COMING SOON: Sponsored Data Research Report

MBC will publish a new research report: Sponsored Data: Mobile’s Next Business Model, in March.  Here is the report’s draft introduction. Email for more details.

In developed markets, mobile data has become a must have service. Consumers are voracious mobile data users and willing to pay for it:

  • Smartphone penetration will be greater than 50% of the entire population in 2015 in North America and every country in Western Europe with the exception of Portugal, Belgium, Austria and the Czech Republic, according to eMarketer .
  • Mobile data traffic grew 63% in North America and 39% in Western Europe between year end 2013 and year end 2014, according to the latest Cisco VNI.

But there are dark clouds on the horizon. There is a convergence of market drivers that could derail consumer’s love affair with mobile data:

  • Mobile data traffic will grow even faster over the next few years. Between 2014 and end of 2018, mobile data traffic in will increase 5X in North America and 7X in Western Europe.
  • Consumer’s willingness to pay is limited. While mobile operators in the U.S. have recently reduced pricing for mobile data, mobile expenditures will most likely continue to represent over 2% of household income in 2015. How much more can most people afford?
  • Mobile operator revenues for mobile data significantly lag traffic volume growth. According to a recent McKinsey study, while mobile data traffic has increased 40X from 2008 to 2013, the revenues associated with it have barely tripled. Can mobile operators sustain their current business models?

So consumer demand for mobile data is big and will get even bigger, but consumers may not be able to pay for much more, leaving mobile operators with a big problem. Mobile operators are going to have to deploy new business models, and Mark Beccue Consulting (MBC) believes the one that makes the most sense is sponsored data.

Sponsored data is simply this – an entity other than the end user pays for some portion of the end user’s mobile data use.

MBC believes sponsored data as a mobile business model is set for significant growth in 2015 and 2016 in the U.S. and Europe, with impact for a host of players, including online retailers, travel providers, search advertisers, media publishers, enterprise plays and b2c businesses.

This report will aim to address the following:

  • Identify and detail key market drivers and barriers for sponsored data
  • Profile the key companies that will drive market change
  • Outline sponsored data business strategies, use cases and revenue models
  • Deliver three-year forecasts for sponsored data users, sponsored data revenues

Prediction: No Google MVNO, It’s Sponsored Data

(NOTE: The following is speculation based on my market analysis and research.)

For the past few weeks, there have been rumors that Google is working to launch an MVNO in the U.S., based on reported talks with Sprint and T-Mobile. I don’t think that makes sense for many reasons I won’t get into here except to say that while Google shows great courage in “fail-fast” initiatives, an MVNO in the U.S. doesn’t scale to their primary revenue model, which is to sell a whole lot of search and YouTube advertising globally. A Google MVNO in the U.S. is expensive and MVNOs are not scalable globally.

So I don’t think those talks between Google and the U.S. carriers are about an MVNO, but about something else. There is a mobile play that is scalable globally for Google, and that is sponsored data. Sponsored data is a business model where advertisers or other third parties pay for a portion or all of a consumer’s mobile data use. I believe the realistic sponsored data use case is simply substitute payment with no priority fast-lane, QoS contingency to rile up net-neutrality advocates.

I believe Google will launch a sponsored data program with one or more of the Tier 1 U.S. mobile players – AT&T, Verizon, Sprint, T-Mobile – before mid 2016.

Here’s why it makes sense:

The market is ready. In its latest Visual Networking Index Report, Cisco predicts mobile data traffic will grow from 30 exabytes in 2014 to 81.6 exabytes by year end 2016, with most of that traffic in the North America and Asia Pacific regions. In the U.S., we are nearing the top of what the market will bear in terms of total expenditure per user for mobile data, and consumers are signaling their willingness to turn to sponsored data as an alternative–mobile-data-users-fear-exceeding-their-quota–open-to-sp.html

Google’s fit. I think there is a Google use case for sponsored data that makes a lot of sense for all the parties involved. Here’s the use case. While on a mobile device on a participating mobile network:
1) A consumer clicks on a Google Ad
2) A consumer starts to watch a YouTube video
3) A consumer opens a Google app (such as Maps or Search) or other 3rd party app

Leveraging policy management and a real time charging systems (either 3rd party platform based or carrier’s internal platforms) and APIs (between Google and carriers, between Google and advertisers), Google advertisers could in real time present sponsored data offers to individual subscribers who have opted-in. For example, a retailer could say, “Spend $50 with us now and receive 10 minutes of YouTube mobile streaming for free”. Offers could be time of day or cell site or app specific, there are lots of options. Consumer agrees, the carrier deducts the agreed amount from the consumer’s data allowance, and bills the sponsor via the Google platform. In this vision, Google is the mediating platform, passing most or all of a wholesale mobile data cost on to the advertiser.

Here’s the benefits – the consumer receives subsidized mobile data, the advertisers gain greater consumer engagement and better mobile conversion rates, Google gains higher mobile CPC (Cost Per Click) fees and the mobile carrier successfully augments an unsustainable business model (consumer pays all) for mobile data with a sustainable one (sponsor pays some).

While it is not as simple as that, this is the type of scalable play in which Google excels.

I would further speculate that this type of sponsored data API platform looks very appealing to other big ISPs, such as Facebook, Microsoft/Bing and Yahoo, any of which could launch their own initiatives.

I believe 2015 is going to be a big year for sponsored data as the new emerging business model for mobile data monetization. There are more sponsored data use cases in addition to the API/ad platform use case that will explode this space. I will be providing details on those use cases in my upcoming market research report “Sponsored Data”, which will publish in March. The report will include market drivers, trend predictions, key player analysis and forecasts. Specific report details will be published in the next few weeks.

Search Partners Next for Messaging Apps?

(NOTE: I originally published this post on LinkedIn Feb 4, 2015)

Don’t be surprised that within the next few months, you begin to see search engines — Google, Baidu, Yahoo and Bing — or a host of smaller ones — start to complete deals with messaging platforms. Why? Because both sides can make money from it.

In my most recent market research report, Messaging Revolution  I estimate there were 2.79 billion monthly active users on mobile messaging app platforms (non-SMS) in 2014. (NOTE: This number is not unique users, there is quite a bit of overlap, with a significant percentage of consumers using more than one messaging app monthly). I believe the number of global MAUs will continue to grow over the next few years, meaning messaging platforms offer a significant opportunity for search engines to increase engagement with consumers.

Messaging app platforms will become the conduit for our daily digital lives as they morph into game, media and social networking platforms. The amount of time consumers are spending on them is significant and will continue to grow. It makes logical sense that many consumers will find web search as a welcome and useful addition while they are engage with messaging apps. For search engines, this is extended reach. For messaging platforms, this is potentially significant revenue in the form of TAC (Transition Acquisition Costs)/royalties paid to them by the search engines.

Interestingly, none of the messaging app platforms I checked — Snapchat, Facebook Messenger, Kik, 5By, LINE, WeChat and Whatsapp — currently offer web search.