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How Service Providers Can Monetize the Mobile Cloud
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How Service Providers Can Monetize the Mobile Cloud

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As a young, tech-savvy middle class continues its explosive growth in emerging markets, the Cisco Internet Business Solutions Group sees great opportunities for service providers. The key lies in ...

As a young, tech-savvy middle class continues its explosive growth in emerging markets, the Cisco Internet Business Solutions Group sees great opportunities for service providers. The key lies in offering enhanced, connected-life services through the mobile cloud. Download the paper: http://cs.co/9006VA4E

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  • For more information: http://cs.co/9006VA4ESubscribe to Cisco IBSG: http://www.cisco.com/web/about/ac79/social-media.html

How Service Providers Can Monetize the Mobile Cloud Presentation Transcript

  • 1. The Road to Cloud Nine How Service Providers Can Monetize Consumer Mobile Cloud HenkyAgusleo NeerajArora February 2013 For more information: http://cs.co/9006VA4ECisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 1
  • 2. Globally, Consumer Spending Patterns Are Shifting Significantly Worldwide population distribution Middle class1 Middle-class1 consumers are 27% Others rapidly increasing and would 6.8 B 41% 8.3 B outnumber others 59% 73% 2010 2030 Middle-class spending, $ trillion Middle-class in Emerging 17 Developed Countries2 would outspend 39 Emerging 14 Developed Countries 8 2010 2030 Distribution of population in 2030, % Developed Countries are aging, while Emerging Developed 16 48 36 100% = 1.3 B Countries would remain young and tech-savvy Emerging 24 58 18 7.0 B <15 Yrs. 15-55 Yrs. >55 Yrs.1. Expenditures between $10 to $100 per day, 2005 PPP2. Developing APAC, Middle East and Africa, and LATAM , whereas Developed include Europe and North AmericaSource: Cisco IBSG SP, Kharas, “The Emerging Middle Class in Developing Countries,” OECD; US Census BureauCisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 2
  • 3. OTTs (not Service Providers) Have Taken the Lead in Connected-Life Experiences >150 million users Mobile Connected-Life Service Comparison Google Apple Usage intensity China Mobile Facebook Nokia Tencent China AT&T Telecom Verizon LinkedIn Deutsche Telecom OTT/ Device OEM MTN Amazon Orange SP Telecom Italia >100,00 services Service maturityNote: Usage intensity based on number of users. Service maturity determined by number of years since service launch and size of offer portfolio.Source: Cisco IBSG, SP analysis; ABI; press searchCisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 3
  • 4. Four Key Areas Offering Mobile-Cloud Service Opportunities A Vision of Mobile-Cloud Service Evolution Medium term Long term Current / near term1  Platform convergence  Personalized, intellige  Immersive, augmented- Learn and Play  „Social‟ experiences nt content push reality enabled 5-D1 experiences More 2  Integrated voice  Emotion recognition-  Nanotech-enabled Immersive, Communicate and video based intelligent embedded Integrated communication communication and Intelligent  Banking/commerce  Improved experience  Internet of Shop & Play services and through intelligence Everythingenabled, proac payments tive/ automatic commerce3  Proprietary  Cloud-based,  M2M-enabled automated Monitor & Control controller-based Big Data-enabled workflows/predictive automation / automation / security decision making 4 security 1. Five dimensions include space, time, and senses Source: Cisco IBSG SP Cisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 4
  • 5. By 2016, $64B Direct-Service Opportunity; $335B Broadband Pull-Through Potential 2012-16 Mobile-Cloud Opportunity ($Billion) 70 By 2016: Direct Service 64.0 Opportunity $400B direct & pull-through opportunity, 60 33% of total mobile service revenue 55.4 11.4 Monitor & Control 50 48.7 3.0 Shop & Pay 43.5 8.1 Communicate 40 39.2 30 41.5 20 Learn & Play 10 0 2012 2013 2014 2015 2016 Cloud pull-through1 258 276 294 314 3351. Cisco VNI: 70-80% of data traffic from video streaming, file/content sharing, online gaming, M2M addressable through mobile cloudSource: Ovum, 2011; Gartner, 2011; ABI Research M2M, 2011; eMarketer 2012; IAB 2012; Cisco IBSG analysisCisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 5
  • 6. For SPs, Mobile-Cloud Services Bring Up to $7 in Revenue per Dollar Invested What an SP’s $1 Investment in Mobile Cloud Service Can Bring Base service $4-5 (e.g., N-screen) + Value Features +15-20% from (e.g., turbo mode) $5-6 basic subscription Learn & Play + Advertisement +10-30% from revenue $6-7 subscription +30-40% from + Personalization $6.5-7.5 non-targeted ad Base service $2-4 (e.g., m-Payment, m-Ad) Shop & Pay + Targeting +$1.5-2 due to $3.5-5.5 (e.g., locationbased) location-based targeting Base service $2.5-5.5 (e.g., social media) Communicate + Personalized +30-40% from advertisement $3.5-6.5 non-targeted ad M2M-based Monitor & Control automation $1.5-2Source: Cisco IBSG, SP analysisCisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 6
  • 7. Optimizing Key Revenue and Cost Components Can Improve Profit by 50% Description Value of Lever Subscription Paid revenue from users for services 10-15% by pricing to customer value Revenue from advertisers/agencies Grow Revenues Advertisement or revenue share from content 15-20% providers of subscription revenue 35-40% Add-on revenue from offering 5-10% Personalization targeted ads / content of subscription revenue Profitability Cost to build and operate 40-50% Data Center cloud-based data center 30-50%from DC cost via virtualization Cost to transport content/apps IP Transport throughout network 5-10% via optimized CDN caching Reduce Costs Mobile access Cost to build and operate mobile 30-80% access network of access platform cost by 10-15%1 using Wi-Fi vs. 3G/4G2 Cost to lower entry barrier for 10-15% Customer consumers (e.g., by providing of device subsidy by going to acquisition device subsidy) cheaper thin-client devicesNote:1) Assume COGS at 50% of OpEx, SG&A at 30%, D&A at 20%. 2) 3G/4G costs exclude spectrum costs.Source: Cisco IBSG SP analysisCisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 7
  • 8. Mobile-Cloud Services Produce EBIT Margin of 30%; Cash Flow Margin of 25% Money Flow Based on $1 Paid Revenue (Average across mobile cloud service categories) Value pricing 0.35-0.40 1.35-1.40 0.90-0.95 Advertisement 0.10-0.15 Personalization 0.15-0.20 1.00 0.05-0.10 0.40-0.45 0.10-0.15 EBIT 0.35-0.40 0.30-0.35 After 25-30% 20-25% 0.15-0.20 of total of total reduction revenue revenue DA Paid Revenue Levers Total OpEx EBITDA CapEx Free Revenue Revenue Cash Flow (Base)Note: 30% EBIT margin improvement assumes full utilization of all revenue and cost leversSource: Gartner 2011; ABI Research M2M 2011; eMarketer 2012; IAB 2012; Cisco IBSG analysisCisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 8
  • 9. Advertising Business Moving To Performance-Based, Targeted Model Orange’s Video Ad CPM Rates Internet Advertising (Euro) Revenue Mix 80% Performance based 64% 60% +85% +40% 40% Impression 31% 65 based 49 20% 35 Hybrid 5% 0% 2006 2007 2008 2009 2010 2011 2012 • Revenue share from impression-based (CPM) ad model Mass ads Targeted ads Targeted ads continues to decline at Homepage at Homepage at Theme pages (orange.fr) (socio-demographic (Finance, Sports, • Maximizing benefits from performance-based model (CTR) targeting) Automotive) requires sophisticated targeting provided by analyticsSource: Orange Ads Rate Card, 2011 Source: Cisco IBSG analysisCisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 9
  • 10. Powering Mobile-Cloud Growth: Platform Convergence, Big Data, Immersive Interface Medium term Long term Current / near term  Platform convergence  Predictive intelligence  5-Dimensional (managed/ unmanaged enabled, push-based (sight, hearing, content, N- personalized services touch, smell, taste) screen, linear / non- (customer user interface for linear content) context, location, time, p immersive  Embedded „Social‟ lace) experiences experiences (in  Real-time interactivity gaming, video, etc.) and role plays with on-screen characters Selected innovations  IP networks  Big Data (customer and  Human-Machine Interface(e.g. wearable devices)  Digital media cloud network side analytics)  Augmented realitySource: Cisco IBSG SPCisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 10
  • 11. Key Success Factors for SPs To Realize Mobile-Cloud Success Key Success Factors Mobile-Provider Actions Contents & apps are foundation Multi-screen concept combining Innovations of services. Explore app stores, traditional and Web 2.0 digital media PaaS developer communities. content delivered to mobile, TV, and PC. Advertisement as second source of SingTel bought Amobee mobile ad Advertisement solution provider for $321M. revenue to subsidize deficiency from revenue subscriber revenue. Globally, ad is expected to comprise 24% of mobile-cloud revenue in 2016. Users value targeted content and ads. Social media (e.g., Twitter) analysis Personalized Cloud brings personalization to users —subscriber profiling for campaign services anywhere, anytime. assessment. Mobile providers cannot do this alone. Mobile Market—World‟s largest Ecosystem of Need content mobile provider‟s app store with partners providers, advertisers, content 160 million users, 630 million developers to participate in value chain. downloads, revenues U.S. $8 billion.Source: Cisco IBSG Press search and analysisCisco IBSG © 2013 Cisco and/or its affiliates. All rights reserved. Cisco Public Internet Business Solutions Group 11
  • 12. For further information:http://cs.co/9006VA4E