Carriers across the United States are scratching their heads trying to figure out what the best business model is when teaming up with content providers to offer Internet access.
It’s a difficult question to answer.
“Each content provider has a different type of business model,” said Matt Sopcich, who heads up U S West Wireless’ data efforts. “There is going to be the need for companies to share in mutual success. You have to look and see what need you’re trying to fill and find potential partners out there. You won’t see one solution that always works.”
Sprint PCS, the first to offer widespread circuit-switched data services, is taking this hodgepodge approach as well. Since introducing its Wireless Web Service this fall, it has signed on well-known partners such as Yahoo!, Bloomberg and Ameritrade.
“We’re trying every revenue model we can think of,” said John Yuzdepski, vice president of product management and development with Sprint PCS. “The sweet spot is sharing transaction revenue.”
Sprint PCS last week teamed with leading online retailer Amazon.com to offer online shopping via its Internet-ready phone. As with its agreement with Ameritrade, Sprint PCS gets an undisclosed cut of each transaction.
“As we move into the unchartered waters of wireless data, it’s important that we create a revenue model that perhaps is transaction-based, and we’re able to create and provide the back-office support to make the customer experience a good one,” said Richard Siber, associate partner with Andersen Consulting in Boston.
Sprint PCS wants to team with partners that will give it the “correct” amount of revenue, but that isn’t always possible. Providers like Reuters won’t pay to make their content available on wireless handsets, and they won’t give it away for free either.
Sprint is willing to pay some content providers if it deems their content valuable to its customers. And it has entered into an advertising relationship with others to get the content it wants. For example, Sprint may agree to promote itself in a content provider’s publication as compensation.
Revenue-sharing from advertising is an area Sprint PCS still is evaluating, believing today that customers don’t want to be bombarded with ads on their handsets.
“At the end of the day, it’s about delivering value,” said Yuzdepski. “The revenue will follow … We’re working with premium companies. And we only would entertain a relationship with a brand-name company that we believe in, and we value.”
While Sprint PCS wants to partner with the strongest Internet partners possible to provide this value to its customers, content providers like Amazon.com have their own goals.
“Our goal is to follow customers, and we want to give the customer the choice, no matter what carrier they choose to have the convenience of shopping at Amazon,” said Chuck Napier, product manager for Amazon.com Everywhere. “We are looking to be pretty aggressive across multiple platforms and networks.”
That scenario concerns operators, which is why many are re-evaluating their portal strategies.
“If I’m a customer of carrier XYZ that is partnering with Yahoo! and I decide to leave them, I don’t leave Yahoo!, but I leave the carrier,” said Siber. “That’s the fundamental problem of not being your own portal or [Internet service provider]. You don’t own the information at that point if you’re partnering. That is why all carriers are rethinking their portal strategy.”
U S West plans to leverage its own parent company’s strength as an ISP, partner with content providers, and through its partnership with webtop organizer Visto.com, offer personal information management. The carrier postponed plans to offer Internet access until early next year because it believes its customers want more than just Web browsing. It is working on ways to customize data access.
“We’re definitely going to allow customers to have the full flexibility they want,” said Sopcich. “I think the ISP definition is going to go away. We’re going to be in the business of helping customers get information they want. That means we’ll be competing with America Online and Yahoo!.”
