These are my notes from Oliver Rippel’s talk at NetProphet 2011. Oliver is the CEO of MIH, a group company overseeing African and Middle East online properties like Mocality and kalahari.net.

The state of e-commerce in Africa

• As soon as e-commerce becomes more than 1% of retail sales, that’s when it becomes mainstream
• US not the most successful e-commerce market - Korea is, with 9% of retail sales online. US is at 4%
• E-commerce in Africa is still nascent:
  • Egypt - 22% Internet penetration, less than 0.01% online retail penetration
  • Nigeria - 29% Internet penetration, less than 0.01% online retail penetration
  • South Africa
    • 6 million Internet users, 12% penetration
    • 0.4% online retail penetration
    • 16.7% credit card penetration
    • 14 e-commerce sites in Top 100 SA sites

Positive e-commerce macro-indicators in Africa

• Big average projected real GDP growth
• There is a growing middle class of 320m Africans
• High mobile penetration (World average: 60%; South Africa: 92%)
• The promise of accessible and affordable broadband Internet is there

Lessons for building a winning e-commerce business in Africa

MIH’s focus is on the full e-commerce value chain The brands cover the whole purchase cycle: awareness, interest, decision, action, post sale, resale

• Embrace mobile
• Leverage offline
  • Go where the users are - online marketing on its own simply won’t work
  • Go to shopping malls and put up posters - whatever works
• Cash is king
  • 50m million banks accounts in Africa, 95% of transactions are cash-based
  • The only mobile payment system that is scaling is M-Pesa in Kenya: P2P payments
  • They are converting a cash economy into a digital economy, so that can now also be used for e-commerce
• Build trust
  • Open marketplace model is inadequate in low trust early stage environment - unlike eBay
  • Instead, MIH uses controlled marketplaces that reduce barriers for buyers by building a trusted brand

I’ve been thinking about Evernote and Dropbox, and the characteristics that make them successful freemium businesses.  Of course, a lot has been said about freemium, and Ning’s recent decision to drop that business model has placed it under renewed scrutiny.  But I don’t think it’s time to bury freemium just yet.  I wanted to write down some quick thoughts on what I believe are three essential characteristics of a successful freemium business:

1. Be patient with users.  Evernote’s cohort analysis shows that initial conversion rates are at about 1%, but once users have been with the service for 18+ months, that jumps to 4% — more than enough to be profitable.  And it’s not actually a bad thing to have free users for that long — at that point they are so invested that they’re not going to take their data elsewhere.  They know and love the product, so when they hit the storage limit, they’re comfortable with paying.
2. Have a natural (and inevitable) path to upgrading.  With both Dropbox and Evernote, if you use the product long enough, you’re going to have to upgrade — at some point you’re going to run out of storage.  If you don’t have a natural path to upgrading you need to create one, or you’ll find yourself in trouble.  Users will use your free product for forever and be happy with it.  You need to make it inevitable that a certain % users will hit one of your limits.
3. Have a great free product.  It might sound contradictory, but if your free product sucks, the switching cost will be very low.  Dropbox and Evernote are successful because users love the free product, so when they run up against the limits, the decision to pay is an easy one.

To put it another way, I think that to be successful as a freemium company you need to (1) have a free product that users love, (2) be ok if those users don’t convert to paying customers for months, but (3) make it inevitable that at some point, they will have to upgrade if they want to keep using your service.

If you haven’t seen these great talks on freemium, I highly recommend you invest the time to watch it - very informative:

• Dropbox CEO on Startup lessons learned
• Evernote’s CEO discusses how to make freemium work

With the three recent big stories in Facebookland (the FriendFeed aquisition, real-time search, and now the test launch of Facebook Lite) it doesn’t take a rocket scientist to figure out that Facebook is going hard after Twitter. (Update 1/16/2010: Facebook just rolled out “via” as their version of Twitter’s “retweet”. That, combined with recent changes to their privacy policy to make the platform more open, are two more clear examples of Facebook’s “Become Twitter” strategy)

What is more difficult to understand is why they are doing it.  Maybe it’s a personal vendetta because of the failed acquisition talks?  I just don’t see the business reason for this.  Here’s why I think Facebook should forget about Twitter and focus on making its own platform great:

Different target markets

It is well known that Twitter skews heavily towards younger tech-savvy users, with the rest of the population finding it hard to see the point.  Facebook, on the other hand, is increasingly being used by an older demographic.  The fastest growing demographic on Facebook is women over 55.

Why is all this important?  Because regardless of what Facebook wants to be, the demographic that is settling in on the site for the long haul is different from the Twitter user base — and they have totally different needs and behaviors. At this point, Facebook is too established as a brand to be able to force their product onto the target market they want.  And why would they even want to?  They have access to a much larger user base than Twitter.  Which brings me to my next point…

Always compete on your strengths

The mistake that Facebook is making is that it is trying to be Twitter for a user base that does not want Twitter.  Not convinced?  Go to http://www.brandtags.net and look at the brand clouds of word associations that people make with Facebook and Twitter.  For Facebook, you get words like Communication, People, Stalking.  For Twitter, you get words like Pointless, Stupid, Useless.

Now, of course Twitter is none of those things, but it shows the enormous gap in brand perceptions.  Why would you want to move a powerful people connection platform closer to something with a niche market that a majority of people find useless? There are a bunch of other Twitter statistics coming out lately that prove the Twitter niche factor: 5% of users account for 75% of the activity, 60% of US Twitter users abandon the site after a month, and 24% of all tweets are from bots (ok, that last one is irrelevant to this discussion, but still interesting).  And there’s also this interesting conversation on Mashable that clearly shows the differences between Twitter and Facebook usage.

The bottom line is that Twitter is for information sharing, Facebook is for life sharing.  That is what people are using it for — sharing photos, videos, those annoying pokes and quizzes, keeping in touch with friends all over the globe, lurking on profiles of people you used to know way back when.  That is the strength of Facebook, and that is what they should focus their platform on.

So what should Facebook do?

So here is my advice to Facebook: go where your users are.  Understand how they use the site, what their needs and behaviors are.  Go visit them, talk to them, watch them navigate around, understand why they are there in the first place.  And then enhance your platform to fulfill those needs.  Build new ways to feel closer to the people in your life.  Make it easier to share and discuss media.  Build families-only mini-communities.  Who knows what you can come up with if you just understand your users and build a web site for their needs?

Seriously — let Twitter be Twitter, forget about them and don’t force your users into that kind of experience.  Don’t try to be “status updates for everyone.”  Be a platform that lives up to the value proposition on your home page: “Facebook helps you connect and share with the people in your life.”

I recently attended a brand presentation where the video below was shown. It’s pretty funny, and also a perfect example of how interactive products and consumer-generated content should fundamentally change our traditional views of customer loyalty. Loyalty in our current environment is fostered through repeated great (user) experiences, not just through advertising and coupons.

But even though I like the general point the video is trying to make, I think it stops a little short of the real issue. It is saying that we should listen to our customers better. But that’s not enough — we need to understand customers in ways they don’t even understand themselves, and then build experiences that meet unmet (and sometimes unconscious) needs through repeated, positive experiences that deepen the customer-company relationship.

Uncovering these needs happens not just through “Voice of the Customer” research programs, but also through more contextual research efforts like ethnography and contextual inquiries (combined with validating quantitative research). I believe this is where traditional Market Research programs like NPS (Net Promoter Score) only tell a part of the full brand loyalty story (albeit an important part, for sure).  There is evidence that the tide is turning on this topic as the field of HCI (Human-Computer Interaction) becomes more mainstream and user experience research techniques become more accessible.

There is a powerful synergy in discovering how to deepen true customer loyalty through collaborative efforts between Market Research and User Experience Research, and we need to bring these two disciplines closer together (this view is also very much in line with the thinking described in the excellent Adaptive Path essay The Long Wow).

I’ve been working on a project where we’re trying to come up with a way to establish a visual design “clutter index.”  The goal is to see if there is some threshold beyond which web page clutter impacts business metrics like conversion and click-through rates.  The challenges are widespread of course, and mainly focused on the following 3 areas:

• The definition and measurement of clutter.  There are a variety of ways to measure clutter on pages, ranging from the completely objective (e.g., % of white space on a page) to completely subjective (e.g., how do users rate the page on a clean vs. cluttered scale).
• The definition of conversion.  Since some pages on an e-commerce web site are revenue-generating, and others aren’t, an important question is how you define conversion.  For revenue-generating pages (e.g., pages with a “checkout now” button) this is easy — “Did the page result in a sale?”  For other pages, like product information pages, this measure won’t work, so some other measure of engagement with the page becomes necessary.
• Controlling for other influencing factors.  In conjunction with the first two points comes the problem of causality vs. correlation.  Assuming you have your definitions of clutter and conversion nailed down, how can you be sure any changes you see in conversion is caused by clutter (causal relationship), and not some other factor you are not accounting for (there’s correlation but no causal relationship).

The way to go about it is to take as many measurements of clutter as you can, feed them into a statistical model with a variety of conversion metrics, and see what comes out.  You also have to find a way to account for other influencing factors so that you can control for that in your model.  Easy, right?  Ok, so there are a lot of open issues, but they’re definitely not insurmountable.  I also believe it’s a worthy pursuit, the hypothesis being that there are clear business reasons for keeping designs and interfaces simple.

And apparently we’re not the only ones thinking about this…  Ruth Rosenholtz and her colleagues at MIT recently wrote a paper (Measuring Visual Clutter) where they seem to have developed what they call a “clutter detector” for a variety of interfaces, mostly offline (desk clutter, map clutter, etc.).  They describe some of their challenges in doing this as follows:

The fact that one person’s clutter is the next person’s organized workspace makes it hard to come up with a universal measure of clutter. Rosenholtz and colleagues modeled what makes items in a display harder or easier to pick out. They used this model, which incorporates data on color, contrast and orientation, to come up with a software tool to measure visual clutter.

On the issue of subjective measures of clutter:

Although there was a fair bit of disagreement among the people being tested about what constituted clutter, when the researchers compared results from their clutter measure to those of their human subjects, they found a good correlation.

I’m still digesting the paper, but it’s a fascinating read so definitely check it out.  Thoughts on how to approach this for e-commerce web pages are also more than welcome!