Chris Locke
The Challenge of Sustaining
App Entrepreneurs
While on one of the earliest trips I made in my role as the managing director of the
Mobile for Development Department within GSMA, I found myself in a busy mar-
ket on the outskirts of Nairobi, weaving my way through a maze of stalls to the
buildings beyond. I was honing in on those painted “Safaricom green”—not a hard
task, as it sometimes seems as if every other building in rural Kenya is painted this
color—and was enjoying spending the day talking to users and agents of mobile
money services.1
Nestled amidst the market stalls I found a pharmacy painted the ubiquitous
Safaricom green, so I went in to meet the owner and rattle off my usual list of ques-
tion. The pharmacy was as expected—rows of medicines, an assistant in a reas-
suring white lab coat. Cependant, perched at the edge of the counter was a huge
ledger used to record M-PESA transactions, and on the walls a smattering of
posters advertised M-PESA services, explaining the charges and noting the M-
PESA agent’s number. I questioned the pharmacist: How long had he been running
an M-PESA agency within his shop? About a year. Was he happy with it? Oui, very
heureux. Was it providing a good side income to his pharmacy? Oui, but more than
que. What did he mean? He earned more from being an M-PESA agent than he
did from the pharmacy. Really? How long did it take for this to happen? About
three months.
Three months! Within three months the revenue from being an M-PESA agent
had outstripped that of running the pharmacy, which probably had taken the man
years to train for and to build up a business. What this man now was running was,
effectively, a phone-enabled bank in the same building as his less profitable phar-
Chris Locke is Managing Director of the GSMA Mobile for Development
Department. The Mobile for Development Department works with the mobile indus-
try globally to build services that have a development impact for the poorest people in
the world. Chris has spent the past 15 years working in the mobile and internet indus-
tries, for companies such as the Virgin Group, Three, AOL, and T-Mobile. Précédent
to his career in industry, he was the Xerox Lecturer in Electronic Communication and
Publishing at University College London, and he has maintained strong links to the
research community, including being the editor of Thumbculture: The Meaning of
Mobile Phones in Society, an anthology of research on the global social impact of
mobile technology.
© 2013 Chris Locke
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Chris Locke
maceutical business. I asked him how the M-PESA business had become so suc-
cessful so fast, and he gestured outside. I turned to look, and saw again the market
stalls I had picked my way through. Most of the traders likely were his customers,
people who used him as a kind of small-business bank to manage float, pay sup-
pliers, deposit earnings, etc.. The pharmacy was a secure building built to protect
the valuable medicines kept within it, but it now also protected the earnings of the
market stall traders outside. It was convenient to use the building as an ersatz bank:
drop a phone in the secure building, place a ledger on the desk, register as an M-
PESA agent, and bingo—you’ve just become a small bank.
AFRICA: THE WORLD’S FASTEST GROWING MOBILE MARKET
Apart from allowing me to indulge in some travel writing, there’s a specific reason
I’m leading off with this anecdote. What that pharmacy in Nairobi represents to me
is something that I think is a specific trope of mobile entrepreneurship in develop-
ing countries—the synergistic business, or the business within a business, où
the use of an existing host business or service allows a new form of digital business
to emerge and become sustainable. I think we need to understand how this partic-
ular model works if we are to fully understand how sustainability is to be achieved
in developing markets.
We talk of Africa in particular as a technological tabula rasa, a geography
devoid of infrastructure that, while posing a tragic problem in itself, offers the
opportunity for innovative solutions. Much has been made of the leapfrog charac-
teristic of the development of mobile telephony in Africa; comment, unencumbered by
a physical landline infrastructure, the continent has been allowed to move direct-
ly into a 21st-century wireless network culture. This is true, and I think we should
be quite optimistic about it.
The rate of mobile telephony development in Africa is phenomenal. Dans 2011,
the GSMA published its African Mobile Observatory, which indicated growth of
30 percent each year, with connections in the region expected to reach 735 million
by the end of 2012.2 This makes it the fastest growing region in the world in terms
of mobile. The appetite for mobile services doesn’t appear to be slowing, and as
cheaper smartphones such as the IDEOS start to take hold in African countries,
the continent will start to move beyond voice services to more sophisticated SMS
and data services. The GSMA report indicates that non-voice services already rep-
resent 26 percent of total revenues in Kenya, which is head-and-shoulders above
many other countries in the adoption of these services.
Innovation, cependant, has not been waiting for digital services to become avail-
capable. What has always struck me about innovation in Africa’s mobile sector is that
a new layer of digital innovation is floating above the topography of the economy,
culture, and society—not in the way ecommerce has slowly denuded high streets
of all but charity shops and betting venues in the UK but in how mobile innova-
tion is being woven into the physical world, dependent on its host. This is the kind
of synergistic innovation that I think characterizes mobile entrepreneurship in
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The Challenge of Sustaining App Entrepreneurs
Africa: it is building on existing businesses and infrastructure, augmenting them
rather than replacing them.
This struck me initially in 2005, when I was editing a book on the global social
impact of mobile. In an excellent chapter by Jonathan Donner, one of the pioneer-
ing academics in this area, he described how he had seen small business owners in
Rwanda use mobile phones to manage their small businesses.3 He noted how café
les propriétaires, hairdressers, and many other small businesses were using the most cheap-
ly (or freely) available mobile services to improve their business efficiency. A café
owner, Par exemple, encouraged customers to give him a certain number of rings
to indicate they would be in for lunch. This is not a separate industry emerging and
existing in isolation, but something that is always connected as it forms new paths
between existing businesses and customers. It is not replacing old systems but
renewing, improving reach, reducing costs, and improving efficiency.
To my mind, this is real innovation, not technology-led innovation whereby
top-down improvements in the features or functionality of a platform enable new
business processes to emerge. It is more akin to a process of bricolage, in which the
most is made of the limited materials available from the bottom up, thereby allow-
ing innovative and creative uses of technology to emerge. The mobile phone—a
device, we may need to be reminded, produced primarily for one simple function,
to conduct phone conversations—is now being used in many innovative ways. C'est
a device that people can make their own, that they can bend to their own needs and
but. The best and most innovative uses of the mobile phone are those that
treat it as a resource as much as a product in itself, and then mine this resource for
all its capabilities.
THE EMERGING ECONOMICS OF APP DEVELOPMENT IN AFRICA
The impending mobile digital revolution in developing markets often is discussed
in terms of the degree of the explosion in market app development. A fantastic and
laudable amount of effort has been put into developing a mobile app ecosystem in
Africa that has driven some real success.
The work of InfoDev within the World Bank group is a particular case in
point.4 For many years they have been pioneers in supporting the training and
mentoring of app developers in emerging markets. By developing these training
programs, they are bringing much-needed digital skills and entrepreneurship
training to emerging markets. There also are countless competitions for app devel-
opers in emerging markets, many with a social agenda, which offer incentives for
developers to train on mobile platforms. This is creating a buzz, as a new genera-
tion of mobile entrepreneurs emerges that is familiar with mobile as a platform and
has the support to develop the necessary skills. Cependant, the question remains as
to how sustainable the app economy will be, and whether it will produce sufficient
revenue in emerging markets to support this new generation of entrepreneurs.
Research by Vision Mobile provides what is likely the clearest breakdown of
the profitability of app developers.5 The economics of trading in the virtual world
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Chris Locke
of app stores is brutal—Vision Mobile’s research shows that up to one-third of
developers live below the “app poverty line”—a particularly vicious application of
Pareto’s principle in which the limited opportunity for exposure to an audience
creates a fierce separation between the most successful apps and what Chris
Anderson calls the “long tail.”6 Contrary to Anderson’s long-tail thesis, there is lit-
tle sustainability in this long tail of app development, which produces barely
enough revenue to sustain the effort
needed to create an app and then to
maintain it.
Simple tools and free
software can unlock the
creative potential of many
budding entrepreneurs and
support them in the
creation of new businesses.
Anecdotal evidence from devel-
opers has shown that, for an app to
sustain two people working full
temps, it must maintain a position
within the top 250 paid apps.7
De plus, sustaining an app in the
market requires much more than
developing it, launching it, and sit-
ting back while it brings in the
money. It requires, plutôt, invest-
ment in constant development,
upgrades, and new features. App stores are fiercely competitive and fast moving,
and offering new features is essential to keeping an app buoyant in terms of ratings,
reviews, and placement on the charts. There currently are more than 400,000 apps
available from the Android app store, which means that a lot of developers are not
covering even their basic costs.
Xyologic tracks stats for a range of markets globally and shows the trends in
app-store downloads and economics.8 Its research shows conclusively that, even if
a developer manages to beat the brutal “discoverability” issues, as most apps sim-
ply go undiscovered by the consumer, the path to producing revenue isn’t an easy
un. In its October 2011 research on the U.S. marché, Xyologic showed that only 1
percent of Android app downloads are in the “paid” category. The picture is better
for the iPhone (20 pour cent) and better still for the iPad (27 pour cent), but as Android
is most likely to be the dominant smartphone platform for developing markets,
this does not bode well for the sustainability of an emergent app-developer ecosys-
tem in the region. And remember—that 1 percent of paid apps on Android is
based on the U.S. marché, where purchasing apps via credit cards is a well-devel-
oped consumer behavior. In emerging markets with little to no credit card pene-
tration, 95 percent or more of users are on pay-as-you-go systems, and with the
smaller amount of disposable income in these markets, the paid apps percentage
can be expected to be even less.
This is not to say there will not be an explosion of digital creativity and inno-
vation around apps in developing countries. It’s hugely encouraging to see that one
of the winners of the Pivot East (a Nairobi-based competition to fund early-stage
app developers) was Ma3racer, a game based on racing matatus, the informal buses
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The Challenge of Sustaining App Entrepreneurs
found all over Kenya. It is great to see a game developed for one of these competi-
tion, as games at the moment are still the most sustainable form of mobile app.
I’ve always rather glibly stated that I’d consider it a success if the next Angry Birds
was written in Kampala or Nairobi or Lagos. This is because I really believe that,
by supporting nascent mobile digital innovation and entrepreneurs, we are build-
ing a more relevant and beneficial industry for developing countries.
The information and communication technologies industry can offer more
than cheap off-shore coding or business process work. Simple tools and free soft-
ware can unlock the creative potential of many budding entrepreneurs and support
them in the creation of new businesses that, if successful, can have a trickle-down
effect and inspire or even directly employ more innovators and entrepreneurs. Nous
need to help a thousand flowers bloom and support islands of innovators who can
grow and proliferate like the rhizomatic growth of the mobile networks them-
selves, rather than creating the massive coding farms that have previously charac-
terized the information and communication technologies industries in developing
marchés. Yet again, we can leapfrog this stage.
My concern, cependant, is that app store economics alone haven’t got enough
revenue potential to sustain this market for long. Some early successes are needed
to prove what’s possible (the function Angry Birds served in developed markets),
but it will be damaging if the seductive promise of this early success isn’t followed
up by a market that can sustain the many, not just the few. What will happen when
the app competition prize money dries up, as has occurred with many past devel-
opment projects? How will the pioneering app developers in emerging markets
sustain themselves if, as Vision Mobile’s research shows us, only a select few app
developers in more mature markets are managing to live above the app poverty
line? Perhaps the answer is in looking beyond the walled garden of app store eco-
nomics and seeing how different models of mobile innovation can support sustain-
able entrepreneurs.
ACHIEVING SUSTAINABILITY BY BEING SYNERGISTIC
Mobile technology at its most simplistic level provides the opportunity to connect.
If users do not allow themselves to be seduced by the shiny world within the screen
of a brand new smartphone, they will find a nondigital world that the device can
harness and interact with. Some of the most innovative mobile services users have
seen in emerging markets in the past few years have not been apps but services that
integrate with and augment the world around them—and not in a way that aug-
ments reality but one that connects reality.
M-Kopa is an innovative service that embeds mobile seamlessly in a non-
phone device and uses many of the business innovations driven by the mobile
industry to deliver its service.9 For example, M-Kopa offers customers a home solar
power system for lighting and charging devices that has a 2G chipset from a sim-
ple mobile phone embedded in it. By sending small amounts of money to the M-
PESA account in the solar system, customers can afford to access cheap, clean elec-
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Chris Locke
tricity in their homes on a pay-as-you-go basis. This is a nested innovation, a prod-
uct that requires not just the physical network but a lot of the existing mobile infra-
structure to succeed, for this product builds on the success of M-PESA. It also
replicates the success of the agent network mobile operators have built to sell air
temps, and uses this model to sell and maintain payments for its solar energy prod-
ucts. It is not just mobile technology that is enabling this business but mobile
industry innovations around marketing, distribution, customer management, et
payment processing. Mobile is not a “dumb bearer” network for M-Kopa but the
very supporting architecture that allows it to thrive and survive.
Grundfos Lifelink provides a similar service for water supply.10 Again, by using
the existing infrastructure of the mobile network and building on the “rails” of M-
PESA, this service provides a scalable, sustainable model for providing access to
water for rural populations.
Tienda Tek by Frogtek is another service that uses mobile technology to pro-
vide simple tools to support small businesses.11 Like an updated version of the basic
use of phones Jonathon Donner noted in Rwanda, Tienda Tek uses more sophisti-
cated mobile devices to bring smartcode-based stock control and management to
microretailers in Latin America.
The M-PESA agency within a pharmacy, the solar energy business that uses
mobile technology and distribution networks, the water service doing the same—
all these are examples of a “Russian doll” mentality of building new innovative
businesses within existing businesses.
1. M-PESA needs no introduction, as it is almost a cliché to discuss it in a paper on information
and communication technologies or mobile for development. Cependant, if you have picked up
this copy of Innovations without knowing about it, then I can tell you in a nutshell that M-PESA
is an SMS-based mobile payment revolution in Kenya used by over 70 percent of the population
to make more than a billion transactions a month. For a great history of M-PESA’s use and
social impact, I suggest that you download the ebook by Nicholas Sullivan and Tonny
Omwunsa, Money Real Quick, Guardian Books, 2012.
2. African Mobile Observatory 2011, GSMA, 2012. Available at http://www.gsma.com/publicpoli-
cy/wp-content/uploads/2012/04/africamobileobservatory2011-1.pdf.
3. Jonathan Donner, “The Social and Economic Implications of Mobile Telephony in Rwanda: Un
Ownership/Access Typology,” in Thumb Culture: The Meaning of Mobile Phones for Society, éd. P..
Glotz, S. Bertschi, and C. Locke. Bielefeld, Allemagne: Transcript Verlag, 2005, pp. 37-52.
Available at http://www.transcript-verlag.de/ts403/ts403.php.
4. See http://www.infodev.org/en/index.html.
5. Developer Economics 2012, Vision Mobile, 2012. Available at
http://www.visionmobile.com/product/developer-economics-2012/.
6. Chris Anderson, The Long Tail: Why the Future of Business Is Selling Less of More. Hyperion,
2006. Available at http://www.amazon.com/The-Long-Tail-Business-Selling/dp/1401302378.
7. See http://appcubby.com/blog/the-sparrow-problem/.
8. See http://xyologic.com/app-downloads-reports.
9. See http://www.m-kopa.com/.
10. See http://www.grundfoslifelink.com/index.html.
11. See http://frogtek.org/products/.
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