Thursday 2 February 2012

Setting the mobile context...

India and "mobile" have been synonymous for as long as I can remember. To the extent that most of us have forgotten what the acronym PCO stood for, let alone see one in our part of the woods! We all complain about SMS spam, ineffective call blocking and poor network coverage. Some of us have also starting tinkering with apps, 3G and 6 inch phone screens. The broader reality of course is very different.

Looking at the commonly known metrics, starting with the biggest numbers -
  • 894 million mobile subscribers
  • 15 mobile operators
  • 85% revenues from voice
  • $4 average revenue per user per month - among the lowest worldwide!
  • ~97% connections are pre-paid
Read the numbers carefully and you should start to get some sense of the market. Cellphones are everywhere, especially in metros where penetration in greater than 100%. More operators => high competition => cheaper services (I pay $8 for an all-you-can-eat national data plan!). 85% voice revenues means either we talk a lot here ;-), or we don't have much going on in terms of non-voice services. And the low ARPU and pre-paid connections are closely related as well - but let's look at VAS first.

Value Added Services - operator marketed, billed services started with BSNL's wake-up call services back in the old days. Since then, mobile operators have been hawking everything from callerback ringtones to wallpapers - both telling me what to buy, and enabling me to complete the purchase through my mobile account. For this "amazing" service, operators have kept 60-70% of the revenues from consumers! The rest is split up between VAS providers and the poor guy who developed the content. Not a pretty business to be in!

So in this world where the developers make pennies (or paise!), there really hasn't been much passion to innovate - why bother when someone else will keep 80% of the value you create! One of the operators VAS page really gives you a good idea what kind of products we're dealing with here - this in a world of apps like Pinterest and Instagram.

Why not sidestep the operator and go directly to consumer, especially with platforms like Android and iOS? Payments! Across multiple sectors - eCommerce to mobile - lack of payment mechanisms continues to be a roadblock. While ecommerce seems to have found a Cash-On-Delivery band-aid, no such luck (yet) for mobile. Add to that our tiny mobile ad market - $25 million last year - and really few monetization options left for a direct to consumer approach. So most of us remain at the mercy of the operator and VAS providers to choose apps for us.

With this context, allow me to present a view of what will happen in the next few years...in my next post.


mea cupla: this post is 4 months late, I have a thousand excuses - but will spare the bs and try to write more regularly.


3 comments:

  1. interesting post, will wait for episode 2 :)

    Raxit Sheth

    ReplyDelete
  2. Thanks Raxit. Let's definitely connect offline - I'm at nverman [at] canaan [dot] com. Look forward.

    ReplyDelete
  3. Interesting read!

    But as voice margins remain low, operators will be forced to further explore VAS to create new revenue streams. I wonder what that will mean for the providers (monetarily)!

    Looking forward to your next post.

    ReplyDelete