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VAS The Emerging Service Mantra for Indian Telcos

Monday, March 1st, 2010

A recently-launched commercial from a leading mobile communications provider inspired me to think about the immediate possibilities of mobile value added services in India. A rural woman bargains with a “machiwala” (fish seller). At the end of a typical bargaining drama and the deal following, she picks up the mobile phone from her bosom and presses a few buttons and asks him with a casual look, “Did you get it?” The machiwala picks up his phone lying in the mutilated fish and replies in a contented manner, “Yes.” The money is in his account.

Everything from choosing the appropriate monsoon crops to choosing an affordable tax-savings plan is available right on our mobile. All we need to do is opt for the service from the service providers. With the rapid evolution of mobile technologies and the popularity of high-end mobile phones, sophisticated services such as sending/receiving payments and tracking a flight are becoming commonplace. As technology evolves to offer all communications services including TV, telephone and Internet on a single handheld device, operators and businesses are in the race to grab the maximum opportunity available in the mobile value added services (VAS ) arena.

With a significant reduction in telecom tariffs resulting in lower ARPU , VAS services emerge as the most viable solution available to operators to maintain their ARPU . With the mobile subscriber-base surpassing 500 million, India opens immense opportunities for mobile marketers to reach their target customers. Compared to conventional advertising, mobile advertising offers several benefits. In an interview with Asia Pacific Business and Technology Report, Rohit Dadwal, managing director, APAC , Mobile Marketing Association (MMA ), said mobile is a medium that offers “maximum impact at minimum cost.”

“Immediacy, effectiveness and personalization are some of the other benefits of mobile marketing that are becoming increasingly relevant as marketers look for ways to cut through the market clutter to reach out to their audience,” Dadwal said. “As consumers need to optin to receive communication on their mobile phones, marketers can be sure that they are seen as trusted messaging sources. The frequency with which a mobile handset is used by the owner contributes to the medium’s effectiveness. The medium offers a guarantee that your message will reach the consumer the next time he checks his handset.”

A mobile component in the integrated marketing communications program is fast becoming a musthave for brands in India and across the globe, according to Dadwal. Mobile is an affordable and highlytargeted medium that can carry a campaign on its own or support traditional media campaigns, he said.

The mobile marketing industry in India has matured considerably over the last few years, finds the MMA . Over a hundred mobile value-added services and technology companies are active in the industry offering innovative solutions to advertisers and publishers. According to MMA , mobile marketing in India has grown to a $25 million per annum industry. However, this represents a bare minimum of the global market size that is estimated to grow to $24 billion by 2013.1

Mobile Marketing Opportunities

The success of mobile marketing is directly linked to the mobile penetration and popularity of mobile Internet. Currently, mobile marketing in India is at a very nascent stage. There is a big opportunity waiting for businesses to advertise their products through this revolutionary medium. It also opens up innovative business opportunities to companies involved in businesses like finance, banking, entertainment, education and many more offered under the VAS tag.

Mobile money transfer is one of the lucrative mobile VAS opportunities equally beneficial for the banks, mobile service providers and application providers. Mobile banking is especially attractive to rural India where banking services are limited. Obopay, the U.S. and India-based mobile payment company, has launched their instant money transfer service in India through an alliance between wholly-owned subsidiary Obopay India and YES BANK , an Indian private sector bank. With Obopay, YES BANK customers can transfer money to and from any mobile phone number with Obopay’s mobile application, text message or mobile Web. Customers can instantly withdraw cash received using their YES BANK debit card. The service also offers consumer bill payment services. Obopay has teamed up with leading telecom service providers like Tata Teleservices, Aircel and Loop Mobile.

Money transfer via mobile has to go through a series of complex regulatory procedures in India. For this reason, mobile devices companies have not stepped into this arena seriously. In a significant move in this line, earlier last year Nokia invested $70 million in Obopay. A few months later, Nokia also announced the launch of Nokia Money, a new mobile financial service that offers consumers with a mobile device access to basic financial services including money transfer among mobile users. The service is based on Obopay’s mobile payment platform. However, Nokia intends the service to be open and interoperable with other payment services as well.

At the announcement, Teppo Paavola, vice president and head of Corporate Business Development at Nokia, said the money transfer will particularly benefit rural consumers, while the utility bill payment offers will benefit the urban customers.

Nokia is collaborating with mobile network operators and financial institutions in different markets around the world. The company is reportedly in talks with six leading banks in India. It is building a wide network of Nokia Money agents through whom consumers can deposit money in or withdraw cash from their accounts. The service is likely to bring about a revolutionary transformation in the electronic payment industry in India. Despite the strict regulatory issues, Nokia is confidently moving ahead with its plan to offer a “universal platform where the mobile phone can be a medium for banking, international remittance, payment of utility bills, payment to merchants for goods and services and buying tickets.” Nokia Money will initially act as an extension of a bank’s branch.

Mobile Advertising

A recent study conducted by Nokia and TNS India shows that mobile Web users in India are using their mobile to access the Internet almost as much as the traditional Web. More importantly, the number of users who use mobile Web to find out about product information (28 percent) surpasses the number of traditional Web users who get the same service (26 percent). The TNS study, which was conducted on a sample of 3,500 consumers across 15 metro and Tier I cities, reflects the emerging face of the mobile advertising industry in India. Industry experts also share the view that members of the younger generation in rural India are more inclined to mobile advertising than traditional forms.

“The rise in the ownership of smartphone devices like the Apple iPhone in the APAC region will see more users adding mobile data plans as value-added services,” said Dadwal. “Applications that are specifically developed for the iPhone, Android phones, Blackberry devices and others will eventually convert many to mobile data use for Internet access. This is a pull factor for subscribers to add mobile data VAS – in turn this will add to the ARPU for each subscriber and improve the bottom line for operators.

Mobile advertising in India largely depends on WAP banner sales. There are no premium sales happening, rather they all are bulk sales. The industry needs to do a lot more in terms of technology, customer experience and advertising options. The proposed 3G rollout and reduction in GPRS service offerings will add further momentum to this growth.

Setting a revolutionary trend in the highly competitive telecom market in India, state-owned BSNL recently crashed GPRS price barriers by announcing five new packets. The service is offered for its existing 2G GSM users. The announcement is yet another boost in a country that has 525.15 million mobile users, of which about 12 million of them are mobile Internet users2. Within a few months, the GPRS network in the country will see a surge in the number of users, giving another testing time for other operators who have been desperately waiting for the arrival of 3G in the country. BSNL ’s move will surely encourage the Internet- savvy customers in India, especially those who cannot afford the need to get updated with the world while on the go. In all senses, BSNL ’s move will be hailed by the mobile VAS industry in India.

The recent merger of Google and AdMob validates the power, reach and value of the wider mobile marketing industry, says Dadwal. “For big brands that already leverage Google’s vast suite of online advertising tools, we will see an expansion across mobile channels, as well as more integrated campaigns that captivate and engage across Web, mobile, print and experiential channels.”

Through this acquisition, Google targets the rapidly growing, still very nascent, mobile advertising market. Though Google offers many forms of mobile advertising, its focus to date has been on mobile search ads, while AdMob’s focus has been mobile display ads and in-application ads, said the company’s official Web site. Ad- Mob’s advertising platform has been highly popular among iPhone users. Morgan Stanley found that iPhone and Android users browse the Internet more than anyone else, contributing to quintupling search growth for Google over the past two years. The merging of Google’s popular Search Ad platform with AdMob’s Display Ad platform will bring new advertising opportunities for brands.

Entertainment

A phone is also a handy multimedia device that everyone would love to possess. Says Dadwal, “The phone in your pocket may also double as a music store, as a new music distribution model with mobile operators the choice of music supplier becoming commonplace across Asia.”

Moser Baer, the leading CD manufacturer, has set a new trend by announcing “content-laden Micro SD cards for handsets,” that offer music and movies to handsets at a nominal price. The company so far has not announced industry tie-ups with any music/ video production company. Rather it uses the content from the Moser Baer Home Video division that owns the rights to approximately 10,000 home videos. Moser Baer cards, similar to the pre-loaded CD s or DVDs, will threaten the existence of multimedia CD s/DVDs in the near future.

While the content-laden cards will provide entertainment companies and distributors with new revenue opportunities, they also offer a lucrative advertising platform for brands targeting the mobile-savvy consumers.

Handsets, especially smartphones, are emerging as high-tech gaming machines. As their popularity increases, they will also provide a convenient advertising platform and create new revenue opportunities for publishers, distributors and service providers. Nokia’s Ovi Store and Apple’s iTunes App Store already provide over-the-air distribution for mobile games, and advertisers have started utilizing this opportunity.

“The revenue from in-game advertising may also be used to partially or completely subsidize the price of mobile games/services that the application provides,” says Dadwal. “The current market size for the mobile gaming industry in India is estimated to be US $15 million, a substantial amount for a market that is very much still in its infancy, and other Asian countries are likely to follow suit.”

The Healthcare segment

“Mobile healthcare is another fast-growing segment in Asia with its aging but tech-friendly population,” says Dadwal. In a recent study, Solidiance estimated that by 2010 the Asia Pacific mobile healthcare business would be worth just under $1 billion with 70 percent of users in more advanced economies. Important applications for mobile in healthcare include remote patient monitoring, mobile nursing, mobile medical records access, access to free mobile healthcare information and more. Indian operators are expected to make use of mobile healthcare business opportunities very soon.

Setting the Stage

Mobile marketing faces some fundamental challenges that hinder mass usage of content on mobile phones, according to MMA . These include lack of knowledge among users, mobile browser constraints leading to poor content quality/experience and the data charges associated with the use of Internet over the phone. Innovations that will solve these challenges will unlock the true potential of the mobile mass media.

Content integration is a key challenge for providers. The market is overflowing with different types of mobiles. To meet this challenge, content providers have to develop content that suits different phones available with different capabilities.

Dadwal feels there is a lack of regulations and guidelines that marketers should adhere to that may also lead to the risk of mobile phone spam and consumers losing trust in mobile marketing. MMA is hoping to address this in the near future together with its member companies. The organization has set in place guidelines that will further enhance the consumer experience of mobile marketing and help to build a level of trust. They include a Global Code of Conduct and Consumer Best Practices, which aim to ensure that the mobile marketing experience that consumers receive is a positive one. The MMA also strives to provide consumers with recourse to convey concerns and criticisms of brands that do not adhere to these guidelines.

With cooperation from the industry, government and associations like MMA , the mobile VAS in India can improve the living standard of mobile users in the country. The industry will flourish as new services emerge and customer trust builds in those services.

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