Partnerships key to getting more money from wireless content: KPMG

Canada’s wireless carriers should give serious consideration to advertising-supported content as a way to derive more revenue from their mobile data services, urges a new report from KPMG. The study, Consumers and Convergence, polled nearly 3,600 cell phone owners around the world, including 200 Canadians. The report found that more than one-third of North American survey respondents wouldn’t pay a premium for converged services such as surfing the Internet, instant messaging and interactive gaming. Another 20% indicated they would be willing to spend 10% more than they do now, however. The findings have significant implications for the wireless sector in Canada, as the study notes. The difficulty of convincing subscribers to spend more on data services appears to threaten the viability, or at least question, the long-term viability of the subscription business model. "The consumers surveyed are generally not willing to pay much of a premium over their current service bill to access such advanced multimedia converged services, meaning convergence is unlikely to provide carriers with a definitive cash cow ‘killer app’," reads the report. Kathy Cunningham, partner, information, communications and entertainment at KPMG, explains that as consumers use their cell phones more and demand different kinds of applications, they appear more willing to accept advertising as part of the user experience, and this presents opportunities for cell phone companies and other third parties. "What the survey indicated is that the mobile service providers will have to partner up with content providers, marketing companies, advertising agencies and figure out among how they’re going to divide up the revenue as opposed to it all being from the consumer," Cunningham tells Report on Wireless. The accounting and research firm dubbed its proposed business model a "wallet-sharing" approach. As opposed to the wallet share model, where the wireless carrier continues to charge subscribers more money for additional services, the wallet-sharing model would see carriers offer up their customers to other parties selling goods and services through an advertising-supported approach. "What this report reveals is that the wallet-sharing model is no different from what major Internet search engines have been doing for years: providing a service offering so compelling that it attracts hundreds of thousands of eyeballs which in turn are attractive to marketing organizations and content providers," reads a news release announcing the report. Mobile data services and applications, says the report, will be key, not as major revenue generators, but as churn reduction tools. This will allow wireless operators to present a stable customer base to advertisers and digital commerce partners, suggests KPMG. As a result the average revenue per user (ARPU) increase won’t come from higher consumer charges, "but via increased revenue from sponsored media applications, or through facilitating e- or m-commerce transactions." Growth from this type of approach to the consumer is there for the taking as well. According to consulting firm Ovum, the global cellular advertising industry was valued at US$45 million in 2005 and that figure is expected to skyrocket to more than US$1.25 billion by 2009. While the opportunity for advertising to the wireless subscriber appears to be huge, Canada’s wireless carriers appear to be doing quite well in terms of growing per-subscriber revenue with wireless data services using the traditional subscription-based model. Recent figures have Rogers Wireless generating slightly more than 10% of its ARPU from data services and Telus Mobility capturing about 6%. It’s not known what Bell Mobility pulls in from wireless data as the company refuses to disclose that figure for competitive reasons.Cunningham admits the Canadian carriers have experienced solid growth in data and that there is currently more available for the taking using the traditional subscription-based model. She adds, however, the survey demonstrates that carriers may not be able to continue to bill for additional services. "What does say is they’re just not going to continue adding on a buck for every new feature that the person is looking for," she says. The KPMG report also indicates that culture plays an important role in determining the types of content, applications or services that wireless subscribers like to consume. The firm suggests that commuting to and from work is one such factor. "Daily commutes, for example, can spell opportunity for mobile providers who can offer services that promise entertainment or personal productivity during transport-bound downtimes," reads the report. Conclusions from the report affect many stakeholders in the mobile wireless ecosystem from the carriers themselves to the content providers and advertising agencies. Service providers will have to turn their attention to marketing their subscriber base to advertising agencies and third parties as a complementary business approach to revenue generation. "Marketing strategies need to encourage familiarity with converged services and be empathetic to cultural habits: one size does not fit all," KPMG states in the report. Content providers will have to be mindful of the fact that consumers want short-duration content – this is universal across all regions studied. "Informative content is the answer in the West, where in Asia, the emphasis is on entertainment," reads the study. "Movie previews, news clips and sports clips are globally sought-after content – all of which plays well into an advertising-driven model." For enterprise customers and marketing companies, KPMG offers this advice: invest in effective and personalized advertising opportunities. The research firm also notes that location-based services are much more effective than traditional Internet advertising with a click-through rate four times greater.

Partnerships key to getting more money from wireless content: KPMG

News | 06/29/2006 4:00 am EDT

To keep reading, get a free trial.

Already a Subscriber?

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us