African startups could struggle to make money out of advertising, says Facebook engineering director Matthew Papakipos.

Speaking at last week’s PIVOT East 2014 conference in Kenyan capital Nairobi, Papakipos warned African startups to avoid falling into the trap of replicating the Silicon Valley model of monetisation via ads.

Papakipos explained that advertising may not be a strong business model in Africa owing to different market dynamics.

“Silicon Valley is in a weird market of 300 million people who all have smartphones and an ad-market that is really lucrative, where we can make huge amounts of money per user,” he said.

“I do not think the market in this region is ready yet for business revenue models that are solely based on advertising and I would definitely stay away from this model for a while,” Papakipos said.

Instead, Papakipos advised startups to find other revenue streams that could guarantee inflows, such as subscription fees.

“You (startups) should instead focus on a things where you get people to pay for your product from the word go, at least until the market matures enough.” Papakipos said.
Africa’s advertising market is small but growing quickly, according to researchers.

According to Gartner, global mobile advertising spending is forecast to reach $18 billion in 2014, up from an estimated $13.1 billion in 2013. Moreover, the global market is expected to grow to $41.9 billion by 2017.

“In the emerging markets of Latin America, Eastern Europe, the Middle East and Africa, mobile advertising growth will largely track the technology adoption and stabilisation of emerging economies, but will mostly be driven by large markets such as Russia, Brazil and Mexico,” Gartner has noted.

“From 2015, growth rates in this region (Latin America, Eastern Europe, the Middle East and Africa) will exceed the worldwide average,” according to Gartner.