Category Archives: eCommerce

Roblox IPO – Prospectus Peek

Roblox Corporation will list on the New York Stock Exchange as RBLX.

How much do we know about Roblox? Kids spend hours on it every day, but do they how Roblox works and the numbers behind it? Take a peek into the IPO prospectus for Roblox. 

About Roblox:

  • Founded in 2004 by David Baszucki and Erik Cassel. Today, Baszucki is the CEO and second-largest shareholder with 12% behind Altos Ventures that has 21%.
  • The company has eight classes of stock some preferred, some convertible and more restricted share units have been granted to employees in the IPO. 

Numbers:

  • The company had $489 million revenue in 2019 and $589 million in the first nine-months of 2020. $409 million (70%) of its revenue is from US/Canada, 17% from Europe, with Asia-Pacific adding 8% and the rest of the world is 5% (28.2 million).
  • The company has $1.49 billion assets, 801 million of which is in cash.
  • It lost $86 million in 2019 and $205 million in the first nine-months of 2020. It has carried forward accumulated tax loss credits with the US government of $162 million and $54 million in the state of California.

Users & Experiences:

  • Key attractions that draw users to Roblox are unique identities, interaction with their friends, low friction (easy to join) and the variety of 3D experiences easily accessible on most devices whether they run on iOS, Android, PC, Mac, Xbox, Oculus Rift etc.
  • Most experiences are free and users can then purchase others such as clothing and avatars.  Users do this using ‘Robux’ which they purchase with a credit card, subscriptions or one-time mobile payment (such as with M-Pesa), and use the Robux is to access digital items such as avatar and features.
  • The user base is currently 51% male and 44% female, with 72% of uses using mobile devices. Geographically, 33% of users are in the US /Canada, 29% in Europe 15% in Asia and 22% in the rest of the world. The Roblox business case going forward depends on growing internationally, particularly in Europe (Germany & France), and Asia (South Korea). Also, in February 2019 they entered a joint venture with Tencent to use the Roblox platform in China and Roblox owns 51% of the JV.
  • Users aged 9-12 years are 29%, under-9s are 25% and 13-16 are 13%, while 14% of Roblox users are over 25 years. They hope to grow the over-13 crowd as they have a higher propensity to spend on content.
  • During Covid-hit in 2020, active users have gone up from 18 million in 2019 to 31 million by September 2020 from 180 countries. On average, people spend 2.6 hours per day on Roblox.

Operations:

  • Roblox has 18,000 servers in the US, Europe and Asia that handle 10 million requests per second.
  • Users are able to draw from a library that has 18 million experiences and the company uses machines and 1,700 humans to moderate this content.

Developer Program:

  • It has 7 million developers and 960,000 of them earn on the platform. Developers can build in their native languages and machines translate the content into 11 languages including English, Japanese, Korean, Spanish, Chinese, German and French.
  • Creators receive 30 % of revenue from the creations while developers receive 70% of Robux spent on their experiences. In the nine months to September 2020, developers earned $209 million up from 72 million in the same period last year. 1,050 developers earned $10,000 or more and 250 earned more than $100,000 in Robux.
  • If they want to cash out of the developer exchange program, the rate is one Robux is equivalent to $0.0035.

Advisors:

  • Underwriters of the IPO are Goldman Sachs, Morgan Stanley, J.P. Morgan, Allen & Co, Bank of America, and RBC.
  • The auditor is Deloitte while the firm of Wilson Sonsini is the legal counsel.

To be continued.

Antler Nairobi Demo Day

VC funder and startup accelerator Antler Global held a demonstration day yesterday in Nairobi where founders of four companies got to explain their practical solutions to existing challenges in the sectors of health, fintech, advertising and e-commerce.

The Singapore-founded Antler has offices in London, New York, Amsterdam and now Nairobi, among others. Antler aims to turn exceptional individuals into great company founders through networks of advisors and by providing funding to enable the building of strong teams to launch and scale ideas. They currently have a portfolio of 120 investee companies.

The four new ones in Nairobi are among fifteen companies that have received pre-seed funding of $100,000 from the Antler East Africa Fund. They are drawn from 1,250 individuals who applied to join the Nairobi program which started in August 2019. The Demo day talks were by:

  • AIfluence: an Artificial Intelligence-based platform that connects influencers with brands and measures the impact and ROI of their campaigns. The company has lined up additional funding and advertising deals with Tik Tok.
  • Anyi Health: Enable patients to apply for credit right at hospitals.
  • ChapChapGo: Aims to fix the broken supply chain of fast-moving consumer goods, in which 70% of trades are still informal – with these purchases happening in a 19thcentury system where people queue to buy, queue to pay and arrange their own delivery. The company aims to leverage on wholesalers through an app, and by using WhatsApp for customer service and sales, to deliver goods at prices that are up to 25% cheaper for consumers.
  • Digiduka: Enables kiosks and shops receiving cash from low-income buyers to also process digital payment on. Many kiosk merchants find mobile money payments too costly and make many trips a week to purchase goods and permits in cash. The company aims to have kiosks double their income by offering digital services that will see them earn 75% of the commission, with Digiduka keeping the 25%. The founders say that pilot has been viable, with a payback period for kiosk owners of one month.

Double 11 (Singles’ Day) Festival in China

November 11 marks a huge shopping festival by Alibaba in China. Known as “Singles’ Day” or “11.11”, it is now acknowledged as the largest e-commerce day in the world. It is mainly on Alibaba platforms like Tmall and Taobao. Rival commerce sites such as JD.com and Lazada also run their own festival days during China’s long shopping season.

Singles’ Day 2019 saw another record year of sales reaching $23 billion (158 billion yuan) in nine hours. Sales hit $1 billion in the first minute and 500 million shoppers were expected to participate. This was achieved despite a slowdown in China’s economy and the ongoing trade spat with the US. Singles’ Day is three times bigger than the largest US largest shopping day – Cyber Monday which had $8 billion of sales in 2018.

Some numbers about Singles’ Day from Jing Daily.

  • On 11.11, Alibaba sells more on one day than many countries do in a year.
  • Alibaba founder Jack Ma has a plan for the company to attain $1 trillion of gross merchandise volumes in 2020 and create 100 million jobs, and serve 2 billion customers. As such the company is expanding in other countries. In 2017, Russia, Hong Kong and the US were the main markets.
  • International brands are signing on with discounts and specials, and in 2018, 237 brands, including Apple, Estée Lauder, L’Oréal, Nestlé, Gap, Nike, and Adidas has sales of 100 million Yuan ($14 million) on Singles’ Day.
  • The holiday was originally aimed at young men (bachelors), but has now evolved such that key targets for brands include China’s 400 million millennials, the “aspirational class” and women, the “she economy.” 
  • Over 80% of the Singles’ Day sales are made on a mobile device .. so retailers need to enhance the whole shopping experience by employing unique mobile features like live streaming, interactive games, virtual reality, video marketing, and digital storytelling.
  • On Singles’ Day in 2017, 1.5 billion transactions were processed by Alibaba’s Alipay.

Other Notes:

Kenya’s Safaricom, which has a partnership with AliExpress, also had some Singles’ Day promotions. They signed a deal in March this year enabling Kenyans to shop on ALiExpress and pay with M-Pesa.

The Jack MA Foundation runs an annual Africa Netpreneur Prize Initiative (ANPI) that awards a total of $1 million in prize money to ten African entrepreneurs each year.

Read more about 11.11 from Jing Daily here.

EDIT: Alibaba reported that Singles’ Day 2019 generated US $38.4 billion of gross merchandise volumes. It featured 200,000 brands and resulted in 1.3 billion delivery orders.

Social Media That Matters by Ogilvy

Ogilvy Africa and Ogilvy Social Lab held a session in Nairobi a few days ago. Speakers tackled the state of social media in 2019 in terms of technology usage, making brands stand out, and the role of influencers, among other items. 

It looked at trends in the world of media dominated by platforms like Facebook, Twitter, Amazon, Google (the four horsemen of the internet), and we learnt that we are in the middle of the biggest social experiment ever as billions across the globe use these platforms every day to network, communicate, transact, engage and get information.

Some of the highlights included:

  • People look at their mobile phone screens an average of 53 times a day – consuming information as text, images, video, and stories in bit sizes.
  • Users spend an average of 6 hours 45 minutes per day consuming digital media, with social media accounting for 2 hours and 20 minutes of that. In Kenya, one study found that young users spend 3 and ½ hours a day on social media.
  • Kenya has 8 million Facebook users and 700,000 Twitter users. It also has 1.5 million on Instagram and 2.1 million on LinkedIn.
  • But engagement is a poor predictor of business results. Brands should produce less content, personalize it and pay to promote it.

  • Everything is becoming a shop – thanks to tools like augmented reality, ordinary objects like posters and benches can come to life when viewed through a phone lens – and lead to hidden videos and links to merchants as seen in Snapchat Lens, Google Lens and Shopping on Instagram. An example was cited of the Jordan shoe sale marking the 30th anniversary of Michael Jordan’s iconic dunk – people at special Nike parties who watched a geo-located augmented-reality advert on Snapchat were able to order a new release of the vintage shoes, in their size, and have them delivered to their homes in two hours. The shoes sold out in a few minutes.
  • People go to YouTube with ‘intent’ – they know what they are looking for and want to watch (usually in the evenings) and this contrasts with ‘discovery’ driven video consumption in the daytime. Also, the first seconds matter the most – there is 47% awareness created in the first three seconds of a video message.
  • The most ignored influencer is the one who works in customer care.

UNCTAD report shows an unequal digital global economy

The increased use of digital platforms in everyday lives across the world is leading to a divide between under-connected nations from hyper-digitalized societies

The Digital Economy Report released by the United Nations Conference on Trade and Development (UNCTAD) shows that China and the USA have done the most to harvest the digital economy and now dominate the rest of the world and leading to an unequal state of e-commerce. The two countries host seven global “super-platform” companies – Microsoft, Apple, Amazon, Google, Facebook, Tencent and Alibaba that account for two-thirds of the total market value of the seventy largest digital platforms with Naspers as the only African company in the group.

Google and Facebook collected 65% of the $135 billion spent on internet advertising in 2017, while, in Australia, Google took 95% of the “search advertising” revenue while Facebook took 46% of the “display advertising” revenue.

Europe’s share of the digital economy is only 4% while Africa and Latin America combine for 1%.  In Africa, progress has also been uneven with four countries – Egypt, Kenya, Nigeria and South Africa accounting for 60% of digital entrepreneurship activity. They are followed by a second tier of Ghana, Morocco, Senegal, Tanzania, Tunisia and Uganda (with a combined 20%)

The Report showed that the evolving digital economy has a major impact on achieving sustainable development goals (SDG’s) and calls for governments in developing nations to focus efforts on things like:

  • Skills development & re-education e.g. consider that in the Western world, you can do a whole university degree online.
  • Revising policies on data privacy & sharing e.g. have restricted local data sharing pools and have tariffs on cross-border data.
  • Revising competition regulations e.g. curb the tendency where platform companies tend to capture/acquire young promising companies in the developing world.
  • Taxation e.g. developing country governments should seek to tax digital platform companies.
  • Employment e.g. by setting minimum wages & work conditions for gig-economy workers.
  • Break down silos: no longer think of government as being separate from academia, private sector, civil society and tech communities.
  • Also, while the US and Europe have divergent views on data protection, it cites a survey which found that Kenyans had the least concerns about data privacy (at 44%).

Speaking at an unveiling of the Report in Nairobi, Dr. Monica Kerretts-Makau said that the world is trending towards a captive society where you have to be on a platform to transact in an economy and that presents problems and opportunities in the African context.

The 2019 issue of the Report, that was previously focused on the “information economy”, can be downloaded here.

EDIT June 2020: The Kenya Revenue Authority announced the introduction of Value-Added Tax (VAT) on digital marketplace suppliers in the Finance Act 2019. Member of the public can send their views on the draft proposal  by June 15 to stakeholder.engagement@kra.go.ke.