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