Building a Digital Ecosystem-Recos for Telecom Operators

8/8/2019 Building a Digital Ecosystem-Recos for Telecom Operators

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A presentation by Subrahmanyam KVJ

Building a Digital EcosystemThe Evolving Imperative

July 2010



| 2

Telecom operators are facing significant pressure on their corevoice services and competition from Internet players

«And they are also facing significant competition from over-

the-top players

Apple¶s iTunes ecosystem effectivelycuts out the operator from the billingrelation that they share with thecustomer

Multiple Google services are aimed atgenerating revenue on top of infrastructure that telcos build andmaintain

Most mobile operators have been seeing a steady decline in

ARPU«

Vodafone ARPU in UK, in £,Q2 08/09 ± Q4 09/10

Source: Vodafone annual report



| 3

Traditional content players are also facing tough times

M usic Print TV

21.6

21.0

19.619.4

18.4

2004 2005 2006 2007 2008

Source: IFPI Statistics; Newspaper Association of America; Ofcom¶s Annual Communications Report, 2009

Music Ind ustry T r ade Sales (US $ Bn),Global, 2004-2008

57.8

55.3

53.2

51.2

49.1

2004 2005 2006 2007 2008

N ew s Paper Ci r c ulat ion ( M n),US, 2004-2008

30.2%29.6% 29.6%

27.9%

26.9%

26.5%

2003 2004 2005 2006 2007 2008

TV as a pr oport ion of t ot al advert i sing s pend, UK, 2003-2008



| 4

These pressures are forcing telcos to partner with a widerange of players

Source: Company websites

Ecosystem Partners Details

Nokia OviNokia, Mobile operators,

developersOvi isNokia·s attempt to create a mobile ecosystem thatcan act as an alternate to Apple·s iTunes platform

Android

Google, Mobile operators,Device vendors, developers,

chipset vendors

Android is Google·s attempt to create a strong ecosystemon an open-sourced platform that brings together a

plethora of players



| 5

Telcos will need to take a clear three-step approachtowards developing such ecosystems

Drive AdoptionDevelop

Partnerships

Differentiate

Portfolio

1 2 3

Partnerships with keyplayers in theecosystem, includingdevelopers, devicevendors, and contentplayers

Follow consumer usage trends,lower usagebarriers and makeavailable multiplemonetizationmodels to partners

Adopt sequentiallaunch approach,simultaneouspromotions from allstakeholdersinvolved



| 6

The rapid rise of interactive applications on the three screenswill require operators to focus on independent developers

MobileRise of smartphones has given the mobile

applications space a strong boost

PCRise in popularity of social gaming is

encouraging development of apps for PC-based services

TV

Development of powerful software forthird-party set-top boxes and increasingprocessing capabilities of TVs is likely to

boost uptake of apps on TV

Independent developers play a key role in the

development of an effective application ecosystem, asevidenced by Apple·s success

Apple offers developers an easy way of submittingtheir apps and earning revenues

Apple·s straight-forward 70% commission todevelopers was much more transparent and perceivedfair when compared to mobile operators

The value of the ecosystem is directly proportional to

the number of active developer community

Apple has over 225,000 apps available on a device

base of around 60 Mn, while Symbian has only 6,900apps on a device base of over 390 Mn

Source: Vision Mobile, ³Mobile Developer Economics 2010 and Beyond´, July 2010



| 7

The mobile applications space currently has the most potential,following the significant success of Apple¶s App Store

Apple·s app store has seen strong uptake in

downloads«

«This growth is expected to be the key driver for overall

mobile applications market

$ , 8$ ,77

$ , 7

, , 7

,

M obile applicat ions st or es¶ download s and r evenue, in M illions, Wor ldwide, 2009-2013

Source: Gartner, ³Gartner Says Consumers Will Spend

6.2 Billion in Mobile Application Stores in 2010´,Jan 2010; Apple press releases

0

500

1,500

3,000

5,000

500 15,000

65,000

120,000

225,000

Jul-08 Ja n-09 Jul-09 Jan-10 Jun-10

Apple App St or e, N o of Download s (in M n)and N o of Apps, J ul y 2008- J un 2010



|

On the mobile platform, telcos should partner with device vendors,third-party app stores and independent developers

Category of Partner Potential Partnership Details Indicative Examples

Device Vendors

Partnerships for operator billing foroperator·s app store; Helps in reducing

barriers to consumer usage

Third-Party App Stores

Partnerships for providing ready access toexisting app portfolio; Helps in scaling

rapidly

Independent Developers

Partnerships to encourage developers to

write for the telco·s ecosystem; Helps increating a thriving ecosystem of apps



| 9

The recent spate of announcements in the PC and TV contentand applications space portend a potentially strong market

Xbox 360 partnership withESPN

Roku¶s Netflix player partnership with MLB

Xbox 360 partnership withESPN

Roku¶s Netflix player partnership with MLB

Acquisitions/

PartnershipsMarket Forecasts Announcements

TV TV In-Stat estimates that TV apps

will generate over 1.7 Bn by2013 in the US

In-Stat estimates that TV appswill generate over 1.7 Bn by2013 in the US

Yahoo¶s TV Widgets areavailable in over 100 countriesand over 25% of all new SonyTVs

Google TV launched

Yahoo¶s TV Widgets areavailable in over 100 countriesand over 25% of all new SonyTVs

Google TV launched

M arket Indicators

Google¶s acquisition of LabPixies

Zynga¶s partnership with Yahooand Google

Google¶s acquisition of LabPixies

Zynga¶s partnership with Yahooand Google

W ebW eb

Social gaming marketestimated at 639 Mn in 2009and forecast to rise to 1.5 Bnin 2014

Social gaming marketestimated at 639 Mn in 2009and forecast to rise to 1.5 Bnin 2014

Google planning to incorporatesocial games into its rumouredupcoming social networkingservice

Google planning to incorporatesocial games into its rumouredupcoming social networkingservice

Plat form

Source: In-Stat, ³TV Widgets/Apps Key to Monetizing OTT Video´, Apr 2010; Screen Digest, ³SocialNetwork Games: Casual Games' New Growth Engine´, Jul 2010; Press releases



| 10

Telcos should consider partnering with Internet players that havealready made significant inroads into TV and web applications

Source: In-Stat, ³TV Widgets/Apps Key to Monetizing OTT Video´, Apr 2010; Screen Digest, ³SocialNetwork Games: Casual Games' New Growth Engine´, Jul 2010; Press releases

Platform Indicative

Partner Nature of Partnership Benefits for Telco

TV YahooA partnership with Yahoo can help telcosintegrate widgets for their IPTV offerings

A partnership with an established andtested platform can help telcos cutdown on the time-to-market

Web Zynga

Telcos can explore partnerships withsocial gaming companies for webapplications on their web portals

For operators who are already focusedon the online advertising opportunitythrough their portals, this offers a

means of increasing stickiness

Verizon¶sW idget Bazaar for Fios TV and Softbank¶s recent investment in Zynga comeacross as representative examples of telco involvement



| 11

Differentiating the ecosystem and the service portfoliorepresents a significant challenge

K ey challenges faced in differentiating

Threat of commoditization

Of late, there has been a spurt in the number of telecom and media players trying to set upecosystems; in this rush, there appears to be a focus on quantity, rather than quality

New ecosystems should strive to steer clear of the race for the maximum number of apps,and instead focus on quality

Stakeholder Lethargy

Developers are loath to learn programming for new platforms since that involves significant

investments on their part

Similarly, content players usually cite the significant costs involved in porting content for different platforms



| 12

A clear way to avoid the risk of commoditization is toencourage partners to stick closely to consumer usage

For instance, mobile app developers in the

ecosystem should consider developing apps only

for the most popular categories of applications on

existing platforms

Similarly, in the online TV platform, ecosystem

operators should carefully introduce content from

partners that is already popular in the traditional

linear TV

U sage statistics of mobile applications on iPhone and Android platforms, Jan 2010

Source: Flurry



| 13

Ecosystem operators should strive to lower the usagebarriers in order to differentiate their platform

Case Study of Amazon·s Kindle

BenefitsFeature

Kindle users do not need to pay for additional data access charges globally; the cost of network access is built into the cost of the device

This helps users focus on consuming content, than worrying about incidental costs of usage

Kindle users do not need to pay for additional data access charges globally; the cost of network access is built into the cost of the device

This helps users focus on consuming content, than worrying about incidental costs of usage

BundledAccess

Pricing

BundledAccess

Pricing

Kindle users can access their purchased content from the cloud on any of the multitude of devices that Amazon offers the Kindle application on

This helps consumers to move effortlessly between devices, yet seamlessly access content

Kindle users can access their purchased content from the cloud on any of the multitude of devices that Amazon offers the Kindle application on

This helps consumers to move effortlessly between devices, yet seamlessly access content

Whispernet

(Cloud Access)

Whispernet

(Cloud Access)

Kindle¶s E-Ink screen attempts to create an experience close to reading a physical book

By making technology work with consumer habits, rather than expecting consumers tochange usage patterns, Amazon has separated itself from the competition

Kindle¶s E-Ink screen attempts to create an experience close to reading a physical book

By making technology work with consumer habits, rather than expecting consumers tochange usage patterns, Amazon has separated itself from the competition

Reading

Experience

Reading

Experience



| 14

Content services delivered in the ecosystem should ensurethat they closely follow evolving consumer trends

3

O n-Demand Real-Time

Snacking

Social

M edia consumption

is now µPull¶ Linear is passé

Attention deficit Preference for short-form content

Content from social network takes priority Hyper-local is the new buzzword

Consumers want

content N OW Real-time need is platform-agnostic



| 15

Ecosystem operators should also try and ensure that they haveeasy-to-implement monetization models available for partners

Pay Per Use

Bundled with

Device Subscription Advertising In-app Purchases

TVOn-demand

Content

Limited access tocontent with new

TVs

Subscription plans topremium content

Ad support on TVwidgets/apps

Ability to purchaseinside TV apps

WebOn-demand

Content-NA-

Subscription to webapps with premium

content

Ad support on webapps

Billing integrationinside web-based

apps

MobileOn-demand

ContentKindle-style pricing

iPad-style on-demandnetwork access

Integration of mobileapps with adverts

In-app purchasing formobile apps

Illustrative Use Cases of Various Monetization Models



| 16

Ecosystem operators should adopt a sequential launchstrategy in releasing the elements of the ecosystem

TVPC Mobile

1 2 3

Currently, the largestaudience for anyecosystem is the PC-using consumer base, and they

should ideally bemade the first target

After theecosystemoperator hasgained experience,then they should

move on to mobile,where innovationbar is quite high

Since the TV digitalecosystem is still ina developingphase, it should beapproached after

gaining significantexperience on theother platforms



Ecosystem creation or participation in one is fast becoming an imperative for telecom and media

players

In Summary«

Image Credits: Flickr users Ben Heine and FlightlessXbird

Building a Digital Ecosystem-Recos for Telecom Operators

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