Why Operators have lost the consumer?
“Operators are like dumb pipes, carrying a lot of data and not understanding how to monetize it”
This statement which has become a cliché acquires a new dimension when Illja Laurs, CEO of Getjar says it because of the simple fact that Getjar was the alternate app store to those of the big platform providers that Operators have been banking on to do “things” with the traffic. Laurs states that operators have absolutely no influence over their customers when it comes to where they go on the mobile Web and what they download. Essentially, customers are ignoring the carriers in terms of where to be headed through the mobile web.
Laurs’ testimony is critical considering that he has been instrumental in building a thriving application portal independent of Google.GetJar storefront is handling more than 100 million app downloads a month, which could make it the second most trafficked store on the mobile Internet behind iTunes.GetJar has revenue share and promotion agreements with more than 50 operators globally on its store front. Even with large accounts like Vodafone, Sprint and AT&T, Getjar gets only 10% of its downloads from Operators and the revenue is lower. Meanwhile, GetJar’s direct-to-consumer business is booming to the point that it has almost completely written off the carrier partnership completely.
Quoting Laurs: “Once we realized this wasn’t a fast way to scale, we gave up on it. We still have those deals in place, but we don’t promote the opportunity at all anymore. … We learned that it would take 1000 carrier deals to double our profits. The return on investment is way less than our direct-to-consumer effort.”
No mincing words there…. it says it all.
Reasons for Operators for not being able to do a meaningful lot with their subscribers are as follows
1. Half Measures: Only a handful of operators are fully integrated with Getjar platform. Very few of them took full advantage of the integration opportunities
2. Operators are deeply abhorrent of surrendering ownership of its subscribers to any other stakeholder. They have can network location and presence engines, they can offer carrier billing, they have detailed information on their customers—all potential goldmines for a developer hoping to make its mark. Such data would be goldmines to developers and App Store makers. The catch however remains that while most of the operators swear to open alliances, the fact remains that in terms of sharing customer data and profiling, operators are taking up walled garden approach.
3. There are 200 major wireless carriers worldwide, and they all have different sets of APIs, resulting in an enormous level of fragmentation. If a developer is presented with the opportunity to build a location feature into a single Google API rather than code to 200 disparate APIs, he’ll always choose the former.
Initiatives like the Wholesale Application Community (WAC) and the GSMA’s OneAPI program are trying to address those issues, but regional and business differences between the world’s operators will still leave plenty of room for fragmentation in a supposedly common API framework. It is very sceptical that 200 different carriers can agree on common frameworks.
4. Another fall out of the operator walled garden approach is that Operators are likely to seek exclusive partnerships, which developers won’t be so keen to lock themselves into.
5. Fifth is the mindset problem. Operators are largely clueless when it comes to monetizing non-telecom services. The operators are slowly expanding their vision and expertise beyond the gateways and routers of the network. But according to Laurs, they’re doing it too slowly.
Thus, operators are being marginalized by their customers when it comes to mobile apps and how there’s little hope of getting them back.
Apple: Of mobile and web payments and virtual currencies. The future of money transaction
Apple for a while has been rumored to be interested in and working on mobile payments. Given the strength of Apple’s great innovation track record and the influence that Apple products wield over the industry, technology and the eco-system, Apple’s interest in Mobile payments is noteworthy. Time and again, repeatedly, Apple has brought forth innovations in various segments it has operated in viz. smartphones (iPhone), Tablets (iPad), Application (Apps store), Music (iTunes and iPod). Given Apple’s stake in Web 2.0 and Mobile 2.0 technologies, a mobile payment platform is a natural extension, a transaction enabler and the missing piece of the monetization game.
Not that Apple is new to the game. They are already doing mobile payments since they launched the iPhone. Their solution is built on an existing payment relationship – iTunes to download music on the web. Apple’s 160 million iTunes users outweigh Paypal’s 90 million.
Contactless payments or Near Field Communication chip iPhones could open up payments and they could help create new business models for in store payments. This could also couple with location based ads and other applications. Apple drove the development of new business models with the music and smart phones – depending on what they do they could change the rules by which different players interact to do payment and commerce. So they have the potential to move the NFC world forward significantly by developing a new tapestry of the hardware, software and business models to move it forward. While NFC has been on the horizon for a while with sporadic trials by Obopay and others, Apple moving into this space should ignite the market. Apple’s moves will have particularly powerful impact, and the only other player who is also mulling contactless payment solutions at this point is Google.
Apart from Contactless payments, Apple is also trying to specialize in allowing users to use their mobile phone number to purchase digital content on the web using their phone number and their phone bill. Boku, a gateway specialist in Mobile carrier billing is rumored to be in talks with Apple for a possible acquisition.
Then there is this talk of Apple trying to create an online Virtual currency much like the Facebook credits for the Application and iTunes purchases. There are significant volumes in there for Apple and again the eco-system is pretty well set and Apple would only need to put the online currency in place for this transaction system to talk off as well. This would mostly cater to P2P payments transfer, casual payments, payments to individual merchants, cross border remittances and check replacement. In markets where P2P is fully implemented it represents over 50% of the mobile payment transactions. This is a big opportunity and right in Obopay’s sweet spot.
Apple is already big in mobile payments with iTunes and Apps store and Apple would sooner be looking to leverage this play into a bigger pie of online and instore payments.
Virtual Currency: Powering on-line transactions
As discussed about in an earlier blog, when increasing majorities of our lives are going online, and online behavior and habits will increasingly get transactional such as buying goods and products. Due to the global nature of the domain itself, purchasing and buying will be greatly facilitated by a virtual online currency, for procuring virtual goods and services online. Sales of virtual goods are projected to reach $1.6 billion this year in the United States alone, according to an Inside Network report. About half of that will be spent on social games, and the majority of that in Facebook games such as Farmville. Facebook Credits is one of the first virtual online currencies that promises to be a billion dollar business soon in the days to come.
Facebook Credit Gift Cards
Facebook is taking its first steps to becoming a dominant player in the virtual currency space and is expected to face stiff competition from Apple, Google and Paypal. Currently Facebook credits is the “funny” money that is used to pay for things on Facebook from online magazines to Farmville turnips. Going forward this “Funny” money may have serious relevance to a lot more than Facebook fun elements. Right now, most virtual goods are acquired within games, but music, movies, and other forms of content could follow suit, increasing the stakes in the race to reduce the friction affecting in-app transactions. Paying Consumers (Through Virtual currency) for watching online video ads or service registration is another way of transacting “funny money”
Facebook already has a big advantage over those companies: a virtual currency, Facebook Credits, that works across different apps rather than being tied to one specific app or another. The other fact that also provides the edge to Facebook in terms of virtual currency is the way they have migrated their partner game and application publishers: Zynga, Playdom, Playfish, Crowdstar, RockYou to Facebook credits. Zynga, the Farmville creator has already been selling over $1 million-worth of virtual credits per day as early as April. Because of the relationship that Facebook has with publishers, it has been able to have every single major publisher switch to Facebook Credits. This provides enormous traction to the platform in its very early days.
The significant other players who could challenge Facebook on the virtual currency platform are Apple and Google. Apple with its 250K apps and iTunes store already has a platform ready through which it needs to integrate its virtual currency. Apple also has the experience and the competency in terms of real time selling of their virtual goods i.e selling iTunes through payment gateways and pre-paid gift cards. Google hasn’t reported much on the virtual currency but with allies like Google Checkout, YouTube, Google Books; Google also has a very strong base for building a virtual currency framework which would integrate into its online merchandise pretty well.
Emergence of more than 2 virtual currency platforms can create complications for developers. App users and gamers will then have to maintain stockpiles of multiple virtual currencies, one for each platform on which they wish to access the same cloud-based app or game which could be a bit of muddle. However, ignoring/non-participation this platform could be a foolish tactic because as and when the Virtual currency platforms reach critical mass and thresholds, would mean lost opportunities and failing to encash on the opportunity !
The Future in Mobile Applications (Part I)
This post talks about shifting the focus on innovation for apps and services to customer centric models amidst larger value creation templates with more stakeholders. It also shows the roadmap and indicators for value creation.
Connectivity and Mobility have become commonplace and commodities globally. The Voice ARPUs have seen deadweight drops amidst serious hyper competition. In that context data is being referred to as the King as Data ARPUs start taking off in India. The Data surge is powered by increasingly large number of users who are beginning to use their mobile phones as more than just voice and SMS device. They are accessing the internet, applications and more services through their mobiles.
Making the Moolah from Mobile Applications will involve changing the business models, shifting the perspective and defining value in a broader context for the mobile communication provider.
1. From device and network centricity to user centricity
The change driver in this domain is Internet’s personalization level for the user. The Internet led approach puts the user first and then allows the user to choose their own devices and the mode of interaction. Thus the game has shifted from customer empowerment to customer led personalization, whereby users can determine the level and context of their experience.
2. Re-arranging definitions of the marketplace and ecosystem: Innovate in partnership
Earlier the definition of a market used to be the service provider, the operator and the consumer. However, Mobile Apps and Telecom operators now need to create value by expanding the boundaries of their market to a much broader view of application driven commerce, content, delivery for the digital consumer. This may also include taking into account other influencers and stakeholders in the value chain for the consumer. Value thus would be created at all levels: Developer, Consumer segmentation approach, Internet Applications, Mobile Device companies, Operators and the final point of contact where “Consumer Need” is created.
Mobile operators must render their platforms,infrastructure and networks capable of supporting a massive innovation network comprising of thousands of partners in the eco-system.
3. Know Your Customer
The real power vested in the operators is the knowledge of their consumers, their habits, trends etc. It is not the data or voice pipeline to “faceless consumers”. The secret today is to identify consumer niches, derive insights and design/engineer services around these niches which are differentiated in terms of need appeasement.
Application richness and relevance will rely on powerful personalization, based on customers’ past usage,purchase, browsing and mobile habits. Also the discovery, purchase and use of applications will have to be de-cluttered and simplified.
The indicators in the picture above are roadmap constructs for building a future in Mobile Apps.Telcos will need to be mindful of these as tennets/ Strategy pillars for their mobile applications strategy.
4. Power Apps penetration through Internet
Telcos need to learn the art and science of “social merchandising”- Leveraging the power of social networks to act as a marketing “force multiplier”. By dynamically sharing browsing, recommendation and sharing history, social networking can evolve from an internet tool to a force that drives the adoption and use of entire new categories of applications and services.
The capability to build a strong consumer centric strategy powered by Apps is not just a tactical move (much to what is likely to be believed by Telcos). It will involve a fundamental re-think of consumers, services, innovation and value networks and the role that the Telcos can play in value creation.
(Discussion to be Continued)
Apps Store: Isnt as easy as getting one, like that!
This is a continuation of the earlier post on Why Apps Stores are important for Operator Lifelines
The Operator abilities to do the Apps stores will define their existence going into the future. However, it is not as easy as just creating a Apps Store. There are considerations that need to be factored in before any operator gets into a data and revenue based strategy around the Apps Store models.
A few pointers to the Operator Apps Store strategy is as detailed below:
1. Mobile operators can shore up their position in the mobile applications space by taking a series of definitive measures. Operators need to decide on the extent of activities that they would want to undertake in the application store segment. While global players with a large captive customer base might want to build end-to-end capabilities in the space, smaller players might decide to undertake only select activities in-house, relying extensively on third-parties for the technology platform.
2. A critical component of operator strategy to compete in the space would be their support of device-agnostic platforms. This will allow operators to support a much wider device portfolio through their storefront, while simultaneously reducing porting efforts, and hence costs and time-to-market for the developers. Additionally, platform-agnostic applications will allow a distinct positioning option for operators, thereby avoiding direct competition with vendor partners. Another option available to operators looking to encourage device-agnostic application creation would be to actively promote web-based applications.
3. Since the quality and reliability of the applications available on a storefront will be dependent on the strength of the developer community, it is imperative that operators provide the necessary incentives for the creation of exclusive applications for their storefronts. This will depend on aggressive revenue share arrangements, wherein operators allow developers to retain a higher share of the application revenues when compared to other storefronts, can help operators play the role of ‘disruptor’ and corner a higher market share. While a revenue share of at least 75% for the developers will be necessary to remain competitive, analysis indicates that by increasing developer share to 80%, operators can get incremental revenue uplift of around 11% points, resulting primarily from a greater market share of application downloads.
4. Operators should strive to develop pricing models which are optimized based on the nature of the application, with popularity, market potential and stickiness of an application being the defining criteria. For instance, typically applications in categories such as medical and finance are highly customized, resulting in a limited number of such applications. However, because of the utilitarian nature of these applications, the consumer willingness to pay is fairly high. As a result, these applications are very suitable for subscription pricing. Operators should also play an active role in formulating the monetization strategies of applications, to ensure the greatest returns from their storefronts.
5. Operators should launch application stores to retain their prominent position in mobile content distribution, as well as to benefit from new revenue streams through the sale of applications, provision of access services and rendering of additional services such as integrated billing and access to networks that application interfaces are supported on. While application stores provide operators with an opportunity to re-establish their position in the mobile content value chain, the opportunity requires a strong operational strategy for success. Operators need to leverage existing capabilities in this space so as to be able to create a robust offering for the consumers. The opportunity should be looked at from the perspective of a strategic imperative to reverse the present trend of disintermediation from the content ecosystem, rather than a pure revenue enhancement exercise. It can’t be left to Apple to pave the way anymore in the application store market. There is plenty of room for more.
Why Apps Stores are important for Operator Lifelines
A recent Report by Capgemini has estimated the 2009 annual revenues from mobile app downloads to be $3.8 Billion. Given that the Apps eco-system is still developing and growing and Operators and handset manufacturers are trying to establish their own Apps stores and the increasing smartphone penetration, the Apps store revenues are likely to Reach US$ 8.6 billion by 2013, a CAGR of 30% between 2010 and 2013. Driven by the proliferation of free and mass market applications, the average selling price (ASP) for applications is likely to drop – analyst estimates indicate a value of US$ 1.72 by 2014, as compared to US$ 3.83 in 2009.
Debating the necessity for Apps stores for Operators, the Capgemini reports remarks that:
Launching an application store will provide operators with an opportunity to augment their existing data services revenue. There are going to be primarily four revenue streams for operators, viz. revenue share from the sale of applications, mobile advertising revenue, incremental data usage revenue and payment gateway revenue. Relying on these revenue streams, our analysis indicates that a typical operator (based in Western Europe with a subscriber base of 50 million) can expect a data revenue uplift of 11% by 2013. Additionally, if an operator is successfully able to implement a strategy wherein they are able to push web-based applications which result in greater data consumption, the revenue upside can be as much as 17% with over 30%-40% of this uplift coming from increased data usage.
In addition to augmenting current data revenues, applications storefronts can also be instrumental in attracting and retaining subscribers with high-spend on mobile data services. High-value customers exhibit a greater proclivity to download and use mobile applications. Moreover, application stores are becoming increasingly important for operators to build and maintain a robust content ecosystem, something that is essential in today’s economic climate and competitive landscape.
Operators are threatened by the prospect of being rendered “bit-carriers” due to the expansion of online and device players across the value chain. The emergence of application stores as primary channels for mobile content distribution can further impact operators’ positioning in the value chain. Consequently, inaction in this space would not only undermine the competitive positioning of operators vis-à-vis other players who actively launch application Stores, but also the ability to drive data consumption amongst existing consumers.
Airtel Apps Central: The case study for Apps Store feasibility in India
Airtel Apps Central recently completed its first 4 months. It has flashed a very impressive set of numbers to emphasize the success of the Apps store format in India. Indeed, there are very interesting set of numbers and facts in 4 month results.
1. The number of apps offered tops 71K, a huge improvement over the 1250 apps it started off with initially.
2. The apps compatibility stands at 780 devices. It started with 550 devices, 4 months back.
3. 75% of the Apps featured are paid, the rest 25% are free.
4. The unique mode of payment, where the post of a paid application gets deducted from the Post paid bill or the Pre paid balance has made acquisition of these apps easier for the consumer.
5. The 71K applications have been categorized under 25 categories
13 million downloads at the rate of 1.2 downloads per second in four months. (That just proves the opportunity for Apps stores in India)
6. More than 32% of the apps downloaded are paid.
7. Tier 2 cities in India made the bigger contributions in terms of downloads (in line with the internet consumption habits of India). The top 5 cities being Surat, Udaipur, Pune, Mangalore and Thiruvananthapuram.
8. The top 5 category of downloads are Social Networking, lifestyle, Books, Entertainment and Games.
Airtel is now working on a downloadable version of App Central so that one won’t need to access it through a web browser but through an icon on the menu. App Central is also aiming to offer local and regional apps for customers across the country.
Two things that will determine the success of the app stores would be
1. Relevance of Apps: As blogged about earlier, Apps would have to dig deeper than Astrology, Bollywood, Cricket and Devotion to establish itself firmly in the minds of consumers. The Mobile phone changed the way a lot of things were done by the Sec C and Sec D class of consumers. The same kind of relevance wil have to be built around these Apps stores
2. Delivery medium: English is the de-facto medium of delivery. This would have to change to Vernacular languages. English by itself has a 10% cut off in population reach. Theres a 90% market that the vernacular languages cover and this is a big opportunity yet again.
The Apps central model will possibly be perfected in India after which Airtel would want to take it to Africa which is the next biggest blossoming telecom market. The parallels and the modus operandi is just so obvious. For a change then, Airtel is making inroads with data traffic in India.Intereting space given that Vodafone and Reliance are already in and Aircel may jump in any given moment now.
Guardian’s Open Platform (Part 2): Where’s the money?
Guardian’s experiment with open source data has proven one thing quite clear that Public data is a growth media for an ecosystem to form. Public data on open source is a nutrient of a whole new eco-system and allow new things to happen. The key to monetization of the open systems in this case is building user centric apps which have a business model.
The applications build on the Guardian Open source platform is divided into three categories mainly differentiated by span of Guardian’s control and the revenue/revenue share model.
So then where is the money?
Guardian’s open platform gives API and Content Developers 3 tiers of access and 3 separate revenue models to choose from:
BESPOKE: Taking, Reformatting, and content augmentation with same access as that of Guardian. Allows custom access for licensing content and integrating rich applications. The revenue is a combination of sponsorship, media, fees, revenue share and downloads.
APPROVED: This involves taking the full Guardian article content, with an advert. Out of this Guardian keeps the ad revenue and the API developer keeps the rest of the page revenue.
KEYLESS: The API developer takes Guardian’s content and keeps part of the associated revenues. Thus there is free access to headlines,data,tags and meta data. There is no key required and partner keeps associated revenue from the page.
What this means for Guardian is that developers are able to access full content APIs on demand from Guardian with keys approved thus making the platform a place to do business with Guardian and engage its scale. Rapid scalability, reliability and performance are the core requirements.
The technology back end running the open source
To assist the developers, Guardian has the Microapps which is a third framework for integrating 3rd party apps into the Guardian platform. The Microapps helps developers integrate their solutions more easily and readily into the Guardian core and evolve the Guardian open platform to be the commercial future of the partners/developers.
Thus the open source platform would be instrumental for Guardian in terms of
• Moving away from content broadcast, and yet keep the growth engines running
• Partner engagement and open source contributions on journalism, data, software, applications, revenue and ads
• It would also support the developers and partners with data and APIs, scalability, reliability and speed.
Guardians enterprising effort build on open source is pretty much on its way to re-define media and thought behind media.
In times to come, media will need to evolve into a two way communication path and Guardian will be referred as a case study, as a pioneer of new media.
Amen!
Guardian’s Open Platform (Part 1): Coming of Age (Driving Innovation to stay relevant in Media)
RIP, Print Media!
The proliferation of Digital and Social Media and Google have had an adverse impact on the print media by means of replacement.Communication is two way, immediate and Twitter has now added a dash of “conversation streams” to the news and print.
In this context, Guardian’s effort to move from being just a broadcast publisher to a platform and use content , search and open source to build a new business model around news and media is noteworthy. The transition from news and journalism to news, data, video, audio, content partnerships, innovation, conversation, comments, keywords, podcasts, recommendations, hashtags and live blogs is a case study.The bottomline is about Guardian’s evolution to a platform and not just a publisher.
This platform approach is about changing the perspective from “bringing the data and apps from the internet” to “enabling partners to build applications using proprietary content and services for all digital platforms”. The idea is “experimenting in combining the experience and knowledge of a large media network with experience, opinions and expertise of people who want to participate rather than passively receive content and news”.
Guardian’s open platform is thus its suite of services enabling its partners to build applications with Guardian. The platform has three parts to it:
Content API: A service for collecting and selecting content from the Guardian for re-use
Data store: A directory of useful data curated by Guardian editors.The developers can take this content of the newspaper as the raw material for building new businesses. This raw data is useful in profiling demographics and trends and data catalogues,
Politics API: Database of candidates, voting records, constituencies, election results and live data on election day. The data here is again freely available for use and analysis. Developers innovate on this data and develop interesting tools such as the voter power index for the recent British elections which lets the user know his vote’s woth basis his marginality and constituency size.
Thus Guardian has been making interesting use of Public data to make its own media eco-system and allow “open ssource” innovation to take over.The emerging trends point to change in public participation space aroud public data. Public data can create new economies, improve procurement processes and through evolutionary pressure in the marketplace increase the usability and user centricity of applications that access Government services. Guardian is stepping as a facilitator for consumers of these services to provide an environment where Consumers can get better and access to newer things, mediated by the ingenuity of the developers
Part 2: How the open source makes money?
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