Service provider revenue hammered by OTTs causing some to take a stab at digital advertisement
OTTs have this habit of taking a business with lots of value/revenue, say SMS, and turn it to void. Enormous value that service providers could once extract from their subscribers disappeared.
How do OTTs financially manage and offer a similar or even better service for free?
A few factors that join together:
- The small ones are funded by VCs and have no real business model but a “Buy Me” sign – not the ones I would like to relate to in this post
- They are efficient – WhatApp offered better than SMS service to the world while SMS operation at each service provider is much larger than the WhatsApp 50 some pre-acquisition team
- They make money elsewhere
Let’s focus on the money
Service providers have tried to fight back OTT services in many ways.
They invested heavily in RCS, which is a failure and while Google did decide to add RCS to Android, we still don’t see a bright light at the end of the RCS tunnel.
Many service providers are trying to build Operator OTT services such as the Telefonica TU Go. Each with its own flavor but these apps are still struggling to compete with OTTs.
OTTs have one interesting thing service providers have barely tackled yet, they use Asymmetric Business Models, meaning, they make money elsewhere.
They offer messaging and voice/video chat services but make money from advertisement (Facebook, Google…), from selling the users something (virtual stickers…) or the service is embedded in context of something larger in scope where communication is just a feature.
WebRTC takes this to a next level as it makes building and embedding communications into other services a relatively easy task compared to the pre-WebRTC days.
Service providers moving to digital
Lately Telenor announced it is acquiring Tapad, a cross device advertisement and retargeting marketing company.
What does Telenor have to do with an advertisement company?
Well, the above makes that pretty clear. They are looking for ways to monetize users through means that are not simple usage/subscription fees. Additionally, it will allow Telenor to monetize non-Telenor users.
As quoted by Sigve Brekke, Telenor’s CEO in the announcement: “I believe significant value can be created from applying marketing technology to improve the digital capabilities of our core telecom business. This will improve our understanding of customer behavior, and supports building a platform for other business areas”
While Telenor took a focused stab at digital advertisement, Verizon took a much wider stab at digital business earlier in 2015 with its acquisition of AOL.
Going the digital ads route starts to become a service provider trend.
Service providers have understood a long time ago that their cheese has been moved. They are diversifying (or at least trying to do so) to different areas, content, IoT, business services and digital advertisement.
The question is, will Telenor and others to enter digital advertisement leverage this asset and create synergy with their communications business.