Africa’s largest mobile social network Mxit is planning to retrench almost 30% of its staff, just a month after the dramatic exit of its flamboyant chief executive Alan Knott-Craig Jr.
The South African headquartered instant messaging (IM) service, which is available for both feature phones and smartphones, says it has over 49 million active African subscribers, making it the largest mobile social network on the continent. Facebook follows closely with just over 48 million users Facebook, according to Internet World Stats.
But Mxit’s pole position in the social media stakes in Africa has not helped the technology unit’s owners, investment incubator hybrid World of Avatar, generate sufficient revenues to cover the firm’s costs, say reports.
Mxit spokesperson, Sarah Rice, has confirmed to ITWeb Africa that discussions are underway with about 40 staff as part of a voluntary retrenchment process aimed at reducing costs. Rice further told ITWeb Africa that the unit plans to complete the process on Monday.
World of Avatar has also withdrawn its funding to online social music startup Boom.fm. The startup released a statement late last week announcing that it is to be subsequently shut down.
“I got retrenched today at Mxit. Along with 40 others out of the 150 staff,” Blaine Murray, a smartphone development specialist working at World of Avatar, tweeted on Friday.
Murray tweeted further about his job loss on Sunday, “Tomorrow I go to the Mxit offices to sign and accept my retrenchment package. And say goodbye to ex-colleagues, going to miss some of them!”
World of Avatar, which was founded by Alan Knott-Craig Jr., acquired Mxit in 2011 for an undisclosed amount from its founder Herman Heunis and South African media group Naspers.
Knott-Craig, though, dramatically resigned as Mxit chief executive and left World of Avatar in October after he was said to have clashed with investors over strategy.
Despite Mxit’s management woes, the IM service dominates the social media landscape in markets such as South Africa.
According to technology research firm World Wide Worx, 9,35-million South Africans are on Mxit compared to 5.33-million South Africans who use Facebook.
Mxit’s strength has been its focus on developing its offering for feature phones: markets such as South Africa only have a smartphone penetration rate of 15%, according to Google research.
However, Mxit is facing greater competition in this space, especially with the growing adoption of smartphones and the emergence of competing IM services
In its interim report this year, Vodacom said that it has experienced a surge in data usage in South Africa owing to a 35% growth in smartphone uptake on the network. About 1.4-million smartphones have been added to the Vodacom South African network since September 2011, bringing the total number of the devices up to 5.3-million in its South African market, according to the company.
As a result, smartphone IM apps such as WhatsApp have grown to a user base of 4.6 million in South Africa, according to World Wide Worx. The research firm further says that WhatsApp has become the leading instant messaging tool among South Africans aged 16 and over, living in cities and towns.
Meanwhile, World Wide Worx has also said that the youngest mobile instant messaging tool to emerge on the measurement radar in South Africa this year, 2Go, has close to a million adult users. 2go, like Mxit, primarily targets feature phone users.
A technology and telecommunications expert says that the writing could be on the wall for Mxit if it fails to adapt to a changing IM world where the likes of WhatsApp and BlackBerry messenger are taken off in African markets.
“Besides stable leadership, Mixit is a company in dire need of radical thinking on new business models that are fine tuned to the needs of certain customer segments,” lead strategy consultant for the Middle East and Africa at Broadband Gurus Network, Sadiq Malik, told ITWeb Africa
“Otherwise they will keep on losing share to operating software based instant messaging and social media instant messaging services such as Gchat , Facebook,” concluded Malik.
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