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

Payments and Commerce:
Middle East and Africa
By
Alan Alden
@SeriesAPartners
www.series-a.com

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)

Series-A Partners: Contacts Within the Region
Dubai 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

Messaging: The Fastest Growing Platform
1.4
Billion
Current Users
2.5
Billion
2018
OPPORTUNITY
1.1 Billion
Additional Users
Africa and Middle East
Leading the Way
PROJECTED ADDITIONAL USERS
BY GEOGRPAHY
Asia Pacific
265
Million Users
North America
244
Million Users
Europe
73
Million Users
Latin
America
45
Million Users
Africa and
Middle East
579
Million Users

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%
Country
Internet Users
Facebook Users
WhatsApp %
Israel
5.9M
4.4M
Iraq
11M
11M Iran
46.8M
NA (Blocked)
KSA
18.3M
12M
52%
UAE
8.8M
6.3M
61%
Jordan
5.7M
4.1M
63%
ME/Africa

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

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

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 Users
63%
Africa has 9/10 countries with the lowest internet
penetration rates(ranging from Niger:2.0%-Burundi:4.6%)
Country
Internet Users
Facebook Users
WhatsApp %
Nigeria
92.7M
15M
Morocco
20.2M
10M
Tunisia
5.4M
5.2M Egypt
48.3M
27M
Ethiopia
3.7M
3.7M
Kenya
32M
5M
Angola
3.3M
5.1M
South Africa
26.8M
13M
76%
(of Internet Users)
63%
ME/Africa

African Market Overview
1/3
Adults 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

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!

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

The Competition:
WeChat and the Influence of Naspers
PRODUCED BY ALAN ALDEN

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

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

The Future:
Messaging Today……eCommerce Tomorrow

Messaging: The Fastest Growing Platform
1.1
Billion
2018
Additional Users
Africa and ME
Leading the Way
PROJECTED ADDITIONAL USERS
BY GEOGRPAHY
Asia Pacific
265
Million Users
North America
244
Million Users
Europe
73
Million Users
Latin
America
45
Million Users
Africa and
Middle East
579
Million Users

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)

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

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

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

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%

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

WeChat Emerging Markets
Case Study:
Content Acquisition in South Africa

Cliffcentral.com
WeChat 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

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

Thank You
Contact Information:
Alan Alden
alan@series-a.com
@SeriesAPartners
www.series-a.com

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