 |
|
|
fpo50px |
 |
 |
nefpo100090s |
 |
Industry reports - Mobile markets
Today’s mobile operators are experiencing significant downward pressure on their traditional businesses of voice and SMS. Increased de-regulation means that the number of operators competing together in each country is on the increase and both Mobile Network Operators (MNOs) and Mobile Virtual Network Operators (MVNOs) are expanding the choice that consumers have. Whether the market is mature or is at an earlier stage and is experiencing rapid growth, it is typical for a large number of operators to be competing for a country’s subscribers. In the UK, for example, the list of mobile operators that compete in the market includes Cable and Wireless, Hutchison 3G, O2, Orange PCS, T-Mobile, and Vodafone [a] not to mention a large number of MVNOs that are also live. While in the rapidly expanding market of Pakistan [b], there are already five MNOs in operation [c].
In addition, regulators in many areas are implementing directives to ensure that pricing is adjusted downwards where they feel that market forces are not able to effect satisfactory price competition. Cross-border roaming is an area where price competition has been limited and the EU Telecoms Commissioner has implemented the Eurotariff directive on roaming across the EU in partnership with the European Regulators Group in order to cap roaming charges [d]. In this context it is regulation, and not deregulation, that has led to reduced revenue from traditional voice charges.
The impact of these factors is to drive down the prices of the traditional products of all of the operators in the market. For example, the average retail revenue for UK mobile subscribers fell between 2004 and 2006, falling from £17.74 ($34.83 USD [e]) to £17.21 ($33.79 USD) across the period [f]. This represents a 3% fall and the trend is expected to continue downwards. Taking another mobile market, Italy, as a whole we can see a faster fall. Total market revenue for mobile in Italy in 2004 was £9,061m ($17,791m USD) with 56.6m subscribers and in 2006 it was £11,612m ($22,799m USD) with 80.5m subscribers. This means that the average revenue per subscriber has fallen from $314 USD per subscriber in 2004 to $283 USD per subscriber in 2006 – a fall of almost 10%. This pattern is replicated across many of the world’s markets and it is driving mobile operators to seek alternative revenue sources to supplement their current incomes.
Of the possible options for revenue growth, operators have identified some key areas. The first, and closest to their core competence, is to expand the mobile services revenue by driving greater data usage. Improved form factors of the user devices and the implementation of more attractive data plans has meant that data traffic accounts for a greater proportion of the mobile bill and is a growing element of the subscriber’s ARPU. Between 2001 and 2006 the proportion of total mobile revenue made up by mobile data increased from 9.8% to 18.1% for 12 countries surveyed by Ofcom, the UK’s regulatory authority for communications, in their International Telecoms Report for 2007 [g]. The second option is to move into non-mobile telecommunication services such as domestic broadband. Many mobile operators such as Vodafone, O2, and Telefonica have a DSL offering in their European operations and they often supplement these with email accounts, on-line storage, and other IT products. The third option is to expand the revenue sources to include non-telecoms products and mobile advertising is a key element of this option.
It is important to understand some of the drivers of the business model of mobile advertising in order to determine what impact this new revenue stream will have on the customer ARPUs and the operator total revenue streams. In this new business model, the customer is the advertising industry and the subscriber is the audience. Rather than charging subscribers for usage of the telecoms service, the mobile operator will now earn money from the advertisers and advertising/media agencies who want to communicate with the subscribers. The subscribers, in fact, may actually end up paying less as some of their services are subsidised. Indeed, to encourage subscribers to allow the advertisers access to the mobile device for the purpose of advertising, the operators will have to provide them with something in return. What this something is, and what advertisers are willing to pay to deliver an advert, are the keys to the new business model. It is the delta between the advertiser payment and the subscriber subsidy that will provide a revenue source for the operator.
Diagram 1: Revenue split between the Advertiser, Subscriber and Operator
(cont. - next column)
Footnotes
(from col. 1 • Understanding the Mobile...)
The advertisers, through agencies and other intermediaries, is the customer for mobile advertising and we must understand what they are willing to pay for mobile advertising and how this advertising channel is priced. Advertising across many media channels is priced using metrics such as CPM (Cost per Thousand Customer Impressions where an impression is a single instance of placing an advertisement in front of a subscriber), CPA (Cost Per Acquisition), CPC (Cost Per Click). CPM puts a monetary value on presenting a thousand consumers with an advertisement while the CPC puts a price on obtaining a response from that consumer. The values of these metrics can vary quite widely but, in general, the greater the targeting and relevance of the advertisement, the higher the CPM. If the CPM is high for a particular advertisement – because it is transmitted to the right consumer, in the right place, at the right time – then it will only require a small number of impressions to earn revenue that will have a significant effect on the average ARPU of the subscribers. And the converse is also true that if the CPM is low then it will require a high volume of advertisements to earn significant revenue. Similarly with CPC and the number of responses, a high CPC would only need a few responses and a low CPC would require a high number of responses.
In Diagram 2 below it can be seen for a single subscriber, that if we can present 20, 40, or 60 customer impressions in a month, then depending on the CPM value of these advertisements – $25 USD, $50 USD, $75 USD – the presentation of these advertisements will generate revenues up to about $5 USD. It will be the aim to deliver as many impressions – and to capture as many responses – as possible.
To elaborate, let us imagine that we are able to deliver 40 impressions to a subscriber each month and that these impressions had a CPM of $50 USD. A CPM of $50 USD means that each impression is worth $ 0.05 USD so, with 40 of these delivered in a month, the revenue earned is 40 x $0.05 USD = $2.00 USD per month.
Diagram 2: Revenue earned from Advertising
It is vital that operators do not irritate subscribers when trying to drive up the number of impressions. In fact, it will be key to use a variety of mechanisms to avoid over-using one particular medium. A subscriber might accept one or two spontaneous SMS or MMS messages in a month but this will not be sufficient to generate the volumes required to create substantial additional revenue. Instead, advertising approaches that do not interrupt the subscriber must be employed. These can ‘piggy-back’ on the current traffic of the subscriber such as peer-to-peer messaging, insertion in ringtones, or pre-play video clip advertisements ahead of a browsing session. All of these do not add to the traffic that subscriber receives but instead take advantage of dead space in the current subscriber activities. For example, inserting SMS advertisements in SMS messages being sent from one subscriber to another gives the operator a valuable customer impression but it does not create an additional message that could be interpreted as spam. The message still has value to both subscribers because it is a normal communication between them that happens to be also carrying an advertisement. In order to be able to employ a multi-channel approach, the operator must choose a mobile advertising solution that can deliver advertising on a variety of media – e.g. text, MMS (image, audio clip, video clip), ringback tone etc. – and in a variety of ways – outbound messaging, banner advertisements, insertions in peer-to-peer messaging. This gives the operator the opportunity to deliver a high volume of advertising but without driving a lot of additional interruptions to the subscriber. One further capability that must be part of any advertising solution is the ability to cap the number of advertisements that a subscriber receives or sends (in their communications). This will prevent over-usage or exploitation by either advertisers or subscribers to ensure that we retain the subscriber’s support and willingness to participate.
(cont.)
Telco Updates
Telco spots on TwitterCantabria infinita
Cueva de El Soplao • Turismo y gastronomía
Propuestas en Brasil
Cabo Frío: paraíso a 200 km de Río • Niterói: playas, arquitectura y agenda cultural • El camino de Niemeyer: recorrido arquitectónico
Propuestas en Argentina
Ruta Nacional 40: Recorrido por la parte Norte • Centro (Cuyo) • Sur (Patagonia)
Propuestas de turismo
en la Comunidad Valenciana
