The perils of a traveling business model

Unpacking the challenges of globalizing a business model to achieve scale

This relationship has to end.  Even in my head, the looming conversation felt heavy and hard.  After 22 wonderful years, I find myself steeped in a heartbreaking truth—it's time to let go.  

Our story begins late in 2001 in a supermarket checkout line, and from that moment on, we were like 5 and 6, inseparable.  Through long queues, longer vacations and the longest winters - we stayed friends, stayed connected, and stayed chill.  But now, after years of drifting apart, our differences have become our undoing.  I live in Lagos and the relationship we started in Des Moines can’t take the pressure anymore.  

And so, I must bid farewell and part ways with Netflix — It is time to cancel my subscription.

As I consider this breakup, it is only right to reflect on the good times with my beloved Netflix.  

When Netflix asked users to review movies, I meticulously wrote one every single day.

When the stock went public, I borrowed, begged, and nearly stole to buy stock.

When Netflix streaming came to Nigeria, I told every Tolu, Tunde, and Temitope. 

When my strategy professor assigned a case study, I studied Netflix (and predicted Blockbuster’s downfall 😎)

Like anyone in love, I expected a happy ending - “Nollywood to the world, powered by Netflix.”  But five years post-launch, Netflix had a disappointing 2.6 million users in 54 countries in Africa¹.  

Was Netflix unwilling or unable (to scale)?  Who was the problem - Netflix or Africa?  

Spoiler alert! Netflix is the bad guy.  

Netflix offered the same product everywhere, assuming a universal sameness of its users.  Netflix and all its features are as American as apple pie, but in Nigeria, we eat akara.  And like most local food, akara is steeped in our history, experiences, and motivations.  Americanized akara or Nigerianized apple pie is easier to digest.  But beyond fusing ingredients (which arguably Netflix did by introducing local content), a good recipe would also look at preferences for portion size and when and how the dish is typically served, for instance - go that extra step to make it easier to try something new. 

Scale is the inevitable outcome of an understanding of users’ deeper motivations.  Depth in understanding is even more critical when when that product comes from abroad.  Netflix's grasp of the African user experience fell short of unlocking the immense potential of this market. Period. 

A ‘traveling’ product's construct and features need to be tweaked to its abroad users’ preferences. Typical product research falls short in researching users abroad - it doesn't dig deeply enough to reveal what would make a user choose your product.  

Going Global: Ambition or Vanity

When I moved back to Nigeria, one of my roles was to partner with digital content startups from around the world to scale on a mobile telecommunications network.  Netflix wasn’t global then, so we could only ‘connect’ when I visited the US.  I strayed.  And found passion in scaling other content businesses as I waited for Netflix to recommit to going global.  

To go global, most companies will ‘pack up’ their business model, pick the market their sizing analysis points them to, and hit the road. But before leaving home for abroad, there are a few things to pack. 

How to pay? 

Dollars, Euros, Pounds, Pesos, Yen. Even mobile phone airtime. You can’t leave home without local currency to spend. This is a basic product adaptation to every product designer.  

When to pay?

The problems start with failing to recognize that 'when to pay’ is also an important product design decision.  

Capitalism is like clockwork.  And that time is set by payday.  To bend to the will of the salary earner, in a capitalist world, is to design around payday cadence - in most developed countries, this is ‘monthly’, but in developing countries - it is not monthly, but daily, weekly, weekends, and everything in between. That’s why pay-as-you-go works in these markets.  

Most subscription products we know, love and celebrate on TechCrunch have a monthly cadence.  Monthly payments may be ubiquitous, but ultimately only inclusive of a few emerging markets.  So if a user earns daily, how do they pay for Netflix when they don’t have a savings culture or account? 

How much to pay?

The list of reasons to break up with Netflix kept growing. The ultimate cost of my subscription was an entertaining roll of the dice - the $12.99 subscription fee converts to a different, often higher, amount in Nigerian Naira.  That’s because my beloved country’s currency value plummets like a rock sinking in a bottomless sea - taking Nigeria’s Netflixers on a seemingly endless financial descent because, somehow, the currency seldom gains value.  And nothing inspires reconsidering a purchase like a floating price - so if what cost me N8000 in May cost me N8500 in June, inevitably, I ask myself, “Do I need Netflix?”.  

It’s bad enough that the original price point was based on American price sensitivity, not Nigerian/African.  Who is to say that a subscription of that amount fits into the life of a wanna-be-Netflixing Nigerian?  Nowadays, Netflix accepts Naira at a price point adjusted to local preferences; however, this would have better addressed at launch to maximize momentum.  

If I pay?

This was the most confounding of all the consumer reactions to a poorly-designed product. I used to think that a good user would pay when due, and when they don’t, they’re not a good user.  But time and time again, most acutely with monthly plans, I watched users empty their accounts, evading the imminent subscription like an oncoming car on a collision course.  

Users told us they liked the product, wanted it, and were willing to pay for it.  But only on their own terms.  Why pay for 30 days when I only need 3?  They said.  You bill in USD, but your price doesn’t work for my pocket. Since I'm busy this month, I'll postpone my payment and renew in a couple of months when I have time to binge. They continued.  

And in markets where cash isn’t digitized, there is no choice but to wait till the user replenishes the empty account with funds to pay a subscription. 

Users basically built their own payment cadence when our products didn't provide one that they wanted.   

Payment success rates improved when we empowered users with more subscription options. To them, this meant more control and, ultimately, a more valuable product to them.  Nigerian users, in particular, have a remarkable tendency to push the boundaries of your product and where they can, rebuild it into the offering they genuinely desire.  

Our users challenged our (lazy) oversimplification of the complex problem of giving them the right product.  We took for granted that they’d take whatever product we gave them. And research helped us determine ‘how to pay’, ‘when to pay’, and ‘how much to pay’. But not the hard to crack ‘If I pay’ question - which is the right kind of second or third-order that leads to the ‘how come’ - the origin story of their users, if you will. 

Products that find that fortune at the so-called bottom of the pyramid, understand that local adaptation goes much further than accepting local currency and renaming their product Netflix Naija. Classic persona research stops at consumer demographics, preferences, and behaviors; it falls short of fully exposing the contexts that underlie the behaviors observed.  

Finding scale in Nigeria for products built abroad challenged my biases about users and global expansion.  The context distinguishing a good user from a bad one is best defined locally, not dictated by the home market. Otherwise, you end up with a third category - misunderstood user.  

We cannot define a good user paradigm in China and expect to find the same user in Nigeria.  We cannot build products that forcefully set the terms for the user’s adoption - we have to recognize where product tweaks will support adoption.  Interestingly, China itself has clearly set terms for adoption for any users in its country, but since few countries do that, products need to find that adaptability themselves.

And in many cases where a no-brainer product that has found scale in developed markets, hits hitches in developed markets, your user isn't the problem, your product is.   

By the 2016 global streaming launch, Netflix joined the +100 other streaming services ending in -flix, many looking to fill the Netflix void in Africa. Unlike the UK, where brand value holds great significance to users, this allows a few brands to hold users' attention (and their money). 

In Africa, the brand playing field was much more cluttered. A strong launch must include mechanics to drive word-of-mouth and cover the last-mile distribution which matters more than a recognizable brand. A big brand name has no license to scale. 

The answer lies in understanding local consumerism. Not what is consumed or even why, but how come. That last question unlocks the context of the what and the why - the root causes, explore motivations, understand connections, and clarify underlying principles.

Be like Water. 

The drinking water market is a business model that continues to inspire Nigeria and beyond.  In 1990s Nigeria, only the small, upper-middle-class segment had good access to bottled water to quench their thirst on the go.  Leaving the rest of Nigeria thirsty-in-transit - until the water sachet was born. 

And overnight, these water sachets were everything, everywhere, all at once, resetting the standard for affordable and convenient drinking water for the masses.  What these entrepreneurs got their bigger, global counterparts didn't was that consistent street presence, word of mouth, and a ridiculously low price point mattered more than fancy plastic bottles and an established brand.  

They appealed to the thirsty Nigerian in the sweltering heat of transit en route to their next paying daily gig.  And today, they’ve created a $2.2 billion market, in Nigeria, that conventional analysis missed.  

This sachet water phenomenon has since traveled to other countries in Africa, Asia, and Latin America. If scale has only just been unlocked for water, imagine what else is untapped. And all it takes is a slight shift in thinking. 

The established water brands may or may not have intentionally opted out of serving the masses - like Netflix, a perplexing paradox of their intent to scale.  But bottom line - the masses were unserved, and their thirst didn’t vanish because they didn’t buy bottled water. 

But in the unpredictably long hours of traffic, in transportation that often lacks air conditioning in tropical heat, bottled water was too expensive for the thirsty everyman. The water sachet entrepreneurs reshaped the drinking water standard around these new users motivation (thirst in traffic) based on an understanding of the local content (transportation lacking air conditioning) along with aggravating factors (unpredictable commute times due to traffic) and connection (anyone in a bus might consider branded bottled water expensive). These insights unlocked a bigger market than previously existed. 

‘Satchet-izing’ has become a common approach to scale in emerging markets because it i’s built from an emerging market archetype for consumerism.

To approach a market prepared to address these realities is to look at the viewer through a kaleidoscope rather than a single lens, acknowledging the intricate interplay of cultural factors.  Zoom out, not in.  

Netflix extrapolated American user traits to the rest of the world and lost out on the vibrant tapestry of cultural, social, and psychological factors shaping consumer behavior in the markets where it has yet to find scale.  Beyond local content, that could be daily, weekly, or weekend plans.  And since there are more mobile phones than TVs, mobile-specific plans too!

Netflix sits alongside many other companies that fail to export their business models to markets abroad effectively.  And if you’re building a business with plans to scale abroad, don’t design the stumbling blocks of your scale into your product.   

Will Netflix ever find significant scale in Nigeria? Maybe.  If it takes time to commit to a long-term relationship (with its users) centered on deeper understanding ….I won’t say no to getting back together.  

P.S.: For giggles, here’s a query I ran in ChatGPT that illustrates the difference in consumerism between the US, UK, China, and Nigeria.  

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