If you missed it, Alan Knott-Craig Jnr (through World of Avatar) acquired a 90% stake in MXit, well known for its mobile instant messaging service. Besides stepping down, Herman Heunis along with Naspers sold their stakes in the company and the remaining 10% is for the benefit of the employees of MXit. Alan will now take the reigns as CEO of the company.
Before I go any further, I would first like to commend Herman Heunis who certainly risked it all. I am personally inspired by him and after 6 years of hard work, I hope he enjoys his well deserved break.
Since news of the acquisition broke there have been more questions than answers. Why did Naspers sell? Is it because they don’t see a future for MXit? What will Alan do at MXit? Is he aware of BBM, WhatsApp and all the other competing mobile IM services?
I am going to take a step back and first look at how BBM ate MXit’s lunch and why it lost out on smartphones. Essentially there are two important reasons why MXit lost ground to BlackBerry’s BBM.
- Device Integration with Push Notifications
- BlackBerry Internet Services
MXit’s biggest problem was that you had to keep the application open in order to receive messages. They tried SMS notifications in the early days, but that obviously became too expensive. And this is where BlackBerry moved in. BBM has tight integration with the device and therefore they have made BBM work just like SMS. I can close the application and receive a notification (just like SMS) when I receive a new message. Obviously this is coupled with their BIS offering which gives you unlimited data for around R59 per month (although that might change).
I used to be an avid MXit user until I got an iPhone. MXit’s biggest strength was (and still is) in being able to support thousands of devices, predominantly low-end devices or feature phones. However they were very slow to adopt smartphone platforms (iOS and Android) and when they did, the experience could have been better in my opinion. It felt as if I was still using an old application, it just didn’t feel as easy to use or as well designed as the competing applications. However, their metrics didn’t show that smartphone platforms where that important did they?
So yes, it is widely known that MXit has faced some stiff competition in the smartphone space, especially from BlackBerry. It also appears that BlackBerry will continue to grow in South Africa. Ah, South Africa? We shouldn’t forget that MXit is a global company. We need to take the other markets they operate in into account. I don’t have statistics available, but I know they have experienced massive growth in Southeast Asia and other developing markets over the last few years. With 40 million users and 14 million of them in South Africa, you can do the math.
The MXit Opportunity
Alan has mentioned that there is a window of opportunity to get MXit’s “ducks in a row”. And this is where some people ask isn’t it too late? I definitely don’t think so. Essentially MXit are in the perfect position to stage a comeback over the next few years and become a dominate player in mobile IM space globally (yes, I am ignoring the “social network” part of MXit).
I think that Alan will be looking to the rest of Africa for new growth (without excluding the rest of the world). Using MXit’s biggest strength, support for thousands of low-end / feature phones and now Alan’s network too. What about smartphones? I mean feature phones won’t be around forever right? This is the comeback opportunity I’ve been alluding to. Smartphones are becoming cheaper and will become more widespread in developing markets over the next few years. MXit will need to leverage this change over. With their large user base, if done right, they can make it happen.
I don’t know why Naspers sold, maybe Herman wanted to leave and they didn’t want MXit without him? Perhaps Alan made the right offer. All I know is that the future potential of MXit is immense. If somebody had to ask me if the acquisition was worth the money, I would reply by saying definitely! Remember, I touched on the instant messaging service. MXit has additional products, and as they grow the potential for solving problems like mobile banking throughout Africa (even globally) become possible. Maybe they will go head-to-head with Facebook.
Update: Arthur Goldstuck has interviewed Alan Knott-Craig on the future of MXit and it seems I wasn’t too far off on my analysis.