was it specifically that lead you into the financial market in 2008?

On the sideline I had a small music production company called “Seed Entertainment”. I owned some music equipment, a stage and a website which didn’t last long but was fun at the time. Then I got a Vox Telecom re-seller contract and recruited guys underneath me to sell VOIP and bandwidth subscriptions. I actually still receive some passive income from that. A few of my friends needed some advice to get their businesses going so I helped them in my spare time as well. But I was very much focused on my Online Financial Advisory business.

The world was shifting, ADSL came into the country, the industry was moving towards web based systems as opposed to desktop solutions. 20 Twenty bank launched and was a huge innovation for the South African market, there were only about 500 000 people online. The FSE (Financial Services Exchange) was established and served as the very first portal to aggregate a customer’s financial information .

As the times moved on, I started seeing my father giving financial advice to younger people whom all started questioning the system. I knew what their needs were and it struck me back then at age 23 – I’ve got an opportunity to solve this problem. They wanted to have access to the financial information via the internet but the industry held back for a long time. Financial Services always had an agenda, and that is to put a intermediary between you and your financial needs to push sales and not service. My father was very services orientated, he wanted the best for his customers and knew that providing good service results in customer retention and sales.

Tell us about where moneysmart began?

In order to educate myself in the business world I studied the philosophy of Robert Kiyosaki (author of “Rich Dad, Poor Dad”) which has made a huge impact on my life and my clients. I was totally committed to changing people’s belief’s about money, shifting the importance of financial IQ to my clients. I eventually had my own operation, I had contracts with the major Life Insurance and Investment Companies, including Sanlam, Liberty Life, Momentum, Old Mutual and many others. But I had a bigger vision and a problem , how do I reach a larger audience? My Friend Dawie (Ex Guitar player in the band) was getting into web development but also soon realized that there is a market out there, not by building websites, but by building businesses from websites. Dawie helped me understand the power of the Web and built my first website for me. Ryno van Niekerk, our moneysmart innovation officer and designer, designed my first website interface. Both guys are still my best of friends and we do business together to this day.

My online approach to financial advice became the first step to building a real business. I had clients from all over SA and I made a handsome sum of money. But still, clients could not see what their investment portfolios were doing if they didn’t contact me. They had little knowledge about putting a budget together and had no clue why insurance was important. Moneysmart was a discovery out of frustration by the industry’s lack of facilitating next generation business mediums like the internet, adapting a tone and communication language to simplify complex economic and financial terms and yet still sold insurance by fighting a TV commercial with a coffin being sunk into a grave. The real thing is, all these insurance and investment vehicles are what the rich use to protect their wealth and create more of it and the best thing about it is, you don’t need to be rich to be doing the same. You just need to start somewhere. That’s why I started moneysmart.

How did you meet Zulfiq and what was it about him that made him the ideal business partner?

It’s funny how the world works. Zulfiq and I met by referral from the Private Equity industry. We were worlds apart but yet had so much in common. Zulfiq started his business Liquid Thought at the age of 21, technology information systems, web based businesses and other ventures and went on building a couple of successful companies and participated in a lot of Entrepreneurial ventures at a very young age. What’s really funny is, we even dated the same Girl. I was so excited to meet him, so I gave him a call and we met up.

Zulfiq gave me my first business lesson on the day we met – attention to detail, I had spelling and grammar mistakes all over my business plan and it was way too long. He kept on sending me back to the drawing board. Zulfiq and I have walked the path together for over 3 years. Zulfiq was my mentor at first and then became my business partner. He taught me so much more of the business world, and stood by my side every step of the way. I had someone I could aspire to, someone that really saw the best in me and helped me become the best that I can be. Zulfiq was responsible for crystalising the moneysmart vision, develop the execution strategy and put together our pitch decks and proposal. So after brain storming, working around the clock from Mondays to Sundays, Zulfiq called me out of the blue and said, “Bro, I think we are ready. Start compiling an investor hit list” and so the real journey began.

It was 2009. There was a recession all over the world and we thought we were going to raise a couple of bar overnight. Back then there was no other business in SA to benchmark ourselves and the concept was way above most investors’ heads. We pitched to over 35 Investors, although they all showed enthusiasm and liked the idea, non were confident to invest at that time. We eventually came to meet a very astute and probably one of the coolest Entrepreneurs in SA – Mr Douglas Reed, Founder and CEO of VOX TELECOMS. We met with this great gentleman, who had so much energy and really wanted us to get this company going. He made a couple of calls and off we went to Stellenbosch. There we met our Investor. In June 2010, we got our first round of funding.

What is the ultimate goal for moneysmart?

I see moneysmart becoming the country’s leading personal finance management platform as well as a pioneer in securing the knowledge economy. I want moneysmart to be integrated into the social lives of users to empower them with our services, tools, education and products to elevate their financial intelligence and give them confidence to make their own financial planning and purchasing decisions. Of course, there is also Global Domination.

Are there any other developments in the works for moneysmart?

At this stage we are having a great time working with the Banks – they are really stepping up to meet their customers’ needs on our platform and soon, we will be building innovative solutions together. Our customers are having a ball helping us to innovate and enhance our service for them. I must say, having your customers do all the specification work makes you think who the innovators really are, but people are so involved and willing to contribute and having an army of customers really helps speed up our development.

Having a dialogue with your customers is a blessing – you know you are working towards their and your own success. We are also finalising our structure on our mobile and tablet applications and setting up workshops to teach people about money, using our tools to advance their lives and in general make the world a great place.

We are launching our first above the line Go To Market campaign called The Dream Theatre which is a full on digital experience with mind blowing technology in the first quarter of this year still. 2012 is going to be a massive year for us and another proud chapter in my life.

Thank you for giving me the opportunity to share my journey and the moneysmart vision with you.

To sign-up with moneysmart click here. 

Prompted by their own questions, as well as responding to tweets from listeners of the show, Koos covered a range of topics, from radio and print media, to the local and international online landscape.

Naspers is a leading multinational media group and over the past two decades the group has evolved from a traditional print media business in one country, to a broad-based e-media company in multiple markets. Naspers’ principal operations are in internet platforms (focussing on commerce, communities, content, communication and games), pay-television and the provision of related technologies and print media (including publishing, distribution and printing of magazines, newspapers and books).

Touchlab, A division of Media 24, recently launched the go! South Africa travel app.

Listen to the podcast of the live interview below:

Then Alan made his boldest move yet – he met with Herman Heunis, founder of South Africa’s most popular social network, MXit, and convinced him to sell. The acquisition was widely covered and the price was said to be a massive 9 digit number.

Some say Alan bought a technology past its prime with the likes of BlackBerry’s BBM and Whatsapp enjoying huge growth on smart phones. Alan saw it differently. With the next billion or two of the African population not even connected to the Internet yet, there is huge scope to provide communication tools to ‘feature’ and ‘dumb phone’ users. However, they aren’t overlooking MXit for smart phones and will aim to release a new version – said to be a game changer – in April 2012.

Alan Knott-Craig is a deal maker and with a huge community as bait, has set out to close several deals that will continue to drive MXit’s growth and revenue. Recently he setup an embed deal with Opera and has several similar deals in the pipeline.

MXit plans to focus on its core strength – instant messaging. Alan notes that they are well aware that its current ‘API’ is not up to scratch (it’s considered to be more like a C# SDK) and they intend rebuilding it from the ground up. This will allow third party developers to build games, apps and other value adds on top of MXit. Alan has hired COO David Weber to head up the API rebuild – David previously helped Herman evolve the MXit core.

In the interview Alan shares MXit stats including the size of the active user base versus the total base of 45 million plus users, and the fact that MXit generated just below 20 billion messages in October. We discuss the success of their virtual currency Moola, the future of MXit on smart phones and their new developer API.

Alan notes that ‘the ship has sailed’ for entrepreneurs looking for investment or a possible acquisition from WOA. They realise the task at hand “we took a pretty big bite” to turn MXit into a globally relevant business. He has however concluded a few deals since the MXit acquisition, for instance investing in Joe Botha’s new startup, Trust Fabric, which we exclusively covered on Bandwidth Blog.

Click play below, and please share and comment.

The original hour long interview was conducted by author and journalist Bob Cringely during the making of his TV series ‘Triumph of the Nerds’ in 1995. In the end, only a part of the interview was used in the series and it was believed that the rest of it was lost. However, a copy of the VHS (remember those?) was recently found in the director’s own garage. With the help of modern technology, the tape was cleaned up, restored and put into context by Cringely himself. At the time of the interview Jobs was running NeXT, the computer company he had founded after leaving Apple.

In the interview Jobs talks about his pioneering days with Steve Wozniak when they built the Blue Box, the visits he made to Xerox Palo Alto Research Center and how it inspired the making of the Macintosh and his forced departure from Apple.

During the interview Jobs states: “We were on a mission from God to save Apple. I don’t care about being right. I just care about success.”

Steve Jobs died on the 5th October at the age of 56.

Watch the teaser below:

source: what’s trending

You might already know that today Walter Isaacson’s biography of Steve Jobs goes on sale worldwide. It is already the top selling book on the Kindle store, so expect massive sales. There have been many biographies of Steve Jobs, but this is the first authorized one, and Isaacson interviewed Steve Jobs over 40 times in the last two years. The book description:

“Walter Isaacson has written a riveting story of the roller-coaster life and searingly intense personality of a creative entrepreneur whose passion for perfection and ferocious drive revolutionized six industries: personal computers, animated movies, music, phones, tablet computing, and digital publishing.

At a time when America is seeking ways to sustain its innovative edge, and when societies around the world are trying to build digital-age economies, Jobs stands as the ultimate icon of inventiveness and applied imagination. He knew that the best way to create value in the twenty-first century was to connect creativity with technology. He built a company where leaps of the imagination were combined with remarkable feats of engineering.  

Although Jobs cooperated with this book, he asked for no control over what was written nor even the right to read it before it was published. He put nothing off-limits. He encouraged the people he knew to speak honestly. And Jobs speaks candidly, sometimes brutally so, about the people he worked with and competed against. His friends, foes, and colleagues provide an unvarnished view of the passions, perfectionism, obsessions, artistry, devilry, and compulsion for control that shaped his approach to business and the innovative products that resulted.

Driven by demons, Jobs could drive those around him to fury and despair. But his personality and products were interrelated, just as Apple’s hardware and software tended to be, as if part of an integrated system. His tale is instructive and cautionary, filled with lessons about innovation, character, leadership, and values.”

Exclusive Books already has Steve Jobs: The Exclusive Biography, and it goes on sale today for R249 for the hardback.

As part of the book’s launch, 60 Minutes interviewed Isaacson. We have added the first and second half of the video below. Personally, I will be skipping the videos until I have read the book.

If you are all interested in how Jobs conducted his business or personal life, or how the book was written, get hold of a nice uncapped internet connection and watch the videos below:

Part 2:

Let us know what you think in the comments. Are you getting the biography?

World of Avatar had an awesome week last week, having seen the launch of boom.fm and announcing their acquisition of Mxit. On Thursday afternoon I had a chat with Peter Matthaei the CEO of boom.fm and the CTO at World of Avatar to discuss how the investment company is doing and what his plans are in running boom.fm. Click play below.

Jess is an entrepreneur who has profited from the global group buying craze. He started Ubuntu Deal late last year and within 6 months was acquired (100% acquisition) by local internet giant, Bid or Buy. International player Groupon also entered the market several months back with an acquisition of local player Twangoo. You can watch the Twangoo interview here.

I chat to Jess about his acquisition, subscriber and revenue growth post acquisition, which cities they have expanded to in South Africa and what his take is on the big international players entering the market (see below). I also asked if there is a market for group buying in Africa, his take on group buying on mobile, the Groupon IPO and the issue around group buying’s low barrier to entry.

The best quote from the interview from Jess regarding group buying in SA: “… Its really going to be 4-5 players left in our local market by the end of the year with some very interesting big players entering..”

Jess has contributed to Bandwidth Blog several times on the topic of social commerce expressing his opinion on Google’s foray into social commerce, Facebook Deals in South Africa, LivingSocial’s launch in South Africa, Google Offer’s imminent launch in South Africa, group buying in Africa, and his take on Groupon’s pending IPO.

Here’s the interview, click play below -

Russell Perry, from his days as CEO of 123People, photo © 123People

Russell Perry was the CEO of the internet’s biggest real time people search engine, 123People. Bandwidth Blog takes you inside his tenure as CEO from when he joined as employee number three – taking the company into 13 countries, available in 11 languages, reaching 50 million unique visitors per month and fighting off competition from big US based rivals like Spock.

You started 123People, the biggest online people search engine. When did the idea come to you and how long did it take to get the first product up?

In fact, I was NOT one of the founders of 123people, I was “merely” the startup-ceo. The idea to create a people search engine was born by Markus Wagner and Martin Stemeseder who had sold their first company 3United (a Vienna based WASP) to Verisign (USA) and in 2007 started to look for new ideas. They were looking at the overall online search landscape and saw that there were some players such as spock.com in the USA and another German vertical search engine focusing on publicly available personal information.

However, it was more an aggregation of data (USA) and a link compilation (Germany) but no real-time search for this vertical.

So both set out to build the protoype and launched the website end of January 2008 out of their New York City apartment. I happened to be in NYC that week and I had been working with Markus and Martin for nearly 10 years – they used to build the stuff for online gaming and also the first mobile gambling platform while I was at bwin.com

I liked what I saw and I was asked if I wanted to build the website into a company. Over the next few months I followed their progress and joined them in the fundraising pitches for series A. In July 2008 we closed the first funding which was contingent on me coming on board as CEO.

The first few months were pretty rocky as we had a business plan but an unusable business model and the product was still in beta. There were no revenues, but there was growth. So I set out to get my A-team together and revamp the business model. Despite the opposition of the main shareholders and the VC guys to take a – what I call the 33-1/3 approach – and split revenue sources into display advertising, affiliate revenues and premium/charged services, we went ahead with it – thanks to one of the smaller strategic investors – and continued to grow the traffic and after six months – July 2009 – we actually broke even. By then we had a commercial product, were active in 8 countries and 6 languages, two of the three revenue streams where generating enough revenues to grow the business even further to about 50mln unique visitors per month by the end of 2009. This made us the most profitable and largest people search site globally.

Did you operate 123People from Austria? Do you believe you can truly build a global internet company from outside of Silicon Valley. Did you have a small presence in the valley?

Due to the fact that that there were several US players we decided to focus on Europe which also was supported by the fact that we had a Austrian VC and a German strategic partner. 123people was HQ’d in Vienna which was a benefit due to the proximity of our initial markets and also advertising partners.

Yes, I do believe that you can build a truly global internet company outside of SV – just look at Skype (Estonia/Luxembourg), and the Chinese online mega-players (though China is a whole market it is’s own, of course).

The only difficulty is that the VC money and a lot of the dumb money is in SV – in Europe there is less risk capital for startups, ample amount for expansion financing, but there is a clear focus on fundamentals of the business model – in SV a lot of dumb money goes to ideas, not fundamentals.. But, in SV the idea creation allows for mega companies to be build much more rapidly – look at FB with nearly USD 2bln in funding. THAT – would not happen in Europe.

No, we didn’t have any presence in SV or even in the US, only some PR support through an agency.

Was partnering with an incubator like i5invest, to gain access to their resources, critical to 123People’s success?

Yes and no, the incubator itself was not really instrumental in the success, it was actually due to the network the CTO (one of the founders) and I had and the people (A-team) we brought on board. What was beneficial, though, was all the back-office resources like accounting and finance that allowed us to manage our costs through being associated with i5invest.

While you where in charge of 123People what was the peak audience number?

Just above 50mln unique visitors per month. An “actual” and audited number since we were listed in the official audience tracking in all countries. Always have to laugh about this, because we didn’t inflate out numbers since we had to deliver to the advertising customers..

If we had been a company without revenues, my answer would we Silicon Valley-eque – 200mln visitors!

How did you beat rivals like Zoominfo and Spock to become the largest online people search?

Spock had really great technology, but they were focused solely on aggregating and creating new profiles of people and making them searchable – but they didn’t have a business model, no revenues and put 100% on product instead of taking a 33-1/3 split in market approach as we did. They burnt through something around the lines of USD 12mln in just a few years without revenues.. Clearly, not sustainable. They also had major issues going into new markets, especially Europe since they didn’t have the legal know-how – which we did.

Zoominfo – we actually partnered with them for a while until they change their focus to only sell their data instead of utilizing the vast database they had to generate traffic on their own.. I had long talks with them that I thought that was not the way to go and clearly 123people, being the startup, wasn’t in the position to pay upfront for data – and that wasn’t our overall business and traffic model. Also, their international efforts changed and they focused only on the US, if I remember correctly.

Did you experience any privacy issues with your content aggregation model in building out profiles of people on the internet?

As a real-time search engine we didn’t aggregate content, we generated an on-demand dashboard of a potential profile out of publicly available personal information Big difference, especially as we were operating in a very strict European and especially Austrian regulatory environment.

Yes, there were several privacy issues from a customer and also legal side. We tackled this by being very transparent with the regulators. I introduced the credo that we need to work with the regulators and do not want to be the pirates of people search and are not building a black-box and hiding how we conduct our searches.. Additionally, I set up customer service right from the start and also established a independent position within our company to cover regulatory and governance topics – way ahead of the regulation being introduced now.

We had some challenges in Germany, but because we were set up the way we were setup we actually won a landmark decision on online privacy in Germany – the courts – usually very aggressive towards companies, see Google Street View restrictions and Facebook inquiries – changed their point and stated that: if a person seeks online presentation of him/herself he or she automatically loses their full rights under German personal law and under the data protection law. This is fundamental as it means that online citizens are protected but they are at the same responsible for their own actions when they post personal data online.

We read that 123People was available in 11 languages – what territories do you consider important to break into besides English speaking countries?

Yes, we were operating in 13 countries and in 11 languages. Clearly, the English speaking countries can be counted easily. The US is the most difficult market to crack, but at the same time there is enough “room’ for several offers from several players. The US market, however, becomes very focused and dominated by the company that can buy their audience. Look at Twitter, spending about USD 1 per user (in acquisition) without regards to the business model. At the same time, they dominate and that will be difficult to break into.

I would go for the UK and Australia – good eCommerce penetration, working online ad eco-system, large online audiences.

Russell Perry interview on Emerce TV

Within two years you sold 123People to the PagesJaunes Groupe – how long did you stay on after the acquisition? Was it a stock and cash deal or pure cash? How did you find working with a corporate parent, trying to keep your small agile company culture?

I was at 123people just over 2.5 years. We sold in March 2010 and I stayed on until end of 2010 and finished the year with a seven-digit ebitda. For me it was bit too early to sell and also to leave the company, but at they say in France: c’est la vie.

The deal was an all-cash deal.

The yellow pages sector is an old publishing environment and hence remains focused on publishing things rather than building eco-systems for customers and users to interact. The good thing about PagesJaunes Groupe was that they were/are generating about 50% of their revenues from online activities – though – and I own a few shares in them and read all their statements of course – is that while they are ahead, the culture is as cumbersome as any large company and their business model relies on off-line sales. I am not saying that that is a bad thing – compare to Groupon’s business model (comment: failing business model) – but when you are a small an agile company that generated revenues purely through online, activities, you have to really watch out that the excel sheet specialists don’t bog down innovation. While I was at 123people under PagesJaunes I was able to keep this innovation drive going and remain agile, I had quite a bit of leeway (and every now and then I wold beg for forgiveness)…

You raised venture capital from Gamma Capital Partners, tell us about that process – is it tough raising VC in Austria?

The process was quite quick since the VC sector in Austria was small and informal. After our exit, Gamma’s old partners pretty much disbanded and today, I would say there are NO VC’s left in Austria – at least not for startups.

What do you think of the current venture capital climate? With so many tech IPOs and high valuations is there a bubble emerging in some sectors within the internet industry?

I have to laugh – going back to dumb money, the VC sector is running after the next Facebook and pumping billions into companies that have no viable business model. I think that we are close to equalizing valuations again. The formula needs to be 3x revenues plus 8x ebitda with a potential upside allowance of 50% or max 100% if it’s a consumer service.

Do you think its important for internet companies to have a business model before they launch? Many current silicon valley companies seems to build product and audience first without thinking about how they will monetise.

I don’t think you should start a business without a business model – otherwise it is called a hobby. But when you see that your hoppy and garage operation can actually be sold or generate a large enough audience to generate revenues – be it primary or secondary revenues – then I would say, go for it!

Recently I had the privilege of meeting with Donna Stephens, Head of Marketing & Customer Service at eRetailer TAKEALOT.com (previously knows as Take2). We met to discuss :

1) A name change,

2) The public disclosure of the ambitious goals at TAKEALOT.com

Based on this discussion I thought it a good idea to present a perspective related to how well TAKEALOT.com is positioned to achieve these goals.

Some context:

In October 2010 Cape Town based e-retailer Take2 was co-acquired by Kim Reid (former Naspers senior executive) together with New York based hedge fund, Tiger Global Management.  The tripartite partnership seems to have the internal equilibrium needed to change the landscape of e-retailing not just in SA but in Africa. The acquisitions fit neatly into the [assumed] strategy of Tiger Global Management who have more than US $ 9.5billion under their control and who have been steadily investing in emerging market internet-related businesses.  Kim Reid seems the ideal candidate to man-ship given his considerable depth of experience with the Naspers owned MIH Group, no stranger themselves to investing in emerging internet-related businesses.  Then there is Take2, a company started by seven investors in Cape Town in 2002. Take2 quickly moved to the position of SA’s second  biggest online retailer, selling books, DVD’s, games, CD’s electronics, toys and much more … with what I am told is a very loyal consumer base.

On announcement of, without doubt, very ambitious goals the media responded with what could be best describe as ‘stoking the fire,’ perhaps to determine just how much of a threat TAKEALOT.com represents to established and market leading e-retailer Kalahari.net.  After-all there is an old saying that goes: ” If you try to steal the giants lunch, the giant is likely to eat you for lunch.” In this case I assume that by announcing the following goals….

• To become Africa’s fastest growing, simplest, most customer centric internet mall (I like that internet mall)

• Provide a wider offering

• Increase depth of categories

• Continue providing in-depth consumer service, interaction and relevance

• Drive revenues past R1 -Billion within five years (from a annualised base of R 75  million)

….. and given that Kim Reid is ex-Naspers the storyline could be easy pickings for a storyteller who favours the controversial.  Personally I do not find the controversial angle as interesting so let’s take a look at the e-retailing industry and how TAKEALOT.com is positioned within this industry.

Before we get to looking at the business let’s tackle the issue of the name change from Take2 to TAKEALOT.com, Why?  Simple, post the acquisition and upon crossing the t’s and doting the i’s – a trademark conflict was uncovered. From my discussion with Donna, I gather that every effort was made to negotiate a retention of the name however the end result being unsuccessful, necessitated the change in brand.  A name change by any brand is certainly cause for alarm bells to go off, because as any brand marketer knows, brand equity is not something that is easily bought.  Even more so it pisses consumers off, especially those that are resistant to change.  The one thing you do not want to do on your journey to growth is ditch the consumers that have helped you build your businesses foundation, especially as a result of not managing a name change well.

In this regard my opinion is that although the name change does represent risk to the existing business, the risk is manageable.  Also given the ambitious goals, to do a name change now would represent significantly less risk than doing a name change in the future across a larger consumer base.  An educated implication of moving to TAKEALOT.com now is; there will no doubt be a loss of a small percentage of the existing consumer franchise, due to amongst other reasons consumer resistance to change.  Whether this loss will be temporary or permanent will be based on the marketing efforts executed by TAKELAOT.com to manage this transition, something which Donna reassures me, is top of mind for her team.

Taking a closer look:

There is a fairly common understanding across the market that the tipping point for the e-retailing industry within a country is determined by comparing the money value percentage of e-retail (online) sales within a country to that countries total traditional retail sales.  In developed markets it has been observed that the tipping point is where the online sales represents 1% of total traditional sales, implying that the 1% mark is where you see upscaling i.e. there is increased new entrants into the online space – either by traditional retailers moving into online or by new entrants  to the online ecosystem and increased adoption by consumers of e-retail.

In South Africa the estimated value of online sales as a percentage of total retail sales is 0.4%.  In addition, internet penetration within SA is estimated at 12% (6 mln users) and lastly South Africa is estimated to have credit card penetration of 16.7 %. These three elements, however not in isolation, are critical elements in determining the potential growth of the online market in SA.  As a point of reference across developed online markets the following represents the percentage of online sales to total retail sales across the respective markets: Korea (9%), UK (8%), USA (4%), Japan (3%) and China (3%).  Interesting to note is that South Africa is further down the development path versus other African countries  e.g.

Egypt

17.1 mln internet users (22% penetration)

<0.01% online retail penetration

2.5% credit card penetration

Nigeria

44 mln internet users (29% penetration)

<0.01% online retail penetration

2.5% credit card penetration

0.2% credit card penetration

Summary: South Africa is not quite at the upscaling mark. To reach that mark would require continued internet penetration growth, something which falls outside the direct control of TAKEALOT.com.  It would also require either an increase in credit card penetration and/or the adoption of alternative payment platforms e.g. mobile payment platforms, both of which have proven to be challenging in SA.  Also a sizable portion of the internet users in SA are users that demonstrate reluctance to the adoption of e-commerce (a major reason being lack of trust in internet security related to provision of credit card details), something which will prove to be a marketing challenge. To focus on other African countries would require innovative business models and based on the above figures would perhaps not be the most effective resource allocation for the short term.  Expanding into other African countries is a must for the medium to long term, especially when one looks at the positive macro indicators across the African content e.g. GDP growth, growing middle class and their related purchasing power, mobile penetration and increasing accessibility to broadband access.

In the short term however commercial growth for TAKEALOT.com will most likely originate from South Africa, which would imply :

• competing aggressively for existing online sales
• Competing aggressively at acquiring new adopters of e-commerce
• Driving an increase in the adoption rate for e-commerce amongst existing internet users and  increasing the adoption rate for e-commerce amongst consumers who have not yet ventured onto the internet but have the means to.

So how well is TAKEALOT.com positioned?

As a brand neither Take2 nor TAKEALOT.com has broad awareness across internet users and the general population in South Africa.  This is attributable primarily to very little marketing support by the previous administration.  Donna and her team have conceptualised both Above The Line (ATL) and Below The Line (BTL) campaigns that will drive awareness of the value proposition, as part of the re-launch. The challenges that this team will face further down the line will be ‘grass root education’ i.e. Driving education amongst: consumers who demonstrate reluctance in adopting e-commerce and with consumers who have not yet ventured onto the internet but have the means to. The objective, to build trust in the internet, e-commerce, e-retailing and most importantly TAKEALOT.com.  This is going to require utilisation of traditional communication channels, mobile and digital i.e. social media, direct marketing. Most importantly this is a continuous marketing effort and one that would need to be refined consistently.  To answer these challenges TAKEALOT.com has appointed M&C Satchi Abel as their Agency of Record.  As newcomers with depth of experience this agency certainly is hungry to deliver. Time will tell how well they do and as the saying goes “the pressure is on!!!!”

Donna also mentioned that there are constant discussions with suppliers to explore alternate categories as well as specialist managers are being brought on board to improve overall category management and online merchandising.  An interesting component to exploring new categories and merchandising would be getting the balance right between listening to what consumers need  (Consumer Needs Research) and trying new things whilst measuring effectiveness through implementation. Getting this area right could be significantly advantageous to the bottom line i.e. through cross-selling, consumer recommendations, special offers etc.  A challenge in this area will be dealing with established (brick and mortar) companies and brands (collectively – suppliers) that do not see the value of venturing into the e-commerce space just yet.  Those companies and brands that do form partnerships with TAKEALOT.com may just find themselves in the first mover advantage seat, assuming off-course these suppliers are not already in bed with Kalahari.net.  The TAKEALOT team are going to have to keep at this and work at it relentlessly… The tipping point will come.  In this regard my opinion is that TAKEALOT.com have a good vision. This is also a tough one because this has a direct impact on both the end consumer and the business in terms of rand value.

Next the supply chain and warehousing. Although a very traditional [industrial] model TAKEALOT.com seem to be well positioned in this area as a result of their recent acquisition of a specialist logistics business and a second warehouse in Gauteng.  These acquisitions coupled with the Cape Town warehouse will allow for the company to scale up operations.  Strategically owning the logistics business provides a significant advantage as TAKEALOT.com could leverage this to differentiate themselves on speed of service delivery and quality of service delivery (aspects which make a difference to an online shopper).  Growth opportunities here would be to look at alternative business models to reach the broader middle classes leveraging the supply chain as a growth driver.

Lastly with regards to the e-retailing platform and payment platform. Having platforms that are limited to those that are typical of e-retailers i.e. Website geared for desktops and a credit card payment platform, will restrict growth opportunities further down the line.  This is also a tough challenge to overcome but one that if met will yield significant success.

In conclusion, my opinion is that for where TAKEALOT.com find themselves at the moment, the structure and plans that are on the table provide a sound strategic foundation.  There is plenty room for experimentation, however, to navigate the growth path is going to require management that Napoleon would describe as “placing an iron hand inside a velvet glove”.

According to bidorbuy CEO Jaco Jonker, UbuntuDeal complements the bidorbuy online marketplace: “While bidorbuy enables sellers to sell online to buyers far beyond their geographical locality, UbuntuDeal brings online audiences through the doors of local businesses. On top of that, bidorbuy focuses on products, and UbuntuDeal is more oriented towards entertainment and leisure experiences. Together, we are poised to bring some very exciting shopping events to the South African internet audience”

Launched in November 2010, UbuntuDeal is based on the business model of collective buying power. Every day, a heavily discounted deal is placed on the site on behalf of one of the participating merchants. If a certain number of people buy, the deal becomes available to all. If not, the deal is off. Currently, the site has daily deals in Cape Town, Johannesburg, Pretoria, Durban, Bloemfontein, East London and Port Elizabeth, ranging from restaurant vouchers and spa treatments to hotel stays and even Wi-Fi internet access.

For consumers, online group buying means great discounts. For businesses, it is a good way to turn available surpluses into cash and to market their services to a very wide audience without spending exorbitant amounts on marketing. Jess Green, Managing Director of UbuntuDeal, says that the social buying business model took off in 2010 and expects further growth this year, both internationally and locally. He adds that UbuntuDeal has clear advantages in this very competitive market: “We always feature deals that offer between 50% and 90% discounts, not less, giving the consumer a bigger and better deal. We pride ourselves on being a step ahead in terms of customer service and web site functionality. Last but not least, the merchants we team up with are happy with the whole process and their marketing exposure.”

Simple as the online group buying business model looks, the real challenge is attaining the critical mass of users. “This is where bidorbuy, a high traffic site with over one million visitors per month, will play a key role”, says Jaco.

Jaco adds that bidorbuy has recently launched a ‘deal of the week’ offering, which aims to offer the best deals for the South African audience on brand new, consumer products. “With the acquisition of UbuntuDeal, bidorbuy is now in a position to offer both product and experience deals to its audience, the largest e-commerce audience in the country.

Look out for the interview with UbuntuDeal this week on BandwidthBlog. Charl Norman will be interviewing Jess Green, Ubuntudeal’s founder for our SA tech startups video series. Look at last week’s interview with Adii for a taste of what to expect!