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An overview of the AfriCam story
In early 1998 Paul Clifford and Graham Wallington were driving on their way to a job. With the Nasdaq soaring and webcam technology just starting to develop, they decided to put a camera in a tree on an African waterhole. And so AfriCam began.In the ensuing three years many individuals and corporates got involved. The following excerpt from a November 2001 Financial Mail article, written by former AfriCam CEO, gives an accurate portrayal of the story:
“AfriCam’s three-year roller coaster ride hit a low last week, with the company deciding to close its local company and scale back the website.
As CEO of the company it has been mostly exhilarating and exciting, often frustrating and challenging, and sometimes a depressing journey. But the spirit in the company was consistent – we would do it all again.
The concept remains brilliant – viewers globally can watch wildlife live in its natural environment, on its terms. It is only made possible by the internet and that is why I continue to believe in it. Simply replicating traditional businesses on the net is unexciting. Using the medium for something new is where winners will emerge (eventually!).
The AfriCam experience is similar to that of other global internet entertainment sites – I am not aware of even one globally that was profitable. Viewers flock, but the conversion of eyeballs to revenues proved problematic and it does not pay. It will eventually, but like radio, TV and newspapers in their early days, being too early proved expensive.
The highs in the business were dramatic: a peak of 38-million audited page impressions, feature coverage in the global media, including Time Magazine, CNN, NBC, Sky and the Wall Street Journal; we were aggressively courted by the world’s biggest merchant bankers to list at ludicrous valuations (US$200m +); we won the “internet Oscars” in our category in June 2001 – a US Webby Award; National Geographic used our services for their website and we achieved top ratings in our first live broadcast to the BBC in April this year.
My view on the internet as a business is simple – the short term was destroyed by an irrational investment community. In the early stages of the internet, valuations very quickly became absurdly high. Investors judged businesses on everything except cash flow.
Page impressions, turnover, unique visitors and growth rate became the measurement techniques. It was acceptable to make a huge loss as long as turnover was growing and more visitors flocked to a site. Profits could come later. In some cases, even a negative gross profit was rewarded by investors.
When judged by these criteria, businesses gear up to deliver on them. A spirit of free began to pervade the internet and products were cheaper because the sellers were prepared to make a loss. Internet surfers did not have to pay for anything and when buying a product, they expected to pay less, much less. This has now changed and we are back to traditional business principles. New investments will only be made in businesses which can generate a reasonable return.
The internet remains a fascinating medium, which can provide consumers with options that were not previously available. That makes it valuable. Over the next few years consumers will become accustomed to paying for services and very profitable businesses will emerge. Traditional businesses will charge for internet services (the internet version of the Financial Mail is a case in point).
AfriCam’s now defunct subscription service would have been a very profitable business. After only two months we had sold over 4000 months at US$5.99 per month, almost all to first world consumers. It had all the basics of a great business model: an 80% gross profit, annuity income, dollar based earnings and no limit to market size. However, the volumes would have taken another 12 months to cover the fixed costs and our balance sheet did not support the short term losses which we would have incurred.
We almost pulled off what nobody else in the world did. We had some profitable months, but the last six months have seen a serious decline in revenues, particularly from the US. Since the September 11 New York terrorist attack, traffic and revenues have been diabolical.
So what went wrong? The surviving internet businesses are those which raised capital at the height of internet mania. We achieved this and raised US$15m at a US$45m valuation, but our investor reneged after injecting only 10% of the commitment. This was our biggest killer blow.
But there are also things we should have done differently: 1) Get cash on the balance sheet. While we burnt through our fair share of cash (but in total less than one month of M-Web’s losses at the time of their delisting), we never had more than a few month’s expenses in the bank. 2) Start a “real” business earlier. We generated profits from TV broadcasting earlier in the year, but a little too late to achieve the appropriate business balance. 3) Start subscription earlier. 4) From a business model perspective, we tried to do too much – too many ventures and subsidiaries.
Africam is a national asset and has had an immeasurable positive impact on tourism to this country. The concept will survive in some form and we will maintain a scaled-down version. It is too strong and has too much global support to die. It will be profitable again. It is just a case of when.