This is a question from Tekedia Forum. I like it and posting it as a piece here. Someone asked how she/he could put N20 million into work in Nigeria in 2018.

I have N20m which I have in Union Bank for treasury bill. The money was payoff from previous job. But unlike in the past where TB instructions could be in perpetual, now the bank does not reinvest automatically. I can’t be doing same monthly. I want to move the money and invest in something else. Any suggestions on good options in Nigeria. I look for max of 3 years with highest safe returns. Prof help

My Response

I am deleting the response here. Please visit the Tekedia Forum page to read it. I updated some minor typos and would want to maintain one version to save my time.

One of America’s most celebrated media companies, Time Inc, is leaving the stage. Time Inc has struck a deal to sell itself to Meredith.  The New York-based Time publishes People, Time, Fortune, Sports Illustrated, etc catering to affluent audiences; Meredith publishes Better Homes and Garden, Family Circle, and Allrecipes, among others. The latter is based in Des Moines, Iowa and focuses on largely Middle American women.

If you look at the brands that Time Inc controls, you would expect it to be in a position of strength to compete in this extremely difficult time for media companies. Time Inc has understood that its competitors are not Economist, Forbes or any of the global media brands. All these firms compete against new species of companies: the social media aggregators. Yes, Google and Facebook are the real competitors to the global media.

Under the aggregation construct, the companies that control the value are not usually the ones that created them. Google News and Facebook control news distribution in Nigeria than Guardian, ThisDay and others. Because the MNCs tech firms “own” the audience and the customers, the advertisers focus on them, hoping to reach the readers through them. Just like that, the news creators have been systematically sidelined as they earn lesser and lesser from their works. But the aggregators like Facebook and Google smile to the bank. The reason why this happens is because of the abundance which Internet makes possible. Everyone has access to more users but that does not correlate to more revenue because the money goes to people that can help simplify the experiences to the users who will not prefer to be visiting all the news site to get any information they want. They go to Google and search and then Google takes them to the website in Nigeria with the information. Advertisers understand the value created is now with Google which simplifies that process.

The trajectory to what happened to Time is global. Meredith will likely close some properties and move some fully digital, firing hundreds of staff in the process. US News & World Report has since become a website after it exited print journalism many years ago. We have all forgotten that print US News.

That brings me to the Nigerian media business: By 2025, the Nigerian Guardian Newspaper, the best brand in the sector, will go all-digital. As Internet penetration in Nigeria deepens, value will move from Guardian to companies like Facebook, and Guardian will fold in. (I do agree that some companies will keep moving, despite the evidence that markets have moved. So, you can see Guardian printing post-2025. But under the scenarios today, I do not think they will make money doing so. Already, most newspapers in Nigeria do not make money, but their patrons use them for political positioning, and that is why they keep printing even when losing money doing so. This piece has focused on Guardian as it is the best; others are even in more challenging territories. But note that brands like BusinessDay which focus on business could actually blossom if they redesign contents to attract startups, entrepreneurs, businesses etc readers.)

The following factors will shape the 2025 Nigerian media business:

• Losing Gatekeeping Role: Guardian has since lost the gatekeeping role as the platform where anyone can read the best insights about the Nigerian nation. Most of its columnists and contributors can be read online, across different channels. That quality that defined Guardian has essentially been disintermediated. Guardian premium brand has been abstracted away by Google Search and its contents commoditized. Search for “marginal cost” in Nigeria, and this blog will do better than Guardian on the search engine. That tells you how Google has broken the hearts of media moguls: they are put to compete with “nobodies”. By 2025, this will only get uglier.
• Localization of Aggregators: By 2025, localized strengths of Facebook and Google to attract ads in Nigeria and make them far easier for anyone to put adverts in their platforms will deepen.  Today, the minor friction on putting adverts in Facebook will be fixed. The implication is that people will choose these platforms more often.
• Strengthening of Local Startups: Local startups executing freemium models with advertising as core revenue base will get stronger. That further challenges media companies as they compete for ad money.
• Digital Consumption: With deeper Internet consumption, I expect more people to be receiving their news digitally. That puts pressure on print journalism
• Advertisers Move Digital: Most advertisers will go digital, putting pressure on print.
• Global Competition: It may not be obvious but that is the reality: Guardian competes against leading global brands like New York Times, Washington Post, etc. The unbounded and unconstrained nature of the Internet has made coverage global. The foreign media do break major Boko Haram attacks before local Nigerian media. When they have the right information they want to covey to the world, they are always first. Largely, Guardian does not expect to be the gateway to the world when big news happens in Nigeria.

In a perfect Internet market, the marginal cost is zero. Interestingly, companies like Google have attained that near perfect market position as their products are completely free. As contents increase, their positions as aggregators will get stronger, putting pressure on original content providers. The end result: expect mass media contents to be priced at zero.

Options

The following are the options for mass-market media companies like Guardian in Nigeria.

• Freemium Model: In this case, they offer everything free online. That is the most possible model because their contents are not specialized to command anyone to pay for them. Except the columns, there is nothing that is on Guardian that you cannot find in Punch and Vanguard. Interestingly, within minutes of publication on Guardian, the contents are in Facebook and personal blogs. The end game is junk display advertising everywhere as companies work to get revenue from Google.
• Subscription Model: This is a scenario where Guardian asks readers to pay for access to contents. This will not work as I had noted above. The contents are not so exclusive to command people to pay. In other words, if you pay subscription to Wall Street Journal, that makes sense as you are reading business news which can be monetized. But paying subscription for Washington Post may not be that necessary when you have other outlets that can give you whatever they have in the Post free. But WSJ contents are exclusive and time-sensitive. Guardian is more of Washington Post than WSJ.
• Others: There are media websites that ask for donations and all kinds of solicitations from users. None of those options can build a real media brand because the revenue cannot support top-grade journalism. So, at the end, it is all click-bait journalism that does not elevate the game.

My Recommendation

In this Tekedia, we generate now good revenue for the rants and contents we put across here. It tells me something: you can actually make people to pay, if you have decent locally-relevant contents. Yes, Nigerians can pay for media but it must align to the capacity to help them improve their lives or businesses. I see a future where the best media brand in Nigeria will be like Bloomberg Intelligence (without the terminal), producing market and business data, at city and state levels, which people will subscribe to consume.

Bloomberg Intelligence delivers an independent perspective providing in-depth analysis and data sets on industries and companies, as well as the government, credit, litigation and economic factors that can impact decision-making.

It goes beyond having the data: you must break them and make it easy for people to consume them. That is a business that will drive media in Nigeria by 2025.  You can take a specialty that is of mass interest, collect the relevant data, and then break that data, relating all on how people can use them to improve their lives and businesses. That localization becomes the differentiation. The political news has been taken over by Twitter and Facebook, and competing there is waste of time. The future will be won by exclusive time-relevant contents, geared largely to commerce.

The blue ocean strategy is about non-disruptive innovation where growth comes, not by taking market share from anyone, but by finding new markets. Basically, the innovator is finding opportunities in uncontested markets which it is pioneering, and by default the category-king.

According to the Blue Ocean Strategy website, the book is based on a study of 150 strategic moves spanning more than 100 years and 30 industries. The authors argue that leading companies will succeed not by battling competitors, but by systematically creating “blue oceans” of uncontested market space ripe for growth.

The strategy represents the simultaneous pursuit of high product differentiation and low cost, thereby making competition irrelevant. The authors say it is successful because it attracts large numbers of customers while raising the cost of competition.

But what happens when other industry players have seen that the uncontested markets are awesome and profitable? Naturally, you would expect them to enter the waters. Just like that, there will be competition, in the previously uncontested market, and the power of full-monopoly will be gone. Now, the former pioneer has to find ways to overcome the sharks which have arrived to challenge its territories.

Two Cases

Viagra, the ED treatment drug, was a blue ocean when Pfizer accidentally created the drug. Viagra thrived and made a lot of money in the new sector. But over time, other players saw the massive opportunity in the sector, and joined the fray. Cialis became a competitor. But luckily for Viagra, it has remained the industry-king.
Contrast Viagra ability to hold its grounds with Etsy, an e-commerce company that pioneered handmade crafting of vintage items and supplies, at scale. Etsy created a new sector which was producing handmade crafts which were largely ignored by eBay and Amazon. It was a non-disruptive innovation as it did not directly compete with industrialized crafts. (I concede that Viagra is a better example of Blue Ocean as the industry never existed, even though the friction was there. In Etsy, there was the craft industry, though the company brought differentiation via handmade crafting.) From a Fortune Newsletter:

The New York Times spilled what used to be called a ton of ink Sunday on Etsy, whose new CEO, Josh Silverman, has the unenviable task of stabilizing a beloved if wobbly company. Etsy thrived for a time not so much because it deployed innovative technology but because it filled a niche ignored by eBay and Amazon . The latter, unsurprisingly, has come on strong in the crafts market, leaving Etsy a warm and cuddly but financially unstable company.

Etsy is feeling the heat, losing market share as Amazon has shown interests in the previous blue ocean which Etsy dominated. But unlike Viagra, Etsy seems to be losing grounds in the waters. The shark, Amazon, is pushing to take over the territory. Etsy is making many changes, including changing the class of its corporation, to give it more room to compete.

Lesson

The key lesson here is that there is nothing like making competition irrelevant, because sooner or later, competition will come to any sector. What happens is that you may enjoy a period of no competition. But as markets see that a new sector is promising, competition will come.

When Peter Thiel, an investor, wrote that “if you’re a startup, you want to get to a monopoly”, he was right. But of course, a startup must also learn to compete because very soon a lucrative sector will find competitors. This explains that no startup should expect to be a perpetual monopolist in a sector it pioneered: sure, other players can come, but the startup should work to win, despite the competition.

Yes, there is a first-mover advantage, but that does not guarantee success if the pioneer has not built moats around its business.

All Together

There is nothing in business that guarantees that discovering a blue ocean will mean that you will be the leader in the uncontested market, for long. For platform-based web companies, they build defenses by growing very rapidly to enjoy the benefits of network effects. But even with that, a new competitor can come with a new level of competition and disrupt the new market (think of Facebook and MySpace).

Generally, every day, a business must work to discover new customers and markets. And once done, must find ways to keep them happy, extrapolating Sun Tzu’s timeless classic The Art of War: you want to hold a territory after you have conquered it. That is one way to prepare for the arrival of the sharks: economies of scale can provide a huge advantage that reduces marginal cost, making it harder for new sharks to swim in the blue ocean.

Apple is growing, but it is also looking for new sources of growth at this moment. Its effort to diversify into shows and movies is a testament that it understands that iPhone cannot carry it forever. As I have noted many times, iPhone is a hardware, and it has a finite maturity in its evolution. In other words, there is going to be a time when any new feature or advancement becomes incremental. I am not sure there is any PC or laptop anyone can sell today that will be radically differentiated from PCs and laptops we have in the market. iPhone will get to that level. And when it gets there, the new basis of competition which has brought Apple unprecedented accumulation of value will be marginal.

A post-fashionista iPhone life will be challenging for Apple, because Apple will need a business model redesign to execute any strategy for the “volume market” where quantity is as important as big purse. Having a proprietary hardware packaged in exclusive software named iOS will not fix many issues because under most cases, on services, the sheer volume of users matter.

You may have 100 iPhone buyers, and you can make good money from them. But when you launch TV shows, the advantage may not just be having 100 iPhone users, but having as many people in the ecosystem as possible, unless the purpose of the shows is to stimulate the purchase of iPhone. It would be very strange if Apple makes its shows exclusive to iOS devices. Doing that will hamper growth of the services, despite a possibility of stimulating growth of iPhone and iPad, in the short-term. But that is most likely the strategy because an Apple that makes it services available to anyone is one that has lost its fashonista’s vision. That exclusivity which Apple has used will be tested and most partners will run away from it.

Case Study – Walmart Pay

Apple is beatable in businesses where everyone matters: poor, rich and in-between. Walmart Pay which is used in only Walmart Stores is giving Apple Pay a tough challenge. Walmart had declined to work with Apple Pay, passing over the exclusivity, for a product that welcomes anyone with a smartphone to the Walmart fold. The people include users of Android and also iPhone. That is a strategy that makes sense in all ways. It is working for Walmart.

Walmart’s decision to turn its back on a major Apple initiative might have been a smart gamble.

In a study from Pymnts.com, 5.5% of iPhone users said that they had used Apple Pay at participating retailers in June, up from 4% in March and 4.5% in October 2016. Walmart Pay, the retail giant’s mobile payment alternative, attracted 5.1% of Walmart shoppers in June. That was up from 3.3% in March. In an interview with Bloomberg, which earlier reported on the study, Walmart senior vice president of services and digital acceleration Daniel Eckert said Walmart Pay should soon pass Apple Pay for usage at participating retailers, making the retail giant’s service the most popular in the U.S.

Eckert’s comments were echoed by Richard Crone, a researcher who monitors the mobile-payment market, who told Bloomberg that Walmart Pay should be bigger than Apple Pay by the end of next year.

Like Apple Pay, Walmart Pay is a service that allows users to make purchases from their smartphones without ever taking out a credit card. However, Walmart Pay is exclusive to Walmart stores. Apple Pay is available at a variety of retail stores, including the Apple Store, Walgreens, Best Buy, and others.

The reality is that the only important differentiator in Apple Pay is the device which is made by Apple. The credit card remains ones issued by Visa, MasterCard, AmEx and Discover. Technically, the upscale Apple does not win here. Many Walmart stores customers are not necessarily affluent, so having an exclusive device like iPhone does not make sense. But having a product that can work in Android and iPhone, and agnostic of hardware, is a slam dunk.

Yes, Walmart Pay has an edge over Apple Pay which works only on iOS. There is no reason for anyone to go with Apply Pay when it is possible to combine Android and iOS. Simply, you want more devices to enable you pay with credit cards.

Walmart Pay is a feature in the Walmart mobile app that enables you to quickly, easily and securely pay with your smartphone in Walmart stores.

Walmart Pay works with any iOS or Android smartphone capable of downloading the Walmart app, at any Walmart checkout lane, and with any major credit, debit, pre-paid or Walmart Gift Card.

The path to services requires volume, and Apple’s closed iOS will be a challenge when the company stalls in its evolutionary finite hardware improvements. I do think that Apple must learn from the Walmart Pay experience: in a consumer market, especially on services, the best model is to welcome everyone. Simply, the exclusivity of iOS may not be strength, going forward.