April 12, 2012

Over the Top

By Hisham Isa, Vice President (Marketing)

As Mobile Commerce takes centre stage, two related and recurring topics are likely to dominate discussions in the mobile industry over the next year: Fragmentation and Over-the-Top services.

  • Which mobile platform and mobile device will be the preferred choice of consumers?
  • How will they pay for services?
  • And how will carriers adapt?
The demand for mobile content keeps growing.  There are more and more ways to view it.  And this is attracting more players into the game . . .  often in ways that appear to threaten the costs and earnings of carriers.

Enter OTT Players

Let's start with a definition.  What is OTT or "Over-the-Top"?  These are services delivered over carrier networks, but which do not directly engage the carriers.  Some of the best known examples of OTT services are Google, Yahoo!, mySpace, Facebook, YouTube and iTunes.

Carriers often perceive these OTT players as a threat because they push data traffic to new heights as surfers consume more content. This should be good news for the carriers, right? Well, only if they charge per MB. Competition between carriers, though, is pushing their margins down and has led to more unlimited surfing plans.  The increased traffic is also making demands on carrier infrastructure.

Some OTT services compete directly with carrier offering and eat into telco profits.  Free mobile messaging is a case in point; consumers who use this service send fewer SMSs.

Meanwhile, the brand value and profits of popular OTT companies rise, while carriers become more and more transparent.  This OTT revenue is going to re-kindle the debate about their services, namely business models, regulation, technology and invariably 'ownership' of the consumer.

Mobile Payments
Like the OTT players, telcos want to create new revenue streams based on forming direct relationships with the consumer. There are a number of value-added possibilities -- like offering voicemail and voice over IP -- but the most popular at the moment appears to be mobile payments. Carriers are entering the space to clear payments, just like a credit card company but using different technologies.

Mobile payment systems -- like "Simply Tap" in the UK --
are becoming more widespread and easier to use.
To this end, carriers are forming new relationships and alliances, which explains a slew of announcements about mobile payments, particularly in the US and Europe  . . .

. . . and more recently around mobile advertising networks:

There are basically two revenue models for the web-based services: advertising and direct sales. So far, carriers -- which have long wanted to leverage 3rd-party earnings from advertisers -- are largely opting for direct sales to consumers via mobile payments, though some are starting to look at ads again too.

Moving forward, developers, marketers and brands will need to focus more on cross platform tools like HTML5 and develop their campaigns around a multi-screen experience.