in bonga points, onfon, revenue sharing, Safaricom

Safaricom and its Revenue Sharing Model.

Safaricom is Kenya’s biggest company in almost every metric you could care to measure: revenue, profits, tax, users; all of these and more. And yet it’s probably the most complained about company after KPLC. In my family, we’re always complaining about how the network is down, data is down or 3G not working. Complaints about the cost of calls, data, and sending money over Mpesa are voiced every few days. Despite all this we stick with them, and I’m not entirely sure why.
A few weeks ago I was reading about Onfon, a company whose Bonga points buying and selling business was famously shut down after 4 hours active. There was also a company that had signed a deal with Safaricom that gave users the meaning of their  names through a shortcode, what struck me was that revenue was shared with Safaricom 50/50!!! Really. Are you kidding me?!!
Cursory research (Internet and a few conversations) reveals this is the standard with Safaricom.
So let me get this straight, you do the research, build the infrastructure and technology, advertise your stuff, all this coming from your own pocket and that of your shareholders, and Safaricom takes half. For what? Providing the network? Access to its customers? Does that sound fair to you?
Apple and Google take 30% of everything you make on their platforms. For that you get access to their users, to be officially sanctioned by them, possibility of being featured on the front pages of their app stores (huge boost), access to the anonmynised details of your users and inapp purchasing systems. Also if you don’t like it you can do in-app advertising and by pass the 30% all together.
If you had a choice it would be clear which you would choose as a developer. Which brings me to a point that I want to make: choice, or competition if you like, leads to lower costs for everyone as the market chooses the best prices best on supply and demand.
Of course Safaricom is allowed to charge anything it likes to access its network and customer and really I can’t blame them for extracting as much value from their expansive and expensive infrastructure investments. I would do the same, after all, they’re here to serve their customers and deliver value to their shareholders.
I’m excited for the mobile virtual network operators to come into play, perhaps one of them will be able to challenge the giant that is Safaricom and introduce some real competition because clearly the incumbents have failed to check them. Peace!!!
While doing research for this post I found that as an Mpesa dealer you make more on commissions (as a function of percentage) on smaller amounts. Of course what matters is volume.