Asymmetric Business Models in WebRTC

Vision Mobile released an interesting report about asymmetric business models and how they are the secret weapon of software companies. I consider this as one of the better reads I had lately.

The report doesn’t uncover new facts. We all know that many device manufacturers such as Nokia have lost their market dominance and that companies like Google, Apple and Amazon are very successful. We also know what Google providers services for free and what is the strategy behind the pricing of Amazon’s tablets.

We are also all aware of the business challenges service providers are struggling with given Over The Top (OTT) communication companies such as WeChat and alike that magically made billions of SMS dollars disappear.

The report (it’s free) doesn’t look at each market as a silo but rather analyzes the phenomena, how they are threaded, what ties all these successful companies together…and of course, what is common between those companies “victimized” by the successful ones.

The magic behind the success of these companies is that they have disrupted one market only to take value from it to another market where they can capture it.

By competing in 2 markets in parallel they create a sustainable competitive advantage, they developed an asymmetric business model.

Google – provides a mobile OS and end user services so they can serve better targeted ads

Amazon – sell tablets at cost to improve users’ shopping experience and stickiness

WeChat – bundling of Tencent’s e-commerce services with the messaging app

Not all OTT companies had a sustainable business model behind them; companies like WhatsApp and Viber had limited revenues when acquired but the acquirer paid the high price not in order to monetize messaging or voice calls but to monetize through a different market.

In-context communication creates asymmetric business models

Looking at WebRTC services, 2 types of business models are used:

• By usage/minute/package charging. This includes API platforms such as TokBox or collaboration services. They work in a traditional silo business model, they charge for the service provided, even if some users can get the service for free, the free service is funded by other premium users or simply by venture funding
• Embedding of the communication services into another service, healthcare, banking, gaming… In this case, revenue is generated through a different channel allowing the provider of the service not to charge for the communication services themselves. This is in-context communication, revenue is generated from the context it is embedded in

The introduction of messaging and VoIP services that vaporized service provider revenue was possible before WebRTC. WebRTC is a technology that makes the introduction of communication services within other services easier. Therefore the threat WebRTC introduces is that communication traffic generated today by a long tail of markets and services will shift from the service provider network to OTT.

This can be viewed as a threat for the service provider but it can also be viewed as an opportunity. If the service provider will create the tools for the long tail to route this communication through their network they will also be able to monetize through other means related to the services in which communication is being done.