Moving Forward and Killing Freemium

Sometime at the beginning of 2014, Bastian and I were sitting with around $9 million in the bank trying to figure out what the best path forward for iROKO was.

We had operated our freemium model for the best part of 18 months and our advertising business had just delivered a record breaking Q4/2013. In fact, in December 2013, we were profitable.

It wasn’t all glory though. We had tried and failed a bunch of parallel initiatives, gotten a boat load of op data, gotten a few lumps from the non-believers and generally had a tough year in 2013. We were at a crossroads. We could continue as is, growing revenues at 50%+ year-on-year, but it wasn’t going to be a unicorn.

We needed to embrace the future. Winning Africa. Our conclusion:

Win Lagos, and win it now.

Burning the Boats and Bridges

We needed to burn the boats and bridges.

In 2013, 47% of our revenue came from advertising. We were largely an advertising based business. We had advertising operations guys (and gals), 13 Ad network relationships, a product built for dual business models.

We needed to burn the boats and bridges.

We felt the way forward was paid content (SVOD: Subscription Video On Demand) and we felt the only bet was to bet the company on that path.

We had the cushion of cash at hand to execute just such a dastardly act. But we were nervous. This move would ensure we wouldn’t meet our 50% y-o-y growth targets. Pretty much guaranteed that would slow [FY 13 to FY 14 we slowed to ~12%].

We had to make some tough choices around office, culture and team to even attempt this switch. But we had cash and courage.

We needed to burn the boats and bridges.

We debated around the benefits of hard migrating people en masse or gradually over time with metered viewing. We had never focused particularly on Nigeria or Africa from 2010 to 2013, so we needed to embrace that reality.

We needed to win Lagos.

In the beginning of 2014, Africa subs represented about 2% of our base. We felt this would require a city by city roll out over and above at geo-by-geo perspective. We needed to focus on this task otherwise we would never get it.

To embrace that future, we needed to divorce ourselves from the past:

  • ~95% of our revenues and users outside of Africa. Burn it!

  • Streaming Vs Download product incorrect for our target market. Burn it. Distort the product for the new reality. Forget iOS. Build for Android!

  • No telco relationships across Africa. Jump on those planes. Get them!

  • Globally dispersed customer acquisition ad spend. Burn it. Narrow it to Lagos!

Burn it. Do it. Boats and bridges.

These are all powerful words. They belie the insecurity Bastian and I labour under (then and now). We didn’t really know whether things would work out or not. An educated guess at best. It just felt like the right thing to do for the long term. So we just tried it. Still a work in progress. It still hurts. Definitely the most expensive project we have, but we are slowly gaining in confidence.

We still need to replace the freemium + paid revenue mix in total, we are a few quarters away from that. But we are more focused than ever. The teams are more aligned on the direction of anything. We are forced to communicate more effectively and concisely on the direction of iROKO over the next few years. We are a better company.

In 2015, we aim to grow at the very minimum to get back to our 50%+ y-o-y growth rates. Excitedly, Africa now represents 11% of our subscription base and grew 457% in 2014, by far the fastest growing market globally was Nigeria.

Below is a graph of revenue and subscribers in Africa over the last 6 quarters. have removed the numbers but as a team we are gunning for Africa to represent at least 25% of our subscription base by year end.

iROKO Subscriber to Revenue Summary

The crazy thing is, our future is still somewhat uncertain. 2015 will see the emergence of many new VOD players in Africa. I suspect the 102 available at the moment will grow considerably. We have our strategy, it’s just mega important we just focus on delivering that.

iROKO’s values are:

Be Bold.

Be Customers.

Be Fast.

Be Honest.

Be Amazing.

We believe to win. One must be bold. So we burned those boats and bridges.

Cover Image Credit: Mariano Kamp