02 OCT 2017

The War of Mobile Content

Why are service providers suddenly offering free mobile content to users in an attempt to one-up each other?

In the past mobile carriers had focused on generating revenue by offering customers call and SMS plans and, of course, charging users when they went over their data plan. And as carriers focused on making money from their core business, mobile advertisers began using carrier infrastructure and services to generate their own revenue – revenue that the carriers themselves were not privy to. Though carriers owned the customer data used to target users more precisely, they still lacked the means to fully take advantage of this invaluable asset. The missing link was mobile content.

More recently, operators have changed their course by tapping into the mobile advertising revenue stream that they were once blocked from. By doing such, they created a new revenue stream for themselves but also needed the actual content. Hence, Netflix, HBO, Yahoo, and other content providers that have either partnered or been acquired by carriers. All these partnerships and acquisitions were in the name of subscriptions and new advertising revenue.

An example of a carrier acquiring a mobile content provider can be seen in the Verizon-Yahoo $4.5B acquisition, which took place even after Yahoo had revealed several security breaches, which demonstrates how valuable Yahoo was to Verizon.

The invaluable asset of a mobile content provider to an operator makes sense when taking into account eMarketer’s prediction that mobile advertising will surpass $100B by 2018. We should expect to see more acquisitions like this around the world.

In addition, these acquisitions are satiating the user demand for new types of mobile content, namely mobile video. According to an Ericsson report, in 2016 mobile video traffic equaled 50% of mobile data traffic and it is anticipated to reach 75% by 2021. The combination of streaming video and high speed internet is what most users demand most, states Business Insider. And by offering these services, carriers are appealing to their markets’ needs.

The challenge in today’s carrier ecosystem is for mobile operators to appeal to their user base with new offerings that go beyond the basic call/ SMS plan – in a fast, personalized and cost efficient manner. Typically licensing and distribution of content can be costly and an arduous process for operators that are looking to have the competitive advantage over others. Being able to continually add mobile content easily, which is fresh and appealing to users, will give carriers the opportunity to offer users more services as well as create new opportunities for mobile advertising revenue.

Move to next publication: RGK Mobile on Telecom Leaders' Summit 2017