Tuesday, October 20, 2009

Monetization in Mobile

Image: TextMovers
Yesterday night's great Boston Mobile Monday had an interesting panel of speakers who were talking about Monetization in Mobile. The panel included a developer, carrier, OEM and a VC, perfect.
Anyway, the question on the table is, to me, a critical question to ask: How to build a profitable business in mobile?
The panel, IMO, went down the obvious path of:
  • Interesting content and services
  • Compelling, yet simple engagement
  • Powerful marketing, discoverability and distribution
  • Advertising is not it
All true, but, duh.
Duh because the free business model, as successful as it may be (is it?), should be viewed as a pathway to an upsell. That's the critical point people seem to forget. Users have money, and they are willing to spend it. On tickets, goods, experience, less so content but some, etc.
Once we figured that out, we come to the real question of, ok, how do you charge the user
  • In both scenarios: resident apps and mobile web
  • In a highly user-friendly way, that does not require you to pre-sign up on the web. Yes, I'm talking about a one-click checkout on-bill transactions. Like they had for years now with PayForIt in the UK.
If developers could answer that question, then the way the US mobile space looks would have been very different. Suddenly the Mobile option would seem like a money generating, obvious decision for marketers, who are today sitting on the fence. It's not to say app stores don't allow charging, and Apple just recently approved on-app follow-on charges. But it's not anywhere near being readily available mainstream technology.
What are the available options to bill the user, in the US, today? (this is my knowledge, please correct me)
  • Carrier billing
    Pros: very simple, user friendly and familiar checkout process. Does not require pre-signup on the user. Support for refunds etc.
    Cons: Expansive setup and recurring charges, to the degree that it is prohibitive for startups. Unimaginable transaction % left to the carriers. Service Guidelines (dictated by the carriers) change on a weekly basis (creating a massive engineering effort).
    • SMS Billing
      Pros: Works (almost) cross carrier. Users are comfortable and familiar with the SMS.
      Cons: see above.
    • WAP Billing
      Pros: Mobile web one-click Amazon-like experience, beautiful. Money savings (not sending premium SMSs).
      Cons: Definitely not cross carrier. Massive efforts required to maintain and add new services to conform with carrier guidelines.
  • Off-Deck billing
    The reason off-deck billing is very interesting is because in the US it has huge potential: In many world countries (the Philippines is a a great example), esp. where people's access to cash and banks isn't as easy, carriers identified the potential and provided mobile solutions for financial transactions, money transfers etc. In the US, there is a growing need for mobile financial solution, but the carriers do not have the silver bullet solution today. That's the definition of a gap that entrepreneurs can fill.
    • Pre registration solutions:
      So yeah, Amazon, Paypal, Google and others provide great solutions, with great payout as well. The only downside is that you either need to
      • Be a pre-registered member of the service: an Amazon signed customer, Google checkout, Paypal mobile etc.
      • Own and be willing to enter your full credit card details (including address etc.) on your mobile phone (these days, with an increasing number of phones that have full keyboards, it's not as bad).
      Bottom line: Mobile is about immediacy. If we can't enable real time access to shopping for a first-time user, it's a real limitation.
    • On the fly: I'm actually not aware of these solutions (enlighten me). On-the-fly off-deck solutions, to me, is exactly what is needed.
To summarize this long post (sorry), I think there is a gap in the US as far as mobile solutions for recurring user billing transactions. It could come from the carriers in the form of financially and technically reasonable ubiquitous solution (like PayForIt), or it could come from entrepreneurs who can figure it out as a service that plugs into apps and mobile sites.

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