Will Direct Operator Billing cannibalise your PSMS Business?

As a Mobile Operator you have a great opportunity to develop new business revenues with Direct Operator Billing (DOB).  The proliferation of smart phones and the popularity and ease of availability of Digital Content and Services is a major driver for DOB.

No doubt you already have an existing Premium SMS (PSMS) business, so the obvious question is:

”Will DOB cannibalise my PSMS Business?”

This is a major concern for Mobile Operators but the good news is that experience shows that both revenue and margin can be grown in total by managing both businesses.  The reasons for this is down to the fact that DOB opens a large new market segment not addressed by the PSMS short code user experience and it also encourages “impulsive” purchasing due to its ease of use.  DOB and other APIs also have the ability to enable new higher margin digital service opportunities, such as Business Services Extensions, Video and Music Services and Premium Branded Games as well as supporting subscription models.

The high margin services will require a higher level of integration and a different marketing approach but have significant ARPU mark-up of the order of €2 to €5 per month. In the case of subscriptions, these can provide a X5 or X8 multiplier on conventional “one off” purchasers and should be promoted actively as a business model. The great thing about subscriptions is that it is permissible for both Androids and iOS.  For example, the UK newspaper “The Telegraph”, is available on iOS as a subscription that by-passes the Apple App store.

Real life operator experience shows that the PSMS business can be maintained while growing DOB.  We work with Mobile Operators who were concerned about this but it is clear from other operator’s experience that the different user experiences, usually on a different grade of devices, ensures natural market segmentation.  The smart phone makes DOB much easier to use than a PSMS purchase.  After the initial device verification PIN all further purchases are “frictionless”.

Once you have decided on DOB as an ideal way to monetise customer relationships, you face the issue of service discovery and customer awareness.  While this can be seen as a “Marketing 101” problem, it is unusual for Mobile Operators to get this right.  In order to develop a strong branding for the DOB service, a common message and marketing framework will enable active merchant participation and market development.  Your merchant portfolio should include Global App Stores, Regional App Stores, up and coming developer community and – most especially – specialist high margin services.  These conventional services can be quickly deployed and are well understood by the market so they can be rolled out quickly.