By Nick Lane
Direct-to-consumer or off-deck was once conceived as a threat by European
mobile operators looking to safeguard the potential revenues generated from
content enclosed within their own portal. Along came a frog--supported by an
extensive cross-media marketing campaign--and the wireless operators looked on
in horror as their revenues started 'hopping' off-deck. Following the success of
Jamba/Jamster's Crazy Frog push, brands became increasingly frustrated at the
limitations imposed on their content by the on-deck model and started exploring
opportunities beyond the operator deck. Television, online and print campaigns
jettisoned into the mass media and spawned the short code and premium SMS
payment mechanisms that are prevalent throughout Europe today.
The U.K. operators have had to bear the brunt of the rise of
direct-to-consumer more than any other nation globally. In 2006, over 70 percent
of content revenues were off-deck. That figure is creeping toward 75 percent
this year, and looks set to hit 80 percent by 2010. But the extent to which
off-deck is wounding the mobile operators--in the U.K .in particular--largely
depends on their ability to adapt to this changing marketplace or face the
unfavorable label of dumb pipe.
Operator role
The role of the operator portal has come under scrutiny in 2007. Neil
Montefiore, CEO of Singapore wireless operator MobileOne, said earlier this year
that he expects operator portals to disappear. While Vodafone's live! portal is
still alive and kicking, the operator became disillusioned with the portal
earlier this year after disappointing traffic levels. Ultimately content sales
forced the operator to revise its portal strategy.
Vodafone is looking to address any perceived off-deck threat by embracing the
move to open Internet access and introducing flat-rate data pricing. In doing
so, Vodafone customers accessing live! will be greeted by a search box now
residing at the top of the home page. Vodafone's intention is to become a
gateway for the mobile Internet with a primary goal of becoming the Amazon.com
of the mobile industry. Vodafone intends to work in conjunction with off-portal
partners to drive the portal ecosystem, making not only its own content more
visible but off-deck content as well. For Vodafone, the change is a necessity if
it is to become a mobile Internet mega-mall facilitator, but one that risks
brand dilution. By working with content partners in an off-deck environment,
Vodafone is effectively maintaining an element of control beyond live!
Orange UK wants to alter consumers' preconceived notion of the mobile
Internet and to guide them toward what it calls "Internet lite," to reflect
users' tendency to "snack" on mobile content and services rather than use them
for long periods of time.
To this end, Orange UK has outlined its endgame of being "habit-forming",
with the ability to identify user behavior based on user profiling,
segmentation, personalization and recommendation. This process will start in
September when the U.K. operator will be able to segment its Orange World
homepage in 10 ways, including gender, age, race and device type.
Like Vodafone, Orange wants to embrace off-deck as means of controlling
off-deck content. The operator refers to the demise of the walled garden as
"deportalisation" but a more appropriate term would be the emergence of the
communal garden, where on- and off-deck boundaries are becoming increasingly
blurred.
By positioning themselves as guardians of off-deck content, both Orange and
Vodafone are inadvertently migrating toward a model similar to one that has
proved successful only in Japan--the i-Mode model.
U.S. embraces off deck
The off-deck movement isn't just happening in Europe. In the U.S., AT&T is adopting a similar strategy to Vodafone live! by forging close partnerships with off-deck content partners, though the pressure to tap into the lucrative off-deck market is not as essential as it is in Europe.
Off-deck in the U.S. remains immature, with some 25-30 percent of content
revenues generated beyond the operator portal. The growth of off-deck has been
highlighted by U.S. operator Alltel, which has seen 240-times growth in off-deck
content revenues between 2004 and 2006. Off-deck content now accounts for 20
percent of the company's total mobile content revenues.
Whether off-deck will play as large a role in the U.S. content market as it
is does in the U.K. remains to be seen. Given that short codes and SMS are not
as widely adopted in the U.S., on-deck revenues will likely remain more stable
in the near-to-medium term. However, adoption of the mobile Internet in the long
term could play a significant role in off-deck chipping away at on-deck
revenues.
Brands are also becoming increasingly savvy at selling their content off-deck
as the mobile entertainment market matures. What's more, brands will promote
their direct-to-consumer offerings more heavily to users, and will therefore
decrease the importance of the operator portal.
The big brands are taking this a step further and now pursuing convergent
strategies on- and off-deck, attempting to coordinate their activities so that
they can reach as many potential customers as possible, using their on-deck
location as a storefront for its off-deck site. For big brands, the likelihood
is that the smart content providers will continue to use both operator and
direct-to-consumer portals so long as operator portals continue to be an
effective channel.
And operators have the opportunity to facilitate this strategy provided, of
course, they have the back-end functionality to support this.
BREW's role
Qualcomm wants to position BREW as a key part of the off-deck market. The
company believes that brands will only invest heavily in mobile provided they
have a secure distribution platform, clear business model and auditable revenue
streams.
The off-deck strategy for BREW is founded on the delivery-based elements of
deliveryOne. Over time, Qualcomm expects to see the on-device experience of
uiOne blending with operator decks to create a more unified and intuitive
experience for consumers. The company is confident that uiOne will be a key
enabler for bridging the on-deck and off-deck, though today, uiOne is confined
to the on-deck experience.
But the off-deck market is reliant on services, such as search, mobile
advertising and community services. Qualcomm said that it is working to support
these elements with BREW and is willing to explore and support any partnerships
that will ultimately benefit the brands, wireless operators and subscribers that
are reached with an off-deck solution.
Qualcomm is confident that its long-standing relationships with wireless
service providers give it a clear understanding of challenges facing the
off-deck content industry. Success in this space will emanate from a
collaborative effort from all players in the value chain.
Nick Lane is principal analyst, Mobile Content & Applications, Informa Telecoms & Media.