Facebook Payments and Commerce: Key Considerations for Its Move Into Africa and the Middle East

Payments and Commerce: Middle East and Africa

ByAlan Alden

@SeriesAPartnerswww.series-a.com

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PRODUCED BY ALAN ALDEN I SERIES-A PARTNERS LLC

Why work with Series-A in the ME and Africa Deep experience, local knowledge and global contacts across five

continents in payments, telcos, govt, and the travel/leisure space

Negotiated complex international deals with companies and governments in both Africa, as well as the Middle East, including the Ministry of Finance and Road and Transport Authority in Dubai

Spent the past 10+ years immersing myself into the South African and Dubai tech and finance communities, where I have developed a strong network of friends and contacts up to the royal families in Dubai, KSA, as well as the leading entrepreneurs, CEOs, and investors in South Africa

Well respected visionary and consultant on where technology is heading, the underlying impact on industries, as well as go-to-market strategies

Strong Finance and Legal background (JD Degree and FinTech Investment Banking)

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Series-A Partners: Contacts Within the RegionDubai Holding: CFO, CTO, Head of Strategy Naspers: CIO, CEO of B2C, Head of M&A

Tecom (UAE): CEO Government: Premier of the Western Cape

Dubai RTA: (Metro, Buses, Cabs)

CEO Computicket:(largest ticket provider in Africa)

CEO, Head of Integration

Etisalat: Head of Corp Dev/M&A TAKEALOT: Founder / CEO

Visa MEA: Dir of Emerging Products Shoprite Holdings (SA): Owners

MasterCard MEA: VP of Government Relations FNB: Former CEO

UAE Ministry of Finance: Multiple Members Investec: Bankers

Expo 2020: Team Member (Al Gergawi Family) Fundamo (Visa SA): Founder/ Former CEO

Jumeirah Group: CEO WeChat Africa: Head of Operations

Emaar Group: VP of Marketing Clifftop Colony (top tech banker in SA): CEO

Orange: Innovation/Investment team Coronation Fund Managers: Chief Investment Officer

PlatinumList:(largest ticket provider in Middle East/UAE)

Founder/CEO Cape Venture Partners: Partner

neXgen Advisory: (Dubai, Abu Dhabi, Kuwait, etc)

CEO - Lead Consultant to HH

Sheikh Mohammed on SmartCity

ACITS (Saudi Arabia): CEO

Close personal friends with the Gergawi and Al Mulla families in Dubai

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Messaging: The Fastest Growing Platform

1.4Billion

Current Users

2.5Billion

2018

OPPORTUNITY

1.1 Billion Additional Users

Africa and Middle East Leading the Way

PROJECTED ADDITIONAL USERSBY GEOGRPAHY

Asia Pacific265

Million Users

North America244

Million Users

Europe73

Million Users

Latin America

45Million Users

Africa and Middle East

579Million Users

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Middle East Internet Overview

* As of Nov 30, 2015** As of Nov. 15, 2015

Middle East Population:

242 Million*

Internet Users: 128 Million

Penetration: 52.9% (world Avg-46.4%)

Facebook Users: 49.4 Million**

FB Penetration:(% of Internet Users)

40.1% (World Avg- ~38.6%)

WhatsApp % Penetration of Internet Users

63%

CountryInternet Users

Facebook Users WhatsApp %

Israel5.9M4.4M

Iraq11M11M Iran

46.8MNA (Blocked)

KSA18.3M12M52%

UAE8.8M6.3M61%

Jordan5.7M4.1M

63%ME/Africa

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Key Middle East Considerations

Shariah law prohibits Muslims to engage with any money lending entity that charges interest, requiring financial providers to provide Shariah compliant offerings, including credit cards

70-80% of online purchases of physical goods in the ME are paid through Cash-on-Delivery, while 30% is paid online 47% of consumers in the ME own some form of payment card

UAE and Saudi Arabia account for ~80% of the smartphone usage and ~50% of eCommerce With 75 and 68%(of its populations), Qatar and the UAE have the 3rd and 5th highest rates of social media

usage in the world. Both have expat populations of ~85%

eCommerce’s potential has been recognized in 2016 with Wadi.com raising a $67M Series A Round and Souq.com’s $275M round, both based in the UAE

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Key Middle East Considerations

Distant second place behind WhatsApp

42M+ Registered Users

70% Active Daily

430M+ Message handled daily

200m+ Stickers sent/received monthly

Nearly 84% of users in the region have access to WhatsApp

~40% of Arab users said it is their preferred social app

Leading Messaging Service in: Lebanon, Qatar, Saudi Arabia, and the UAE

80M total users in the region at the start of 2015

87% of total internet users are Facebook subscribers 84% access via mobile

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African Internet Overview

* As of Nov 30, 2015** As of Nov. 15, 2015

African Population: 1,201 Million*

Internet Users: 349 Million

Penetration: 29.1% (world Avg-46.4%)

Facebook Users: 124.6 Million**

FB Penetration:(% of Internet Users)

37.6% (World Avg- ~38.6%)

WhatsApp % Penetration

of Internet Users63%

Africa has 9/10 countries with the lowest internet penetration rates(ranging from Niger:2.0%-Burundi:4.6%)

CountryInternet Users

Facebook Users WhatsApp %

Nigeria92.7M15M

Morocco20.2M10M

Tunisia5.4M5.2M Egypt

48.3M27M

Ethiopia3.7M3.7M

Kenya32M5M

Angola3.3M5.1M

South Africa26.8M13M76%

(of Internet Users)

63%ME/Africa

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African Market Overview

1/3Adults With Access to Bank

Accounts

23%African

Smartphone Penetration

85%Kenyans Using

Mobile Money Transfers

Increasing adoption will drive messaging and payments

70-80%Smartphone Penetration in

other parts of the world

51%Latin American Adults with

Access to Bank Accts

Solutions for the unbanked are imperative in helping achieve financial freedom

0.1%Nigerians Using

Mobile Money Services

Large dichotomies exist in Africa due to trust, awareness, and knowledge

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African Market Overview

In 2015, mobile money generated $656m in revenue in and in the next four years this is expected to double to $1.3 billion

Emerging markets are developing the most innovative payments offerings, including m-Insurance, microloans, and other mobile payment offerings

Instant mobile-to-mobile international money transfers are becoming the norm

PayPal’s Xoom teaming up with mPesa to send remittances directly into users accounts

Blockchain technology has the potential to provide more efficient forms of trading, transfers, and settlement to traditionally multi-party transactions

eCommerce is continuing to accelerate as better logistics, infrastructure, and selection continue to be put in place Same day delivery is arriving to major cities and becoming an instant game changer!

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Internet.org

With 9 of the top 10 countries with the lowest internet penetration in the world, Africa is well positioned to benefit from Internet.org

Corruption on all levels is endemic in these areas, so understanding the corporate, governmental, social, and religious landscape is imperative in succeeding in these environments

MTN and Vodacom, the two largest telcos in SA, are accusing messaging apps, including WhatsApp and WeChat, of “freeloading” on their networks and have asked the government to investigate. These ill feelings could spill over to Internet.org

Facebook has 7.3 million daily users in SA and 7 million access FB via mobile

Morocco has already banned VoIP over mobile networks

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The Competition:WeChat and the Influence of Naspers

PRODUCED BY ALAN ALDEN

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Influence in the Region

Based in Cape Town, Naspers is a $50B public company that owns ~34% of WeChat’s parent company, Tencent $32M investment in China’s Tencent now worth $45B (37% ownership)

Largest tech investor outside of the US, focusing almost exclusively the BRICs and Africa

Largest African media company (digital TV, web and print holdings)

Ownership stakes include: 42% of TAKEALOT, the largest eCommerce site in Africa;

47.6%(and now more) of Souq.com, which just received $275M at a $1B+ valuation;

53.5% of Dubizzle, an online classifieds site in the UAE

Payments: PayU is Naspers’ online payment solution in the ME / Africa In Jan. 2016, Hired Laurent Le Moal, PayPal Europe’s CEO to become its new CEO Souq.com has its own payment gateway, Payfort, which will eventually move offline to the POS

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WeChat Africa

Tencent’s WeChat and Naspers have teamed up to take on FB’s popular WhatsApp service in Africa Recently launched WeChat Wallet in South Africa with partner Standard Bank

Actively building up presence in Nigeria, South Africa, Ghana, and other areas Nasper’s ownership of numerous digital assets, as well as DSTv, and newspapers will create multi-

platform marketing approach

WeChat has ~6 million registered SA users vs. WhatsApp’s 14m active WhatsApp users South Africa has one of the highest WhatsApp penetration/usage rates in the world

Recently announced plans to invest 50M ZAR into local entrepreneurs and technology innovations Currently invested in and integrated with SA startups: Money4Jam, PicUp, and OrderIn

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The Future:Messaging Today……eCommerce Tomorrow


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Messaging: The Fastest Growing Platform

1.1Billion

2018

Additional Users

Africa and ME Leading the Way

PROJECTED ADDITIONAL USERSBY GEOGRPAHY

Asia Pacific265

Million Users

North America244

Million Users

Europe73

Million Users

Latin America

45Million Users

Africa and Middle East

579Million Users

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The Two Horse Messaging Race

0

150

300

450

600

750

900

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015

800+ million users

659 million users

212 million users

Facebook vs. Tencent/ WeChat*

Line (Japan)

WeChat / Weixin(China)

FB Messenger (US)

*WeChat, which is owned by Tencent, is called Weixin in Chinese

1B+ million users

FB WhatsApp (US)

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Messenger and WhatsApp’s Monetization

Payments

3rd Party Content

App Store

Advertising

Identity Management

Gaming

Travel B2B Services(Facebook for Business)

Payments

Payments Will Provide the Foundation

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How to Reduce B2C Friction?

Provide a Deeply Integrated Payments Offering Capturing Credit Cards is Key

WeChat and QQ have more than 200 million credit cards on their platforms

Ability to capture loyalty and other cards enables companies to quickly delineate user and provides FB with better ad targeting

Integrate Commercial Customers into the Platform Facebook has more than 50 million active SMB Pages

WeChat has more than 10 million “Official Accounts” within the WeChat app

Creates own ecosystem and “browser” type effect, keeping users within the platform

Ease of Communication is Always Key Messenger’s Threads Concept is a great start

M and other forms of AI will increase the personalization throughout process

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Monetization… FB’s Greenfield Opportunity

Facebook Global ARPU

Q4 2014 Q4 2015

$2.81

$3.73

Payments $0.19 Payments

$0.13

$3.60

Advertising

$2.62

Advertising

WeChat KaKao Talk Line

~$7.00

$4.24

$3.16

Asian Messaging Platforms Have

Proven the Potential of Monetization

Competitive Messaging Platform’s ARPU

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Monetization… WeChat’s Monetization

How Is WeChat (aka Weixin in China) Monetizing Users

Key Demographics

90% Users-18-36 Years Old

1.8:1 Male / Female Ratio

659M MAUs

1.1B+ Registered Users

100M Users Outside of China

Key Points Gaming is largest driver of revenue

54% of Tencent’s revenues

Parent co, Tencent, is now the biggest

gaming publisher in the world

$1.76B – Estimated influence on

lifestyle spending

50% of Users who use Taxi booking

feature spend an avg of $16/ month

20% of users spend $30 or more a

month on Official Account Services

200M Users are set up for payments

WeChat

~$7.00

E-Commerce Services~20%

Gaming

~55%+

Revs

Advertising~15%

Other~10%

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The Model: WeChat Platform / Ecosystem

Gaming

Content

More than 10 million “official accounts” on the WeChat platform

Many businesses launch on WeChat before launching their own standalone apps

Has created an “app within an app” ecosystem

Businesses

Payments

More than 200 million cards linked to the WeChat and QQ platforms

Linked to many city services providers for bill payment

Users forced to provide payment details to interact with certain groups or businesses

More than 50% of WeChat’s current revenues

Largest portion of value-added services (VAS) revenue coming from gaming

Parent company, Tencent, is largest game publisher in the world, and owns stakes in Riot, Epic Games, Glu, as well as a 10% stake in Activision Blizzard

WeChat / Tencent have gained exclusive streaming rights to sports and entertainment content providers, including: the NBA, FOX Sports, 21st Century Fox, HBO, National Geographic, Warner Music Group, and more

Aggressively going into emerging markets outside of China and creating exclusive content deals with local entertainers

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WeChat Emerging Markets Case Study:Content Acquisition in South Africa


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Cliffcentral.comWeChat Gambles on Gareth Cliff, South Africa’s Howard Stern

On May 1, 2014, Gareth Cliff, the most popular media personality in South Africa

left terrestrial radio to launch his own online station, CliffCentral.com

with the help of WeChat and mobile provider MTN

Key Considerations To Success of Partnership: Current media consumption habits

• Will customer acquisition be “evangelical sale” to gain new listeners to a new platform

Cost of streaming data for listeners/users outside of MTN

• Customers, especially younger ones in emerging markets, are very price sensitive

• Which carrier is the best partner: evaluation customer segmentation/ breakdown

Offline and online promotions and advertising

• What kind of resources will be required to market the new platform

• FB would have a distinct advantage here by leveraging previously “likes” and similar interests for targeting

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In Conclusion….

Someone who understands the landscape, the culture, the major players, and intimately understands the competitors will be

required to best move Facebook forward in the region

Facebook has created an “incumbent” position in the ME and Africa with WhatsApp and the traditional Facebook platform,

but the competitors are well financed and have deep roots in Africa

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Series-A Partners: Contacts Within the RegionDubai Holding: CFO, CTO, Head of Strategy Naspers: CIO, CEO of B2C, Head of M&A

Tecom (UAE): CEO Government: Premier of the Western Cape

Dubai RTA: (Metro, Buses, Cabs)

CEO Computicket:(largest ticket provider in Africa)

CEO, Head of Integration

Etisalat: Head of Corp Dev/M&A TAKEALOT: Founder / CEO

Visa MEA: Dir of Emerging Products Shoprite Holdings (SA): Owners

MasterCard MEA: VP of Government Relations FNB: Former CEO

UAE Ministry of Finance: Multiple Members Investec: Bankers

Expo 2020: Team Member (Al Gergawi Family) Fundamo (Visa SA): Founder/ Former CEO

Jumeirah Group: CEO WeChat Africa: Head of Operations

Emaar Group: VP of Marketing Clifftop Colony (top tech banker in SA): CEO

Orange: Innovation/Investment team Coronation Fund Managers: Chief Investment Officer

PlatinumList:(largest ticket provider in Middle East/UAE)

Founder/CEO Cape Venture Partners: Partner

neXgen Advisory: (Dubai, Abu Dhabi, Kuwait, etc)

CEO - Lead Consultant to HH

Sheikh Mohammed on SmartCity

ACITS (Saudi Arabia): CEO

Close personal friends with the Gergawi and Al Mulla families in Dubai

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Thank You

Contact Information:

Alan Alden


[email protected]

@SeriesAPartners

www.series-a.com

Date post:	23-Jan-2018
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Facebook Payments and Commerce: Key Considerations for Its Move Into Africa and the Middle East

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