Mxit shuts up shop, donates IP to charity

Mxit on Friday confirmed that it would shutting down its commercial operations to focus on Reach, its charitable arm. CEO Francois Swart is meanwhile set to depart the company he has been in charge of since the departure of Alan Knott-Craig Jr in 2012.

In its statment, the company also confirmed that while its app will still be available for download, the majority of its 30 or so remaining staff would be transferred to Reach — its charitable arm.

The statement confirms what Memeburn’s sources have been telling it for some time now.

The statement also reveals that Mxit user numbers had dropped to just 1.5-million in July 2015, corroborating what Memeburn wrote about the mobile social network’s numbers earlier this year.

In response to that article (and others suggesting that its user numbers were falling), Mxit had originally went on the defensive, claiming that articles contained “misleading numbers, statements that are based on hearsay and speculation, and most worryingly, expert industry opinion that fails to distinguish between the basics of active vs. registered users in social media”.

“Whilst Mxit overall has seen a decline in activity and engagement over the past 18 months, the use of services offered by The Reach Trust on Mxit has been stable and in many cases show an upward trend,” Swart said in the statement.

Memeburn sources also said that some of the company’s technology had been spun off and was operating as a separate company. Mxit has so far not come back to Memeburn on inquiries into this and other aspects of the business’ restructuring.

At this stage, it’s unclear what Swart will do next although there have been suggestions that he could find himself working on other projects run by Mxit investor Paul Harris. Mxit did however reveal that Michael Jordaan, who was named Mxit chairman in 2013, would have no influence on Reach.

Founded in by Namibian entrepreneur Herman Heunis 2005, Mxit at one stage had 50-million registered users and had a larger presence on the African continent than Facebook.

Early on, it rode an explosion in South African mobile ownership and was especially popular among teenagers and young adults, for whom it provided a cost-effective means of communicating with friends and meeting strangers online. A little more than a year after launching, it claimed to have over a million registered users.

The user numbers Mxit claimed to have continued to grow rapidly. By the end of 2010, Mxit was being hailed as Africa’s largest social network, with 27-million registered users. It was seen as a vital communication tool, with its users able to communicate seamlessly across other platforms like MSN messenger and Google Talk.

But the world was changing too. As we wrote in February:

Early adopters were latching onto the latest smartphone models as soon as they could, and Steve Jobs had catapulted the world in the post-PC era with the launch of the iPad. Mxit still appeared to have a solid and loyal user base but it was a platform born on to Nokia-era feature phones that used the increasingly dated, and very slow J2Me development language, which was being left behind by a new smartphone wave. It wouldn’t be long before Nokia’s CEO Stephen Elop issued his famous, and brutally honest, “our platform is burning” statement to the world.

Despite those pressures, there still appeared to be hope for Mxit when maverick entrepreneur Alan Knott-Craig Jr bought out the company in 2011. Knott-Craig brought with him the sense that he could turn things around. The scion of one of South Africa’s mobile pioneers, Knott-Craig Jr took over from Heunis as CEO, concluded the deal through his startup investment company World of Avatar which at the time had serious investor clout behind it. The company’s backers included the family trusts of two FirstRand founders: Paul Harris and GT Ferreira.

At the time of stepping down, Heunis claimed in a News24 article that Mxit now had an impressive “42- million users”, bigger in South Africa than both Facebook and Twitter combined. There was no mention of active user numbers.

Knott-Craig Jr was determined that the mobile social network mark the start of its era under him with a bang, hosting a lavish R1-million Alice in Wonderland-themed party in Stellenbosch.

Despite Knott-Craig Jr’s best efforts however, user numbers continued to decline. And as the numbers declined, trouble was brewing inside the company. Knott-Craig was forced to step down as CEO in October 2012, apparently over disagreements with Paul Harris around how the company should be run. A lack of user growth was believed to be one of the factors at the centre of the ouster.

The banker had apparently threatened to pull his share of the R100-million investment being ploughed into Mxit if Knott-Craig did not step down. According to Business Times, “Harris was unhappy with Mr Knott-Craig’s performance and style and was only prepared to invest his share of R100m — which shareholders are ploughing into the company — if the CEO resigned”.

Publicly, the company continued to tell reporters that its monthly active user number was moving up and down between 9.3 million and 10 million. At the same time, an industry insider told Moneyweb the number was closer to five-million.

By mid 2014, Mxit was down to 4.9-million monthly active users in South Africa (Swart said removing porn and profanity was partially to blame for the decline).

Mxit 7, the new version it had spent so much time and effort building and which was supposed to seamlessly bridge its smart and feature phone offerings, had reportedly been downloaded by 7.4-million users but only 55% of those were still active. In late 2014 meanwhile, it undertook a fresh round of retrenchments, with 45 staff — including some in key positions — offered packages.

That kind of decline is difficult for any company to deal with and it seemed that the end of Mxit as we’ve always known it would be inevitable.

The hope now is clearly that the Reach Trust will be successful in its aim of providing viable minimum-cost solutions to South African learners.

According to Mxit’s statement, more than 500 000 learners access educational apps on the platform every month.

“With the power of mobile technology in the hands of almost everyone in the country, we believe that it is critical to extend and expand the access to mobile content and services to accelerate social and economic change,” said Andrew Rudge, CEO of The Reach Trust, in a statement.