MXIT has announced the immediate departure of CEO Alan
Knott-Craig Jr, and a "R100m investment”. Arthur Goldstuck unravels the
Alan Knott-Craig Jnr has stepped down as CEO of Mxit, barely
a year after he bought it through his investment company, World of Avatar
(WoA). He is also departing WoA.
“While the shareholders and I share the same vision, we
differ on how to get there. Therefore, I agreed to go my own way. I wish them
all the best for the future. Mxit is Africa’s biggest tech success story, and
can be a global success story,” said Knott-Craig Jnr in a statement issued
yesterday afternoon. The statement added that he would not be drawn further on
the issue, suggesting that the terms of his departure include a confidentiality
His departure comes as a shock, as he was seen as being
heavily invested on an emotional level
in the future of Mxit and social networking in Africa - as evidenced by his
book Mobinomics, jointly authored with Gus Silber.
An aspect of his management that stood out, however, was how
relaxed he tended to be about Mxit’s performance. He often commented that it
was more important to have fun, and that he did not pay much attention to the
numbers. At the same time, he placed strong emphasis on building up a powerful
team that would upgrade Mxit into a world-class platform for apps, social
networking and mobile commerce.
In the early stages of this development, he appeared to rely
for revenue largely on the rising trajectory of Mxit Moola, a virtual currency
with which users can pay for certain activities, games and products within
Mxit. Moola is available in South Africa, the United Kingdom, Indonesia, Kenya,
Namibia and Lesotho.
Mxit has not made a significant impact in attracting
advertising, despite offering a highly effective youth and young adult target
market in the mobile arena in South Africa.
With advertising revenue growing slowly and Mxit Moola not
growing fast enough, there would have been heavy pressure from shareholders who
anticipated Mxit becoming a high-growth company. The purchase price has never
been revealed, but it is believed that the price paid to founder Herman Heunis
and shareholders Naspers [JSE:NPN] could have been as high as R500m.
The number does not sound exaggerated, given that the
current shareholders say they have invested a further R100m. That may
well have been the sweetener to convince Alan Knott-Craig Jr to leave, but
could equally represent the extent to which Mxit was burning through cash to fund
its redevelopment. As the quid pro quo to provide further funding at such a
high level, the investors would have been able to call the shots on the future
of the network.
Just a week ago, Mxit had made an acquisition to shore up
its offerings, buying mobile community-building platform Motribe from Nick
Haralambous and Vincent Maher.
All of these developments come at a time when Mxit’s
subscrtiber base has remained steady at around 9.3-million active users, while
the likes of Facebook, Twitter, BBM and WhatsApp are seeing massive growth (see
Social Media breaks Barriers in SA). None are yet as big as Mxit in
South Africa, but all are on a growth path that could see Mxit relegated to
third or fourth place in the coming two or three years.
Mxit was clearly not overcoming its apparent stagnation, but
simply holding on to 9.3 million highly active users remained an achievement.
It appears that was not enough for the investors.
The bottom line in such matters is usually just that: the
bottom line, i.e. how much money are they making? If investors didn’t like
Knott-Craig’s answer, they may have decided to find someone who could give a
*Follow Arthur Goldstuck on Twitter on @art2gee