Group buying has exploded in South Africa and shows no sign of slowing. Although some of the smaller ‘fly by night’ players have come and gone, there are plenty local group buying sites that are carving out a market for themselves. We are also seeing lots of international players entering our small local market with Google Deals, Facebook Deals, etc.

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. (more…)

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. (more…)

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…. (more…)

Group buying is taking off in SA in a big way – the number of group buying websites are still growing every day, and if your site has its foothold already, with all the deals in place, its clearly worth a lot. South African online marketplace and auction site bidorbuy.co.za has acquired Cape Town-based social buying site UbuntuDeal.co.za. This is the latest addition to the bidorbuy group of sites, which include Jobs.co.za, Jump.co.za, TheClassifieds.co.za, PayFast.co.za and Snaply.com.

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!

I consider Adii one of the most successful local web entrepreneurs I have ever met. He’s also a close friend of mine – we met when I used to own a night club in Stellenbosch (don’t ask), he was studying there at the time and owned a website that showcased Stellenbosch’s hottest girls from the University. (no brainer)

Since then I have watched him discover WordPress, build his very first premium WordPress theme – Premium News – and later co-found one of the top global theme companies – WooThemes.

WooThemes has had great success – in an international sense – with over 85 themes in their library, millions of dollars in revenue annually and have contributed code to the WordPress core. Like using WordPress menus? I do too – it used to be called ‘Woonav’ and was so good that Matt (creator of WordPress) and his team decided to include it in their next release.

Adii has travelled the world speaking at design conferences (he also owns a design agency called Radiiate – look for the adii in Radiiate) and has setup a charitable organisation – The Rockstar Foundation – which helps fund educational projects.

Together with his co-founders (Magnus Jepson and Mark Forrester) they are navigating through an interesting period in premium themes. Besides lots of competition from theme makers, theme markets have opened, ‘aggregating’ themes into a central market place. ThemeForest have done this with great success, considered to be a big Woo rival even though their store features themes from the Woo collection (other top theme companies are also on board like another local player Obox Themes). WordPress have also setup a premium theme market with selected theme providers on board.

So what’s in the interview? I asked Adii about their current growth, what their future plans are, which types of themes are most popular, how much revenue they generate, what’s behind his ‘rockstar’ tag, how is the charitable organisation is doing and how his first book, Rockstar Business, has done.

Premium themes is big international business, and SA web entrepreneurs seem to be really good at it – WooThemes have lead the way globally defining this market with a few big players and Obox Themes, also based in Cape Town, have international rep for their work in the theme business. I think we should be proud of what our local theme companies have done and continue to celebrate them.

Interview below – click play and please share.

Disclaimer: I’m personal friends with the founders of WooThemes and Obox Themes.

Adii photo by Christine Meintjes

The concept of group buying has exploded in recent years largely due to the massive growth of Groupon. Their acquisition spree has motivated entrepreneurs all over the world to try clone Groupon’s success in their local market and hope to be one of the lucky startups to exit at the hands of American players’ mammoth $1 Billion funding round.

In South Africa two local entrepreneurs have done just that – Dan and Wayne from Twangoo – by selling 100% of their company to Groupon for an undisclosed amount (our guess is around the $1 Mil mark but some sources say its x6 that amount!).

Groupon’s purchase of Twangoo was one of three acquisitions the US company concluded recently. The other two are Indian daily deal site SoSata and Israeli company Grouper. There have been reports that local media giant Naspers also wanted to acquire Twangoo but lost out to Groupon in the end.

Groupon is looking to dominate every market – even our own, by betting that group buying will be huge in South Africa even though retail coupons have never taken off like they did in America.

“Collective buying is in its infancy in India, Israel and SA but we see strong potential,” says Groupon president and chief operating officer Rob Solomon in a statement.

The Twangoo acquisition seems to be a talent grab as Groupon looks to setup sales and marketing teams in each country by acquiring clones. The technology that powers Twangoo will no longer be used and the Twangoo website is set to shut down soon. Groupon SA will operate under the ‘MyCityDeal’ brand which was another Groupon acquisition in Europe.

What does the Groupon/Twangoo acquisition mean for other players in our local (but small) market? Like Ubuntudeal, WiCount, Dealio, OneDayOnly and more niche sites like Saleswine. We suspect that most of the sites that don’t have any deals on their homepage currently won’t be around this time next year. Although, the race is not over yet – we have it on good authority that a big local media player will be entering the group buying space pretty soon.

Back to the interview -

We spoke to Twangoo founders and asked them about the Groupon deal – was it a cash and/or stock acquisition, how well Twangoo was doing before, why they don’t own groupon.co.za, what their plans are for mobile seeing as they are in a mobile dominated market and how they approached Groupon to setup the acquisition?

The term Twangoo is slang for ‘Tuangou’ the Chinese term for group buying. There is even a well established Chinese group buying site called Twangoo – twangoo.com, seems Dan and Wayne named their company after the Chinese leader? Was there anything original about their Twangoo operation? Does it matter? Say what you like – they just made a few million in under a year.

Let’s call it ‘Right place at the right time’.

Click play below.

Video edited by Le Roux and Nadine, article contribution by David.

Our second Bandwidth blog interview (previously we interviewed Motribe) is with Eric Edelstein and Eran Eyal of Evly. Evly launched to much hype (by the founders account) and debate late last year. Some observers felt they launched too soon and that their product was nowhere close to being public beta ready. Others believe they are onto something big and hailed it another feather in the Silicon Cape cap.

We get into the minds of the Evly founders and ask them to back up their loud and proud ‘36 million users in 18 months’ goal, what the initial up take of Evly has been and what their future plans are, especially in terms of their product road map and venture funding.

Eric and Eran have previous experience with online startups including Springleap, a 3 year old, 25,000 user large T-Shirt community with crowd sourcing elements similar to USA pioneer Threadless. Springleap laid the groundwork for their crowd sourcing platform and served as the ultimate case study for them to derive experience from to execute on their Evly ambitions. (Although Springleap’s tech has yet to go into the Evly platform, there are plans for its implementation in the future.)

Evly’s core focus is to solve problems. Enabling Joe Public to setup a crowd sourcing tool to use the wisdom of crowds of solve any problem, raise funds and/or even create your own Springleap.

With the likes of Quora taking off in a big way, Evly has a steep mountain to climb that won’t get any easier. There is the risk that users won’t find a need to create their own crowd sourcing site if a place like Quora does it all for them already.

Even though the site is in Alpha/Beta there will need to be significant improvements in order to take on the big guys and win.

It is still very much early days for the project and we wanted to know what, when and how.

Since the intention of Evly is to crowd source opinions. We would love to hear yours in the comments. Tell us what you think! Press play below.

Previous interviews - Motribe founders Vincent Maher and Nic Haralambous

Welcome to the first in a series of video interviews taking you inside the offices of SA’s leading internet startups. We had the pleasure of visiting local internet entrepreneurs (and newly found Capetonians) Vincent Maher and Nic Harry of Motribe.

The experienced duo launched Motribe just over two months ago to great fan fair. We explore their thinking on using the Amazon cloud to build Motribe, how they reached millions of pageviews within two months (we also get into their latest figures), how they raised capital and why they settled with 4Di Capital for their first round of funding. We also look at their competitors in the mobile social networking space, how they acquired such an awesome top level domain and their thoughts on competing with the well funded startups of Silicon Valley.

Want answers to these questions? Click Play after the jump.

(more…)