Why should Telcos build their own digital service ecosystem?

Wednesday October 28,2015


Sundar Balasubramanian VP Products

Operators around the world are faced with disruption by new digital services. These include Over-The-Top (OTT) apps such as Facebook and Whatsapp that have helped drive adoption of smartphones and mobile data in some emerging markets. As a result, they capture the mindshare of first time smartphone and mobile data users. Some operators have been quick to recognise this trend and have even partnered with the OTT players to offer “lifestyle” bundles for social networking, messaging, photos etc. Is this sufficient?

Why build telco-branded digital services?

We at Lumata believe operators should go one step further and build their own digital service ecosystem, not just as a competitive response to OTT players. Here’s why.

While partnering with OTT players might help you grow the base in the short-term, you have no access to data on customer usage and behaviour within these apps. This data is gold mine and a source of competitive advantage for the OTT players. Your own apps will provide the means to build a rich profile of your base, augmenting what you already know about your customers with inferred interests. You can put this information to use while promoting your own services or monetise it with third party brands and advertisers.

Digital services also expand the engagement a subscriber has with you as a telco. The conversation can finally move beyond traditional voice, SMS and data services. An engaged subscriber is more likely to buy more products and services and stay longer as a valued customer. It’s also an opportunity to show that you understand and care for them by offering digital services that enhance their everyday lives.

Finally, these services can also be a source of new revenue. Let’s explore this further.

Who will pay for this?

Customers like digital content but they predominantly also like it free! This begs the question who will pay for these services. There are three potential models:

  1. Subscription/Pay-As-You-Go: This is similar to the current VAS model facilitated by operator-billing and subscribers are quite accustomed to how this works.
  2. Advertising: Once you build a critical mass of apps, plug them into an ad network or exchange to monetise with third-party advertising. Alternatively, you can also position the apps as the platform for subscribers to get rewarded with minutes or data bundles for watching ads.
  3. Partnerships: Strike revenue share or affiliate marketing deals with third party services for generating leads.

Yet another Whatsapp?

Let’s be clear. We are not advocating building clones for popular OTT Apps. Finding the right services for your customer base is hard work. Solicit feedback from your customers to find a fit with their needs. Based on this feedback, you then have to find areas where you can uniquely add value. For instance, a music or video on demand app is relevant only if you can differentiate from other such OTT services. If you can source local music content at a better price than any international OTT player like Spotify or get exclusive rights to content, you will attract consumer attention. Similarly, if you have exclusive access to a sports arena, team or sports content, you can package this into a unique service for your customers. Partner with government agencies to provide emergency response at the touch of a button, using real-time location information you can securely share with the agencies.

Unlike OTT apps, you already have a customer base where you can selectively promote the services through data-driven targeted campaigns. You can even incentivise install and usage of own-branded apps through loyalty programmes to drive home the message “the more of our apps you use the better it is for you as a subscriber”. Some apps will make the cut while others will not. Be prepared to fail fast and iterate at the speed of a digital startup.

Do you have the right tools for the digital world?

You may have realised by now that the marketing and automation tools you have used in the past may not be sufficient to manage, and more importantly exploit, data that will come out of these services. In the process of building your own digital ecosystem, focus also on building the tools that will help you target your customers in real-time with the right service, intelligently adapt the digital service to match individual subscriber profiles, incentivise them to actively use and promote your services, and last but not least, monetise the services to generate new revenue streams.

Outsource initial development to digital agencies who can build apps, acquire customers and monetise through mobile ad networks. Work with vendors who not only understand telco data but can also build you the data hub and recommendation engine for your specific usecases.

This might sound daunting – after all turning a telco into a digital startup is no small feat. Rest assured that you have been here before with content and VAS. Use those skills to identify and launch customer-centric digital services that your customers expect from you. At the same time, avoid the mistakes from VAS – collect and exploit data from usage of these services to build your self-sustaining digital service ecosystem.

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There is 1 Comment

Telco Digital service Ecosystem

Its a great insight you shared particularly driving in digital service ecosystem. I would love to be a part of your team representing Africa Emerging Africa market. Am from Nigeria.
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