Operator VAS: Chronicle of a Death Foretold
Leaving SMS apart, Operator VAS in Europe has not been a success story. Driven by promising revenues coming from ringtones and wallpapers (anno 2000), the believe grew that VAS was going to be a revenue driver. Premium SMS Services followed soon after, just before Music and Ringbacktones (2003) gave rise to another wave of hope in operator VAS but never materialized in any substantial contribution to the top line. Currently, under the believe that bundled offers increase customer retention, packages including Deezer or Spotify subscriptions are the last witnesses of the fact that Mobile operators are not media companies and that in a fast moving consumer driven market, operators lack the organisational DNA to deliver a compelling Mobile VAS customer experience.
To make things worse, creating a personalized customer experience has been commoditized. In 2015, two men and a dog in a garage can create an app in a few days that delivers a unique user experience to a specific customer segment.
The Operator Fixed Line Services business might seem more solid with some players boasting about significant IPTV penetration figures. With the broadcast industry having its own existential fight, it is questionable whether operators can keep up with the consumer driven innovation that is causing this disruption.
In 15 years of operator VAS, the only success factor has been monetizing the customer billing relationship and the broad customer base. Owning the billing relationship is an important asset, when AOL divested its DSL business to Telecom Italia, it saw its revenues from paid services on its portal drop with 50% overnight.
Operators need to rethink their VAS Strategy, beyond billing relationship. It makes sense to consider what network or customer assets it can be leveraged to generate a VAS related revenue stream.
Success in VAS is possible – case Study VODAFONE India
In December 2008, the penetration of CRBT in Vodafone India reached 26% of the customer base, a 65% YoY growth with unseen levels of total Mobile VAS spending. The secret of the success was OnMobile, a technology based media marketing company, who was fully integrated into the Vodafone Network and marketing directly to the Vodafone user base exactly meeting customers expectations: RBT for the weekend, micropayment options for prepay users, IVR based local language support and series of IVR and SMS based marketing campaigns.
Data privacy laws and liability concerns giving a 3rd parties direct access to your base stations and customer base have blocked a similar approach in Europe, but the success story of OnMobile with Vodafone in India shows that sharing customer and network assets with a professional VAS company that innovates at the speed of light can lead to success.
API based VAS Strategy
In 15 years of operators VAS industry, mining customer base (bundles) and billing relationship are the only but constant success factors. As a basis for a future VAS Strategy, it is worthwhile exploring to "outsource" the service innovation to the developers, partners and the start-up community. This is the basis for an API based VAS Strategy, leveraging network and customer assets where operators are a catalyst for innovation instead of a driver. This API based approach to VAS, opens the door to a usage / transaction fee based business model. The following examples illustrate this:
Payment: the secure element on the SIM card of every smartphone is the key to allowing secure transactions in payment but also in access management – an API strategy in this field would, instead of developing an own payment service, rent out space on the NFC enabled SIM card (service applet) to VAS partners and make it accessible through a developer SDK. The Partner can then focus on creating an innovative customer experience "powered by ...".
E2E Video Quality: Video is the main driven for network data usage. Video Optimisation Technology is implemented in most networks to optimize the quality of the streamed videos. The E2E video streaming Quality guarantee can be a key service differentiator for a service proposition in which E2E video quality is a key element. The explosive growth of companies like Akamai is evidence that there is a need for this.
Twilio, a US based messaging provider has developed an API that is compatible with IBM’s Blue Mix platform so that IOT developers can use a messaging service when designing an IOT BlueMix Service. Many of the messages and voice traffic run over the Mobile Operators network who have invested in building the network assets to enable this communication. There is no reason for Operators not to be part of this market (Unified Messaging, Voice) as part of an API Strategy.
An API based approach for making the VAS interfaces available to 3rd parties is the most pragmatic approach as it facilitates easy integration into 3rd Party Services. This is not a new approach, already in India, Vofafone India has launched such an API strategy in 2014.
Be Ready for API based VAS
Becoming a catalyst for innovation requires organisational transformation and matching processes to facilitate this change. How to work with 3rd parties in a pro-active way and developing an API roadmap and the matching business model are new skill-sets that operators need to develop.
Eventually, the main benefit will be to be perceived as an enabler of innovation instead of a slow mover. The innovative services that can grow in this API ecosystem will then hopefully reduce customer churn by offering a better customer experience to the operator customer base ...
Contact : Peter Van Overmeir - info@themobileproject.net
