Why Ad-Supported Business Fails in Africa
The biggest temptation in Africa is to build a web business, hoping to use ads to sustain it. Even a pure-play media company still struggle. I have explained why aggregation makes it increasingly difficult to make money easily online.
For Africa, I will offer five reasons why starting a web business, on the constructs that adverts will provide revenue, is dangerous:
- Cost of Impressions are Low. Which means from Google to Bing, the companies you can host their ads will pay you largely nothing
- Cost of Data is High: The cost of accessing the web in Africa remains expensive. The implication is that most people do not want to even see the adverts. Opera browser has become popular just for that.
- Advertisers Discount African Traffic: Most global aggregators like Google and Bing do not pay the same rates, on African traffic, as they would pay for clicks which originate from Western users. They are listening to advertisers who do not value most African traffic. The reason for that is next.
- Purchasing power is low: If we do not have so much money, it means we do not have money to spend. So, why waste money looking for us?
- Rich Africans Not Online: If you think you can get help from the top middle class, good luck. Most are not yet online. And advertisers know that. If the customers are offline, local brands prefer to use the old media to reach them.
So, at the end, building a non-media business that can be supported with ads will be hard.
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Nice conversations here. Entrepreneurs must test hypotheses before they deploy solutions in the market, at scale. This is where to start small makes sense as it is also possible that the shift will happen one day.
