Mobile content in emerging markets: Which services offer the best prospects?

In a former role, I hosted a number of conferences and discussion events with a mobile content focus. More times than I care to remember, I grinned politely at the well-worn joke that 3G stood for Girls, Gambling and Games. The premise, of course, was that three areas stood out as being likely to generate decent revenues for anyone involved in the mobile content value chain.

Looking back, it now seems strange that these product areas were emphasised more than, say, mobile music services. My understanding is that while mobile gaming continue to be an important output of the wider mobile entertainment industry, in terms of revenues generated music is a much bigger deal. Gambling, too, continues to account for quite a small portion of overall mobile data revenue. In 2008, my understanding is the global revenue from mobile gambling services was around USD 200 million - vs. USD 10.1 billion for music services.

I always took the 'girls' referred to in the joke about 3G to be the kind of girls prepared to make their living through the provision of adult content. This segment is, of course, not to everyone's taste but I hear that the wider adult entertainment business looks set to be quite recession-proof. While mobile content value chain participants do make money in this space, writers of reports on mobile VAS seem to struggle to provide exact revenue figures and forecasts. This is because adult content revenues seem to be split by format (video, wallpapers etc.) and amalgamated into other categories. I assume this is due to a keenness for big brands not to be too closely associated with something that many customers will always see as morally dubious - while at the same time making money from it. I daresay significant sums change hands, but it seems a little bit tricky to know how much.

It's not something I've studied closely, but I've always assumed that the added value in specifically mobile content lies in... er... mobility, i.e. that the content is deliverable anywhere, anytime to the user's eyeball. This advantage around immediacy and availability was, I thought, why users would tolerate the limitations of the mobile phone form factor, i.e. a very small screen and, until fairly recently, annoyingly slow connection speeds. My own mobile content use is pretty much limited to catching up with real time football (soccer) scores when I am not near a PC or TV. While I am perfectly happy to do that in a public place such as on a train or in a cafe, I can't help noticing that people near me sometimes like to have a crafty glance at the screen to see what I'm up to - much as commuters peek at one another's newspapers. Were I in the market for adult content, I think I'd be a bit concerned about getting caught in flagrante by some curious member of the public. This seems like an inhibitor to revenue growth to me, but maybe I'm unusually squeamish or self-conscious.

It seems fair to assume that the kinds of mobile content likely to gain traction vary across world regions, in line with factors such as disposable income and cultural norms. With reference to the latter, gambling and adult content, particularly, are never going to fly in territories where they are prohibited by law. Even where that is not the case, the mobile VAS space is bound to look a little different from country to country.

The vast, growing Indian market is an interesting example. On a visit to Mumbai in 2007 I was told that the mobile content industry there is all about ABC - astrology, Bollywood and cricket: a trilogy of national obsessions. A company which seems to have taken this on board is Nokia, which started to get more deeply involved in the Indian market early last year by customising its Ovi-branded offering in line with these obsessions.

The international potential of Bollywood is being stifled by "the hefty upfront fees expected by local license holders and the questionable origin of much of the content", according to Informa's Ronan Shields, writing in Mobile Media late last year. Shields notes that "many players in the mobile industry are eager to export this content to the massive number of South Asians living in Africa, the Middle East, North America and Western Europe and offer it on phones in the form of wallpapers, ring tones and video clips." The article contends that the development of a truly international market for the content is being hampered by a handful of India-based licence holders that "are often loath to loosen their grip". According to Shields, this handful includes one particularly powerful player: "digital-content giant Hungama alone holds licenses for 70% of all Bollywood content, according to sources."

In terms of services which sell well within India, a good chunk of the action seems to be in ringback tones - and more revenue potential from this kind of product might lie in other emerging markets. Mindful of this, Vodafone has, according to a recent Cellular News story, signed a deal with India's OnMobile to offer ringback tones across a number of territories. ­"Currently," states the article, "millions of Vodafone Essar customers in India use OnMobile's ring back tone service, which will be rolled out across Vodafone’s other emerging markets from the Spring."

Another sort of service tipped by some to do well in emerging markets is mobile social networking. A Mobile Media article written in Q2 of last year, for example, says that "even as cellcos in developed markets struggle to make money from such services," their counterparts in developing countries are "desperate" for a piece of the action.

In January, while still working with Informa Telecoms & Media, I was invited to make a presentation at a Mobile Monday Istanbul meeting. Offered a few choices of themes on which I felt I could speak, the organiser chose mobile social networking. Drawing on a related Informa report, I shared the view that vastly lower levels of PC and fixed broadband penetration might make specifically mobile networking services grow well in emerging markets. Had I spotted the Mobile Media article before heading for Turkey, I might have added the point made there that while MNOs in the developed world are "fearful of introducing advertising" (the business model upon which social networks depend), "the low profit margins for mobile data services in emerging markets mean that cellcos there are more open to the idea of supplementing their earnings with other sources of revenue, such as advertising." David Dew, CTO of messaging-software company Critical Path, which is branching out into social networking, is quoted as saying that cellcos in price-sensitive emerging markets are less wary of the perceived intrusiveness of mobile advertising, since users there welcome the opportunity to receive discounts and other special offers from brands.

Ringback tones and social networking as hot tips for mobile VAS in emerging markets, then. Is there, however, a good level of solvent demand? In the Cellular News article, a Vodafone spokesman is quoted as saying that ringback tones are an "affordable" way of personalising a mobile device - but in the context of emering markets, what does "affordable" really mean?

Writing in Mobile Media earlier this year, Informa's Guillermo Escofet notes that in relation to the average user's spending power, India has the least affordable mobile content of sixteeen countries surveyed. In the case of mobile games, writes Escofet, "although India is where the cheapest mobile games can be bought on-portal, at US$1.03 each, it is also where they are most expensive in relation to per capita income – even when weighed against the US$9.64 charged by Vodafone Germany, at the other end of the spectrum."

"With a mobile game in India costing most of what the average Indian earns in a day", asserts Escofet, "it could be argued that the market for such products is largely confined to the country's middle- and upper-class minority. The same could be said for other emerging markets."

Perhaps with this in mind, companies such as Nokia have dedicated part of their efforts to the development of services which offer less affluent subscribers much more practical benefits. A Mobile Handset Analyst article written in November describes the Finnish handset vendor's unveiled introduction of seven low-cost handsets equipped with features developed for users in rural communities, "in keeping with its new business model of bundling services with the appropriate devices." According to the article, this has been driven by the company's desire not to compete for a greater share of emerging-market sales "by lowering prices, as Samsung and ZTE have done."

The competition for emerging markets is heating up, contends the article "because the already long handset-replacement cycles in developed markets are being extended by the economic crisis." In this context, Nokia, states the article, "is eager to identify the software and services that will provide it with new revenue streams and protect its share in certain markets." An unnamed Nokia spokesperson is quoted as saying that the company's Mail on Ovi service will give "millions of users the possibility to create their first Internet identity and communicate in new ways." Global Crown Capital analyst Tero Kuittinen is quoted as saying it will serve as "a firewall aimed at preventing BlackBerry from migrating into low-end business and emerging markets.

Despite the global economic downturn, mobile content/VAS in emerging markets seem to present operators, handset vendors and others with some interesting opportunities. I'd be interested to know which of entertainment services and more practical applications is the hotter tip.

Mobile content in emerging markets: Which services offer the best prospects?