• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content

Loading…

Flash Player 9 (or above) is needed to view presentations.
We have detected that you do not have it on your computer. To install it, go here.

Like this document? Why not share!

Mobile

on

  • 1,950 views

 

Statistics

Views

Total Views
1,950
Views on SlideShare
1,950
Embed Views
0

Actions

Likes
0
Downloads
88
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Mobile Mobile Document Transcript

    • Mobile Value Added Services in India A Report by IAMAI & eTechnology Group@IMRB December 2006
    • Mobile VAS in India, December 2006 © Internet & Mobile Association of India (IAMAI), 2006 All rights reserved. No part of this report may be reproduced, either in part or in full, without the prior permission of Internet & Mobile Association of India IAMAI & eTechnology Group@IMRB 2
    • Mobile VAS in India, December 2006 Table of Content Mobile Value Added Services in India............................................................................................1 Introduction......................................................................................................................................4 Executive Summary......................................................................................................................... 5 The Indian Mobile Telephony Market.............................................................................................9 The Role of VAS........................................................................................................................... 12 Environmental factors driving VAS......................................................................................................................... 12 Market efforts driving VAS......................................................................................................................................13 VAS- Definition & Market Size................................................................................................... 15 Current Growth & Future Potential for Different VAS................................................................. 16 Perceived & Practical value of Entertainment VAS.................................................................................................18 Perceived & Practical value of Info VAS.................................................................................................................18 Perceived & Practical value of mCommerce............................................................................................................19 The VAS business model ..............................................................................................................20 Content Enablers.......................................................................................................................................................20 Technology Enablers................................................................................................................................................ 22 Revenue Sharing in VAS (except P2P SMS)................................................................................ 23 Revenue sharing arrangement in VAS (except P2P SMS) ......................................................................................23 Revenue sharing in enterprise solution services....................................................................................................... 23 VAS Platforms............................................................................................................................... 25 Operator.................................................................................................................................................................... 26 Challenges to the growth of VAS in India.....................................................................................27 The future of VAS in India ....................................................................................................... 31 About eTechnology Group@IMRB............................................................................................ 32 IAMAI & eTechnology Group@IMRB 3
    • Mobile VAS in India, December 2006 Introduction Mobile phones today have moved beyond their fundamental role of communications and have graduated to become an extension of the persona of the user. We are witnessing an era when users buy mobile phones not just to be in touch, but to express themselves, their attitude, feelings & interests. Customers continuously want more from their phone. They use their cellular phones to play games, read news headlines, surf the Internet, keep a tab on astrology, and listen to music, make others listen to their music, or check their bank balance. Thus, there exists a vast world beyond voice that needs to be explored and tapped and the entire cellular industry is heading towards it to provide innovative options to their customers. Spoilt by choice, the mobile phone subscribers are beginning to choose their operators on the basis of the value added services they offer. The increased importance of VAS has also made content developers burn the midnight oil to come up with better and newer concepts and services. To understand that where this industry is at present and where it is headed, IAMAI and IMRB International have jointly prepared the Mobile VAS Report to focus back stage and uncover the trends in the cellular industry, current market status, value chain, competition, market dynamics & expected roadblocks. This is the first publicly available study on Mobile VAS in India and the insights provided herein can be used by both the mobile operators and the content providers to better address the needs of their customers. A timely and strategic action would help nurture the mobile VAS market in India. IAMAI & eTechnology Group@IMRB 4
    • Mobile VAS in India, December 2006 Executive Summary Need for the study The mobile subscriber base is growing at a scorching pace in India, India is now the 5th country in the world to have crossed the 100 million mark in subscriber base and has in the last two months become the fastest growing mobile market in the world. As average revenue per user decrease from voice drops, and voice becomes commoditized, Telcos are increasingly looking at data as an additional revenue stream. The end users have also embraced VAS and it contributes between 5-10% of the revenues of different Telcos. Thus Mobile VAS has become an important element in the growth of mobile telephony in India. Yet it is also equally true that there is little clarity on business issues and growth seems to be driven by more by inherent market momentum than a concentrated effort on the part of the stakeholders; differences exist even on basic issues like definition for Mobile VAS. Thus an understanding into the VAS space is needed to help stakeholders give a direction to this wave of growth. This report explores the key issues around the value chain of Mobile VAS in India and provides a much needed holistic perspective to macro and micro issues in this space. It clearly defines the constituents of Mobile VAS, examines the environmental factors driving it, and maps business models, market size and revenue sharing arrangements. The report also goes on to identify the roadblocks that need to be addressed for the current growth to be sustained. Methodology The eTechnology Group@IMRB (specialist technology research unit of IMRB International) & IAMAI interviewed key stakeholders in the Mobile VAS space for their perspective. The respondents comprised representatives of a cross section of Telcos, content aggregators, platform enablers, short code owners & industry experts. We also analyzed data from industry associations such as COAI & ABTO and other published reports and used several independent methods to arrive at the industry size and growth estimate for 2007. IAMAI & eTechnology Group@IMRB 5
    • Mobile VAS in India, December 2006 Key Findings The Mobile VAS industry in India is estimated at Rs. 2850 crore at the end of 2006 and is estimated to grow at 60% to touch Rs. 4560 crores at the end of 2007. This space is currently completely dominated by entertainment services and comprises of; P2P SMS -Rs. 1140 crore; Ringtones (including CRBT) - Rs. 1026 crore; P2P & A2P- Rs 428 crore; Games & Data- Rs. 171 crore; Others (MMS etc) - Rs 86 crore. Game & Data Others 7% 3% P2A & A2P 15% P2P 40% Ringtone Dow nload 35% Source: IMRB Research As the P2P SMS component accrues completely to the Telcos, the remaining 60% (Rs 1710 crore) is where revenue sharing arrangements exist between content owners/developers & Telcos as follows; A ggregator / Copyright Developer Ow ner 25% 15% Operator 60% IAMAI & eTechnology Group@IMRB 6
    • Mobile VAS in India, December 2006 Source: IMRB Research Thus the Mobile VAS industry in India (excluding Telco share) is currently 24% of Rs. 2850 crore and is estimated at Rs. 684 Crore in India. IAMAI & eTechnology Group@IMRB 7
    • Mobile VAS in India, December 2006 The Road Ahead We believe that while the mobile VAS space is all set to grow rapidly, all the stakeholders will have to work together and create a self-sustaining ecosystem for this growth to sustain. Similarly it would take a joint effort of all concerned to address the significant roadblocks and thus unlock the true potential of Mobile VAS in India. The key addressable barriers would be to ensure greater rationality in revenue sharing between Telcos & content developers; ensure copyright protection, develop higher quality content which goes beyond Bollywood and cricket and also to have a focused WAP strategy. We also believe that while pure entertainment service would continue to appeal to the younger consumers, the overall focus for Mobile VAS would shift to utility based services like location information & mobile transactions; as security concerns are addressed mobile transactions will also have a good potential in India. IAMAI & eTechnology Group@IMRB 8
    • Mobile VAS in India, December 2006 The Indian Mobile Telephony Market India is going through a telecom revolution, especially in the wireless telephony segment. The adoption of mobile telephony remains unparalled in scope, as users from diverse segments increasingly choose to exercise the option of personal mobility. The user base has been adding 3- 4 million subscribers per month (on an average) and recently the mobile subscriber base crossed the 100 million mark in April 2006. The success of the market can be gauged from the fact that mobile user base has surpassed the PC user base in India and very soon the Indian market will have more mobile users than TV viewers. India is rapidly moving towards being an evolved mobility market with no distinction between market incumbents and challengers. Growth of Mobile Subscribers 109 114 120 120 96 100 104 100 80 No. of Subscribers (in 60 m n) 40 20 0 March '06 April '06 May '06 June '06 July '06 August '06 Source: COAI & ABTO The growing intensity of competition has led to more services for the end user at lower prices. This has had an effect of stimulating demand and thus increasing the category adoption rate. As more users have been added to the subscriber base, it has led to a further downward pressure on operator costs. This has led to further cost benefits to the end user, fuelling further growth in the subscriber base. IAMAI & eTechnology Group@IMRB 9
    • Mobile VAS in India, December 2006 The growing subscriber base has also augured well for industry revenues, which have risen consistently over the last four quarters. However the other side to this growth is that ARPU’s (Average Revenue per User) have been correspondingly declining quarter on quarter. The average industry ARPU has fallen from Rs. 375 for Sept ’05 quarter to Rs. 347 for June 2006 quarter, a fall in ARPU of Rs. 28 per subscriber since Sept ’05 (a decline of 7%) Revenues & ARPU Revenue (Rs. Crore) ARPU (Rs.) 6000 5621 380 375 4460 4942 5000 370 370 4010 4000 360 ARPU (Rs.) Revenue (Rs 3000 356 Crore) 350 2000 347 1000 340 0 330 Sept '05 Qtr Dec '05 Qtr Mar '06 Qtr. Jun '06 Qtr. Source: COAI While the decline in ARPU’ has been accelerated by the recent marketing interventions like lifetime-free schemes; this has been a consistent trend for some time. It is also a function of the structure of the Indian mobility market. At 80%, the pre-paid segment completely dominates this Indian mobility market. Subscribers- Prepaid vs. Postpaid Market Split Postpaid 20% Prepaid 80% Source: IMRB Research IAMAI & eTechnology Group@IMRB 10
    • Mobile VAS in India, December 2006 Pre-paid has been a good platform on which the market had grown very fast, as it creates a volume based platform for tariff reduction. Operators have had a strong focus on the pre-paid segment as the cost of customer acquisition is very low compared to the post-paid segment. Another reason for the strong focus on customer acquisition has been to up the network valuations, which are largely assessed based on the number of users on it. However the flip side is that, customer retention has become very difficult. Loyalties in the pre- paid segment are low due to the low switching costs and it is not uncommon for user to routinely change their numbers and service providers. Pre-paid subscribes are also low usage subscribers who contribute only 25-30% ARPU’s as compared to the post-paid segment. Source: IMRB Research Another aspect to the mobility market has been the constant decline in the call rates; initially this reduction has been helpful in further increasing the subscriber base and expanding the Minutes of Use of the existing base. However after a point reduction in call rates has been ineffective and minutes of use (MOU’s) have been inelastic in responding to reduced rates. Mobility operators in India have been faced with two clear challenges: (i) To address customer retention in the high churn pre-paid market (ii) To develop alternative revenue streams as voice has become commoditized and has ceased to be a tool for differentiation IAMAI & eTechnology Group@IMRB 11
    • Mobile VAS in India, December 2006 The Role of VAS This is where the role of VAS (Value Added Services) comes into focus. Operators are facing cutthroat competition and with the call rates in India being one of the cheapest in the world, the margins are very low. Therefore they are looking at VAS as the next wave for growth. It has become the flywheel of telecom growth and a large chunk of revenue for operators is likely to come from VAS services in the years to come. But it is not only effort from operators which is driving the growth of VAS, there are other factors contributing to it. The growth of VAS in India has been helped both by macro level environmental factors and specific market initiatives to develop this category. Environmental factors driving VAS Booming economy India has maintained its position as the second-fastest growing major economy after China, as rising consumer and government spending taking place. Consumption and infrastructure spending are driving the growth. This booming economy has created job opportunities and increased the spending power of an average Indian. This has resulted in higher disposable incomes and faster acceptance of new technologies with a willingness to spend for them. Increasing comfort levels with basic mobility services There is now a critical mass of users in the Indian mobile telephony market who are experienced mobility users. These users are very comfortable in using their phones and want to exercise the option of doing more on them beyond basic voice applications. The first phase of growth for VAS has come in from these converts; and these users will continue to drive the market and evolve into more advanced applications. At the same time the basic VAS applications will also continue to appeal to the new mobility category initiates. IAMAI & eTechnology Group@IMRB 12
    • Mobile VAS in India, December 2006 Personalization of the digital world and digital devices With increasing pressures and stress on individuality, mobility users also want to carry forward “That I have It’s My Life s as their individuality to their mobile device. Thus for a large my ring back tone says a lot number of users the mobile phone has become a truly about me. It is like a message for all my callers…“ personal device and VAS has become an extension of - User, 25, Delhi persona. The enormous success of Caller Ring Back Tone (CRBT) is an excellent example which illustrates that users are ready to adapt to any service which offer them the option of personalization. Reduction in call rates & CPP initiation CPP (Calling Party Pays) was an important initiative which unshackled the mobility market and allowed many more subscribers to enter the mobility category. This initiative, in conjunction with the gradual reduction in call rates has ensured that the expenditure on voice for a typical user has gone down over the years. As a result more users have become comfortable in spending on VAS as it does not significantly impact their overall outlay on mobility. Market efforts driving VAS For the operators, success of VAS has become important for their growth. This has led to a sharp focus on marketing & tie-ups and a somewhat limited focus on development of content. Most operators are now trying to innovate in their VAS offerings and create sharper differentiation for their offerings. Focus on movies & music Movies & Music are the passion of India. Most of the rich content available to the end users revolves around these two, with Ringtones of popular Bollywood songs, Wallpapers of movie leads and games developed around movie themes. Given that Youth account for a large segment IAMAI & eTechnology Group@IMRB 13
    • Mobile VAS in India, December 2006 of users & also dominate the pre-paid category, the focus on entertainment has been a strong hook to develop the VAS category and operators & content aggregators have been sharply focused in their efforts to pluck this low hanging fruit. It has been helpful that the film industry in India is very prolific and there are endless options to develop content around SMS contests Television is another culturally entrenched constant in the life of the average Indian. Typically TV viewing has been a passive affair, however following the global trend TV channels have been focused on making programming interactive. Thus programs, especially music & contest shows have started giving the option to their viewers to participate through SMS. A popular show like Kaun Banega Crorepati (KBC) generated 58 million SMS over a 3 month period. These shows have also been a key driver in increasing familiarity with basic SMS for traditional low user segments like non-working women. IAMAI & eTechnology Group@IMRB 14
    • Mobile VAS in India, December 2006 VAS- Definition & Market Size Mobile value-added services (VAS) are those services that are not part of the basic voice offer and are availed off separately by the end user. They are used as a tool for differentiation and allow the mobile operators to develop another stream of revenue. The nature of value added services change over time. A VAS may become commoditized and becomes so common place and widely used that it no longer provides meaningful differentiation on a relative basis. For example several mobility operators & other stakeholders in the industry no longer consider P2P SMS as a form of VAS. However for the purpose of estimating the market size we have taken P2P into account, though we also feel that P2P SMS is ceasing to be a meaningful tool for service differentiation. Current market size The current market as of November 2006 for mobile VAS in India is estimated at Rs. 2850 crore. . Composition of VAS Revenue Game & Data Others 7% 3% P2A & A2P 15% P2P 40% Ringtone Download 35% Source: IMRB Research IAMAI & eTechnology Group@IMRB 15
    • Mobile VAS in India, December 2006 Mobile VAS in India can be further categorized into the following broad categories: P2P: Person to Person SMS, the most common form of mobile communication apart from voice Ringtones: This is inclusive of monotunes, polytunes, truetunes and also includes CRBT (Caller ring back tones). P2A & A2P: P2A (Person to Application) SMS inclusive of messages sent by end users for contests & for seeking other information like news & updates; (A2P)Application to Person SMS inclusive of service push by enterprise service providers; Also include calls on IVRS for all other services like astrology Games & Data: Games include download of one play games offered by Reliance & full play games offered by other operators; Data include download of wallpapers & logos Others: Include MMS (Multi Media Messages) & subscription charges for WAP services Though the mobile subscriber base has grown by over 95% (August 06 over August 05) we believe that the relative growth in VAS revenues will be lower. As the current focus by mobile telephony operators is on adding subscribers, many low value users are now entering the category and are not likely to contribute significantly to the growth of VAS. Overall the growth in 2007 will continue to be driven by Ringtone downloads and by games; the share of games in the overall pie is also expected to grow. The current VAS market is expected to grow by 60% for the next year and at the end of 2007 should be close to Rs 4560 crore. Current Growth & Future Potential for Different VAS To understand the reasons behind the current popularity and predict the future potential for these services, we have grouped Mobile VAS into three broad heads, based on the nature of the service offering. IAMAI & eTechnology Group@IMRB 16
    • Mobile VAS in India, December 2006 o Entertainment VAS- Entertainment VAS is designed for mass appeal and extensive usage. These provide entertainment for leisure time usage. An example of these kind of services are Jokes, Bollywood Ringtones & games. These services are currently very popular and are driving the revenues for the Indian mobile VAS market. o Info VAS- These are the services which provide useful information to the end user. The user interest comes in from the personal component of the content. E.g. Information on movie tickets, news, banking account etc. These also include productivity services like missed call information which brings back lost business opportunity for the operators. They also include user request for information on other product categories like real-estate, education etc. o mCommerce VAS (Transactional services)- mCommerce VAS allow the use to conduct a transaction using the mobile phone. These services are in a very nascent phase and are not really available to most users. An example of these kind of service are buying railway tickets or movie tickets through the mobile phone. The revenue generation and popularity of these three types of VAS revolves around 2 factors: Perceived Value - Perceived value of a VAS depends on perceived rather than the actual utility to the end user. When the immediate benefit may not be clear to the subscriber, the value that a subscriber derives from it largely depends on the marketing efforts and persona related to the service. The value is gauged more from the intangible benefits derived from the service like emotional benefits. A good example of a VAS with high perceived value is CRBT (Caller Ring Back Tone). Practical Value - Practical value is completely based on tangible benefits derived from the service. The benefits considered could be based on convenience & saving of time and money. E.g. Service availed to get the cheapest air fares available. IAMAI & eTechnology Group@IMRB 17
    • Mobile VAS in India, December 2006 These three categories of VAS provide a unique combination of perceived and practical values for every user and this may change over time as the market & users evolve. To understand the growth of the different types of VAS and their future growth, they have been analyzed on both of the above mentioned factors. Perceived & Practical value of Entertainment VAS Currently entertainment based VAS applications are driving the market both in value and volume terms. These have a very high perceived value as apart from basic entertainment, these can also be a means of self expression by the end user. This explains the success of Entertainment VAS despite the fact that its practical value is minimal. Entertainment content is dynamic and changes very frequently which keeps the subscriber’s tastes alive but we feel that unless it is supplemented by innovative applications like CRBT, the drive will be difficult to sustain. In India, entertainment VAS is there to stay though we predict a fall in its contribution to the overall VAS revenue pie in the next 3-4 years. This would happen as other type of services become more popular and user engagement with entertainment VAS reaches saturation. Perceived & Practical value of Info VAS Currently infotainment VAS has moderate practical and perceived value. We feel that this is mainly because of not very strenuous effort to promote these services and a lack of customization for the end-user. Currently very few applications are catering to subscriber’s needs. Not many efforts are being made to develop the market and create awareness about these applications. However perceived value will increase in the future as new utility applications are developed catering to different niche segments; like location based services. IAMAI & eTechnology Group@IMRB 18
    • Mobile VAS in India, December 2006 Perceived & Practical value of mCommerce Currently transaction based services are in a very nascent stage in India and are constrained by both lack of awareness and suitable applications. Both practical and perceived value is low amongst users. One of the main reasons driving low trials is discomfort with the idea of paying through the mobile. Users are skeptical regarding transactions on mobile, no stringent policies and measures are in place to instill a sense of security in the subscriber’s mind. This is acting as a roadblock in the aggressive focus and investment to increase the perceived security of mobile payments. Currently there is also a lack of innovative applications which can click with the subscribers. We feel that growing eCommerce will also have a positive rub off effect on m commerce because users will have a higher level of familiarity and comfort with online transactions. However it will be initially focused on low value transactions and will gradually expand. Over the medium-long term we expect an exponential rise in the popularity and revenue generated from these services. Perceived Vs. Practical Value Matrix VAS Market 2006 VAS Market 2010 High High Entertainmen Infotainment Entertainment Perceived Perceived Infotainment mCommerc Value Value mCommerc Low Low Low Practical Value High Low Practical Value High Source: IMRB Research Source: IMRB Research IAMAI & eTechnology Group@IMRB 19
    • Mobile VAS in India, December 2006 The VAS business model The mobile VAS market in India has evolved into a complex ecosystem. There are multiple entities involved in the value chain but our research reveals that it is still not well defined and lot of overlapping takes place. A single entity performs one or more roles and several are also focusing on expanding their existing roles. The main entities involved in VAS value chain are: VAS Ecosystem Request in Text format/ Server Subscriber call Managed Request completed Platform Operator Subscriber Enabler Content flow Portal/ Aggregator Content flow Developer/ Owner Source: IMRB Research Content Enablers Content Portals/Aggregators/Developers: At the first level existing portals in the Internet space are providing content to end users. For most of them, mobile data content offers an additional revenues stream, from a strategic perspective it also offers an opportunity to leverage the traffic to the portal and generate potential advertising revenues. IAMAI & eTechnology Group@IMRB 20
    • Mobile VAS in India, December 2006 Ringtones & wallpapers are two very popular categories where portals like Indiatimes & Rediff lead. On the next level there are a host of large content aggregators. Most of these like Mauj & Indiagames offer content directly to the end user through their own portal and also provide content to mobile operators. They perform the twin functions of in-house content development & also aggregating from other smaller boutiques. There are also many small pure development entities, as they do not have the technical support to host content or to negotiate with operators they prefer to provide it to aggregators. Third Party Copy Right Owner Most of the rich content in mobile VAS is built around Bollywood movies & music. The copyright for these are held by production houses or rests with individual artistes. A part of the revenue is shared as fee with the owners for using the copyright material. Apart from Ringtone & wallpaper development there is also a growing trend of game development around popular Bollywood movies, a recent example is a popular game based on the Hindi movie “Don”. Traditional Media Companies Following the global trend most traditional media companies are also trying to bring the feature of interactivity into their media. As we have discussed in the first part, SMS contests have been a very successful way for TV channels to achieve this. However using this feature involved revenue sharing with several entities, so to generate cost efficiencies over the long run, some media houses have expanded and acquired Short Codes for their own brands. Prominent amongst them are Sony TV, Aaaj Tak & Zee TV. HT Media is a relatively new entrant in this space and has also acquired a short code. IAMAI & eTechnology Group@IMRB 21
    • Mobile VAS in India, December 2006 Technology Enablers Short Code Provider These are the companies who own a short code (e.g. 8888, 3456 etc) which is sold to a third party client for some keyword and a specific period. They have a tie up with multiple operators to ensure customers of all operators send the SMS to the same number. e.g. if Star wants to get participants for a TV show, it can advertise “Type ‘X’ on your mobile phones and send to 3456” .The server at destination 3456 would identify the message with the keyword ‘X’ and route it to Star. There are around 10 national level players and several regional players in this domain. The entry barrier is very high because of high initial deposit and need to tie up with each operator for each individual circle. Our research reveals that most operators also ask for a deposit of Rs 2 million and a minimum guaranteed volume of half a million SMS per month for entering into an arrangement with a Short Code owner. National level code owners Code Sony TV 2525 Aaj Tak 2424 Indiatimes 8888 Zee TV 7575 Hungama 4646 Active Media 3636 Rediff 7333 Mauj 7007 Teleshoppe 3456 Source: IMRB Research Technology Partner/Platform Enabler IAMAI & eTechnology Group@IMRB 22
    • Mobile VAS in India, December 2006 Technology partner & platform enabler handle software platforms and authoring tools. Platforms are the backbone of the service providers and allow managing of various entertainment services, such as games, streaming audio and video and ring tone downloads. Authoring tools are a necessary component for delivering applications by application developers. Revenue Sharing in VAS (except P2P SMS) Revenue sharing arrangement in VAS (except P2P SMS) Aggregator/ Copyright Developer Owner 25% 15% Operator 60% Source: IMRB Research Operators typically retain the biggest chunk of revenues. Copyright fee given to content developer/owner comes from the margin of Content Aggregator or Operator or both. Revenue sharing arrangement is typically 60% for the operator, 25% for the aggregator and 15% for the owner. This model is significantly different from evolved market like China where the share of operator is typically 20-30% in the entire chain and aggregators & owners keep a much higher share. Revenue sharing in enterprise solution services IAMAI & eTechnology Group@IMRB 23
    • Mobile VAS in India, December 2006 Short Code Owner 30% Operator 70% Source: IMRB Research Enterprise service providers are increasingly using VAS as a marketing and customer development tool. It is being increasingly used to connect to users through the mobility platform. Eg. “Tracking of DHL courier through SMS- Send POD number as DHL-XYZ to 3456” The end user requests for this service by sending an SMS, this is routed through the mobile service operator to the Short code service provider. The short code provider collects all the information on the server and passes it to the client (Eg. DHL). The per unit revenue accrual in this VAS is low (Rs 3/SMS) as compared to other types of VAS, but it offers two streams of revenues as both the end-user & the enterprise service provider pay for the VAS. We expect this to grow significantly as enterprises look beyond mass media for solutions to reach out to their customers. It is also cost effective for the enterprise as it serves both as a data base development initiative and also leads to cost savings as queries can be handled through automated response IAMAI & eTechnology Group@IMRB 24
    • Mobile VAS in India, December 2006 Amongst enterprise service providers VAS is more popular amongst certain verticals due to their I immediate amicability to this service. Top 5 enterprise users Real estate information FMCG contests Cargo and courier tracking Education/ Career information Travel services in e-space Source: IMRB Research VAS Platforms Every service needs a platform for delivery VAS can be provided to the customers on two platforms- Data & Voice Data/Text Platform The end user sends the service request in an SMS form. The request goes to a server managed by the Platform enabler on behalf of the operator. The content is arranged by the Operator from the Content Aggregator who procures it from the Content developer. This content is forwarded to the Platform enabler who stores it in the server. The server automatically and instantaneously entertains the request from the customer as all these VAS are preloaded into the server. Voice Platform The end user calls up the service provider and avails of the service. The call is routed to a server managed by Platform enabler. The server interacts with callers using IVRS (Interactive Voice Recognition System), gathers information and routes calls to the appropriate recipient. The remaining chain is same as that of a text based platform. IAMAI & eTechnology Group@IMRB 25
    • Mobile VAS in India, December 2006 Per unit voice based VAS generates more revenue than text based VAS as the call charges are very high at Rs 6/7min and selecting the service normally takes more than a minute. This means that for the same service voice based will generate several times the revenue over text based VAS. As the penetration increases more in rural India, necessity and importance of IVRS will increase as people will be more comfortable with an interactive voice platform in local language over selecting options by pressing numbers. IAMAI & eTechnology Group@IMRB 26 Operator
    • Mobile VAS in India, December 2006 Challenges to the growth of VAS in India There are several major challenges which need to be overcome for sustained growth to be initiated. The major challenges that need the immediate attention of key stakeholders are: Focus only on youth and entertainment Usage of VAS has not spread evenly across demographic profile of customers. Currently the youth segment is driving the VAS market as can be seen from the rapid growth of Entertainment VAS (mass service) and not so rapid growth of mCommerce and Infotainment VAS (customized service). In light of this trend the “Now that the market is stakeholders are also playing safe and concentrating on maturing, segmentation is the key.…“ mass services for which content is easily available and - Leading Operator chances of failure is less. But this has hampered the growth of other services which are not getting enough time, effort and investment from the players. For the VAS market to bloom fully, applications need to be created for niche segments, as these are the services which will create real value for the subscribers. Piracy of Content Another reasons for players playing safe and not investing in novel applications and content is becuase this market is greatly affected by piracy This is acting as a barrier for companies investing into content development. “If there are ‘X’ number of legal transactions happening, One of the solutions to increase customer retention is by almost ‘3X’ pirated versions providing exclusive content to them, however this is are transacted.…“ - Content Aggregator hampered by piracy. Thus piracy is hurting the operators both ways, neither can they stop customer churn by exclusive content development nor can they go in for investment in innovative applications to spread their demographic reach. IAMAI & eTechnology Group@IMRB 27
    • Mobile VAS in India, December 2006 Lack of Infrastructure There are a lot of services which cannot be introduced in India because of lack of supporting infrastructure. E.g., Absence of location based VAS. Location based VAS is still not possible due to the lack of digitized map of India. Applications like live video-sharing are yet to arrive in the Indian market. In evolved markets like Finland & Korea, a user can shoot his own video and simultaneously show it to his friend in some other city. This kind of application would take some time to arrive in India. To avail of new and high end VAS, technologies like 3G need to be installed. However, 3G networks are not mere upgrades of 2G networks; rather, entirely new networks need to be built and frequencies need to be assigned to mobile operators. Preference for low feature handsets Though the mobile subscriber base is growing, a large chunk of the market is opting for basic low feature handsets in spite of the fact that handset prices are coming down. There is a mindset to purchase the handset for basic utility service which is voice. But these handsets are not in a position to support a large number of VAS. Since in many VAS like MMS, both the sender and receiver handsets need to support MMS, the scope of such VAS gets limited. This is further impeding the introduction of high end VAS. There are many services which are not performing to their potential despite their usefulness and there are some which cannot even be introduced. High cost to the end user Currently the cost of most VAS is high. This is mainly because of the fact that VAS market is lead by Entertainment VAS which has a high perceived value. People are paying for it as they perceive it highly but over a period of time as they get used to it, the willingness to pay high amounts may come down. IAMAI & eTechnology Group@IMRB 28
    • Mobile VAS in India, December 2006 We feel that a market correction in VAS cost to end user will result in higher usage both in terms of customers and their frequency of usage. Absence of utility services These are those services which have a high practical value. But currently due to lack of familiarity & awareness from the end-usr and lack of investment, effort and marketing from the supplier’s side is resulting in very few such services being available in India. Such services mainly fall in the category of mCommerce and to some extent Infotainment. Customers are also currently not comfortable with mCommerce. As the comfort level increases which can be brought about by encouraging government action like robust policies, laws etc, we will see exponential rise in VAS usage. The future belongs to services providing value to the customer exploiting the mobility factor. Transparency in revenue sharing Transparency is a big issue faced by the entities in the Mobile “This is a highly unregulated market with no transparency but VAS value chain. The market is highly unregulated and there still we are going ahead with full steam..…“ is no transparency in terms of contact payouts and royalties. - Content Aggregator There are at least 10 entities involved between customer and Content Owner (e.g. artist) and the flow of revenue is not transparent. Other entities feel that mobile operators take a very high share of the overall revenue, this affects the content development market with lower incentive to the developer to provide higher quality content. The difference is especially stark when compared to developed markets where pay-outs are well defined and more balanced. Underdeveloped WAP market The key issues constraining the development of the WAP market are: o Lack of WAP enabled handsets & limited incidence of active usage of WAP o Speed of connectivity which prevents an enriching experience o Limited customization of existing portals for WAP usage and limited content for WAP access. IAMAI & eTechnology Group@IMRB 29
    • Mobile VAS in India, December 2006 WAP usage is extremely limited & currently most operators do not seem to be aggressively focused on increasing usage. Current user experience with WAP is limited to download of rich content like logos & games. We feel that extensive WAP usage can take off given the significant growth in the number of Internet users in India (38 million in Sep 06- Source: IMRB “The youth have taken to the Internet and what is available Research). More number of evolved Internet users would be there should be available on the mobile..…“ willing to look at accessing the Internet on mobile if -Leading Operator appropriate content was available. However the WAP portals of most operators offer limited content and therefore cannot deliver a meaningful online experience on the mobile for the end user. Spam There are high volumes of spam in the VAS market currently. Spam is an uninvited message urging the consumer to avail of some service. Example “Bid for a Laptop by messaging your bid amount to XXXX” SPAM has a high nuisance value and can discourage users to avail of a genuine service as they feel that once they have availed of a service & their number becomes a part of a database, their inbox will be flooded with uninvited messages. As an industry initiative there is a pressing need to take charge of as it goes against the long term interest of the industry. Taking cognizance, some operators have already started offering a service to there subscribers where they can choose not to receive any promotional SMS’s. IAMAI & eTechnology Group@IMRB 30
    • Mobile VAS in India, December 2006 The future of VAS in India In India, VAS will see a lot of structural changes, consolidation and emergence of cutting edge services: • Mobile operators will lose prominence in the value chain as the market for Content Aggregators will consolidate and with their better bargaining power, this will ensure a revenue shift from Operators to Aggregators in the value chain. The VAS market will reflect revenue sharing arrangement in markets like China more closely. 60% 80% 60% Operator share in 30% 40% the value chain 20% 0% Current E 2010 Source: IMRB Research • In VAS content, we will see revenue from entertainment VAS come down from the levels. End users want control and interactivity and therefore the applications to look out for in future will be user generated content and mCommerce. However mobile gaming will continue to grow and will contribute a higher share to the VAS pie. • Regional content is giving a significant boost to the content market especially in the entertainment category. Regional content is getting popular both in voice and non- voice services. Players have anticipated the trend and this is leading to regional content development. With increasing mobility penetration into the heartland of India, significant VAS revenues will be driven by regional content from B & C class towns. • Internet on mobile will become a more feasible option as leading players in the internet content space especially configure their sites for access through mobiles; this would be further strengthened by the new trend of .mobi domain being set up. Thus GPRS usage should pick up significantly IAMAI & eTechnology Group@IMRB 31
    • Mobile VAS in India, December 2006 About eTechnology Group@IMRB eTechnology Group (a specialist unit of IMRB International) is a research based consultancy offering insights into IT, Internet, Telecom & emerging technology space. In a scenario where even experts are constantly caught by surprise, we have constantly delighted clients by offering simple solutions to complicated problems. Our continuous link with industry and a constant eye on the pulse of the consumer ensures that we can decode the movements of technology markets & consumers. To our clients we offer an understanding of the present and a roadmap for the future. DELHI MUMBAI Vivek Khattar Balendu Shrivastava eTechnology Group@IMRB eTechnology Group@IMRB IMRB International IMRB International 8, Balaji Estate, Kalkaji ‘B’ Wing, Mhatre Pen Building New Delhi - 110019. Senapati Bapat Marg, Mumbai Tel : (91)-11-42697815 Tel : (91)-22-24323500 Fax: (91)-11-42687801 / 02 Fax: (91)-22-24323900 Email: vivek.khattar@imrbint.com Email: balendu.shrivastava@imrbint.com BANGALORE CHENNAI Rajesh Kurup eTechnology Group@IMRB Rathina Kumar IMRB International eTechnology Group@IMRB D-7, Devatha Plaza IMRB International 131, Residency Road 63, Pantheon Road Bangalore - 560025 Chennai - 600008 Tel : (91)-80-2213186, 2274388, 2274236 Tel : (91)-44-4222 0801 Fax: (91)-44-4222 0900 Email: rathina.k Fax: (91)-80-22473486 Email: rajesh.kurup@imrbint.com Analysts for this report: Balendu Shrivastava : balendu.shrivastava@imrbint.com Sohil Kunwar: sohil.kunwar@imrbint.com IAMAI & eTechnology Group@IMRB 32
    • Mobile VAS in India, December 2006 Published By: Dr Subho Ray, President, on behalf of Internet and Mobile Association of India, 406 Ready Money Terrace, 167, Dr Annie Beasant Road, Worli, Mumbai 400018 IAMAI & eTechnology Group@IMRB 33