MXit targets ‘micro-entrepreneurs’

2012-02-19 15:25

Cape Town – The Americans are coming, says the new owner of chat service MXit – and they are coming with guns blazing.

If he cannot succeed in turning around the MXit business, social media in Africa will belong to the Americans, says Alan Knott-Craig Jnr, chief executive of investment group World of Avatar.

“And they will dictate what we should eat and drink. They will create the culture.”

Knott-Craig is serious about the role of the popular chat service in the lives of the continent's youth.

According to him there are now almost 50 million MXit subscribers in 120 countries where more than 10 million use the service on a daily basis. Between 35 000 and 50 000 subscribe to the MXit service every day.

MXit, which was founded in Stellenbosch in 2006, has so far been content to think (relatively) small.

But no longer, says Knott-Craig, who bought the company for an undisclosed amount last year after Herman Heunis, the previous chief executive, decided to dispose of his interest. Naspers, which owns the remainder, also decided to sell out to World of Avatar.

MXit is currently restructuring to improve, among other things, its versions for smartphones, particularly the Apple iPhone. The chat service has also been thrown open to outside programmers so that they can create their own software. MXit’s policy was previously to itself create all the games and services it offered.

Anyone will now be able to create an application and sell it to other users, much like in Apple’s very popular App Store. Facebook has had great success with this concept. After it took this decision a couple of years ago, it was soon flooded with software.

These days, for instance, Zynga, the creator of the FarmVille farming simulation social network game among others, makes up more than 10% of Facebook’s turnover.

“We want to create an economy of micro-entrepreneurs,” says Knott-Craig. MXit is involved in a philosophical dispute with Facebook. Knott-Craig believes consumers are streaming to MXit because of the anonymity – they want to escape their everyday lives.

Facebook places great emphasis on consumers' personal information to sell advertising, says Knott-Craig. MXit’s policy is to derive no more than 10% of its turnover from advertising.

Where would the money then come from? Knott-Craig wants to create a mobile payment system so that its millions of users can all use MXit Moola to pay for coffee in a coffee shop.

The company recently persuaded First National Bank to significantly lower transaction costs for MXit Moola, to make the service more attractive. By April, when the restructured company is to be announced, MXit wants to have a least one large South African retail chain allowing MXit Moola.

As part of its restructuring, the company last week opened its books to show revenue of around R100m for last year – although it still made a loss.

According to Knott-Craig MXit has to show a profit this year, “or we are dead”. He has every confidence in the new MXit. “If I did not believe this possible, I would not have bought the company.”