Idea 2: Create an open VAS Platform with 60% revenue share to content and service providers

The big advantage of the mobile is the in-built microbilling platform. Operators control that – both for postpaid and prepaid users. The Internet lacks a similar capability and is thus largely limited to relying on advertising as a business model. In the mobile space, micropayments by subscribers is an order of magnitude larger in India.

[Internet advertising is about Rs 600 crore ($120 million), while VAS accounts for about Rs 7,500 crore ($1.5 billion ). In contrast, mobile advertising on SMS and WAP is about $10 million  (Rs 50 crore).]

In India, the only workable way to do the “subscriber pays” model is to work with the mobile operators. Revenue shares of what the user pays are heavily loaded in favour of the operator, who tend to keep more than 70% of what the user pays. Also, the lack of an “open platform” (where any content or service provider can offer a service to an operator’s subscriber base) has limited the aggregate number of services and left users  largely with a range of operator-defined SMS subscription services, voice portals at Rs 6 a minute for access, CRBT (caller ring-back tones), and other downloads (ringtones, wallpapers, games).

Imagine now if a mobile operator can change the game by offerings its microbilling platform to anyone who wants to launch a service and offering a 60% or more revenue share of what the end user pays. The operator can also use its own portal to help in discovery of the off-deck services. Such an initiative will get the entire software and content community excited and spur a lot of services – similar to what happened in Japan when NTT Docomo launched i-mode in 1999.

These innovative services are what will attract users to the mobile operator, in turn bringing more service providers. This is what has happened with the iPhone Appstore. And it is an initiative that existing mobile operators will not match for a long time since they will seek to protect their existing VAS revenue streams.

Thus, for a new operator, an initiative like this on the VAS side can give a significant competitive advantage in getting data-loving, service-starved mobile users to switch.

201 thoughts on “Idea 2: Create an open VAS Platform with 60% revenue share to content and service providers

  1. Hi Rajesh,

    Multiple concerns:

    1. Mobile Phone market is very fragmented. For me to build and sell a game, I need to create atleast 1000 versions (minimum, GLU claims to make 25000 versions) for it to be supported across the industry. Not sure if indie developers are interested in J2ME market at all.

    2. Problem of discovery. If it becomes easy to publish on a operator platform, there will be loads of content, very little differentiation between content will be left and will ultimately result in content commoditization. Like the iPhone platform, if a game is hit, then you will find many copies of that same game available.

    Regards,
    Gaurav Agarwal

  2. I hope Indian mobile operators are reading your blog and get some ideas on giving more cut to content providers.

    When I was aggregating and selling mobile games to mobile operators in India around 5 years back, they were just ready to give 10% cut, as opposed to US operators who are willing to give away 80%.

    Great exclusive content can drive data usage up and hence increase revenues in much better way than just trying to take a bigger pie of content deal.

    Iphone app market is a great example. Apple is earning tonnes of money.

  3. Another dimension to the issue :
    The operators have not realized that their key asset is “Time” …subscriber’s idle time. Look around (maybe beyond big cities)..see the amount of time our “aam aadmi” has at disposal. The kirana store owner…waiting for the customer, people commuting in trains, bus..or just sitting and relaxing. In no way I am demeaning their lack of work. My point is, people invariably reach out to their mobiles to kill time in case they are not reading the vernacular daily or gossiping. They call folks just for “aaur kya chal raha hai”. The younger ones download ringtones, wallpapers. Do the operators not see an opportunity there ? They have a larger social goal. The junta has the info. access medium. Just give them good quality content. The problem is that operators came into being before the VAS entrepreneurs. The in-house content prod. units and their false sense of “control” is not making them open up.

  4. The VAS market is indeed fragmented. Frankly, there is nothing exciting available from the operators that could crack me up to get the “must have”. If it is a ring tone, it’s free if you search for it. If it’s a game, it’s free again if one searches for it.

    Much of their initiative rests on milking the early adopters so that they can cash on in the novelty. Unfortunately, the same ideas are replicated by the others so that they don’t loose any customer. There is no differentiator per se.

    I endorse the idea of an open platform so that everyone cashes in. I don’t foresee this happening because the management is guided by dumb morons who cannot think beyond the short term gains and guided by the quarterly results. It needs a radical overhaul of the thinking process because changes don’t happen overnight.

  5. Indian operators might not do this given the mindset in which they operate. This is already starting to happen through operat0r-independent networks such as the bluetooth networks.

  6. hey rajesh i am working on a project can u please tell me what are the vas revenues for mobile comapnies in q1 10 such a reliance , idea and others

  7. first idea try to improve customer free services …then try new good offers..at free of cost..then try bigger ones…

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