I love working on building ZNews Africa, but one of the most frustrating aspects is the dichotomy between the reception of the idea and the opportunity between people of the global Pan-African community, whom the product is built for, and people outside the community, who do not relate with the problem we are working solve.
Africans, globally, get it, and yearn for whatever will solve the perception gap issue — as evidenced by the hundreds of thousands panels, events, articles, and social media conversations about “changing the African narrative.” (I was a speaker on a panel about this last weekend).
Many people outside of our target are unfamiliar with what we mean when we say “Pan-African” or “African diaspora.”
Others are confused about whom we are targeting, whether it’s Africans in the U.S., or in Africa, and if we do mean Africa, they ponder if building a business for Africans is worth it. As one investor asked my cofounder Alpha Bah and I, “Do Africans even care about news in their lives?”
I guess he thought everyone was too busy keeping their huts together out in the bush, scrambling for that $1 a day to eat, while trying to survive the latest plague. (Hence the need for all those changing the narrative conversations).
The issues above are generally the result of people being unfamiliar with Africa and all of the complex identities, issues, and the superb potential and opportunities of the market. So let’s focus on communicating through the universal language, Plato’s stated most universal truth: Math.
As part of our second Milestone at the Tow-Knight Center, the EJ17 cohort was instructed to buy an ad. We at ZNews recently released a major update to our Android mobile app, so it was a perfect opportunity to promote the improved product.
We launched a Facebook Ads campaign and set a spend of $10 a day for 30 days targeting users on the African continent. The ad wasn’t the most eye catching, but it was clear: Our branded blue circle with red, green and gold trim, with our company name in the middle. Our copy was “African News at the Push of a Button,” a tagline penned by one of our advisory board members last year.
We ran the ad for 30 days and I collected the metrics from Flurry, Instagram and Facebook. Here were the results:
The reach blew my mind. Reaching 1.5 million people is outstanding for a new brand on such a small budget. For context, consider our Facebook page has 26,000 likes. Getting 66,500 impressions on our Instagram account was a stellar performance for an account with just over 2,000 followers.
All of that is nice, but the new user number is actually the sexiest. Acquiring 6,065 new users with $300 gives us a user acquisition cost of 4 cents per user. Using the data from this short campaign we can make some projections on the monetary potential of the app based on a few assumptions.
Let’s walk through each component:
User Acquisition Cost: Let’s set the user acquisition to 5 cents per user, based on the results of the March campaign.
Audience: With a nice seed investment (hint for you money folks), we could budget for a $50,000 ad spend. That would garner 1,000,000 users.
CPM: For those unfamiliar with ad revenues, CPM is the rate at which a publisher is paid for every 1,000 people who see an ad. The actual rate would depend on a variety of factors including which country the user resides, the type of ad, etc. I’ll use the data I have, which is the rates mobile app advertisers have quoted us. We have been offered a wide range of rates, the lowest being $6 and the highest $12. For this example I’ll use the average of both numbers, $9.
Active Users: User behavior for mobile news apps differs from those on social media platforms. While someone might spend several hours on Facebook each day, users tend to spend a few seconds to several minutes in a news app scanning headlines and reading an article or two. However, they are likely to visit the app multiple times days, particularly if they receive a notification.
For these projections I’ll assume users open the app 3 times a day Monday through Friday and once on Saturday and Sunday, for a total average of 17 sessions a week. Let’s assume users see at least one ad for each session.
It’s unlikely every user that has downloaded the app uses it actively, or even retains it. Let’s assume a bit over ⅓ of users fit into the “active user” category of 17 sessions per week.
Now let’s run the numbers:
The projected revenue would be $2,784,000. Not a bad start. But what if we really scale?
In 2015, the tally of smartphone users on the African continent was 228 million. Imagine if we built a strong team and developed superb marketing strategies that resulted in capturing a whopping 5% of the existing market. If the assumptions from the previous exercise hold, what would that look like?
Generating over $31 million a year is a very good business. We, however, are seeking greatness.
There’s another data point that is crucial to not only understanding the potential for ZNews Africa, but for any business that is building mobile products for the African consumer. Smartphone acquisition in Africa is moving at a rapid rate. The projected 1.2 billion population of the continent is expected to have a total of 720 million smartphone owners by 2020.
Let’s assume all of the projections above hold, and over the next 3 years ZNews is able to get 5% of the smartphone market, with about a third active users, with the same 17 weekly sessions, with the $9 CPM.
Over $100 million in revenue a year is a serious opportunity. Even a simple old school business evaluation of yearly revenue x 10 would value ZNews Africa at over $1 billion and that’s with only capturing 5% of the market. What if our user base was larger?
Consider that for this exercise we only focused on mobile ads, and not sponsored content, affiliate marketing, branded content and the list of other advertising revenue streams. Note that we only looked at the potential of mobile on one operating system, Android. What about adding an iOS product? (We’re working on that).
What about the 30 million Africans who live outside of their home country, many of which live in North America and Europe, and whom would warrant higher CPM rates?
Africa currently has no dominant, internationally recognized news and media brand. This is a market of which 50% of the population is under the age of 20, and are still forming their brand preferences and consumer behavior as they get older and as they become connected. The opportunity is huge.
What do you think? Are you interested in being apart of our growth and profitability? Send us a note at firstname.lastname@example.org.