You are a merchant and you sell laptops; which scenario favours you?

Option A: You pay a company so that when people search “laptop”, it shows promoted links on top of the search results. Those people may not be looping for laptops to “Buy” but could be doing research on the specifications of laptops or just trying to understand how laptops work. If someone clicks on the space you have bided and won, you have “lost” money since  that person has no interest in actually buying a laptop. 

Option B: You pay a company which sells laptops so that when people come into its ecosystem and search “laptop”, your store comes on top of the search results. More than 90% of visitors are in the “spirit of buying” something when they visit that site. Yes, any click has a potential “Buy” trigger that can follow. 

Option A is  the Google search scenario while Option B goes for Amazon.  Amazon is now a huge ad company for merchants and it is growing every quarter: “Amazon generated $8.76 billion in advertising revenue in its second quarter. That revenue, which included things such as advertisements on the e-commerce website, contributed to an overall beat against Wall Street estimates”.

Amazon Ad could become another play for Amazon’s ecommerce one oasis. Indeed, the biggest threat to Google search (for merchants) is not Bing, but Amazon, because on merchant advertising, Amazon is winning that segment. Google gives you clicks, Amazon delivers sales into the bank accounts for merchants. If you understand that merchants spend a lot on adverts, it becomes easier to process why Amazon market cap rose by more than 10% yesterday. 

Facebook will be a waste of efforts if Amazon carries that item especially if you have a merchant store within Amazon. Both Google and Facebook will give you clicks from adverts; Amazon will deliver sales to the bank accounts. That makes Amazon ad business a superior business. If ads are to take users to commercial sites, Amazon wins because it is the grand-dominion of all digital commerce sites.

Why Merchants Like Amazon Ads – And Why it is Now a $31 billion Business

Feedback on LinkedIn

Comment: What’s missing in this analysis is that buyers do not always go straight to Amazon. More often than not, they would first search for where buy a laptop. So, there’s plenty of value for the seller outside of an Amazon.

Although it could be argued that they are the single largest forum, when one considers that it is not only Amazon selling laptops, limiting oneself to Amazon automatically cuts the market range for the seller’s product.

My Response: Certainly, I am not saying other channels are not useful. I am focusing on conversion efficiency and value on ads. Coca Cola can throw its money in any channel. But for a merchant with a $1,000 ad budget, that conversion rate matters. That is why Amazon has grown this from $0 to $32 billion in a very short time!

Comment follow: That conversion rate sure matters for a user with such limited ad budget. It will sure impact ad spend choices for maximum impact. Still I won’t ask them to go to Amazon by default. A number of other considerations will come: type of product and target market are critical.

I don’t know that Amazon has grown because of the ads. It is probably adding to it presently and it’s share will grow. Moving from 0 to 32bn has been a combination of innovation, customer obsession, diversification and sheer capital thrown at it. It took Amazon several years to break a profit.

My Response again: The $32b is specifically for the ad business, not other aspects of Amazon. Putting that number is to make a case that it is very viable and useful to small sellers. As I noted in the video, this is one oasis strategy because Amazon is collecting $32 billion to help people showcase things within Amazon and after they have sold, Amazon takes another cut on those sales. It is a massive positive loop!

Following investigation into fraud and money laundering allegations leveled against Nigerian fintech giant, Flutterwave and its counterpart, Chipper Cash, the Central Bank of Kenya (CBK) has ordered all financial institutions in the East African country to stop doing business with the fintechs.

The order follows the announcement on Thursday by CBK governor Patrick Njoroge that both Flutterwave and Chipper Cash are not licensed to operate in Kenya.

“Flutterwave is not licensed to operate as a remittance provider or for that matter as a PSB service provider in Kenya. They are not licensed to operate and therefore they shouldn’t be operating. We can also say the same for Chipper Cash,” he said.

The CBK’s bank supervision deputy director, Matu Mugo, directed all regulated banks, microfinance and mortgage finance institutions to cut all their relationship with the two startups with immediate effect.

“It has come to the attention of the Central Bank of Kenya (CBK) that Flutterwave Payments Technology Limited and Chipper Technologies Kenya (Chipper) have been engaging in money remittance and payments services without licensing and authorization by CBK…You are therefore directed to immediately cease and desist from dealing with Flutterwave and Chipper,” said Mugo in the letter.

Early this month, a Kenyan court had ordered the freezing of the companies’ accounts for money laundering. The court said that both Flutterwave and Chipper Cash were among over 50 companies carrying out illegal activities in Kenya.

Following investigation, Kenya’s Asset Recovery Agency (ARA), told the court that the accounts of seven targeted companies were used as conduits for money laundering in the guise of providing merchant services. The agency said it began investigations after suspicious activities and transactions in the seven companies were flagged on suspicion that they were proceeds of crime. It also said that the fintechs was illegally operating in Kenya, because it has no valid license from the CBK.

The development is a huge blow to the two startups that are occupying prominent positions in African fintech market. Flutterwave is the most valuable African fintech at $3 billion valuation while Chipper Cash is believed to have attained the unicorn status.

It is also seen as a potential setback for the African tech market that has been riding on huge investment funds from investors across the globe. African startups raised $1.2 billion in Q2 2022, indicating a 15% drop from the total funding raised in Q1.

However, Flutterwave and Chipper Cash’s lack of license has been attributed to Kenya’s irregular license schedule. Flutterwave started operation in Kenya in 2016, while Chipper Cash was launched in the country in 2018. 

As Nigeria’s revenue shortfalls bite harder, the federal government has been seeking alternatives to the dwindling oil revenue that the non-oil sector has failed to upset.

The Minister of Finance, Budget and National Planning, Zainab Ahmed, disclosed that the federal government has finalized plans to introduce additional 5% tax on all telecom services, including calls, SMS, and data services.

Zainab made the new tax plan known at a stakeholders’ forum organized by the Nigerian Communications Commission on Thursday. She said the plan will help the federal government to offset the deficit emanating from poor oil revenue.

“The issue of revenue is not something that need to be shy away from, our revenue can no longer take care of our needs as a country. Also Nigeria is no longer making enough money in oil revenue hence the attention is shifting to non-oil revenue,” she said.

The minister, who was represented by Musa Umar, Assistant Director, Tax and Policy, appealed to stakeholders to support the new tax plan.

However, the development has been greeted with scorn as it is seen as an attempt to compound Nigeria’s economic woes. Responding to the concern, Ahmed made reference to other African nations such as Malawi, Tanzania, and Uganda, who she said have successfully implemented such tax regimes to generate more revenue.

Although the minister allayed fears that the new tax plan will result in suffering with the promise that it will be implemented in a manner that bears no negative impact on Nigerians, many, including telecom industry stakeholders, disagree.

Engr Gbenga Adebayo, Chairman of the Association of Licensed Telecommunications Operators of Nigeria, ALTON, said the telecom industry won’t be able to absorb the impact on behalf of subscribers.

He lamented that the federal government is shifting taxes to services instead of goods and products. He said that subscribers will bear the burden as the telecom industry is already feeling the weight of 39 different taxes.

“It is a strange move, it appears a bit unusual. Excise duty is supposed to be apportioned to goods and products, but we are surprised this is on services,” he said.

“We currently pay a lot of taxes, running into 39 of them, so we can’t add more to our existing burden. We won’t be able to absolve this on behalf of subscribers. The five per cent excise duty will be paid by the subscribers. It will collected by the operators on all voice and data services including OTT and remitted to the Nigerians Customs”, he added.

The telecom industry served as Nigeria’s economic cash cow in the wake of the pandemic that crippled economic activities globally. But recently, the industry has been seeking approval for upward review of the cost of its services, including data, calls and SMS. It said the Russia-Ukraine conflict has resulted in a 35% hike in operational cost amidst other factors in the country that have made business difficult.

Thus, the implementation of a new telecom tax will leave the industry with no choice than to increase tariffs for its services.

We can learn many things from the military. They move battalions. In markets, we move and control factors of production. At Tekedia Institute, I teach a course on the OODA Framework, picking perspectives from the military on how to build fast-growth companies.

Protect your flanks and move the columns, being aware of frontal attacks. Join us and learn from the kid who grew up in Ovim – the “land of generals” – and thrive in your business and career.

Zoom link in the Board. Register for the next edition here.