New business models for mobile services
| – will decide whether mobile operators will be successful |
| Throughout a large part of the mobile services market’s childhood, there has been only one access route to the customer – through the mobile operator. This has made the services market very inflexible and meant that players on the mobile market have not reached the turnover they had expected that an open market would give. This walled garden model is still being used in a number of regions, but in Western Europe a Paradigm shift is happening and many mobile operators are today using revenue sharing models that give all content providers access to offer SMS/MMS/WAP services to end-users across all mobile networks. The revenue sharing models that are being used are the same as those originally used for Premium SMS services and they are only the first step; the next step will be new and more advanced business models. The future services market will be much more complex and the success of different players will be very much dependent on their customer relationships. In this way it will not necessarily be the operators that handle the billing of services, as other players will also be able to charge customers. The success of the mobile operator is therefore very dependent on mobile operators understanding how to position themselves correctly and thereby retain their customer relationship with the end-users. In Strand Consults new report – ”How to get success in the 3. generation VAS market” – we have described and analysed the following four scenarios for future possible mobile services business models: |
- Operator centralised – in this scenario the operator has succeeded in retaining their position in the centre of the value chain. It is the operator that has the customer relationship and the other players are therefore willing to give some of their generated revenue to the operator in exchange for customers.
- Financial centralised – the financial institutes have in this scenario acquired the customer relationships. Billing of customers is handled by them and other market players will therefore be interested in using their billing systems. Billing systems can be credit cards or different types of Micro payment systems.
- Media centralised – in this scenario it is the portals that are owned by media companies that have the customer relationships. It will be the portals that spring to mind when customers want to purchase services and the portal owner’s will therefore have a large market strength, which they can use to gain a larger share of the revenue on the market, as they can bill costs to customers media accounts.
- Users centralised – in this scenario none of the players have achieved strong customer relationships and are therefore fighting equally for the customers favour. This is a free market where the customer is in the centre and where users create mobile content themselves and have no fixed suppliers.
Operator centralised – in this scenario the operator has succeeded in retaining their position in the centre of the value chain. It is the operator that has the customer relationship and the other players are therefore willing to give some of their generated revenue to the operator in exchange for customers.
Financial centralised – the financial institutes have in this scenario acquired the customer relationships. Billing of customers is handled by them and other market players will therefore be interested in using their billing systems. Billing systems can be credit cards or different types of Micro payment systems.
Media centralised – in this scenario it is the portals that are owned by media companies that have the customer relationships. It will be the portals that spring to mind when customers want to purchase services and the portal owner’s will therefore have a large market strength, which they can use to gain a larger share of the revenue on the market, as they can bill costs to customers media accounts.
Users centralised – in this scenario none of the players have achieved strong customer relationships and are therefore fighting equally for the customers favour. This is a free market where the customer is in the centre and where users create mobile content themselves and have no fixed suppliers.
These scenarios are amongst other things characterised by the possibility of there being numerous ways to access the customers and that the mobile operators do not necessarily have to be the market player that has the customer relationship. But it is also very interesting that it is not a matter of course that all players in the future services market will necessarily be part of the value chain and thereby some of those players can be bypassed. This could for example happen to the mobile operators if they do not succeed in retaining their customer relationships. In that case the mobile operators will not be the access point for customers to use services, but instead be reduced to bit-pipes.
Being bit-pipes is the nightmare scenario for the mobile operators, but they can ensure themselves that they do not end up as bit-pipes, by using the many tools they have available to influence the end-users purchasing habits.
As Strand Consult points out in our new report – ”How to get success in the 3. generation VAS market” – one of the ways that mobile operators can achieve this is by using differentiated revenue sharing models. New differentiated revenue sharing models from the mobile operators will e.g. be able to take into account the value that a content provider is contributing with. Thereby a content provider with a strong brand (for example Disney or Coca-Cola) can be offered better revenue sharing models than content providers with less known brands.
Also the operators should use revenue sharing models to encourage the development of quality services that can help move the mobile services market from its current focus on simple SMS services and over to more advanced services. But it is important from the mobile operators viewpoint that these advanced services actively use the mobile network, rather than just move data, as this will give the operators significantly better market conditions. An example of this could be location-based services, where the mobile network is used to determine the location of the handset.
It will therefore be the operators’ task to attract the correct content providers and services, while at the same time retaining their customer relationships. Only in this way will be operators be able to ensure themselves a central position on the future mobile services market.
