The tech giants trying to steal African startups’ lunches

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There cannot be a more stunning validation of your startup idea than it being pinched by an Apple or Google. OK, so massive companies aren’t targeting African startups specifically, and there is no suggestion ideas are being stolen. But there are a number of big players threatening to steal the lunches of African innovators. Will they succeed?

Ride-sharing

Ride-sharing apps are the toast of the town right now, especially in Nigeria. Disrupt Africa reported last month on Nigerian startup GoMyWay, which connects passengers with car owners going the same route with empty seats to spare. The startup is bidding to provide a solution to transportation problems in Nigeria via a people-powered transportation network, and has an impressive roster of investors that includes Konga founder and chief executive officer (CEO) Sim Shagaya and former Amazon and Naspers executive Bill Paladino. It has plans to launch in South Africa, Kenya and Ghana soon. Jekalo is doing a similar thing.

Another not-so-new company now also doing a similar thing, however, is Google. It emerged this week the company is getting into the carpooling business, launching RideWith as a pilot in Tel Aviv, Israel. The service is rolling out via Waze, and will head to new markets should it prove successful. It is perhaps a good thing GoMyWay has pretty prompt expansion plans. Time is short for startups already operating in this space to reach scale before Google arrives with a fistful of marketing dollars.

Music

Music streaming and download startups are all over Africa, with the likes of Mdundo, iROKING and Recast just three of a myriad of competitors fighting for market share. But now there’s a new player in town, and it has certainly got game when it comes to music. Apple Music is now available in a handful of African countries, such as South Africa, Angola, Zimbabwe and Kenya, and has been the subject of much excitement.

The startups operating in Africa’s music space probably have less to fear from Apple than you might think, however. There are questions over the cost of the service. There is limited African content, something that is unlikely to change too quickly and an area where Mdundo and the others are already adequately satisfying the need. The existing startups will benefit from the fact Africa isn’t too high on Apple’s agenda right now. But they’ll have to up their game nonetheless.

Mobile payments

Apple’s attempts at lunch-stealing don’t stop with music. The company announced the launch of its mobile payments service in September last year, with Apple Pay – which relies on near field communication (NFC) and works for those that own the latest iPhone 6 – expected to roll out outside of the United States during 2015. South Africa is especially busy with mobile payments startups, including the likes of SnapScan, FlickPay and Zapper, with Apple Pay on the face of it seeming a threat to their growth.

Not so much, according to Gilles Ubaghs, senior analyst in the financial services technology team at Ovum. He believes the arrival of Apple Pay in South Africa would rather assist pre-existing mobile payments companies in building the country’s mobile payments ecosystem.

“One thing we’ve seen in other markets is since Apple launched Apple Pay, the wider market has seen a hugely heightened level of development as everyone rushes to be competitive with Apple Pay. Expect to see mobile payments in general get more attention from banks, merchants and payment providers across the board,” he said.

“Apple has the market visibility, and really the bling factor, that means consumers will notice it and take much more notice of it compared to other systems.”

Social networks

After years of neglect, Facebook has finally arrived in Africa. Literally. The company recently announced it plans to open its first African office in Johannesburg, South Africa, with the move touted as its bid to further its commitment to the continent. Increasing Facebook activity in Africa has been evident over the past year, with the company rolling out its Internet.org app in Zambia, Kenya, Tanzania, Ghana and South Africa.

Facebook has already done pretty well in Africa, considering how little attention it has paid the continent. There are 120 million active users of Facebook in Africa, and the partnerships the company is signing all over the continent to zero-rate its service will only help it grow. 2go, which has had its fair share of success thus far, and Mxit, which has been experiencing problems of late, have their work cut out to stave off the competition given they are locked out of these zero-rating deals. Niche social networks such as OurHood may have more of a chance given they fill gaps in Facebook’s service.

Taxi apps

This one is slightly different. Uber is not so much stealing startups’ lunch but taking back what is theirs. Prior to Uber’s arrival on the continent, a few startups had attempted to set themselves up as the “Uber for Africa”. In South Africa, Snappcab remains but Zapacab never recovered from being forced to compete with such a corporate superpower. In Kenya and Nigeria, Easy Taxi has proven a worthy adversary, and says it has what it takes of stay in the game. Other startups may not be so lucky in what is an increasingly busy sector.

The lunch-stealing on Uber’s part may be yet to come. The company has already proven its versatility to African requirements by adding cash as a payment option in Nairobi, removing one advantage the likes of Easy Taxi and Maramoja originally had over it. The next logical step would be for Uber to add alternative methods of transport onto its platform. Motorcycle taxis are extremely common across the continent. Maramoja has already taken the leap by making them available to customers. Rwanda’s SafeMotos is building a whole business around connecting users to motorcycles. If Uber chooses to go down this route it really would be gobbling up a lunch it has not eaten before.

Focus wins

It isn’t all bad news for the African startups affected by these monster-sized lunch thieves. Large companies struggle to compete effectively on all fronts, and startups can benefit from the fact they are focused on one area rather than several, as is the case with the likes of Apple and Google. Startups need to work on differentiating themselves, with what Maramoja is doing a good example of this. Clarity of purpose helps, but startups should be willing to adjust their positioning based on what the market is telling them. Corporates are less agile.

Plenty of companies have survived after a tech giant tried to eat their lunch. FourSquare has survived the launch of Facebook’s “Places”. Apple’s iMessage did not kill the likes of GroupMe, TextPlus, or even BBM, as was predicted. Bit.ly, written off after Twitter embedded its own URL shortening, is still in business. Boxee survived Apple TV. There is hope, if what you’re doing is necessary and different.

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Passionate about the vibrant tech startups scene in Africa, Tom can usually be found sniffing out the continent's most exciting new companies and entrepreneurs, funding rounds and any other developments within the growing ecosystem.

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