If you asked 100 penguins in the wild if they’d like Killer Whales to eat fewer of them next year, I’m pretty sure they’d overwhelmingly say yes. In an astute follow up question, they’d also probably agree that Killer Whales will eat less of them - if you’re an penguin, living in a dark, cold and pretty inhospitable environment, optimism has to be pretty high up on your ability to believe you can survive. After all, if you started to think “brrr…but it’s sooo cold…” life isn’t going to be very enjoyable.
So when payment enabler, Valista (PR-led survey bias alert) questioned penguins delegates at Mobile Content World last week about operators’ cut of PSMS revenues, surprise, surprise, 65% of respondents believed that it should fall to less than 20% in less than 3 years. And a further 18% felt it should fall to less than 5% - which would be in line with credit card payments, for instance. Currently, it’s around 40- 50%.
I assume that the other 17% of the respondents were operators, or maybe some killer whales snuck in - did anyone notice?
Of course, just because the outcome of this survey was patently predictable, doesn’t mean to say that its conclusion is invalid. As I wrote earlier this week, the current share of PSMS is unfair and needs to fall if operators are to maintain a place in the mobile payments value chain. While their huge slice of the action can perhaps be justified while they are both payment enablers and the principle marketing channel, they might be able to get away with this. But with the rise and rise of off-portal, the marketing role is no longer going to necessarily be valid, making it increasingly difficult to maintain these kinds of margins for payment provision.
This leaves them very vulnerable to another payment system launching, bypassing operators entirely, leaving them with no role in mobile payments. This will be a great shame as, in my view, the mobile is poised to take over the role of cash, dwarfing today’s already huge mobile payment ecosystem.
Surely, mobile operators need to be thinking about pre-empting this inevitability and start getting competitive now.
News just in: Turkeys vote to abolish Christmas.
When I worked at Sun a long time ago, Scott “Scooter” McNealy used to say
“Eat lunch or Be Lunch”
I think this motto applies here. PSMS has not been adopted, for numerous reasons,
but mainly due to their 45-50% share. With Odopay, paypall mobile and numerous other systems easing mobile and off deck mobile payments, the carriers better get on the ball quickly. Their greed has limited and stifled the market for the whole value chain.
Absolutely right. PSMS transaction fees are prohibitively high and stifling innovation. I’ve seen several promising applications be put on hold because of it. PMMS should apparently be out in the US by Q2 of 2007, though they are shooting for Q1. I am hoping operators have learned their lesson and better understand the breadth of SMS and MMS applications and alter the percentages accordingly, but I understand that this will likely not be the case. At least not immediately. I can tell you one thing… the market will not wait three years.
When I’ve dealt with Premium SMS setups I’ve found there’s in cases also an inflexibility in the consumer pricing.
In one case the payment provider had to send two SMS to charge 1.5 Euro times 2. More SMSs for higher price of course. It’s very confusing for the end-user (”why do I get all these messages?”), limiting for the content provider (as prices are affectively locked to specific values) and shows of inflexible systems and business models. Also, if your product price is let’s say 20-30 Euro (which is typical for smartphone software), this model is outright unacceptable.
When I presented these issues to the provider they didn’t understand what I was talking about: “This is the way it is.”
(I won’t name names)
Are you all really convinced that the main reason for a stiffled market and no innovation are “greedy” revenue shares of the operators?
If we look at the spanish market for example, we can see that its penetration rate ( 12%) and ARPU (6€) are the highest in Europe. And this eventhough the spanish MNO have the least payouts of all (50%). Truth is the market adapts to diferent situations and in the case of spain, the content providers mainly sold content with no or little rights, basically covers. Ringtones in Spain is thus a very healthy market.
There must be other reasons/arguments than price. From my persepective, I don´t see them lowering anything, if anything they will rise in some specific areas.
Yago,
I don’t know what the rev share is in Spain, but here in the US its nearly 50% and that is stifling. Consider that Visa takes 3%. And, now there are other mobile billing options emerging-paypal, obopay, bango, and other run arounds. So, I think for the carriers sake, they should reduce this rev share which in turn could also result in reducing the cost of the PSMS for the consumer. Its the big slice/small pie or the small slice/big pie scenario. Right now, this pie is very very small.
Reno,
in Spain the payout is a bit over 50% and the pie is big (350mill EUR). Off course you can get very low transaction costs with other billing mechanisms, but why did these methods not have any take up rates at all? Are they too complex? Not thought for impulsive purchases (like in the case for music and personalization items)?
The competitive advantage of PSMS is their maximum simplicity and universality… ant that has its price. As long as operators manage to sell through those pricings (and it does not seem to change) we will be seeing these RS for some long time. It is all about pricing correctly the product, think about airline tickets, cinema or software… everywhere in the industry you can find products that are sold at undescribable prices.
Apart from that I do agree that being a bit more generous in their revenue share, they could activate the market. This would increase investment in promotion of PSMS services and contents and thus increas the whole pie…