Kissing the Cell Phone!

M-Commerce & it’s Business Models

By:
Ali Chekah
Narges Aghabeigi
Mohammad Hossein Eftekhari

19 ‫ دسامبر‬02 Sharif University of Tech 1

 content
• Definition
• Attributes and Benefits
• Drivers
• Limitations
• Differences in the User Experience
• Mobile commerce from the Customer‘s point of view
• Mobile commerce from the Provider‘s point of view
• Business models
• New Possible Roles
• Revenue Models for Content Providers

19 ‫ دسامبر‬02 Sharif University of Tech 2

 Definition
Use of a mobile device to:

 Purchase goods

 Purchase services

 Purchase content

 Pay via cell phone post/pre-paid account balance or via

a credit/debit card

19 ‫ دسامبر‬02 Sharif University of Tech 3

 Attributes and benefits

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 drivers
• Exponential growth of consumer interest and adoption of the
Internet and e-commerce.
• Tremendous growth in mobile telephony; however, voice has
become a commodity and will no longer fuel revenue growth
for operators.
• The evolution of the handheld devices incorporating WAP and
now GPRS.
• Cost of entry into mobile e-commerce is low for most
entrants.
• Cell phones is absolutely a personal device

19 ‫ دسامبر‬02 Sharif University of Tech 5

 Limitations
• Usability Problem
• small size of mobile devices (screens and size, keyboards, etc)
• limited storage capacity of devices
• hard to browse sites
• short battery lifetime
• Technical Limitations
• lack of a standardized security protocol
• insufficient bandwidth
• 3G licenses
• transmission and power consumption limitations
– poor reception in tunnels and certain buildings
– multipath interference, weather, and terrain problems and distance-limited
connections
• WAP Limitations
• Speed
• Cost
• Accessibility

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 Differences in the User Experience
• Less browsing and more searching
• Fewer site visits
• One company to own entire experience
• Focus is on information rather than
transactions

19 ‫ دسامبر‬02 Sharif University of Tech 7

 Mobile commerce from the Customer‘s point of
view
• The customer wants to access information, goods
and services any time and in any place on his mobile
device.

• He can use his mobile device to purchase tickets for

events or public transport, pay for parking, download
content and even order books and CDs.

• He should be offered appropriate payment methods.

They can range from secure mobile micropayment to
service subscriptions.

19 ‫ دسامبر‬02 Sharif University of Tech 8

 Mobile commerce from the Provider‘s point of
view
• The future development of the mobile telecommunication sector
is heading more and more towards value-added services.
Analysts forecast that soon half of mobile operators‘ revenue will
be earned through mobile commerce.

• Consequently operators as well as third party providers will focus

on value-added-services. To enable mobile services, providers
with expertise on different sectors will have to cooperate.

• Innovative service scenarios will be needed that meet the

customer‘s expectations and business models that satisfy all
partners involved.

19 ‫ دسامبر‬02 Sharif University of Tech 9

 Business Models for
m-Commerce

19 ‫ دسامبر‬02 Sharif University of Tech

 content
• Definition
• Attributes and Benefits
• Drivers
• Limitations
• Differences in the User Experience
• Mobile commerce from the Customer‘s point of view
• Mobile commerce from the Provider‘s point of view

• Business models
– Importance of appropriate Business Model
– Development Process
– Relevant factors for Business Modeling
– An Example of Business Model
• New Possible Roles
• Revenue Models for Content Providers

19 ‫ دسامبر‬02 Sharif University of Tech 11

 Business Models for m-Commerce
Importance of appropriate Business Models
•Even the most brilliant service will not be commercially
successful for the provider if the chosen business model is
not appropriate for the service.

•Therefore the presentation put an emphasis on defining

criteria for the evaluation of generic m-commerce business
models and choosing the right business models for the
services mentioned before.

•The approach followed consisted of considering a business

model in terms of actors, roles and business relations such
as information, product, service and revenue flows.

19 ‫ دسامبر‬02 Sharif University of Tech 12

 Business Models for m-Commerce
Development Process for new Products and
Services
Market Pull

Concept definition of Business modelling Business

the product/service analysis

Technology
Push
Marketing Yes Sustainable No
plan ok?

Market analysis
Service development Definition and use
(interest, sustainability,
and investment of market analysis
competition,
analysis
competitive advantage)

Business plan

No Sustainable Yes Stop

ok?

19 ‫ دسامبر‬02 Sharif University of Tech 13

 Business Models for m-Commerce
Relevant factors for business modelling

• The following core issues for business models were identified and
defined:

• the concept for a new mobile commerce service

• the positioning of the mobile operator taking into account its
strategic advantages
• the target market, in terms of market segment and corresponding
potential
• the relationship with other strategic business partners.

• We will start by looking at the position business modelling takes in

the development process for new products and services.

19 ‫ دسامبر‬02 Sharif University of Tech 14

 An example of a Business Model for m-
Commerce : Mobile Gambling - Usage scenario
•Betting is always time sensitive, people always want to
bet just before the match or race begins. Therefore the
application has to allow quick and easy usage.

•Users could send their bets and check their status

using text-based technologies like SMS or WAP.

•The application could be downloaded from the

provider’s server to the user’s mobile or run from
where it is hosted.

19 ‫ دسامبر‬02 Sharif University of Tech 15

 An example of a Business Model for m-
Commerce :Mobile Gambling - Payment method
•The timing of payment is important because for a bet to be
valid the player should make a commitment to pay that he
cannot repudiate afterwards. The payment method will have to
be quick and easy.

•Possible options for payment are

•mobile micropayment.
•subscription to the service and creation of a gambler’s account
(prepaid or postpaid option).

19 ‫ دسامبر‬02 Sharif University of Tech 16

 Mobile Payment Service
Mobile Micropayment
2. Sign 4. Check
purchase 3. Return signed signature
order purchase order

Customer:
Merchant:
mobile
Point of Sale
devices
1. Send
purchase order

2. Upload 1. Registration
application process
and credentials Mobile
Gateway
a) Send collected
purchase orders
regularly

Financial
Content Billing
Institution

Application b) Check
Micropayment purchase
Repository
orders
1. Provide
Customer‘s
keys and Public Key
Advertising
certificate Infrastructure
c) Clearing
Location Based
Services 2. Certification Customer registration
request
3. Create key pair Application and
and certificate credential upload
Payment and
Mobile commerce platform clearing

Sharif University of Tech

 An example of a Business Model for m-
Commerce Mobile Gambling - Mobile operators
and value chain
•The operator should try to position himself in a key role in
the value chain by providing the portal and participating in
the revenues accrued by gambling services over its
network.

•Those revenues will be significantly higher than the sheer

increase in airtime charges.

•In order to achieve this a mobile operator should exploit

its strengths (brand name, customer base, infrastructure,
price control, etc.) effectively.

19 ‫ دسامبر‬02 Sharif University of Tech 18

 An example of a Business Model for m-
Commerce Mobile Gambling – Players and
Alliances
•Players
•The main players that could participate in the gambling value chain are:
• the User, who decides about the bets
• the Application Service Provider (ASP) providing the offers
• the Internet Service Provider (ISP) providing web access
• the Payment Service Provider (PSP) supporting the financial
transactions and
• the Mobile Operator that provides the network as well as the portal.
•Alliances
•The most promising scenario for mobile operators rests on his taking a key
role in appropriate partnerships and business alliances, which are based on
revenue sharing.

Sharif University of Tech 19

 An example of a Business Model for m-
Commerce Mobile Gambling – Revenue Flow

Internet Service
Operator Domain
Provider (may act as a portal)

Yearly / Monthly Fee

(Subscription)

Payment

Payment

Portal
Payment
Pays for for service Payment Service
Access to
User Users
Provider /
Payment
- Airtime Payment Clearing House
- subscription Operator
- premium charge
- access to content

Payment Payment
- For distribution - Once-off
- For Access to - For usage
the mobile channel - Revenue sharing

Direct Subscription Payment

Content Payment Application
Service Provider Payment

19 ‫ دسامبر‬02 Sharif University of Tech 20

 content
• Definition
• Attributes and Benefits
• Drivers
• Limitations
• Differences in the User Experience
• Mobile commerce from the Customer‘s point of view
• Mobile commerce from the Provider‘s point of view
• Business models
• New Possible Roles
• Revenue Models for Content Providers
– User fee business model
• Subscription fee and/or usage fees
– Shopping business model
– Improved efficiency business model
– Advertising business model
– Revenue Sharing

19 ‫ دسامبر‬02 Sharif University of Tech 21

 New Possible Roles
• Mobile ISP: email and Internet access
• Content Provider: Leverage control of the first screen
– Subscription fees, advertising, etc.
• Mobile Portal: one-stop solution
– Messaging, PIM, personalization provider
– Subscription fees, advertising, etc.
• Mobile Location Broker
– Through partnership with location-based services
• Mobile Payment and Billing Provider
• etc.

19 ‫ دسامبر‬02 Sharif University of Tech 22

Revenue Models for Content Providers

• User fee business model

– Subscription fee and/or usage fees
• Shopping business model
• Improved efficiency business model
• Advertising business model
• Revenue Sharing
• …These models are often combined

19 ‫ دسامبر‬02 Sharif University of Tech 23

 User Fee Business Model
User Fee (monthly
Percentage subscription or
of User Fee 3rd Party Billing
actual usage fee)
Provider

Content
Provider Mobile User
Mobile Content

• Often involves 3rd party billing provider

• Two variations:
– Subscription fees – easier to collect
– Per-use fee

19 ‫ دسامبر‬02 Sharif University of Tech 24

 E-Tailing Business Model
Mobile Content

Mobile Payment
Mobile
e-Tailer Shopper
Product/Service

• Another distribution channel

• Likely to work well for some categories of services and products
– Movie tickets, flowers, last minute travel reservations
– Impulse buying
• New scenarios: location-based comparison shopping, dial-a-
coke, location-based delivery (e.g. pizza, taxi)

19 ‫ دسامبر‬02 Sharif University of Tech 25

 Improved Efficiency Model
Content Provider
Mobile Service/Content
Mobile Internet Mobile User
Business &
Lower Service Usage/Transactions Core
Operating Costs (possibly including payment) Business
Customer
Traditional Business

• Customer convenience & lower costs

• Examples: mobile banking, trading, ticketing
– Nordea: WAP Solo
– Daiwa: By late 2000, 20% of all online trades
– Airlines, movie theaters, public transportation
19 ‫ دسامبر‬02 Sharif University of Tech 26
 Advertising Business Model
Advertising Mobile Service/Content
Fee incl. Promotional Info

Content Provider
Promotional
Advertiser Info Mobile
Product/Service User
Payment

• Challenge: Small screen, privacy, user tolerance

• Opportunities:
– Mobile
– Personalized
– …Small Screen…
19 ‫ دسامبر‬02 Sharif University of Tech 27
 Mobile Advertising
• Flat fee
– e.g. go2.com
• Traffic-based fee
– CPM: cost per thousand ad impressions
• Performance-based fee
– e.g. click-throughs, call-throughs, commission on sale

19 ‫ دسامبر‬02 Sharif University of Tech 28

 Revenue Sharing Business Model
Value-Added
Mobile
Content
Content
Mobile
Content Content Mobile
Owner Provider User

Share of Payment
Revenue

• Quite common, given the control of the customer by

mobile operator
• Complexity of the value chain
– Positioning, authentication, billing
• WASP model, e.g. Webraska, BlueFactory, etc.
19 ‫ دسامبر‬02 Sharif University of Tech 29
 references
• “M-Commerce , Technologies, Services, and Business Models”, by
Norman M. Sadeh, Wiley, 2002
• “Service Scenarios and Business Models for m-Commerce“, Elisabeth Felt,
Britta Reufenheuser ,IST Mobile Summit 2002, Thessaloniki, Greece,2002
• “An Introduction to e-Commerce,a Managerial Perspective“,
Turban,Prentice Hall , 2006
• „ www.elsevier.com „ , 2006
• „ www.nokia.com „ nokia reports, 20/5/2006
• http://www.epaymentsnews.com

19 ‫ دسامبر‬02 Sharif University of Tech 30

41-‫ربیع الثانی‬-5 Sharif University of Tech 31