A host of issues from the business model, too many entrants and lack of innovation have prevented the value added services segment from evolving beyond vanilla SMS and ring tones. By Venkatesh Ganesh
SMS-based services, wallpapers and ring tones continue to hog the lion's share of a VAS provider’s revenues seven years after these services were launched. Logically, in other markets, these services progress to advanced services such as the ones based on information (trading in the markets), commerce (mobile banking), social mobile, productivity-based apps, entertainment (Video on Demand) and location-based services.
According to IAMAI, revenues accruing from VAS have been growing and this market is estimated to be worth Rs. 11,680 crores in 2010. Traditional VAS services such as P2P SMS and Caller Ring Back Tones (CRBT) continue to contribute substantially to these numbers. “Till date VAS has meant ABC (Astrology, Bollywood and Cricket) in India,” said Romal Shetty, Head of Telecom, KPMG in India.
These basic services are large contributors. Traditionally entertainment related VAS has been the growth driver in India, which centered around Bollywood and cricket. However, the stakeholders, are unable to garner higher revenues from VAS due to limitations in technological platform, like inadequate spectrum.
3G's likely impact
As telcos start rolling out 3G on a mass scale across the country, VAS players will see better days. Once 3G becomes a mainstream technology, there will be faster access to content over the Internet on the phone.
“3G is likely to give a significant push to the overall VAS business. As customers get comfortable accessing the mobile Internet through their feature phones, smartphones and tablet devices (iPad from Apple or Galaxy Tab from Samsung), the VAS industry is likely to grow significantly,” said Badri Sanjeevi, COO, Mauj Mobile.
Agreed Nitish Mittersain, CEO of Nazara Technologies, “With 3G, there would be a huge thrust by telecom companies to grow their slice of the data services pie. To put it in perspective, mobile Internet traffic in India was growing at a rate of nearly 300-400% annually in India prior to the 3G launch.”
“Mobile data services consumption in India has increased to 4% of the total Internet usage. The number of subscribers using the mobile Internet has increased by 104% in 2009,” according to Abhishek Chauhan, Senior Consultant, ICT Practice, Frost and Sullivan, South Asia and Middle East.
According to Albert Almeida, COO, Hungama Consumer Business, the majority of the population today is using basic handsets and is consuming this content on text and voice-based services. With 3G there is an area of opportunity with applications, full length videos and better quality gaming for the mobile, which is a vibrant and growing industry.
Chairman, CEO & Founder of IMImobile
"Everybody wants to jump onto the bandwagon and it makes sense when the stakes are high. Owning the platform becomes the key to success in such a scenario"
As more bandwidth becomes available, data services are bound to pick up, reasoned Vishwanath Alluri, Chairman, CEO and founder of IMImobile.
“3G is expected to boost revenues in the short term and, as Mauj is a mobile Internet-focused player, we expect to benefit significantly,” said Sanjeevi.
Chauhan cautioned that the growth of VAS revenue from 3G may not be high, since operators might use a part of the 3G spectrum allotted to decongest existing voice networks. Other analysts shared a similar point of view. “VAS uptake after 3G will be a slow burn,” said Kedar Sohoni, President, Informate Mobile Intelligence. According to Shiv Putcha, Principal Analyst with Ovum's emerging markets practice, VAS services won't have a massive pickup initially but it depends on the operators. “Telcos, after fine tuning their strategy in terms of pricing and content relevance, would see a pick up,” reasoned Kishan Bhat, Manager-Consulting, Zinnov Management Consulting, an advisory firm. With 3G roll outs, the focus on heavy content like video-based and other forms of interactive media on portals should increase.
COO, Mauj Mobile
"As customers get comfortable accessing the mobile Internet through their feature phones, smartphones and tablet devices (iPad from Apple or Galaxy Tab from Samsung), the VAS industry is likely to grow significantly"
VAS providers themselves are cautiously optimistic about the way that 3G would play out. Alluri pointed out that, in a price sensitive market like India, 3G might initially need to take the corporate route. Even post 3G rollouts, 2/ 2.5 G applications are going to be important in the short term as over 80% of the subscriber base would still be on 2/2.5 G, pointed out Chauhan.
In the past, a VAS company would tie up with a telco or a Bollywood production company to offer either SMS of the telcos different offerings or songs and other kinds of downloads. Essentially, the revenue was shared with other stakeholders. Other companies tied up with handset makers like Nokia to develop and port games onto the handset manufacturer’s mobile platform. For every handset sold, which had these games built into it, the company that developed or ported the game received a share of the revenues. Companies like Indiagames and Nazara followed this strategy. “We recently tied up with the mobile gaming division of Electronic Arts to distribute its mobile games in India,” said Mittersain.
In August, Mauj acquired UK-based Mobango, an independent mobile app and user generated content store. “This application store focuses on creating a large distribution platform for free mobile applications to users,” said Sanjeevi. According to him, Mobango has 200,000 downloads a day in India and it is likely to increase significantly with the launch of 3G services. Mobango makes money through its pay per deal business model wherein it creates a platform that users can download from.