Mobile 2.0 is all about VAS…

Apologies for having disappeared without notice…
The fact is, I am inducted into a new role in my organization and have started traveling pretty often. Since I am writing after a long time, this is just a post to cover up my writers block here…

The details provided on various parameters and players in the industry, introduced in my previous posts, can be analyzed in great depths but I would want to cut this short and move on to newer horizons of analyzing the various happenings and the buzz across the industry. People may have discussed this on forums and their blogs but I am trying to spill out my thought process rather than aping somebody else’s mindset.

There is a lot of talk about web 2.0 and now the mobile arena is looking to replicate the same experience. There are a lot of views on the definition of itself. Some are of the opinion that it’s about web on the mobile providing you the freedom of internet access on the move. Whereas, some are talking about the technology convergence and offering multimedia specialties on the mobile. In fact most of the players in the value chain would want to perceive it in the manner that would be most beneficial.

But I have a different perspective to the same scenario. Whatever the industry is trying to believe whether convergent devices or web on the move; it’s all about “Mobile Value Added Services“. There is a variety of subscribers that the mobile industry caters to and each one has their evident needs and wants. All of those would be addressed by mobile 2.0 services portfolio.

People have compared applications on the web to their counterparts on mobile and have also gone ahead to compare the existing applications to what can replace them in mobile 2.0.

All that I believe is Mobile convergence providing the subscribers the strength and reach of web and the convenience of a mobile is the next generation of mobile – trying to be termed as Mobile 2.0.

My thoughts –

Mobile 2.0 is much more than broadband access on the move. This is not about accessing the web in the mini browser and hanging onto web 2.0 through your mobile. This is much more than that to my understanding.

Mobile 2.0 is more about getting personal about your most personal device ever. Although I remember that the earliest talks of Mobile 2.0 have started way back in late 2005, but I am unsure on how much India progressed on this front. I understand that hindrances are many and players are trying to find way-around to provide the subscribers the experience they would have never imagined.

Jatin Madan
jatinmadan@aol.in

The “Moolah” Movement – Revenue Flow with Content Based Applications…

1. Content Download Applications:

1.1 The Application

The content based applications are a great revenue source for Indian operators. In India the new applications and services mushrooming at regular intervals have been focused on this type of content. I am trying to highlight a few of the application areas and have tried to collect and club as many related services under this category

I would like to put it simply by saying that selling mobile based content is as simple as A, B and C:

1. Astrology and related services
2. Bollywood Related content
3. Cricket

Astrology and Related Services

For providing the information based services to the end customers like daily horoscope, a continuous inflow of data is required from the content provider. This set of services has seen a good uptake from the subscribers and have had a positive revenue flow for all the involved entities.

For expert services, the VASP or content aggregators own a call centre like set up wherein the dependency on the content provider is eliminated. The reasons I see for that to happen are great ROI and the quality assurance.

Bollywood Related Content

This is entertainment services section that has all the content that is made available to subscribers for download. The biggest revenue generator has been music though other content like wallpapers; mobile themes have also seen a decent uptake.

Cricket

The game India lives for. This is the single religion of the nation. This is the single thread that binds every Indian despite the cultural, regional and language differences. Subscribers were hooked on to their television sets and then came the mobile revolution where they could SMS and get the scores or call up a short code and listen to the updates.

Though all the content is available easily on web but the aggregators/VASPs prefer to rely on the expertise of content providers for this.

1.2 Value Chain Entities

1. Mobile Operator
2. VASP/Platform Owners
3. Content Aggregator
4. Content Owner

1.3 Prevailing Business Model

As per my understanding, currently the following two revenue share agreements exist:

1. Pay per Use Model: Mobile operator charges the customer for accessing the services. Operator in turn makes a payout to VASP and other players based on previously agreed upon revenue share. The VASP or aggregators get a chance to ask for a premium in case of expert services. The voice calls and SMS services are charged at different rates to subscribers and
2. Subscription Model: Subscriber pays out a monthly subscription fees to the operator for receiving daily alerts or tips. This revenue is shared in the same manner as in the above scenario.

1.4 Future possibilities
The future can not be predicted but just discussed. It is just a matter of time when I would realize whether my beliefs would still hold good or are shaken away. I would like to discuss the future possibilities in the content driven business under two separate heads. The content related activities and the business synergies between the various players.

Future of Content:

• Type of Content – The future content would be much more matured in nature. Two important things to be highlighted here are the availability of regional flavoured content and the optimization of content for delivery to mobile handsets. User Generated Content (UGC) would grow leaps and bounds with the advent of Mobile 2.0 and content tagging would be of great importance in the months to come.
• Content Sampling – Subscribers want to hear or see the content before paying for downloading. The sampling requires getting cheaper thereby reducing piracy to some extent. With a lot of importance given to multiple access mechanisms the manner of sampling would also take a new meaning. The advent of 3G would enable the content to be sample on voice and requested to be delivered via mobile web.
• Content Delivery Mechanism – Content would be made available agnostic to the access mechanism being used. The content could be requested from web and delivered to mobile or vice versa. This has already started happening but to a very limited extent.
• Gaming Content - The mobile gaming industry has not yet picked up to a great extent when we compare it to nature of population who believe in sports. The mobile games need to be subsidized and with the advent of mobile advertising the sponsorship of games is not to far away.

Future Business Model Evolutions

1. Subscription Subsidized Pay per Use – Not sure on this being the future as I think someone would have already started offering this to subscribers. The value offering is subscriber to a set of services and access at a low cost. Eg. Subscribe to cricket updates on voice portal and call up at 50% call rates.
2. All you can eat – The bulk model can be looked into with subscription to a particular pack would let you download content to a specific number with no access charges. Eg. Subscribe with INR 100 ring-tone pack and download 10 ring-tones with no IVR browsing charges.
3. Mobile Advertising Supported Model – The content uptake would definitely be triggered with the content being subsidized with the advertising revenue inflow and the advertisers would be more than willing to brand the quality content. So this would bring to light what content is considered quality by the advertisers and lead to innovations on the content side as well. Eg. Car racing game by branded an automobile company would be available at INR 20 rather than INR 50.
4. The Retail Model - This has already started happening as the content owners are trying to gain more out of their content and approaching the customers directly via retail chains. The reason – low revenue share payouts from the operator end.
5. Operators Eliminating Middle-Men – With a lot of movement by the players trying to take up additional responsibilities of other players in the revenue chain, the agenda is clear. They need additional revenue share for the content and services they are providing. This may lead to operators getting into direct relationships with various players at different levels.
   

Jatin Madan
jatinmadan@aol.in

Value Added Services – Profiling based on Value Chain…

I have spent a lot of money and time downloading ring-tones, configuring music for my CRBTs, hunting for newer mobile games, et al. There are a lot of ways in which we download the content to our mobile handsets or use a plethora of other VAS services.

In this post I am trying to put across new light by segregation them in accordance to the similarity of the value chain and thereby revenue share agreements pertaining to services.

I have tried to broadly segregate the services in two sets – Content Based and Content Independent.

Content Based can be further segregated into:

1. Download Content – The applications that allow downloading content on the mobile hansets like ringtones, wallpapers, etc.
2. Experience Content – The applications that enhance the customer experience by using content like Back Ground Music, CRBT, etc.

Content Independent Applications are the ones that are closely integrated with the operator’s network and do not require content. These services have a higher dependency on the subscriber data rather then content delivery or experiencing. Services like Missed Call Alert, Wake-up alarm services etc are the applications in this category.

Although all the downloadable content today is available in the form of subscription packs which is like bundled offering for duration of time thereby subsidizing the costs involved. There is much more to subscription packs than just the content. I would try and explore the subscription model as well in a later post.

I would be using a few services as examples that are selling like hot cakes today. They have been positioned greatly with the subscribers and can be delivered in various manners leading to maximum penetration of these services.

1. Download Content
   1. Astrology
   2. Bollywood ring-tone and wall papers
   3. Cricket
2. Experience Content
   1. Ringback Tone
3. Content Independent
   1. Missed Call Alert
   2. Voice Mail

I will pick each one of them individually and discuss the various business models that exist today and the future evolution of the same in my next post.

Jatin Madan
jatinmadan@aol.in

Revenue Model – Money Flow Addendum…

This post is more like an addendum to my previous post on the revenue shared between the entities. Every player in the value chain wants to make the most moolah but currently it is the mobile operator that gets the largest part of the pie. Today the mobile operator loosely retains around 60-80% or the revenues flowing from the subscribers. This is not a definitive figure as the revenue share varies from service to service.

This remaining spread gets shared amongst the remaining players as on today. But things are in for a change as suggested by industry experts in numerous reports available across web. People have suggested that this ratio would be reversed in the coming 12-24 months.

The likely reasons I see for the same happening are:

1. Mobile advertising providing additional source of revenue for the operator
2. Increasing pressure from the other players finding ways and means to own the subscriber (Yes, I am hinting at growing focus towards retail).
3. Customers getting attracted to newer applications, which would be offered at a premium share rate to the operator.

I believe in the same but with a little skepticism of the operators in India still retaining about 40% of the subscriber paid amount in totality. The reasons are simple and straight forward:

1. The conservative attitude of the operators when it comes to paying out money.
2. The growing number of smaller players in the industry who would still be dependent on the operator.
3. Operators’ focusing on customer acquisition in B and C circles would involve a lot of impact on their bottom-line. Thus they may still want to make up for it more from VAS where they can.

I may not be an expert but have an opinion that may count. This is just what I am trying to express here. I would follow it up with the changing paradigm of the industry revenue model. I just like to call it – “The Moolah Movement”.

Jatin Madan
jatinmadan@aol.in

There goes the Money??? – Revenue flow in the VAS Business…

VAS is perceived as a premium service by a majority of the subscriber base. But this is not true as SMS services started way back in 1999-00 were conceptualized as a value added service that has today become a bare necessity for every mobile device. There has been a lot of technical innovations/roll-outs post SMS launch at consistent intervals and the commercial launch of CDMA in 2003. What I am hinting at is VAS being a part of our routine life and being an integral part of the mobile services in the time to come.
This post is not focused on when and where the services started but to discuss the effect of evolution of VAS value chain for various players in the business.

The VAS industry in India is dominated by the revenue sharing agreements between various players. The subscriber pays out to the mobile operator irrespective of the application used and who is the owner. The mobile operator in turn pays out an amount, agreed upon, that varies between 20-40% of the complete earnings from those services. Out of this minimal amount, a fair share is also paid out to the content copyright owner which may vary up-to 12% of EUP (this is what subscriber pays to avail of service). So looking at it from the content owner’s perspective he is receiving a minimal amount whereas the operator keeps the major share. What I am talking about can be easily understood in the below example:

Example:
I am putting across the linear model where subscriber pays operator for the services and operator pays out to application provider. Application providers pay out the royalty for content to copyright owner.

I have taken a scenario when a subscriber dials a premium short-code number to download a ring-tone and the entities involved are kept to bare minimum i.e. the operator, application provider and the content owner. As more and more entities come into picture, the shares gets further squeezed.

*I have assumed the IVR browsing charges at INR 6/min.

So the content owner gets Rs 1.44 out of Rs 12 that the subscriber pays for downloading a ring-tone. It is just a bare percentage of money that the subscriber is actually paying out for the content.
We also should not overlook the important fact that the application provider is in a tighter spot by earning on 96 paisa out of Rs 12. And generally this is the entity that bears the cost of infrastructure for providing the services and application development.

And just in case a fourth player enters the picture this gets a lot tighter for the players to earn. I would try and showcase that with the same example:

The Application provider has to shell out more money as he is getting the convenience of getting more content from the same place and the Content Owner has to further forgo a percentage of his share to the aggregator.

The reality is far away from this picture as well since we know there is more than these four players in most of the transactions thereby everyone scratching for every penny available in the market. This gets to chaotic situations when the mushrooming companies would start firming up the grip on the market and they join the rat race as well.

So the margins of the existing players get shrunk by 20-25% with the introduction of just an additional player and operator retaining the same share. One can easily imagine if the chain gets more complicated and operators share does not come down, what would be the players fighting for?
This is very evidently, one of the main reasons for so much movement, making it a happening market? Every player is trying to act in multiple domains as I had discussed in my previous post on the value chain proceedings so as to maximize their Revenue Share.

Though I presume, these squeezing margins would be taken care of by additional revenue streams of Mobile Advertising and Retail Business Model for content and application providers, which is now becoming a critical factor for the Indian VAS Industry Value chain.

These players would also be supported positively by growth in the VAS usage – thanks to the increasing spare income with the Indian youth

Jatin Madan
jatinmadan@aol.in

New VAS Services… Where do they come from???

This post is a general understanding of how the new applications and services are launched in the VAS market as of today. Tomorrow is a different ball-game altogether, the ideas would be all around and the niche service offerings would be the play…

Operator Pull

These showcases the customers needs/wants when under analytical light. This is more of a copybook approach which to my understanding is not of great accolades as of today. But this would be quite a potent approach in approaching the non VAS user and also for cross/up selling VAS services.

To my understanding, each Telco has a new products development team focused on conceptualizing new business products, with VAS as no exception. The VAS products focus team is constantly working to analyze the needs and wants of their subscribers.

This team understands the customer preferences from vivid perspectives. They have the best tools available with them for customer profiling and lifecycle management.

Based on the customers profile they can analyze and find out the right content and services focused for the particular set of customers. OR they can up-sell and cross sell services and applications based on the customers lifecycle to promote VAS.

A small example may be of selling data services to a corporate customer since he is more likely to avail the service as compared to general public.

Customer profiling is a vivacious process in itself that involves lot of activities specific to services and applications. If need be, I would be happy to share those details with you.

VAS Provider Push

This is the place where all the innovation comes into the industry. All the other players in the value chain are on their toes to make more money by promoting newer services. This is actually a result of the poor revenue share that they get from the operator (generally 20-40%).

The other players are vouching for more and more mind-space and (pocket space)of the subscriber but the only medium they have is mobile operator to reach the target audience. I would like to segregate this under two heads again:

Firstly, the VASP’s and technology enablers who have the access to a limited profile of the subscriber’s VAS usage trends. They are in a position to analyze the limited data set to get the correct view of the target audience and promote and innovate the kind of services and applications for them

Secondly, the content right owners, providers and aggregators are the people who are second to none in this innovation play-field. They keep devising new and improved ways and mechanisms to deliver their content on mobile handsets of subscribers.

With all this innovation happening and the various players trying to eat into each other’s pie, I wonder what is next when new entrants who have been mushrooming across the nation take their foot-hold in this innovation land.

Jatin Madan
jatinmadan@aol.in

The Value Chain Proceedings…

Now that I have described all the players present in the VAS business arena, I am just trying to put some light on the relationships they share. I would also try to highlight the interdependencies among them and the information flow as I understand it happens.

There is a constant innovation happening in the mobile space with all the players in the value chain trying to reverse or forward integrate. They are able to move up and down the chain but can’t replace the network operator as the customer is still owned by them. This can only happen if the retail strategies by VAS players come out to be successful.

The ongoing major movements that I understand are happening are:

1. The content owners and developers are moving towards the aggregation playfield
2. The aggregators are starting to own the content and develop applications around them
3. The technology enablers and VASP’s are beginning to won and aggregate content as well and are constantly raising the bar for each other.
4. Teclo’s, technology enablers and VASP’s are looking forward to replicate the web experience on mobile thereby the focus of telco’s is moving towards data revenues.
5. Handset Manufacturers are tying knot with the content and application providers providing added value for the subscribers.
6. Telco’s have started to get in direct relationships with content right owners and promoting the uptake.
7. New entities are adding up in the value chain with new ideas to explore the subscriber needs. Mobile advertising, retail and mobile TV are just to name a few here.

All these movements (and many more) are leading to constant innovation in the industry and making it a better place for the subscriber as he is offered so many options. This has also led to many application and services that are offered to customer which he did not feel he needed.

On the application development and offering side, there are a couple of means in which they appear in the market. Either the operator profiles the customer demands or the VAS providers come up with a new idea.

1. Operator Pull (Showcasing customer requirements)
2. VAS provider push (Showcasing Industry Innovation and movements inside the industry)

The operator pull is based on analyzing the customers need and pulling the other player to offer those services whereas the second approach is more focused on offering new services and content and ensuring their uptake by the customer.

I would be discussing them in the next post. Keep visiting…

Jatin Madan
jatinmadan@aol.in

The Composite VAS Business…

This is just another post in the series to introduce the player in the Mobile VAS industry. It does nothing more than trying to explain that the consumer and the enterprise value chain are not mutually exclusive but are just a virtual overlap of the same player having a different role to play.

Basically the role of each individual player gets modified when it comes to the composite value chain or the business model. I’ll take a specific example of VASP who may play the role of a content aggregator for a specific application in the consumer model but act as just a technology facilitator in the enterprise model.

Although the mobile operator seems to play the same role of facilitating the delivery of information or content, it is the minimal role it plays for the enterprise customers.

Here the content generator and developer is the enterprise, but the technology support from the operator is of prime essence or the entire business model pertaining to mobiles from the enterprise perspective is at stake.

An important point that I would like to highlight here is that VASP’s and technology enablers, though had a different role to play in the consumer based model, play a similar role for the enterprise customers.

I would not want to delve into too many details to complicate things further as this post is focused at mapping the two models/value chains together. In my further posts I would try to put across my understanding of how this business model is evolving on a regular basis and what would be the effect of new players OR services/application providers to this value chain.

Jatin Madan
jatinmadan@aol.in

MVAS Business Model

My previous post was more focused towards a basic level understanding of the value chain but this one takes a step closer to reality. It describes the state of affairs as on yesterday. (Since this industry is evolving every hour, as I post this it is already obsolete but I thought it would be nice to showcase the transition)

This value chain is significantly different from what has been expressed in my last post. Innovators find a way to carve out a niche for themselves in the value chain and in turn add value to the services being delivered to the subscribers. The main reasons for evolution of VAS value chain at a rapid growth has been:

1. Develop alternative revenue streams to counter rapidly declining ARPU
2. Shrinking operator margins (To my understanding they would shrink further with further evolution in VAS market)
3. Customer Retention focus to curb increasing churn
4. Entrepreneurs with innovative ideas to serve customers
5. Openness of investors to support new initiatives in the booming telecom market.

I have tried to segregate the value chain in two parts:

1. The Consumer value chain
2. The Enterprise VAS value chain

Consumer Value Chain:

This part of the business is focused on providing value added services to the individual mobile subscribers. My segregation of the major players in the current Value Chain is as mentioned below. Some people may have a different perspective to this:

1. Content Generators – These are the companies that own the copyrights of the content. Examples include the music labels, movie production houses, media houses/TV channels.
2. Content Developers – These are the companies that create customized content as required by the subscriber preferences. Examples include the companies running their own mobile portal on voice, SMS, WAP or USSD.
3. Content Aggregators – These are the companies that aggregate content and make it available to network operators. Examples would include companies that are focused on the content business. They differ from the content developers in the manner that their mainstay is the rights of content and not the mechanism in which it is delivered.
4. VASP – These are the companies that provide Value Added applications to the network operators. They may also act like a content aggregator for the convenience of operator and to create a niche for themselves but focused on providing innovative applications to operators.
5. Technology Enablers – These are the players that provide the services oriented towards providing Vas to subscribers but may or may not be dependent on the content. To clarify things here, an example to with this is “missed call alert services”. This seems to be a fair example for understanding how they differ from VASPs.
6. Mobile Network Operator - They are the famous telcos like Airtel, Vodafone etc that provide the transport and support mechanism to provide content and other services to subscribers. Today in India, they own the customer and bill them for providing services. (I would be taking up the revenue flow in a separate post.)
7. Handset Manufacturers – Mobile handset manufacturers have also started playing an important role. They have their way by activities like embedding links for direct access to portals in their handsets, etc. Things like On-device Portal are where they play an important role in the value chain.

Enterprise Value chain

The enterprise Value chain is comparatively simple in comparison to the industry value chain. I would like to depict it in a more linear manner rather than complicate things further.

My perspective is that it consists of the following entities:

1. Enterprises
2. Enterprise Service Providers
3. Mobile Network Operator
4. Enterprise User

The linear model is depicted in the figure below:

In my next post I will try to map the two together and complicate things further.
And I would also like some help on depiction in beautiful diagrams. Do get in touch if you are interested.

Jatin Madan
jatinmadan@aol.in

“Traditional Value Chain…”

I was taught in my B-School that every industry has a value chain. And absolutely no points for guessing that Mobile VAS has one as well which I wanted to discuss in this post.

This industry started as a value addition to the mobile value chain and has matured itself into a vertical in the telecom arena in itself. People’s perspective of the value chain is simple – a linear line up of entities. But my understanding of the subject is a little more complicated. To my views, the mobile VAS value chain was a linear structure that would mature into 2^nd dimension whereas the VAS providers (VASPs) move towards starting a relationship directly with the mobile subscriber.
The traditional entities in the value chain are:

1. Content Generator – Online Portals, TV channels, Movies, etc.
2. Content Aggregator
3. VASP – Can be deciphered in two ways – VAS Provider or VAS Application Service Providers
4. Mobile Network Operator
5. Subscriber

These players are placed in the value chain as depicted in the figure below: (Apologies for such a raw appearing figure as my focus is on clarity of subject and not to mention that I am not great at photo editing softwares)

 

This is already a 2 Dimensional chain wherein the content generator is directly providing the content to operator and also through aggregator.
Although as of today, since the customer is owned by the operator, he bills the subscriber and provides a revenue share to other parties. But this landscape is moving towards a paradigm shift with newer players making entry into this much sought after and booming arena and adding new dimensions to it.

The new buzzwords are mobile advertising, mobile TV and retail (focused at approaching the customer directly). And the new players into this market are many more. I would discuss more about the Relationship between the various players in the value chain and how the value chain stands as of now.

Jatin Madan