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Mobile Vas India

Mobile Vas India

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Mobile Value Added Services in India

A Report by IAMAI & eTechnology Group@IMRB December 2006

Mobile VAS in India, December 2006

© Internet & Mobile Association of India (IAMAI), 2006 All rights reserved. No part of this report may be reproduced, either in part or in full, without the prior permission of Internet & Mobile Association of India

IAMAI & eTechnology Group@IMRB

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Mobile VAS in India, December 2006

Table of Content
Mobile Value Added Services in India............................................................................................1 Introduction......................................................................................................................................4 Executive Summary......................................................................................................................... 5 The Indian Mobile Telephony Market.............................................................................................9 The Role of VAS........................................................................................................................... 12 Environmental factors driving VAS......................................................................................................................... 12 Market efforts driving VAS......................................................................................................................................13 VAS- Definition & Market Size................................................................................................... 15 Current Growth & Future Potential for Different VAS................................................................. 16 Perceived & Practical value of Entertainment VAS.................................................................................................18 Perceived & Practical value of Info VAS.................................................................................................................18 Perceived & Practical value of mCommerce............................................................................................................19 The VAS business model ..............................................................................................................20 Content Enablers.......................................................................................................................................................20 Technology Enablers................................................................................................................................................ 22 Revenue Sharing in VAS (except P2P SMS)................................................................................ 23 Revenue sharing arrangement in VAS (except P2P SMS) ......................................................................................23 Revenue sharing in enterprise solution services....................................................................................................... 23 VAS Platforms............................................................................................................................... 25 Operator.................................................................................................................................................................... 26 Challenges to the growth of VAS in India.....................................................................................27 The future of VAS in India ....................................................................................................... 31 About eTechnology Group@IMRB............................................................................................ 32

IAMAI & eTechnology Group@IMRB

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value chain. or check their bank balance. Customers continuously want more from their phone. surf the Internet. competition. feelings & interests. IAMAI & eTechnology Group@IMRB 4 . We are witnessing an era when users buy mobile phones not just to be in touch. keep a tab on astrology. current market status. December 2006 Introduction Mobile phones today have moved beyond their fundamental role of communications and have graduated to become an extension of the persona of the user. A timely and strategic action would help nurture the mobile VAS market in India. there exists a vast world beyond voice that needs to be explored and tapped and the entire cellular industry is heading towards it to provide innovative options to their customers. IAMAI and IMRB International have jointly prepared the Mobile VAS Report to focus back stage and uncover the trends in the cellular industry. The increased importance of VAS has also made content developers burn the midnight oil to come up with better and newer concepts and services. This is the first publicly available study on Mobile VAS in India and the insights provided herein can be used by both the mobile operators and the content providers to better address the needs of their customers. Thus. To understand that where this industry is at present and where it is headed. market dynamics & expected roadblocks. their attitude. make others listen to their music. read news headlines. Spoilt by choice.Mobile VAS in India. They use their cellular phones to play games. and listen to music. the mobile phone subscribers are beginning to choose their operators on the basis of the value added services they offer. but to express themselves.

market size and revenue sharing arrangements. The end users have also embraced VAS and it contributes between 5-10% of the revenues of different Telcos. This report explores the key issues around the value chain of Mobile VAS in India and provides a much needed holistic perspective to macro and micro issues in this space. short code owners & industry experts. examines the environmental factors driving it. We also analyzed data from industry associations such as COAI & ABTO and other published reports and used several independent methods to arrive at the industry size and growth estimate for 2007. differences exist even on basic issues like definition for Mobile VAS. content aggregators. India is now the 5th country in the world to have crossed the 100 million mark in subscriber base and has in the last two months become the fastest growing mobile market in the world. IAMAI & eTechnology Group@IMRB 5 . As average revenue per user decrease from voice drops. and voice becomes commoditized. platform enablers. It clearly defines the constituents of Mobile VAS.Mobile VAS in India. and maps business models. The respondents comprised representatives of a cross section of Telcos. Thus Mobile VAS has become an important element in the growth of mobile telephony in India. Yet it is also equally true that there is little clarity on business issues and growth seems to be driven by more by inherent market momentum than a concentrated effort on the part of the stakeholders. December 2006 Executive Summary Need for the study The mobile subscriber base is growing at a scorching pace in India. The report also goes on to identify the roadblocks that need to be addressed for the current growth to be sustained. Methodology The eTechnology Group@IMRB (specialist technology research unit of IMRB International) & IAMAI interviewed key stakeholders in the Mobile VAS space for their perspective. Thus an understanding into the VAS space is needed to help stakeholders give a direction to this wave of growth. Telcos are increasingly looking at data as an additional revenue stream.

Rs.Rs 428 crore. 1026 crore. Games & Data. P2P SMS -Rs. 4560 crores at the end of 2007. Others (MMS etc) .Rs 86 crore. Game & Data P2A & A2P 15% 7% Others 3% P2P 40% Ringtone Dow nload 35% Source: IMRB Research As the P2P SMS component accrues completely to the Telcos. This space is currently completely dominated by entertainment services and comprises of. 2850 crore at the end of 2006 and is estimated to grow at 60% to touch Rs.Rs. 1140 crore. P2P & A2P. the remaining 60% (Rs 1710 crore) is where revenue sharing arrangements exist between content owners/developers & Telcos as follows. 171 crore.Mobile VAS in India. A ggregator / Developer 25% Copyright Ow ner 15% Operator 60% IAMAI & eTechnology Group@IMRB 6 . December 2006 Key Findings The Mobile VAS industry in India is estimated at Rs. Ringtones (including CRBT) .

2850 crore and is estimated at Rs. IAMAI & eTechnology Group@IMRB 7 .Mobile VAS in India. December 2006 Source: IMRB Research Thus the Mobile VAS industry in India (excluding Telco share) is currently 24% of Rs. 684 Crore in India.

Mobile VAS in India. ensure copyright protection. the overall focus for Mobile VAS would shift to utility based services like location information & mobile transactions. December 2006 The Road Ahead We believe that while the mobile VAS space is all set to grow rapidly. IAMAI & eTechnology Group@IMRB 8 . We also believe that while pure entertainment service would continue to appeal to the younger consumers. as security concerns are addressed mobile transactions will also have a good potential in India. Similarly it would take a joint effort of all concerned to address the significant roadblocks and thus unlock the true potential of Mobile VAS in India. all the stakeholders will have to work together and create a self-sustaining ecosystem for this growth to sustain. The key addressable barriers would be to ensure greater rationality in revenue sharing between Telcos & content developers. develop higher quality content which goes beyond Bollywood and cricket and also to have a focused WAP strategy.

India is rapidly moving towards being an evolved mobility market with no distinction between market incumbents and challengers. This has had an effect of stimulating demand and thus increasing the category adoption rate. as users from diverse segments increasingly choose to exercise the option of personal mobility. of Subscribers (in m n) 80 60 40 20 0 March '06 April '06 May '06 June '06 July '06 August '06 96 100 104 109 114 120 Source: COAI & ABTO The growing intensity of competition has led to more services for the end user at lower prices. fuelling further growth in the subscriber base. especially in the wireless telephony segment. The user base has been adding 34 million subscribers per month (on an average) and recently the mobile subscriber base crossed the 100 million mark in April 2006. The adoption of mobile telephony remains unparalled in scope. it has led to a further downward pressure on operator costs. December 2006 The Indian Mobile Telephony Market India is going through a telecom revolution. This has led to further cost benefits to the end user.Mobile VAS in India. IAMAI & eTechnology Group@IMRB 9 . The success of the market can be gauged from the fact that mobile user base has surpassed the PC user base in India and very soon the Indian market will have more mobile users than TV viewers. As more users have been added to the subscriber base. Growth of Mobile Subscribers 120 100 No.

28 per subscriber since Sept ’05 (a decline of 7%) Revenues & ARPU Revenue (Rs.) 360 Source: COAI While the decline in ARPU’ has been accelerated by the recent marketing interventions like lifetime-free schemes.) 4942 356 347 5621 380 370 350 340 330 ARPU (Rs. It is also a function of the structure of the Indian mobility market. 347 for June 2006 quarter. Postpaid Market Split Postpaid 20% Prepaid 80% Source: IMRB Research IAMAI & eTechnology Group@IMRB 10 . 375 4010 4460 370 ARPU (Rs. At 80%.Prepaid vs. this has been a consistent trend for some time. Jun '06 Qtr.Mobile VAS in India. December 2006 The growing subscriber base has also augured well for industry revenues. Crore) 6000 5000 Revenue (Rs Crore) 4000 3000 2000 1000 0 Sept '05 Qtr Dec '05 Qtr Mar '06 Qtr. which have risen consistently over the last four quarters. The average industry ARPU has fallen from Rs. However the other side to this growth is that ARPU’s (Average Revenue per User) have been correspondingly declining quarter on quarter. Subscribers. 375 for Sept ’05 quarter to Rs. a fall in ARPU of Rs. the pre-paid segment completely dominates this Indian mobility market.

customer retention has become very difficult. Source: IMRB Research Another aspect to the mobility market has been the constant decline in the call rates. However the flip side is that. Operators have had a strong focus on the pre-paid segment as the cost of customer acquisition is very low compared to the post-paid segment. as it creates a volume based platform for tariff reduction. Loyalties in the prepaid segment are low due to the low switching costs and it is not uncommon for user to routinely change their numbers and service providers. initially this reduction has been helpful in further increasing the subscriber base and expanding the Minutes of Use of the existing base. Another reason for the strong focus on customer acquisition has been to up the network valuations. Pre-paid subscribes are also low usage subscribers who contribute only 25-30% ARPU’s as compared to the post-paid segment.Mobile VAS in India. Mobility operators in India have been faced with two clear challenges: (i) (ii) To address customer retention in the high churn pre-paid market To develop alternative revenue streams as voice has become commoditized and has ceased to be a tool for differentiation IAMAI & eTechnology Group@IMRB 11 . which are largely assessed based on the number of users on it. December 2006 Pre-paid has been a good platform on which the market had grown very fast. However after a point reduction in call rates has been ineffective and minutes of use (MOU’s) have been inelastic in responding to reduced rates.

At the same time the basic VAS applications will also continue to appeal to the new mobility category initiates. and these users will continue to drive the market and evolve into more advanced applications. Environmental factors driving VAS Booming economy India has maintained its position as the second-fastest growing major economy after China. These users are very comfortable in using their phones and want to exercise the option of doing more on them beyond basic voice applications. This has resulted in higher disposable incomes and faster acceptance of new technologies with a willingness to spend for them. the margins are very low. Consumption and infrastructure spending are driving the growth. December 2006 The Role of VAS This is where the role of VAS (Value Added Services) comes into focus. Increasing comfort levels with basic mobility services There is now a critical mass of users in the Indian mobile telephony market who are experienced mobility users. But it is not only effort from operators which is driving the growth of VAS. It has become the flywheel of telecom growth and a large chunk of revenue for operators is likely to come from VAS services in the years to come. Therefore they are looking at VAS as the next wave for growth. IAMAI & eTechnology Group@IMRB 12 . This booming economy has created job opportunities and increased the spending power of an average Indian. Operators are facing cutthroat competition and with the call rates in India being one of the cheapest in the world. The first phase of growth for VAS has come in from these converts. The growth of VAS in India has been helped both by macro level environmental factors and specific market initiatives to develop this category.Mobile VAS in India. as rising consumer and government spending taking place. there are other factors contributing to it.

This initiative.User. with Ringtones of popular Bollywood songs. 25. success of VAS has become important for their growth. Market efforts driving VAS For the operators. Most of the rich content available to the end users revolves around these two. It is like a message for all my callers…“ their individuality to their mobile device. mobility users also want to carry forward “That I have It’s My Life s as my ring back tone says a lot about me. Reduction in call rates & CPP initiation CPP (Calling Party Pays) was an important initiative which unshackled the mobility market and allowed many more subscribers to enter the mobility category. Wallpapers of movie leads and games developed around movie themes. As a result more users have become comfortable in spending on VAS as it does not significantly impact their overall outlay on mobility. December 2006 Personalization of the digital world and digital devices With increasing pressures and stress on individuality. This has led to a sharp focus on marketing & tie-ups and a somewhat limited focus on development of content. in conjunction with the gradual reduction in call rates has ensured that the expenditure on voice for a typical user has gone down over the years.Mobile VAS in India. Thus for a large number of users the mobile phone has become a truly personal device and VAS has become an extension of persona. Focus on movies & music Movies & Music are the passion of India. Most operators are now trying to innovate in their VAS offerings and create sharper differentiation for their offerings. The enormous success of Caller Ring Back Tone . Given that Youth account for a large segment IAMAI & eTechnology Group@IMRB 13 . Delhi (CRBT) is an excellent example which illustrates that users are ready to adapt to any service which offer them the option of personalization.

Thus programs. December 2006 of users & also dominate the pre-paid category. IAMAI & eTechnology Group@IMRB 14 . It has been helpful that the film industry in India is very prolific and there are endless options to develop content around SMS contests Television is another culturally entrenched constant in the life of the average Indian. the focus on entertainment has been a strong hook to develop the VAS category and operators & content aggregators have been sharply focused in their efforts to pluck this low hanging fruit. Typically TV viewing has been a passive affair. A popular show like Kaun Banega Crorepati (KBC) generated 58 million SMS over a 3 month period. however following the global trend TV channels have been focused on making programming interactive. These shows have also been a key driver in increasing familiarity with basic SMS for traditional low user segments like non-working women. especially music & contest shows have started giving the option to their viewers to participate through SMS.Mobile VAS in India.

Definition & Market Size Mobile value-added services (VAS) are those services that are not part of the basic voice offer and are availed off separately by the end user. A VAS may become commoditized and becomes so common place and widely used that it no longer provides meaningful differentiation on a relative basis. though we also feel that P2P SMS is ceasing to be a meaningful tool for service differentiation. For example several mobility operators & other stakeholders in the industry no longer consider P2P SMS as a form of VAS. The nature of value added services change over time. However for the purpose of estimating the market size we have taken P2P into account. They are used as a tool for differentiation and allow the mobile operators to develop another stream of revenue. December 2006 VAS. 2850 crore.Mobile VAS in India. Composition of VAS Revenue Game & Data P2A & A2P 15% 7% Others 3% P2P 40% Ringtone Download 35% Source: IMRB Research IAMAI & eTechnology Group@IMRB 15 . Current market size The current market as of November 2006 for mobile VAS in India is estimated at Rs. .

the most common form of mobile communication apart from voice Ringtones: This is inclusive of monotunes. polytunes. IAMAI & eTechnology Group@IMRB 16 . the share of games in the overall pie is also expected to grow. Also include calls on IVRS for all other services like astrology Games & Data: Games include download of one play games offered by Reliance & full play games offered by other operators. P2A & A2P: P2A (Person to Application) SMS inclusive of messages sent by end users for contests & for seeking other information like news & updates.Mobile VAS in India. many low value users are now entering the category and are not likely to contribute significantly to the growth of VAS. As the current focus by mobile telephony operators is on adding subscribers. Current Growth & Future Potential for Different VAS To understand the reasons behind the current popularity and predict the future potential for these services. (A2P)Application to Person SMS inclusive of service push by enterprise service providers. based on the nature of the service offering. Overall the growth in 2007 will continue to be driven by Ringtone downloads and by games. December 2006 Mobile VAS in India can be further categorized into the following broad categories: P2P: Person to Person SMS. we have grouped Mobile VAS into three broad heads. Data include download of wallpapers & logos Others: Include MMS (Multi Media Messages) & subscription charges for WAP services Though the mobile subscriber base has grown by over 95% (August 06 over August 05) we believe that the relative growth in VAS revenues will be lower. truetunes and also includes CRBT (Caller ring back tones). The current VAS market is expected to grow by 60% for the next year and at the end of 2007 should be close to Rs 4560 crore.

mCommerce VAS allow the use to conduct a transaction using the mobile phone. A good example of a VAS with high perceived value is CRBT (Caller Ring Back Tone). the value that a subscriber derives from it largely depends on the marketing efforts and persona related to the service. IAMAI & eTechnology Group@IMRB 17 . An example of these kind of services are Jokes. Information on movie tickets. o mCommerce VAS (Transactional services)phase and are not really available to most users. These services are in a very nascent An example of these kind of service are buying railway tickets or movie tickets through the mobile phone. news. o Info VAS. The benefits considered could be based on convenience & saving of time and money. Service availed to get the cheapest air fares available. These provide entertainment for leisure time usage. Practical Value . The user interest comes in from the personal component of the content. Bollywood Ringtones & games.g.Perceived value of a VAS depends on perceived rather than the actual utility to the end user.These are the services which provide useful information to the end user.Mobile VAS in India. The revenue generation and popularity of these three types of VAS revolves around 2 factors: Perceived Value . They also include user request for information on other product categories like real-estate. These also include productivity services like missed call information which brings back lost business opportunity for the operators. These services are currently very popular and are driving the revenues for the Indian mobile VAS market. When the immediate benefit may not be clear to the subscriber. E. The value is gauged more from the intangible benefits derived from the service like emotional benefits. E. education etc.Entertainment VAS is designed for mass appeal and extensive usage. December 2006 o Entertainment VAS.g. banking account etc.Practical value is completely based on tangible benefits derived from the service.

they have been analyzed on both of the above mentioned factors. IAMAI & eTechnology Group@IMRB 18 . These have a very high perceived value as apart from basic entertainment. Not many efforts are being made to develop the market and create awareness about these applications. entertainment VAS is there to stay though we predict a fall in its contribution to the overall VAS revenue pie in the next 3-4 years. Perceived & Practical value of Entertainment VAS Currently entertainment based VAS applications are driving the market both in value and volume terms. Currently very few applications are catering to subscriber’s needs. like location based services.Mobile VAS in India. Perceived & Practical value of Info VAS Currently infotainment VAS has moderate practical and perceived value. Entertainment content is dynamic and changes very frequently which keeps the subscriber’s tastes alive but we feel that unless it is supplemented by innovative applications like CRBT. In India. To understand the growth of the different types of VAS and their future growth. This explains the success of Entertainment VAS despite the fact that its practical value is minimal. these can also be a means of self expression by the end user. However perceived value will increase in the future as new utility applications are developed catering to different niche segments. December 2006 These three categories of VAS provide a unique combination of perceived and practical values for every user and this may change over time as the market & users evolve. This would happen as other type of services become more popular and user engagement with entertainment VAS reaches saturation. We feel that this is mainly because of not very strenuous effort to promote these services and a lack of customization for the end-user. the drive will be difficult to sustain.

Users are skeptical regarding transactions on mobile. However it will be initially focused on low value transactions and will gradually expand. Over the medium-long term we expect an exponential rise in the popularity and revenue generated from these services. This is acting as a roadblock in the aggressive focus and investment to increase the perceived security of mobile payments. Practical Value Matrix VAS Market 2006 High Entertainmen VAS Market 2010 High Infotainment Entertainment Perceived Value Infotainment Perceived Value mCommerc mCommerc Low Low Practical Value High Low Low Practical Value High Source: IMRB Research Source: IMRB Research IAMAI & eTechnology Group@IMRB 19 .Mobile VAS in India. Perceived Vs. December 2006 Perceived & Practical value of mCommerce Currently transaction based services are in a very nascent stage in India and are constrained by both lack of awareness and suitable applications. One of the main reasons driving low trials is discomfort with the idea of paying through the mobile. We feel that growing eCommerce will also have a positive rub off effect on m commerce because users will have a higher level of familiarity and comfort with online transactions. Both practical and perceived value is low amongst users. Currently there is also a lack of innovative applications which can click with the subscribers. no stringent policies and measures are in place to instill a sense of security in the subscriber’s mind.

For most of them. There are multiple entities involved in the value chain but our research reveals that it is still not well defined and lot of overlapping takes place. from a strategic perspective it also offers an opportunity to leverage the traffic to the portal and generate potential advertising revenues. December 2006 The VAS business model The mobile VAS market in India has evolved into a complex ecosystem. mobile data content offers an additional revenues stream. A single entity performs one or more roles and several are also focusing on expanding their existing roles. The main entities involved in VAS value chain are: VAS Ecosystem Request in Text format/ Subscriber call Request completed Server Managed Subscriber Platform Enabler Operator Content flow Portal/ Aggregator Content flow Source: IMRB Research Developer/ Owner Content Enablers Content Portals/Aggregators/Developers: At the first level existing portals in the Internet space are providing content to end users.Mobile VAS in India. IAMAI & eTechnology Group@IMRB 20 .

They perform the twin functions of in-house content development & also aggregating from other smaller boutiques. There are also many small pure development entities. A part of the revenue is shared as fee with the owners for using the copyright material. Traditional Media Companies Following the global trend most traditional media companies are also trying to bring the feature of interactivity into their media. as they do not have the technical support to host content or to negotiate with operators they prefer to provide it to aggregators. As we have discussed in the first part. Aaaj Tak & Zee TV.Mobile VAS in India. some media houses have expanded and acquired Short Codes for their own brands. so to generate cost efficiencies over the long run. However using this feature involved revenue sharing with several entities. Third Party Copy Right Owner Most of the rich content in mobile VAS is built around Bollywood movies & music. a recent example is a popular game based on the Hindi movie “Don”. Prominent amongst them are Sony TV. IAMAI & eTechnology Group@IMRB 21 . SMS contests have been a very successful way for TV channels to achieve this. December 2006 Ringtones & wallpapers are two very popular categories where portals like Indiatimes & Rediff lead. Most of these like Mauj & Indiagames offer content directly to the end user through their own portal and also provide content to mobile operators. The copyright for these are held by production houses or rests with individual artistes. Apart from Ringtone & wallpaper development there is also a growing trend of game development around popular Bollywood movies. On the next level there are a host of large content aggregators. HT Media is a relatively new entrant in this space and has also acquired a short code.

it can advertise “Type ‘X’ on your mobile phones and send to 3456” . December 2006 Technology Enablers Short Code Provider These are the companies who own a short code (e. The entry barrier is very high because of high initial deposit and need to tie up with each operator for each individual circle.Mobile VAS in India. e.The server at destination 3456 would identify the message with the keyword ‘X’ and route it to Star. 8888.g.g. 3456 etc) which is sold to a third party client for some keyword and a specific period. National level code owners Sony TV Aaj Tak Indiatimes Zee TV Hungama Active Media Rediff Mauj Teleshoppe Source: IMRB Research Code 2525 2424 8888 7575 4646 3636 7333 7007 3456 Technology Partner/Platform Enabler IAMAI & eTechnology Group@IMRB 22 . There are around 10 national level players and several regional players in this domain. if Star wants to get participants for a TV show. Our research reveals that most operators also ask for a deposit of Rs 2 million and a minimum guaranteed volume of half a million SMS per month for entering into an arrangement with a Short Code owner. They have a tie up with multiple operators to ensure customers of all operators send the SMS to the same number.

25% for the aggregator and 15% for the owner. streaming audio and video and ring tone downloads. This model is significantly different from evolved market like China where the share of operator is typically 20-30% in the entire chain and aggregators & owners keep a much higher share. Authoring tools are a necessary component for delivering applications by application developers. Revenue Sharing in VAS (except P2P SMS) Revenue sharing arrangement in VAS (except P2P SMS) Aggregator/ Developer 25% Copyright Owner 15% Operator 60% Source: IMRB Research Operators typically retain the biggest chunk of revenues. Platforms are the backbone of the service providers and allow managing of various entertainment services. December 2006 Technology partner & platform enabler handle software platforms and authoring tools. Revenue sharing arrangement is typically 60% for the operator. such as games.Mobile VAS in India. Revenue sharing in enterprise solution services IAMAI & eTechnology Group@IMRB 23 . Copyright fee given to content developer/owner comes from the margin of Content Aggregator or Operator or both.

Mobile VAS in India. Eg. but it offers two streams of revenues as both the end-user & the enterprise service provider pay for the VAS.Send POD number as DHL-XYZ to 3456” The end user requests for this service by sending an SMS. this is routed through the mobile service operator to the Short code service provider. It is being increasingly used to connect to users through the mobility platform. The per unit revenue accrual in this VAS is low (Rs 3/SMS) as compared to other types of VAS. DHL). The short code provider collects all the information on the server and passes it to the client (Eg. December 2006 Short Code Owner 30% Operator 70% Source: IMRB Research Enterprise service providers are increasingly using VAS as a marketing and customer development tool. “Tracking of DHL courier through SMS. We expect this to grow significantly as enterprises look beyond mass media for solutions to reach out to their customers. It is also cost effective for the enterprise as it serves both as a data base development initiative and also leads to cost savings as queries can be handled through automated response IAMAI & eTechnology Group@IMRB 24 .

The content is arranged by the Operator from the Content Aggregator who procures it from the Content developer. The request goes to a server managed by the Platform enabler on behalf of the operator. December 2006 Amongst enterprise service providers VAS is more popular amongst certain verticals due to their I immediate amicability to this service.Data & Voice Data/Text Platform The end user sends the service request in an SMS form.Mobile VAS in India. Top 5 enterprise users Real estate information FMCG contests Cargo and courier tracking Education/ Career information Travel services in e-space Source: IMRB Research VAS Platforms Every service needs a platform for delivery VAS can be provided to the customers on two platforms. This content is forwarded to the Platform enabler who stores it in the server. The server automatically and instantaneously entertains the request from the customer as all these VAS are preloaded into the server. The server interacts with callers using IVRS (Interactive Voice Recognition System). gathers information and routes calls to the appropriate recipient. IAMAI & eTechnology Group@IMRB 25 . The remaining chain is same as that of a text based platform. The call is routed to a server managed by Platform enabler. Voice Platform The end user calls up the service provider and avails of the service.

As the penetration increases more in rural India. necessity and importance of IVRS will increase as people will be more comfortable with an interactive voice platform in local language over selecting options by pressing numbers. December 2006 Per unit voice based VAS generates more revenue than text based VAS as the call charges are very high at Rs 6/7min and selecting the service normally takes more than a minute. IAMAI & eTechnology Group@IMRB Operator 26 .Mobile VAS in India. This means that for the same service voice based will generate several times the revenue over text based VAS.

Thus piracy is hurting the operators both ways. however this is hampered by piracy. But this has hampered the growth of other services which are not getting enough time.Mobile VAS in India. effort and investment from the players. The major challenges that need the immediate attention of key stakeholders are: Focus only on youth and entertainment Usage of VAS has not spread evenly across demographic profile of customers.Leading Operator stakeholders are also playing safe and concentrating on mass services for which content is easily available and chances of failure is less. For the VAS market to bloom fully. “If there are ‘X’ number of legal transactions happening. December 2006 Challenges to the growth of VAS in India There are several major challenges which need to be overcome for sustained growth to be initiated. Piracy of Content Another reasons for players playing safe and not investing in novel applications and content is becuase this market is greatly affected by piracy This is acting as a barrier for companies investing into content development.…“ . In light of this trend the “Now that the market is maturing. Currently the youth segment is driving the VAS market as can be seen from the rapid growth of Entertainment VAS (mass service) and not so rapid growth of mCommerce and Infotainment VAS (customized service). almost ‘3X’ pirated versions are transacted. IAMAI & eTechnology Group@IMRB 27 . as these are the services which will create real value for the subscribers. neither can they stop customer churn by exclusive content development nor can they go in for investment in innovative applications to spread their demographic reach. segmentation is the key. applications need to be created for niche segments.…“ .Content Aggregator One of the solutions to increase customer retention is by providing exclusive content to them.

December 2006 Lack of Infrastructure There are a lot of services which cannot be introduced in India because of lack of supporting infrastructure. E. There is a mindset to purchase the handset for basic utility service which is voice. High cost to the end user Currently the cost of most VAS is high. Since in many VAS like MMS. Preference for low feature handsets Though the mobile subscriber base is growing. both the sender and receiver handsets need to support MMS.g. This kind of application would take some time to arrive in India. There are many services which are not performing to their potential despite their usefulness and there are some which cannot even be introduced. People are paying for it as they perceive it highly but over a period of time as they get used to it. But these handsets are not in a position to support a large number of VAS. Absence of location based VAS. In evolved markets like Finland & Korea. the scope of such VAS gets limited. technologies like 3G need to be installed. a large chunk of the market is opting for basic low feature handsets in spite of the fact that handset prices are coming down. the willingness to pay high amounts may come down. entirely new networks need to be built and frequencies need to be assigned to mobile operators. However. 3G networks are not mere upgrades of 2G networks. This is further impeding the introduction of high end VAS. To avail of new and high end VAS. Applications like live video-sharing are yet to arrive in the Indian market. a user can shoot his own video and simultaneously show it to his friend in some other city. IAMAI & eTechnology Group@IMRB 28 ..Mobile VAS in India. Location based VAS is still not possible due to the lack of digitized map of India. This is mainly because of the fact that VAS market is lead by Entertainment VAS which has a high perceived value. rather.

IAMAI & eTechnology Group@IMRB 29 . this affects the content development market with lower incentive to the developer to provide higher quality content. There are at least 10 entities involved between customer and Content Owner (e.. Transparency in revenue sharing “This is a highly unregulated market with no transparency but still we are going ahead with full steam. The future belongs to services providing value to the customer exploiting the mobility factor. Underdeveloped WAP market The key issues constraining the development of the WAP market are: o Lack of WAP enabled handsets & limited incidence of active usage of WAP o Speed of connectivity which prevents an enriching experience o Limited customization of existing portals for WAP usage and limited content for WAP access. artist) and the flow of revenue is not transparent.…“ . effort and marketing from the supplier’s side is resulting in very few such services being available in India. As the comfort level increases which can be brought about by encouraging government action like robust policies. Other entities feel that mobile operators take a very high share of the overall revenue. Customers are also currently not comfortable with mCommerce. we will see exponential rise in VAS usage. Such services mainly fall in the category of mCommerce and to some extent Infotainment. laws etc.g. December 2006 We feel that a market correction in VAS cost to end user will result in higher usage both in terms of customers and their frequency of usage.Mobile VAS in India.Content Aggregator Transparency is a big issue faced by the entities in the Mobile VAS value chain. The difference is especially stark when compared to developed markets where pay-outs are well defined and more balanced. But currently due to lack of familiarity & awareness from the end-usr and lack of investment. Absence of utility services These are those services which have a high practical value. The market is highly unregulated and there is no transparency in terms of contact payouts and royalties.

Current user experience with WAP is limited to download of rich content like logos & games. We feel that extensive WAP usage can take off given the significant growth in the number of “The youth have taken to the Internet and what is available there should be available on the mobile.Source: IMRB Research). Spam is an uninvited message urging the consumer to avail of some service. Taking cognizance.. some operators have already started offering a service to there subscribers where they can choose not to receive any promotional SMS’s. Example “Bid for a Laptop by messaging your bid amount to XXXX” SPAM has a high nuisance value and can discourage users to avail of a genuine service as they feel that once they have availed of a service & their number becomes a part of a database.Mobile VAS in India. December 2006 WAP usage is extremely limited & currently most operators do not seem to be aggressively focused on increasing usage. However the WAP portals of most operators offer limited content and therefore cannot deliver a meaningful online experience on the mobile for the end user.…“ -Leading Operator Internet users in India (38 million in Sep 06. Spam There are high volumes of spam in the VAS market currently. As an industry initiative there is a pressing need to take charge of as it goes against the long term interest of the industry. their inbox will be flooded with uninvited messages. IAMAI & eTechnology Group@IMRB 30 . More number of evolved Internet users would be willing to look at accessing the Internet on mobile if appropriate content was available.

we will see revenue from entertainment VAS come down from the levels.Mobile VAS in India.voice services. this would be further strengthened by the new trend of . significant VAS revenues will be driven by regional content from B & C class towns. • Internet on mobile will become a more feasible option as leading players in the internet content space especially configure their sites for access through mobiles. Regional content is getting popular both in voice and non. End users want control and interactivity and therefore the applications to look out for in future will be user generated content and mCommerce. 80% 60% Operator share in 40% the value chain 20% 0% 60% 30% Current E 2010 Source: IMRB Research • In VAS content. The VAS market will reflect revenue sharing arrangement in markets like China more closely. • Regional content is giving a significant boost to the content market especially in the entertainment category. this will ensure a revenue shift from Operators to Aggregators in the value chain. VAS will see a lot of structural changes. With increasing mobility penetration into the heartland of India.mobi domain being set up. Thus GPRS usage should pick up significantly IAMAI & eTechnology Group@IMRB 31 . December 2006 The future of VAS in India In India. Players have anticipated the trend and this is leading to regional content development. However mobile gaming will continue to grow and will contribute a higher share to the VAS pie. consolidation and emergence of cutting edge services: • Mobile operators will lose prominence in the value chain as the market for Content Aggregators will consolidate and with their better bargaining power.

shrivastava@imrbint.com CHENNAI Rathina Kumar eTechnology Group@IMRB IMRB International 63.shrivastava@imrbint. Mumbai Tel : (91)-22-24323500 Fax: (91)-22-24323900 Email: balendu.110019. Internet.600008 Tel : (91)-44-4222 0801 Fax: (91)-44-4222 0900 Email: rathina. Residency Road Bangalore . Telecom & emerging technology space. In a scenario where even experts are constantly caught by surprise.k IAMAI & eTechnology Group@IMRB 32 . DELHI Vivek Khattar eTechnology Group@IMRB IMRB International 8.Mobile VAS in India. Mhatre Pen Building Senapati Bapat Marg.kurup@imrbint. To our clients we offer an understanding of the present and a roadmap for the future.560025 Tel : (91)-80-2213186. Kalkaji New Delhi . Devatha Plaza 131.com sohil. December 2006 About eTechnology Group@IMRB eTechnology Group (a specialist unit of IMRB International) is a research based consultancy offering insights into IT.com Analysts for this report: Balendu Shrivastava : Sohil Kunwar: balendu.kunwar@imrbint. Tel : (91)-11-42697815 Fax: (91)-11-42687801 / 02 Email: vivek. Our continuous link with industry and a constant eye on the pulse of the consumer ensures that we can decode the movements of technology markets & consumers. 2274236 Fax: (91)-80-22473486 Email: rajesh.com BANGALORE Rajesh Kurup eTechnology Group@IMRB IMRB International D-7. Pantheon Road Chennai . Balaji Estate. we have constantly delighted clients by offering simple solutions to complicated problems. 2274388.com MUMBAI Balendu Shrivastava eTechnology Group@IMRB IMRB International ‘B’ Wing.khattar@imrbint.

167. December 2006 Published By: Dr Subho Ray. 406 Ready Money Terrace. President. on behalf of Internet and Mobile Association of India. Worli.Mobile VAS in India. Dr Annie Beasant Road. Mumbai 400018 IAMAI & eTechnology Group@IMRB 33 .

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