Is a donation-based business model viable in Africa?
It’s the beginning of another month, and as always, we take a step back to reflect on the business landscape in Africa. Today, let’s talk about something that should be booming but isn’t— The donation-based business model.
If you're familiar with Africa or engage with African communities, you’ve probably heard the widely accepted notion that Africans are much more community-oriented and supportive than Westerners. But is that really the case?
This month, I hesitated between two titles: "How to get millions of users for free" and "Can donations be a viable business model on the continent?" In the end, I chose the latter and we will see why below.
Grab a cup of coffee ☕ and a croissant 🥐, and let's get down to business.
1. Our initial problem
When you're a startup operating in the B2C space in Africa with a business model based on microtransactions, you need massive volume to be profitable because of low purchasing power. And to get that volume, there are two options:
- Have a lot of money to acquire users
- Partner with people who already have those users like telecom companies
So, who else has a large user base? Content creators on social media. These creators have millions of fans on YouTube, Instagram, TikTok, and Facebook.
Naturally, we started asking ourselves: how can we tap into their audience and redirect that traffic to our platform ? That’s how we came up with a solution called Kerem.
2. The content creators’ problem.
Before talting about kerem, let’s look at the numbers.
In our previous newsletter, we talked about the challenges of generating revenue through advertising. This issue becomes even clearer in the Africa Creator Economy Report, a 2024 study by David I. Adeleke.
According to the report, over 70% of content creators earn less than $65.
58% of these content creators share their work on YouTube, and over 95% have fewer than 10,000 subscribers. However, despite their relatively small following, these creators boast an engagement rate of over 60% on their platforms — which is impressive.
How do they make money? Selling digital products top the list of how they make money (52.8%) with creators relying heavily on it to turn their passion into profit. Sponsored content, physical merchandise and ad revenue follow at 19.4%, 13.9% and 12%.
Why is it that, on a continent where people are known for their strong sense of community, donation-based business models are so rare?
The launch of Keremba.com, our donation platform, helped us answer that question.
3. Gara’s Strategy: Get users for free
July 2024 — we received a certain amount from the French Public Investment Bank following our 2023 fundraising round, with the goal of investing in R&D.
We decided to build a donation platform for African creators, leveraging Gara’s payment APIs.
The objective was simple: create a platform similar to Tipeee.com to collect donations, take a 10% cut from each transaction, and redirect users to Gara to consume more content and generate more revenue. The remaining 10% would be reinvested into producing exclusive content for Gara.
Thanks to this system, we plan to solve our issue with free users on Gara.
On paper, it looked very sexy. Especially as there are two similar platforms in the world.
- Patreon in US
- Tipeee in UE
In 2022, over $100 million was being paid out to creators every month through Patreon. With the platform taking a commission of 5% to 12%, this suggests monthly revenues for the company ranging from $5 million to $12 million.
On the Tipeee side — a platform based in France — the numbers are more modest: €47 million raised overall, generating around €1.54 million in revenue for 20,587 creators.
After three months, the Kerem platform was fully developed. We created two videos (fr), one for content creators and one for donors with a guilt-inducing approach - Activate subtitles for English.
4. The fear of asking for money
Our initial findings were quite disappointing. Most of the content creators we contacted to create an account and share their profile with their community were unanimous in their response: "Africans don’t like giving money." "There’s no point asking them for money — they already give us likes."
As a result, we struggled to get even 10 creators on the platform during the first month. Many were simply afraid to ask their community for money and preferred to rely on brand deals and product placements instead.
In the second month, we decided to focus on Kosmos, a highly motivated group of young creators in Congo. Since many African creators tend to follow trends, we knew we needed a success story to inspire the others.
We built a four-week communication plan for them. Within a month, they managed to raise $150 in donations, which is about twice the local minimum wage.
In the third month, a creator in Côte d’Ivoire named Cénack, whom we had previously failed to convince, released the trailer for his animated film on TikTok — and gained 20,000 followers in a week. In one of his posts, he tagged us, writing on Facebook:
People on TikTok... Oh my !!!
You guys...
You're so hot, it's never happened to me before, and to think I haven't shown you anything concrete yet.
And it goes on, the craziest thing is this proposal to provide financial support via a crowdfunding... I've always been sceptical about this method here on the continent, especially in the country, given the many daily challenges... but if you're keen, we'll give it a try, after which it's not necessarily a question of funding the whole project, but of
...to finance a specific part of Placman Chronicles, such as the creation of the pilot or key scenes. I could use this as leverage to attract other sources of funding, while at the same time involving the community, who could feel part of the project.
So I'm going to think about the best way of setting that up and we'll see what happens.
Teddy Kossoko, I take that back.
The next day, he created his donation page and raised about $50 within a day. Then we stepped in to guide him — showing him how to encourage more donations by flattering his audience and offering exclusive content as incentives.
After that, he began receiving more and more donations and from several different countries
On the Gara side, on certain days we began to notice more transactions coming from donations than from other sources such as In app purchase or pass purchase.
5. The Future of donation in Africa
The Kerem platform is a key asset within the ecosystem of solutions we’re building in Africa to address the monetization value chain challenge.
The donation-based business model is relatively lightweight — take Tipeee.com, for example: despite operating in France, where people have more purchasing power and are more comfortable with giving, the platform only generates about €1 million in annual revenue.
That said, for African creators, donations can be a meaningful source of supplementary income. Most of the creators on Kerem collect the equivalent of twice the local average income each month — just enough to get by.
But for this model to truly spread, creators need to learn how to ask their communities for support and that’s far from a given.
What’s paradoxical is that in Africa, many people who don’t create value often ask for money freely, while those who actually produce content are the ones afraid to ask for help.
Beyond the tools we’re building at Gara, what creators really need is guidance and coaching, and that’s something that falls outside the scope of our current activities.
