Billing on Mobile

Yesterday Research In Motion launched its BlackBerry App World, in response to Apple’s App Store and expects approximately 1,000 applications to be posted on the store this week, including applications from the New York Times, Shazam, Bloomberg, Gameloft, Lonely Planet and MTV.

But with strong price competition amongst the Apple App Store’s 25,000 apps, doubts are being raised over whether developers can make money out of apps for these stores. Is the RIM app store likely to suffer the same fate?

According to MocoNews, the average cost of building an iPhone app is around $30,000, which is a small sum for a large media brand but is, of course, a more significant investment for a small development shop. Charmin, the toilet paper brand, sponsored the “SitOrSquat” app . It said the effort worthwhile even though the app has been downloaded only 1,600 times (between the iPhone and BlackBerry).

Mobile consultant and analyst Chetan Sharma sums up the hits-driven nature of the business this way: “One good application will get a boost on one day, and then it dies down the next. Then what do you do? It’s not a sustainable model for a company.”

We’d be interested in your ideas on app stores, are they the business model for the future? Do you think you’ll be making money from your bright idea?

By our Technology Correspondent - Dickie Siskin.

1 April 2009: Following the recent frenzy caused by recent announcements of LTE network technology and App Store, the mobile industry continues to push the technology boundaries with an announcement that looks set to revolutionise the mobile payments industry.

A new form of fast and reliable mobile payments has been launched today by SMS Aggregators. Known technically as PSMS, the new Pigeon Send Money Service uses the innate response of advanced homing pigeons to get the payment from the user’s phone back to the operator much faster than previous methods.

“The system is very simple to use,” explained Mike Thrush from the MPA (Mobile Pigeon Association). “The user selects the content on their mobile phone and then chooses how to pay. When they select PSMS, they simply locate the nearest pigeon and put the money in the conveniently located strap attached to the left leg. Once released, the pigeon will fly direct to Newbury, Hatfield, Slough or Paddington depending on the colour of the strap. At each mobile operator headquarters there are teams of collectors who empty the money twice a day.”

A Vodaflown spokesman, Al Grebe said: “We have installed thousands of new roosting spots at Newbury to make sure we can cope with demand. Each day our collectors take the money from each pigeon and assign it to the correct MSISDN (Mobile Subscriber Individual Sparrow Debit Number). During the trials they have collected a few eggs as well, so there is a real bonus to this.”

Under the new scheme called FlockToit, there will be very strict rules about how the pigeon must present itself to the consumer and it is not yet clear if they will have to display information about terms and conditions or bird-seed charges. “We are looking into printing this information straight onto the feathers using the latest non-toxic inkjet technology.” said FlockToit spokesman Steve Pipits from Oriole in Paddington.

Andrew Bird from mFlocks, one of the first AFIs (Accredited FlockToit Intermediaries) said: “This is a great step forward in P-Commerce as our customers have been demanding higher reliability than the old systems we used to use.” He added that the development continues on this exciting new initiative: “We are looking to use the other leg to carry the payment for data charges, as it is best to separate these from content charges.”

There have been a few teething troubles during trials, but a spokesman from Jay Mobile, Robin Dent told us: “We have lost a few birds due to over zealous hunters and these pigeons become known as uncollectables.” Stephen, a hunter living in the country near Newbury said in defence of the shooting fraternity that: “It’s very hard to tell a P-SMS from an ordinary pigeon; perhaps they should try rabbits instead.”

If you haven’t guessed already, you’ve been April Fooled!

Some recent stats from Bango show that only 5 countries in the Top 10 for browsing are also in the Top 10 for payments - USA, UK, Spain, Portugal and South Africa. 

Here are the reasons why one country may be a much better candidate for selling mobile content than another:

• Disposable income – the more disposable income people have the more they will spend on content.
• Ease of paying for content – can users easily pay on their mobile bill with one-click payment?
• There are cheap, flat-rate data plans that make browsing the mobile web affordable.

Being successful is not just about identifying the hot markets to focus on.  Here are some thoughts on what you also need to:

• Price according to the market – a $5 game in the US may only be affordable at half the price in a country like South Africa
• Get your content in front of your targeted audience using affordable mobile marketing programs.  This could be on-portal advertsing, search marketing through Yahoo! or Google, mobile advertising on third-party sites and SMS campaigns.

You don’t need all of these factors to have a market worth targeting. A classic example is South Africa, where the majority of the population don’t have large disposable incomes, but are avid mobile browsers and content consumers. For them, the only way they can get onto the internet is using their phones and they love it.

Do you have any other factors that you think influence a market? Let us know. Bango is always here to help if you need any advice.

App Stores for mobile phones do seem to be flavor of the month, judging by the announcements at Mobile World Congress this month.

Along came Apple and launched a highly successful iPhone App Store and now nearly all the major handset vendors - Nokia, RIM, Google to name a few - have or are jumping on the bandwagon.

This glut of mobile app stores is likely to confuse the market. I’m a developer, which store should I optimize my app for?

Whereas a mobile shop in the mobile internet removes a lot of the complexity of getting apps working across different platforms, devices and operating systems.

This is brilliantly summed up by Vic Gundoria, VP of Engineering at Google:

“You can build an application that spans devices if you use a modern browser. We’re seeing the emergence of a platform that spans devices. We don’t need to name it, it’s called the web.”

But Google don’t exactly walk the talk as they too have an app store for their handset but then I guess people will be expect that.

The other benefit of the web approach is you can integrate a range of payment methods into your mobile shop - on phone bill, credit/debit card and PayPal - and people always have a way to pay no matter where they are in the world.

Nearly all the app stores I’ve seen just support one payment method, limiting their market potential. You could call it financial suicide.

In this economy, all of us are looking at how we can save money. But we should also be looking at how we can increase revenue.

“Don’t leave money on the table that should be yours,” warned Anil Malhotra, SVP of Marketing at Bango. “Just as a bank may not always pass on interest rate improvements then make sure your billing provider does.”

Here are some hints and tips on how you can increase revenue:

Look beyond the headline rates quoted by your billing provider. It doesn’t take into account hidden costs such as chargebacks, transaction fees which may be hidden in the small print.

Consider speed of processing and connection reliability. There’s a direct relationship between incomplete payments and how long it takes the billing platform to establish the connection and process the payment. This should take no more than a few seconds.

A fast track payment flow, showing only the screens that are needed for compliance with local standards, means more people pay.

Doing this and other measures discussed in Bango warns content providers to look beyond the headline figures means you can increase your mobile revenues by 6 percent.

The risk of not doing this is potentially hundreds of thousands of dollars a year, depending on the size of your business.

If you are looking for a mobile billing solution and think that Premium SMS is the obvious choice for selling your mobile content then it’s probably worth taking a closer look at what other options you have. There are two things to bear in mind:

• What’s the user experience going to be?  A poor experience will reflect badly on your service.



• What’s the payment success rate or put another way, how many of my transactions are likely to fail?

The WAP payment flow is an evolution of the P-SMS  user experience, offering users a no-surprises, transparent experience much like the browse and buy experience you get on the PC internet.  Users can clearly see what they are buying, how much it costs and what the T&Cs are.

All of the UK operators now endorse the Payforit WAP flow as they believe it offers consumers a superior experience than Premium SMS.  US operators - Sprint, AT&T Mobility, Virgin Mobile and soon T-Mobile - also offer WAP billing as do most operators in Europe.

The failure rate with WAP billing is around 8% in the UK - 7% of which is users with insufficient funds according to Bango data.  In our experience just 1% of transactions fail because of problems processing payments. 

When you compare this with Premium SMS failure rates of 16% (recently quoted by a European network operator) you can quickly see how poor Premium SMS is compared to WAP billing.  Remove the 7% for insufflient funds and on average 9% of transactions fail, compared with 1% for WAP billing.

For anyone selling mobile services, Premium SMS means 9% of customers are fulfilled but not billed.  That’s right, they get your content for free!  With WAP billing, you only deliver the content once Bango has collected the money, plus you get more successful transactions. 

Premium SMS volumes have been on the gradual decline in the last year (down 23% from April to July 2008 according to one European network operator).  This is partly caused by loss of consumer confidence, the rise in complaints seen by PhonepayPlus and partly because some offending services have been shut down.   

Is it any surprises that more and more new mobile services use WAP billing rather than Premium SMS to charge for content?  What are your experiences with WAP billing?  We’d love to hear them.

Yet more bandages are being applied to Premium SMS based subscription services with the new rules introduced today by UK regulator PhonepayPlus.

The rules (detailed in Regulation of Mobile Phone-paid Services and their Marketing) aim to curb the abuses with subscription services where Premium SMS is the billing method. 

This will protect consumers from rises in bad practice by mobile content providers who consistently fail to adopt industry best practice.

I’m pleased to say that these new measures don’t apply to Payforit compliant services. Payforit is a mobile web payment flow endorsed by all the UK operators with pricing transparency and clear opt-in, opt-out regulations that prevent the sort of abuses that are still rife in Premium SMS based services.

The new rules say “as part of the prior permission undertaking, any consumer joining a subscription service must first receive a free confirmation text message detailing the cost and conditions of the service.”

The PhonepayPlus document says: “The requirement will not extend to services which use Payforit, whatever the cost, on the grounds that Payforit already provides a method of consumer confirmation.” 

PhonepayPlus received more than 8,000 mobile related complaints in 2007/8, a 108% increase on the previous year. This upward trend continued into 2008. Each month they receive close to 2,000 complaints relating to mobile content services. In 2008 54 mobile phone-paid services were fined in excess of £1.2 million.

It’s good that PhonepayPlus has brought in these strong measures - they not only protect consumers but prevent those of us who are working hard to adopt industry best practise through Payforit from being brought down by less scrupulous businesses.

The MMA code of conduct for mobile marketing provides a robust framework for the industry to follow. This means that all off-deck services sold in the US need to be MMA compliant. The code of conduct has recently been extended to mobile web services and WAP billing systems such as Bango’s mobile billing platform.

Here’s why WAP billing is good news for anyone selling mobile services:

More successful transactions – more money
Message based systems are prone to failure because some messages simply get lost in the operator’s network. Because Bango integrates directly with the operator’s own billing system, you’ll experience a higher conversion rate and more successful transactions.

In addition, as people are already in your mobile ‘shop’, you’ll benefit from more repeat sales as your consumers are bound to see something else they want and can buy there and then.

Bill your mobile marketing traffic
Now anyone responding to your mobile advertising campaigns (eg on-deck placement) or sponsored links in mobile search results can browse straight into your mobile website and pay directly on their phone bill. This means they no longer need to stop and send a text message to pay for the content.

This single, integrated ‘browse and buy’ flow generates more successful transactions and lets you fully capitalize on your hard working marketing dollars. Because the mobile web is without boundaries, brands often find users browsing into their sites from search engines, you need to take advantage of this free traffic as well to sell your digital content.

Transparent consumer experience
WAP billing gives your customers the same, familiar browse and buy model they see on the PC and on operator decks. So whether consumers are paying for a download or signing up to a subscription service, the process is familiar.

The payment page shows the merchant’s name, title of the content or service being bought price along with the price and terms and conditions, ensuring your customers fully understand what they are buying. They also get a clear cancel button should they not want to proceed.

Mobile websites can easily detect handset capabilities and only offer content known to work, ensuring the consumer does not pay for content they cannot access or use. You can also choose to use the Bango Identifier functionality to leverage the Bango User ID and personalize your site for each of your customers.

Lower support costs
Research from iGilliot and Qpass shows that when content is purchased using Premium SMS, refunds represent between 10-20% of mobile content sales. Bango’s statistics, however, show that on off-portal WAP sites refunds are much lower – no wonder WAP billing is being strongly endorsed by the operators.

With Premium SMS, the point of payment (sending the text message) and download (on a WAP page) are separated into two steps. With WAP billing, the point of payment and download are tightly coupled in one seamless WAP flow, leading to fewer errors and low refund levels.

Read the WAP billing guide to find out more how WAP billing delivers these benefits compared to Premium SMS and what the customer experience is like.

In our experience, not necessarily! When we compare the top 10 countries for mobile web traffic with the top 10 countries for mobile payments, then only 3 countries featured in both lists - the UK, USA and South Africa (November 2008).

What’s happening here is that mobile internet growth rates are way higher in countries where there isn’t a good fixed line network infrastructure. Countries like India, South Africa, Pakistan, Indonesia and Malaysia fall into this category.

India, with a population of just over 1.1 billion and lack of an established fixed phone line network, relies on mobile phones to stay in touch.

However, high activity levels don’t necessarily mean lots of financial transactions.  There are a number of reasons for this:

They’re just surfing the web - A higher proportion of people in these countries have no intention of buying any digital content through their phone, they are simply using their phone to get onto the web. Africa, in particular Nigeria, dominates international mobile phone access to the BBC’s news website.

Low disposable income - With the exclusion of the US and UK, the countries in the Bango Top 10 feature those with some of the lowest per capital incomes in the world.  It doesn’t mean they won’t be buying, it’s just that content needs to be priced low for that market.  In South Africa, for example, a game is 20 RAND (just under $2 when I did the currency conversion just now) but the same game will be priced at $4.99 for US consumers.

Lack of on bill payment - Enabling on bill payment is often difficult in these countries for one reason or another.  Low payout rates make it uneconomical for content providers to market to consumers in these countries.  Or, the need for operator approvals of all content to be sold, as in India, means its an onerous task to enable on bill payment - especially as there are over 10 operators covering this huge country.

From what we see of our customers, South Africa is the exception to the rule - there are lots of people surfing the moble web from a country with low fixed line infrastructure and low disposable income but you can create a great content business here.

Have you had any successes selling your digital content around the world?  Do tell us. Why not read some of the experiences of Bango’s mobile billing customers.

The best way of understanding the recent changes in mobile billing is to think of the mobile content industry as an oil tanker. Previously, it has been moving in a northerly direction in the Premium SMS sea. But the captain (think of mobile operators here) has given the order and now our oil tanker is moving westerly - towards the warmer climes of the mobile internet.

Like all oil tankers change happens slowly! So what has caused our oil tanker to change direction?

New mobile traffic channels have opened up - paying for on-deck links to off-deck sites and mobile advertising through Yahoo! and Google - so content providers are now acquiring customers through the mobile internet rather than via PC web affiliate programs. Quite simply, a quiet revolution is taking place in the way that media companies and content providers engage with their consumers and sell content.

Marketing is now more precisely targeted at consumers ready to purchase with sales made through WAP billing. The UK oil tanker registered in London started changing direction in 2005 and is now moving full steam towards WAPland. The good news is that the US oil tanker is now moving in the same direction - towards a MMA compliant WAP-based mobile subscription service.

Bango’s mobile billing service provides a seamless consumer journey and eliminates the need to send text messages to make a purchase. It offers a safe buying experience for consumers - the price, subscription time period and T&Cs are clearly displayed on-screen before consumers click to purchase.

A recent update to the Bango mobile subscription service provides an API so content providers can immediately see the status of all their subscriptions.

“Bango re-bills consumers on their behalf once the subscription period has finished, notifying the user by text,” said Anil Malhotra, SVP of Marketing at Bango. “Using the Bango API, content providers get up-to-date information on the status of each subscription which is invaluable as they measure the conversion rates of their mobile marketing.”