|Asia-Pacific II 2009
|The power of messaging
|Acision Asia Pacific
Boudewijn Pesch is the Managing Director of Acision Asia Pacific. Mr Pesch joined CMG in 1998 as the Chief Representative, and was later appointed Managing Director of CMG Asia-Pacific. When CMG merged with Logica, becoming LogicaCMG, Mr Pesch was named Director for LogicaCMG’s Telecoms Products business and expanded its business presence in new markets such as Pakistan, Bangladesh, Vietnam and Thailand. When this business was bought by Atlantic Bridge Venture, and established as Acision, Mr Pesch assumed his present post. Prior to joining CMG, Mr Pesch was the General Manager of the Detron Group in Asia Pacific. Mr Pesch also served in a consulting position with VB Group in The Netherlands. Boudewijn Pesch earned a Masters degree in management studies and a Bachelors degree in engineering.
Text messaging volumes increase yearly, but competitive price erosion in messaging has reduced margins. Nevertheless, a number of new services might reverse this trend. Mobile operators need to personalise their messaging services by offering subscribers a variety of new features. Operators can build revenues by extending messaging to fixed terminals via the PC or via cable TV and by offering Internet-based instant messaging to heavy users such as teens. Messaging-based business applications, including mobile marketing, are also important revenue generators.
Innovation in messaging Text messaging is one of the most successful data applications for mobile operators; its volumes increase year after year. However, price erosion in messaging has put pressure on margins and the mobile industry is frantically searching for new services with opportunities for revenue growth. I Ovum states that no other service generates revenues that are even close to those from text messaging. In 2009, SMS will generate 80 per cent of worldwide messaging revenues. Besides exploring new ways to increase existing text messaging revenues, operators need to consider an evolutionary approach using text messaging as a starting point. Future revenue growth can be obtained through differentiation and by creating new business on existing text messaging channels. Mobile messaging has not reached its limits; the time is right to leverage the unique values of mobile messaging beyond person-to-person traffic. In fact, messaging revenues have the potential to double by 2011, reaching a market size of US$165 billion. The future of text The success of text messaging is often attributed to its ease of use, reliability and transparent pricing. Yet, some argue that rich Internet-based messaging services will take over its dominant position in a few years; the trends bear this out – mobile broadband coverage has increased dramatically and market share of Internet enabled mobile devices now surpasses the 25 per cent mark. On the other hand, text messaging is not showing any signs of slowing down. In May 2008, Ovum increased its volume predictions on text messaging for 2011 by over 60 per cent. The popularity of text messaging has turned it into a key operator tool for subscriber acquisition and retention, but this has resulted in near flat fee pricing. The truth is that it will not decrease in volumes or usage, but operator margins are threatened. However, if the right solutions are put in place, operators can increase their text-messaging results. Differentiation and margins Over the past 15 years, most operators have adopted a similar strategy of positioning text messaging as a new service. In recent years, however, messaging has reached mass-market adoption and turned into a commodity. To address this challenge, operators need to do what every business does when faced with commoditization. Operators must differentiate their mobile messaging portfolio by further refining the service positioning to address the different messaging needs of various user segments. At the same time, it is crucial to avoid disruption of SMS’s key asset: simplicity. Confronting subscribers with complex features easily results in poor adoption rates. By gradually differentiating mobile messaging, operators will ensure text messaging relevance across their entire subscriber base and increase overall revenues. To realize the required margin growth, it is crucial to minimize the costs associated with service differentiation. Based on this vision, we have defined a text messaging strategy aimed at doubling the messaging revenues. This strategy consists of five key elements that will drive subscriber and channel revenue. Personalize the messaging experience – By offering personalised messaging services, operators can charge for a number of new features that are already proving to be effective. Currently, a vast majority of subscribers use several messaging services. Through email and instant messaging, users are increasingly familiar with features such as automated replies, forwarding, signatures, threaded messaging and presence information, and these should be applied to text. The demand for personalized messaging is tremendous. Research indicates that 57 per cent of Filipino respondents are extremely or very likely to use such features. Initial launches of personalised messaging services have shown a text messaging revenue growth potential of up to 15 per cent. An example of such a personalised service launched by SingTel and Maxis in 2008 is Auto-copy. This service automatically forwards copies of text messages received to another phone number or email address. Extend mobile messaging to fixed – Besides the mobile phone, many subscribers use a range of fixed devices such as PCs and TV sets daily. When offering access to text messaging on these devices, the barrier to use text messaging would be even lower. Extending text messaging to fixed devices gives operators a way to earn service revenues in the fixed domain. The additional user interface can also earn additional billable text messaging for the operator. The enhanced user interface may improve advertising effectiveness and the user’s abilities to personalize the messaging experience. Finally, it allows delivery of text messages via third-party bearers such as a cable or DSL Internet connection. Delivering messages using a fixed network substantially reduces costs by reducing the traffic on the mobile operator’s radio network. Widgets as extension to SMS – PC and Web-based widgets enable users and Web developers to control how to position certain third-party applications. This drastically limits the barrier to use these applications. It is no surprise that in June 2008 alone, over 600 million people communicated through widgets. If operators were to allow text messaging through widgets, it would help them increase the value of text messaging and realise the opportunities mentioned above. Instant messaging as extension of SMS – Most people associate think of messaging with dominant brands such as Windows Live Messenger and Yahoo! Messenger in mind. In recent years however, the IM landscape is getting ever more diverse. A long list of social networks, mail providers, niche communities and mobile operators has launched their own IM services. Operator IM may not be a new killer application, but it is a logical extension of mobile messaging for mobile and fixed Internet users. Use messaging to mobilize the Web – Usage of the Internet among teenagers has grown to a staggering 12.5 online hours per week. Yet the average teenager is available at least 112 hours per week through his mobile phone. In other words, teens are almost ten times more likely to be available through their mobile phone. Clearly, the mobile channel can become a crucial link, enabling people to interact at any time. As a result, a value-added services market has taken shape since the 1990s. However, there are still many Internet-based service providers that do not mobilize their service offering through mobile messaging. Mobilize business applications – On average, 5.5 per cent of patients do not show up for their appointments at their doctor’s office. A simple text-messaging reminder would substantially reduce the number of no-shows and the associated costs. Incentivated Ltd, a mobile marketing agency, proposed a simple SMS reminder service for UK-based optician and helped to generate US$8 million in savings. Operators have addressed the mobile enterprise opportunity mainly through technological innovations such as the wireless application protocol (WAP) and push email. This has resulted in a plethora of device specific applications with low reliability and high integration costs. Consequently, enterprise mobility has brought little or no productivity improvement for the average business. The opticians example illustrates that the real opportunities may be much closer than the solutions implemented so far. Combining the reach and reliability of text messaging with the relevance of data in enterprise applications promises a quantum leap in enterprise productivity. Set up a mobile marketing business – Operators can already play a pivotal role of mobile operators in the mobile advertising value chain. They own the customer relationship and access channels, the advertising inventory, the location information and the customer profile. This profile is much more than the phone number. It involves usage behaviour, demographics and content preferences. Furthermore, the operator controls the main vehicle for the digital dialogue: mobile messaging. According to IAB, 95 per cent of text messages are opened compared to 25 per cent of emails. This puts mobile operators in a very strong position indeed when competing for advertising budgets. At the same time, operators are anxious to protect existing service revenue streams, which remain the most significant part of their business. To date, mobile advertising is making slow but steady progress towards the forecasts of becoming a US$19 billion dollar industry. In summary, advertising revenues will never be adequate to replace service revenues, but are a welcome supplement for operators. Mobile operators are uniquely positioned to monetize the best advertising inventory in the world. Combining customer location and profile enables the delivery of unprecedented levels of advertising relevance and reach. By addressing the essential enablers mentioned above, the competitive position of operators in the advertising market could be second to none. The future of messaging continues to be bright despite the current economic slowdown, and mobile operators who recognize the potential of messaging can effectively extend their revenues by leveraging their existing assets and exploiting the potential still left in today’s mobile services, allowing them to remain agile and profitable.