Safaricom's data revenues have not only exploded, but according to my back of the envelope calculations, they are set to approach M-PESA type revenues by the year 2020, and combined, will dwarf voice revenue by almost 100%; that's less than 5 years from now.
In announcing their full-year results for 2015, Bob Collymore (Safaricom CEO) [highlighted](Mobile data is one of the key drivers of future growth. Today we are announcing the launch of Safaricom’s home broadband solution, which is a set-top box that brings the 3G and 4G network into the home, and distributes the superfast connectivity via Wi-Fi to any existing Wi-Fi enabled devices.(FY 2014 press commentary)) that this would be an area of focus for them going forward:
"Mobile data is one of the key drivers of future growth. Today we are announcing the launch of Safaricom’s home broadband solution, which is a set-top box that brings the 3G and 4G network into the home, and distributes the superfast connectivity via Wi-Fi to any existing Wi-Fi enabled devices." he said.
Data is probably going to be the biggest money earner for Safaricom soon, but it's not a given that it'll stay that way forever.
There's a real threat from wired unlimited connections. More than that, there's also a real chance that Safaricom falls into the same trap that has befallen a lot of their counterparts in the West: they become a pipe for internet companies (local I hope) that are far more profitable than them.
Kenyans Willingness To Spend Money To Get Online
I want to talk a little about the potential strategies going forward that they could use to avoid this scenario while growing their data revenues and potentially getting into even more profitable businesses.
Kenyans have proven that they are willing to spend money to get online. We have a couple of million of us on Facebook and just shy of one million on twitter.
Other social networks like Instagram and Snapchat continue to grow in popularity in Kenya too but this will not be enough to ensure the continued growth of data use, and therefore revenue. Most of the data that is generated on the most popular networks, Facebook and Twitter, is text and pictures. There's need for something more; that more is video.
Currently, looking at their most recent subscriber and revenue numbers, I'd estimate that each subscriber on average used approximately about KES 1350, in the last financial year. That's considering the fact that data revenue grew by an impressive 59% year on year. (Side note: I spend about that much per month).
When you look at the consumption patterns in more developed markets, most of the traffic is video. In fact, it can be said that two companies dominate in that regard: YouTube and Netflix.
During peak hours, they account for about 50% of traffic on the network (predicted to go up to 80% in 4 years). I'd bet my entire salary next month that Safaricom is not seeing those types of numbers yet. But they will, eventually and I think they should be doing everything in their power to help get them there.
The Problem With YouTube
Youtube will definitely help them get there but it suffers from a couple of problems: one is a general problem with the platform; the other is local.
Youtube has a discovery problem.
It's difficult to casually stumble upon good content, hell it's difficult even if you're actively looking for it. It's something that companies continue to struggle with despite their best efforts.
The local problem is obvious if you take some time to think about it; there's just not enough local content on it. The most active local channels are stations like KTN and Citizen but there are no videos that are truly viral and local.
We currently don't have enough people using the platform to tell their stories or upload their video, we have a few people who are trying and I try to follow as many as I find but it's proven difficult, and it's not consistent.
The first problem is up to YouTube to solve, the second; well it'll solve itself as more Kenyans get online and realise the potential of the platform.
But there's a little Safaricom can do to encourage it, including: highlighting, training and sponsoring some of the content online, and perhaps running campaigns to encourage people to upload their stuff.
But this only gets them half the way there. Next, Safaricom could launch their own Netflix competitor.
Work on getting a local content both from independent studios and film makers, and from the TV stations; stations are a great source because they have a large back catalogue and their titles are instantly recognisable by most of the population.
The great thing about a Netflix type of service is that it could work as another revenue stream (Netflix is a 50 billion dollar company), they can harp about how they're creating value in the local entertainment industry and it'll be able to work across all networks (and worldwide).
All this while giving people a reason to use more data.
All this is pretty much inevitable, it's estimated that mobile data use will grow tenfold around the world and in Africa by 2018. The real question is whether Safaricom will benefit from it in other ways than just providing the pipe.
My bet is yes.