Mobile Infrastructure Needs to Get Moving

Revenue leakage, insufficient marketing, and inadequate mobile operator business infrastructure rank high among the issues holding back the development of mobile commerce in Europe, according to a September survey of major mobile content providers. The Mobile Content Providers Confidence Study, conducted by Qpass, a U.S.-based provider of mobile commerce software solutions, revealed that 85% of mobile content providers believe operators are "constrained by poor or inadequate systems for mobile commerce." Moreover, 70% of content providers deemed this situation "unacceptable."

In the survey, content providers that provide premium content—which includes games, ring tones, and information offerings, to customers on both sides of the Atlantic—slammed European mobile operators for the inability to refresh, track, and charge for mobile content. In contrast, U.S. mobile operators, initially slow to join the mobile data revolution, have effectively leapfrogged their European counterparts in the implementation of flexible mobile payment systems.

A chasm has emerged between mobile commerce in the U.S. and Europe, notes Stephane Labrunie, VP of European sales at Digital Bridges, a European content provider that participated in the survey. "Europe is a very complex market for content providers, and this survey illustrates the huge challenge content providers face when getting content onto handsets across Europe."

The U.S. mobile content market has picked up speed while Europe has apparently reached a plateau with less growth on a monthly basis. Labrunie says that, "Although the European market still has huge potential for growth, it is currently difficult to realize this opportunity because the operators are asking themselves what position they want to take in the value chain and what resources they want to commit. On a more positive note, however, one trend we are seeing is that operators are moving from working with 15 or more content providers to a select handful, which should impact operators' bandwidth and the timescales involved in getting the games to market."

In the U.S., mobile content providers are confronted by fewer languages, fewer carriers, fewer handsets, and fewer billing systems than their counterparts in Europe. Moreover, the concentration around a handful of mobile commerce providers (like Qualcomm) also levels the playing field because content providers aren't stretched to deliver multiple versions of their content and integrate with a wide range of operator billing systems. "The tools and technology are in place for even a very small content provider to make money," observes Anders Evju, Digital Bridges' North American VP & GM.

Indeed, the root problem in Europe is the plethora of first-generation mobile commerce and billing solutions, which mobile operators have band-aided together over the years as they have grown or acquired service providers. These legacy systems, customized for voice calls, can only rate simple price plans based on minutes of use. Moreover, outdated legacy systems effectively force operators to process prepaid and post-paid user separately, splitting their content offers—and revenues—between the two. As a result, operators are limited to offering their prime content offers to post-paid users—a market that can be as little as 5% of the customer base. Lastly, legacy systems are unable to track and charge for individual services in response to market dynamics—making it increasingly difficult for operators to launch compelling content or pull unpopular content from the market quickly.

"It can be up to six months before we hear feedback from the operator/provider in terms of sales," observes Andy Fitter, a director at Morpheme Ltd., a U.K.-based provider of gaming content. "This can be an absolute nightmare," he says, because in the course of just a few months, a device's popularity may have already faded.

Without a real-time analysis of what flies and what fails, content providers are forced to build their business models by second-guessing fickle consumer tastes. Also because operators have little insight into content sales, they are limited in how they can promote it or differentiate it from other offerings within the mobile portal. "Our content sits alongside all the other content at the portal," Fitter explains. "It just doesn't get the push or the support we'd like to see."

These frustrations parallel the views expressed by most content providers in the survey. They ranked time-to-market for new content, a lack of real-time sales analysis, and inflexible pricing models as the key issues holding back consumer adoption of mobile content and mobile commerce services—and their own revenue growth. More than two-thirds of mobile content providers reported that it typically took longer than a month to release new content once a distribution agreement had been signed with an operator; 40% reported it took more than two months; and 25% more than three months.

"European mobile content providers are clearly struggling to work within the confines of first generation m-commerce platforms. They need to develop and promote products in real time, rather than taking months, as is currently the case, and extract sales information in real time, rather than being tied to a billing cycle," notes Ken Parkinson, Qpass' European sales and business development director.

Qpass' product is essentially an overlay to operators' existing business systems to manage mobile commerce payment and settlement, content partner relationships, service bundle creation, and customer care activities in their mobile or Wi-Fi networks. Qpass undertook the study of mobile content providers as part of a broader study of the European market in conjunction with its European launch of the Qpass Services Management software, a mobile commerce solution that has already been deployed by seven of the leading operators in the U.S.

"If mobile network operators (in Europe) are not provided solutions to these problems they will continue to hemorrhage revenues," Parkinson warns. "And the content provider community will feel it."