Content is king: Delivery, distribution and revenue matter too

Editor’s Note:This article is an excerpt from RCR Wireless News’ March Special Edition, “The Perfect Storm – A Focus on Mobile Messaging, Marketing, Content and Apps.” The 80-page special edition will be available next week at RCRWireless.com.
Mobile content – the stuff that people read, watch, play, photograph, post and tweet – is the reason wireless carriers are lowering voice pricing plans, collectively spending hundreds of millions of dollars on new spectrum and new networks. It is driving force behind nearly everything in the wireless sector today.
But is all content created equal? No. And is content king? Yes, but some other parts of value chain, like discovery and delivery, are equally important. And pretty much all points along the value chain will agree that the monetization of the application, i.e., making money, is a pretty big part of the equation.
The perfect storm of faster mobile networks, increased smartphone adoption and sophisticated operating systems are spurring more people to access content from their mobile devices. While ringtones and text-messaging have been the bread-and-butter of this sector, applications developers are quickly learning to capitalize on applications that incorporate video, social networking, location-based services, gaming and nearly every other type of enterprise or consumer-facing content to mobile users.
Hot trends in content
Anything tied to social networking, location-based services and mobile marketing is gaining attention in the industry, if not yet generating revenue. SMS is a bona fide success, but multimedia messaging has been slower to take off, said Taco Schoute, head of messaging at Ascion, one of the largest SMS and MMS solution providers. People are wary of sending MMS messages if they don’t reach their destination. Handsets need to be integrated and networks need to be integrated for MMS messaging to really take off.
And even though SMS messaging continues to grow – it is expected to increase 40% by 2014 – Schoute said operators won’t see the same percentage increase in associated revenues from the growth. “In every market we see cost pressures.” Operators are addressing those cost pressures through consolidation of their hubs in the network. For example, Vodafone Group plc has one messaging system for Western Europe and one for Eastern Europe instead of one for each of the eight countries it operates in.
Despite constant rumors of its early demise, the ringtones business is still healthy, said Steve Spiro, VP of marketing at Myxer, a third-party mobile content aggegrator. Indeed, 85% of Myxer’s 85 million downloads per month are ringtones. The youth demographic that Myxer caters to enjoys ringtones, they just don’t like to pay for them, Spiro said. As such, mobile advertising likely will play a role in the downloadable content space.
The mobile games sector is perhaps another area where the reality has had to temper the hype around the market in part because the overall gaming sector is so huge. “Have people made money on mobile games? Some are hits, some are losers. You can make money in mobile gaming business but there are a lot of upfront costs and risks,” said Lynn Monica, VP & GM of Mobile Games, Hands-On Mobile. Hands-On has had great successes with Guitar Hero and World Tour Poker. They are addictive and consistent. The multiplayer aspect makes them more attractive, Monica said. The company has also done well with simple games like Kitten Cannon. Carriers are easing up their requirements that a game has to be on a certain percentage of their handset portfolio before they’ll promote it, which is welcome news to game developers, Monica said. Usually, gamers develop for one operating system (think iPhone) and then develop for other platforms if the game is successful.
Video is an up-and-coming application as wireless operators and TV broadcasters increasingly try to capitalize on the space. FLO TV has increased its presence beyond partnerships with Verizon Wireless and AT&T Mobility and is selling directly to consumers. MobiTV continues to rack up subscribers, counting 8 million subscribers today.
Social networking also is getting a lot of attention, and most OS platform providers are including ways to tie social-networking widgets to the mobile device.
Augmented reality services and 2D barcodes also are seeing a lot of chatter but have yet to fully take off in the United States, although mobile couponing is gaining some ground. Verizon Wireless earlier this year announced a deal with Cellfire to implement its m-couponing service for VZW subscribers at 4,000 grocery store outlets across the country.
And surprisingly, good old-fashioned text is getting a lot of attention in the mobile world, with electronic readers and subscription news services increasingly popular. Paul Reddick, CEO of content aggregator Handmark, said news and information from Forbes, Associated Press and CBS is getting a lot of attention at Handmark’s Web site. Reddick is philosophical that soon people will often learn about breaking news events on their mobile phones. He likens it to the relationship people used to have with print newspapers. Content was delivered to a subscriber’s door, where he opened the newspaper and scanned the front page to see what was deemed important. It’s no surprise then that Handmark has launched an initiative to take 500 publishers mobile.
The operator equation
While tons of mobile content is available today, operators are not necessarily getting what they think is their fair share of the revenue split. Operators have a chance to get back into the revenue stream for downloadable applications by linking their information to applications to provide richer, relevant content for subscribers, according to several people working in the content space.
Carriers can link next-generation iPhone-like devices with common address books to give new life to traditional content and make money from the it, predicted Barry Downes, CEO of FeedHenry, which works with operators to provide the last mile of an SDP (service development platform), enabling an application to be developed for Web, mobile, desktop and IPTV experience. “Your address book is your real social network in many ways. You may have thousands of friends on FaceBook, but less than a couple hundred in your address book. But you connect with those people more regularly.”
Operators also are launching their own application stores to try to serve their customers, Downes noted.
Devices have more memory and power, and networks are faster, but operators still need to figure out the business model for making money from mobile content, said Deepak Swamy, associate vice president, Communications, Media and Entertainment practice at Infosys. Infosys said the announcement from 24 operators at Mobile World Congress to try to build a single point of entry for application developers is validation that operators need to make a play in the mobile content space above the network. “They need to get more applications in more hands in the short term.” Infosys estimates that of the 4 billion devices in circulation today, 2 billion are operating on networks that have no operator storefront.
Of the pieces of the mobile application business, creating, managing and delivering content is not the largest challenge. The real challenge is to create content that is relevant, fresh and appealing to customers and being able to monetize it, Swamy said. “It’s hard to create an attractive ecosystem for developers if you can’t get the revenue piece of it right.”
Infosys, for example, is working with a top pizza chain on an application that allows people to order pizza from their handset. (And who hasn’t cursed the pizza delivery’s service automated number that doesn’t recognize cellphone numbers.) To make the mobile application work properly, it needs to be integrated
into the back end of the POS (point of sale) platfo
rm so that it looks just like orders placed online or through the call center. Wireless operators could charge the pizza company for a piece of that revenue.
Businesses will continue to push the operators toward new applications. Ryanair, for example, is a low-cost airline operator that has dropped its live check-in stand in favor of a mobile check-in or online check-in option, Downes said.
Free vs. paid
The mobile space is smack in the middle of the constant tug of war between proponents who believe digital content is valuable, and therefore people should be willing to pay for it, vs. the people who think the Internet has taught everyone that content should be free. The answer to what people are willing to pay for may lie in the type of content a person is consuming.
In interviews for this article, several industry insiders said people are willing to pay for content that is relative to them. Ringtones are likely to continue to be free, and games can straddle both camps, with introductory downloads that may be free and are entertaining enough to entice a user to pay for the premium app. CNN Mobile chose to make its iPhone application a paid offering, but reasonably priced it at $2.
“In the media space, apps that have more take-up are apps that are paid for,” FeedHenry’s Downes said. “That may be because it’s news, but it’s counter-intuitive to the Web, which says it all has to be free. People will pay for content that is updated regularly and that is valuable to them.”
Again, here a free version of an app is a great way to get a lot of downloads, but finding a way to make money is the trick, Hands-On Mobile’s Monica said. Ads will become more successful and the future, and link ads will come later. “Often free is a great way to go to entice someone to buy the full version. But the problem with so many free offerings is the clutter. Sometimes some great games get lost in the clutter of the free ones. The two can work well together and there are great opportunities for both.”
Interested in more content from the March 2010 Special Edition? Click here