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.