Russell Beattie

Check out this interesting article in the 3G newsletter:

According to a new study and analysis by NOPWorld (UK) in conjunction with Mobile Metrix (Sweden) the UK ring-tone market is worth over �60m per annum. Adults aged 15-34 spent �49.2m on logos per annum for their handsets and �90m per annum on SMS alerts. Colin Strong, Director of Mobile research at NOP comments "We would expect this to be significantly higher when taking into account kids spending (aged below 15 years)".

The study found that 32% of adults aged 15-34 years had purchased a ring-tone in the last three months, 21% had purchased logos and 20% had purchased SMS alerts. Whilst these figures are encouraging, take-up of services that are higher revenue generating for network operators was much lower with just 9% of 15-34 year olds having used e-mail to their mobile phone and 7% having played an SMS or WAP game.

One of the significant findings from the research is that the distribution channel for mobile services is very fragmented with no one player dominating. It also becomes clear that operators are by no means dominating the supply of mobile content and services with typically single digit shares for services such as ring-tones. According to Edward Nugent, Mobile Metrix the situation is unlikely to change as the entry barrier to provide mobile services is reducing and more players are entering the fray. Even though the market for mobile services is growing the fragmented nature of the distribution means that more players are sharing the revenue.

According to Nugent one of the most significant findings was the preference stated by consumers as to where they wished to buy mobile services. While half had no preference 54% of those that did express a preference stated retail outlets. This suggests that convenience can play an important part in the sales of mobile services.

Significantly over 60% prepay customers prefer retail outlet whilst network operators are preferred by only 10%. Interestingly preference to purchase from the network operator rises to 30% for post-paid users. So the more affluent the user, the more the retail channel is preferred. Colin Strong comments "The retail channel has proven to be a difficult one for the selling of these sorts of services. With the introduction of much better and higher value mobile services such as arcade games, polyphonic ring-tones the potential of this channel clearly needs to be developed.

It is clear that if mobile operators wish to dominate in the provision of mobile services to consumer they need to radically rethink their strategy. As in most industries the battle is in the distribution part of the value chain.

There's tons of good facts I can gather from this article. The one that grabs me is how no one business has become the defacto service provider for ringtones, logos and other mobile services. Neither the carriers nor smaller companies have figured out how to dominate. Compare this to the Internet when early on it was obvious that Yahoo was dominant and then now where Google rules the search engines. The fact that the field is open is encouraging, though I would pessimistically guess that this is only due to the operators not "getting it". Once they work out how to retain customers, they have the biggest advantage in this area controlling the services and for the most part the handsets that people use.

The second thing was the talk of how badly the retail channel is doing at marketing these services - which are only going to get more valuable now that Java games have arrived for real. I'm sure there are hundreds of companies converging on this right now, but it's interesting to me that I haven't seen the level of marketing in the shops on the level of say, rechargeable phone cards. Why not have similar cards for downloadable games? I buy a game card from a shop, scratch off a special number just like in pre-pay cards, dial it and receive an SMS message with a WAP link to download the game. That's the level of packaging consumers want. Think about it - this way you could give away the cards for Christmas, etc... Yeah, you could do this via "gift certificates" where the gift-receivers could go online and download whatever they wanted, but the marketability of game-only cards is what people look for.

Just my thoughts...

-Russ