Finweek English Edition - - INVESTMENT -

Re­cently I re­ceived a great ques­tion from reader Daniël Mal­herbe: “Since one can’t in­vest in Valve Cor­po­ra­tion, which owns the Steam plat­form, be­cause it is pri­vately held, are there sim­i­lar game devel­op­ment com­pa­nies that are go­ing to grow in the next few years be­cause of their huge in­vest­ment in e-com­merce plat­forms and in­de­pen­dent gam­ing com­mu­ni­ties that your team knows of?”

Be­fore we delve into the an­swer, let’s clar­ify what Daniël is talk­ing about. Steam is a US plat­form that sells games on­line. It cov­ers the PC, Mac and Linux plat­forms and its of­fer­ing is im­pres­sive – it in­cludes block­busters sell­ing for up­wards of $60 down to smaller free games and ev­ery­thing in-be­tween. The beauty for Steam is that it has a mas­sive user base and hence is at­trac­tive to game de­vel­op­ers as an out­let and it sim­ply takes a com­mis­sion on each sale. How­ever as the reader noted, Steam is not listed, but Ac­tivi­sion Bl­iz­zard op­er­ates in a sim­i­lar space and is listed in the US but has al­ready been dis­cov­ered and the reader is look­ing for some­thing yet undis­cov­ered.

The bad news is that we have no pure e-com­merce or game de­vel­oper listed com­pa­nies in South Africa, but we do have some al­ter­na­tives – kinda.

First up is the go­rilla in the room, Naspers*. Sure, Naspers owns a bunch of print ti­tles and DStv, but its real kicker is Ten­cent in China and Mail.ru in Rus­sia, along with a num­ber of smaller on­line plat­forms across the de­vel­op­ing world and of course it has all the Me­dia24 web- sites lo­cally. DStv really is the cash cow that en­ables Naspers to spread into the e-com­merce world and so far it has been hugely suc­cess­ful. There are also a num­ber of re­tail­ers with e-com­merce web­sites, some of which ac­tu­ally work fairly well, but can we see any of them be­com­ing the next Ama­zon with al­most no phys­i­cal store pres­ence? I don’t think so.

The mo­bile op­er­a­tors are be­com­ing util­i­ties and look­ing into var­i­ous e-com­merce op­tions and in time this could be­come sig­nif icant. Event tick­ets and mu­sic are just two value adds they could sell to their user base and in time th­ese sales could be­come sig­nif­i­cant and help make up the shrink­ing mar­gin they’re ex­pe­ri­enc­ing on data and voice.

Mov­ing swiftly to the smaller play­ers, there are a few that are ac­tive in the e-com­merce space but none of them are pure plays or de­vel­op­ers.

Comair may be an air­line, but when last did any­body buy a ticket via any method other than on­line and in that sense it is a player in the e-com­merce space? How­ever while that state­ment is true the back end is an air­line and I would never in­vest in one.

So then we land at Poynting, which started life sup­ply­ing de­fence equip­ment and base sta­tion tech­nol­ogy. Re­cently it launched an e-com­merce web­site that sells wire­less de­vices, an­tenna boost­ers and the like. While it’s still small, it is grow­ing and likely to be­come more sig­nif­i­cant but it is sell­ing prod­ucts, so there are the risks as­so­ci­ated with in­ven­to­ries and the like. Mon­ey­web is the most pure web­site play in the listed space but ra­dio still gen­er­ates most of its rev­enue. How­ever, the Look Lo­cal deal with ma­jor­ity share­holder Caxton does mean on­line will be­come more im­por­tant in fu­ture, yet this is not really e-com­merce, rather we have web­sites that rely on ad­ver­tis­ing for their rev­enue.

The last in the listed space is Blue La­bel – its core busi­ness is en­abling out­lets to sell air­time, pre­paid elec­tric­ity and the like. It re­cently launched pin-less air­time, which can be used to buy air­time with­out vouch­ers and long pins be­ing printed. Here one merely en­ters the mo­bile num­ber one is buy­ing air­time for and an SMS is sent con­firm­ing the air­time has been loaded.

So there are no pure e-com­merce plays yet, but I would sug­gest tak­ing a closer look at Naspers and Blue La­bel and maybe start at­tend­ing some ven­ture and an­gel cap­i­tal events, where you may meet the lo­cal ver­sion of Valve Cor­po­ra­tion – but be care­ful here. The hype al­ways sounds im­pres­sive, yet the re­ward is sel­dom any­thing be­yond a drink at the cap­i­tal-rais­ing event. Simon Brown is a Fin­week con­trib­u­tor and heads ju­s­tonelap.com, a free re­source of fi­nan­cial in­for­ma­tion and in­vest­ment ed­u­ca­tion.

*Fin­week is a Me­dia24 publi­ca­tion, which is a sub­sidiary of Naspers.

A ven­dor sell­ing pin-less air­time

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