Trouble at World of Avatar as Mxit set to retrench employees and Boom.fm shuts down

World of Avatar has suffered further blows after announcements that Mxit is to retrench staff and Boom.fm is to close.

Chief Executive Alan Knott-Craig Jnr suddenly stepped down in October amid rumours of financial difficulty, shareholder disagreements and possible layoffs.

Although no further information was forthcoming from Mxit after Knott-Craig Jnr’s exit, some insiders, staff and ex-staff suggested things were not going so well at “Africa’s largest social network”.

Now World of Avatar Communications Officer Sarah Rice has confirmed to HumanIPO the truth in rumours that Mxit is to retrench staff, though she could not confirm exact number.

It follows the announcement on Friday by World of Avatar-owned Boom.fm it will be going off-air. Boom.fm was a website where music fans could listen to their favourite local South African bands and discover new music through the boom.fm player. The website allowed any band to upload their music and sell it directly.

Rice explained: “WoA (World of Avatar) is no longer funding it and the management for Boom have chosen to shut it down.”

The above explanation, coupled with the statement by the website’s management which says “our current revenue streams do not cover our operating costs”, suggests the shareholders at World of Avatar are starting to “tighten the screws” and are looking for a return on their investments and shedding any business units that are not self sustaining.

Given this, questions will be asked as to whether Mxit is in a similar position to Boom.fm, with revenue streams that do not cover operating costs. Weight will be added to this theory by the fact that Knott-Craig Jnr left Mxit based on shareholder disagreement on strategy.

For a long time Mxit was the only social network to cater for feature phones across Africa. 2go has since arrived on the scene and now has more users in Nigeria than Mxit. Could the 2go competition along with US$50 Android smartphones across the continent be taking their toll on Mxit and forcing it to reconsider its business model?

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