There’s a very long list of companies with billing platforms that leave carriers out of the revenue stream. But even as operators grudgingly open up their networks, nobody seems to be making a lot of progress.
Billing Revolution is the latest player to join the field, coming out of stealth in September with a platform to support credit card payments for both digital and physical goods. The offering essentially allows vendors to charge consumers directly for everything from ringtones to airplane tickets; consumers can complete transactions with a single click after establishing an account. And the platform supports advertising, producing another potential revenue stream for publishers.
“Our goal really is to bring e-commerce to the masses both here in the U.S. and globally,” said Mike Dulong, co-founder and SVP of business development at Billing Revolution. “Our belief is that these are very much the perfect market conditions for this to take off.”
Limited success
If that sounds like a familiar refrain, well, it is. The field of text- and Web-based mobile payment companies began to get crowded more than two years ago, when PayPal Inc. added wireless functionality and started vying for space against mobile startups including Obopay, TextPayMe, and Secure Wireless Transfers Corp., among others.
But it would be generous to call the results mixed: PayPal’s “Text 2 Buy,” a program that offered mobile transactions for a range of goods and services, failed to gain traction, SWT’s KushKash has morphed into a person-to-person money-transfer offering (one which remains virtually unknown), and Obopay found success in mobile banking – not in text retail payments.
Much of the lack of traction is directly attributable to carriers, which understandably have fought to be kept in the value chain. AT&T Mobility (then Cingular Wireless L.L.C.) two years ago notified content partners that it would block credit-card purchases and other operators took similar – if unofficial – stances. Plenty of other factors have shackled the space, too, including a lack of Internet-friendly handsets and general consumer concerns about moving money on mobile networks.
Apple leading the way
Many of those hindrances are being overcome, of course, as the success of Apple Inc.’s App Store – which leaves operators out of the revenue loop – illustrates. And Billing Revolution hopes to tap that activity: the company last month announced a credit- card checkout tool-box designed specifically for iPhone, BlackBerry and Android developers. The offering could serve as a direct-to-consumer conduit for developers, allowing them to move a free or premium application through one of the new storefronts, then use Billing Revolution’s platform to upsell or initiate a subscription service.
Dulong was a co-founder of Third Screen Media, the mobile ad company snapped up by AOL L.L.C. Fellow co-founder and CEO Andy Kleitsch founded WeddingChannel.com and spent time as an executive at AT&T Mobility. Billing Revolution charges transaction fees of 3.5% plus 50 cents per purchase for general transactions; mature-content deals call for 7.5% plus 50 cents per purchase. And while those rates may be too steep for players hawking simple wallpaper at $1 each, they’re likely to be more attractive than carrier billing arrangements, Dulong said.
“Right now, the business terms developers are getting from the operators – who sometimes take 40% to 50% of revenues – are horrible,” Dulong observed before adding, “We’re not about trying to compete with carriers; we see them as a necessary part of the ecosystem.”
Squeeze play
Carriers are sure to become less “necessary,” though, as mobile collides with the Internet and consumers expect the same freedoms on their phones they enjoy on their computers. Operators have begun to accept that, according Frost & Sullivan analyst Vikrant Gandhi, going so far as to support WAP billing for some content partners.
“Everybody’s talking about open networks,” Gandhi said, “and carriers realize one fact: on your smartphone you can actually do a lot of transactions on Web sites. There’s been a gradual realization of that, and if you look at some operator decks, you actually see some solutions.”
Whether carriers can bring enough value to the table to find a long-term place in the revenue chain is unclear, though, and competition between operators and those who support credit-card billing will surely heat up as the wireless Web evolves. Billing Revolution already has some impressive clients including Yahoo Inc., PlayPhone and Ascendo, which distributes smartphone applications, but it has yet to strike arrangements with Apple, Google Inc. or any of the other new distributors that might be key to its success.
The market still may not be ready for a large-scale mobile payment scheme that leaves carriers out of the loop. But Dulong believes consumers are already embracing the concept of using their phones to make purchases that are billed to their credit cards.
“We’re adjusting all of our forecasts; we’re actually pulling revenue from 2010 into 2009 by sheer virtue of market demand,” claimed Dulong, who declined to discuss specific figures. “We’re just seeing a huge shift in the marketplace, a huge demand for our service. We’ve had remarkable conversion rates. Once these consumers see the experience on the phone, that kind of puts them over the hump.”
