Revenue leakage a problem in off-deck areas: Study

By Gabrielle Kalika

May 15, 2008

The new hub-and-spoke

A new study claims that mobile digital commerce services will grow to $1.9 billion by 2012, up from $1.1 billion in 2007.

While digital commerce service providers' percentage share of the premium content market is forecasted to decline, growth in premium content categories will enlarge the overall market, according to MultiMedia Intelligence. Video will be the primary driver of growth.

“Revenue leakage is still an industry-wide problem across all geographic locations, especially in the off-deck space,” said Frank Dickson, co-founder and chief research officer of MultiMedia Intelligence, Scottsdale, AZ.

“It occurs in three different places in processing transactions,” he said. “Estimates are that as high as 10 percent of transactions result in leakage. Robust reporting, transaction transparency and predictive analytics are the three most common tactics that platform companies are using to combat the problem."

Digital commerce service providers process the financial transactions that monetize premium content from music, video and gaming companies over the wireless carrier’s network.

Carriers are enforcing Mobile Marketing Association guidelines. Off-deck providers have reportedly upset carriers such as Sprint Nextel with unprofessional market activity. Sprint responded by enacting strict guidelines, complete with penalties for content partners.

MultiMedia Intelligence expects that other carriers worldwide will adopt a similar policy to eliminate rogue off-deck providers.

Companies such as mobile analytics specialist Bango and OpenMarket, a division of Amdocs, are also attempting to address the revenue-leakage problem with innovative means, the market researcher said.

Carriers have been driven to taking such an aggressive attitude toward rogue mobile content providers by the high customer acquisition costs and revenue leakage issues in delivering content, MultiMedia Intelligence said. 

The company recommends following the MMA guidelines and keeping a civil relationship with the carriers due to their power in the mobile channel.

“The transition to an off-deck dominated content market is developing in North America,” Mr. Dickson said. “However, a stronger transition is stymied as the mobile content discovery and purchase process is still too challenging to consumers.

“Marketers need to provide user-generated content and community features,” he said. “This will not only increase the stickiness throughout the delivery chain enabled by the platform but will also facilitate discovery and recommendations.”

Comments on "Revenue leakage a problem in off-deck areas: Study"

1. Andy Bovingdon says:

   May 15, 2008 at 9:08am

   Frank has produced another great report – revenue leakage can be a major problem on mobile and one that is too often overlooked. But it’s a problem that is costing operators and businesses millions every year, not to mention the brand damage from associated customer dissatisfaction. Most problems can be linked back to commonly used Premium SMS payment systems which give no obvious instructions for use and lack clear terms and conditions or guarantees. SMS messages are also prone to delays, failures and misuse all of which result in significant loss of customers and revenues. These all result in significantly higher customer care costs for the carrier and the vendor, which is often not taken into consideration in the final revenue numbers.
   
   Most of the revenue leakage problems can be easily resolved with real WAP billing with direct operator billing connections (rather than a mobile web skin in front of old PSMS systems). All of the UK carriers have standardized on Payforit which delivers a simple, easy to understand payment flow through a set of consistent mobile web pages. It ensures reliable ease of use with clear T&Cs and is already showing higher customer satisfaction and lower service costs. Bango customers currently see refund levels well below 0.01% using Bango Payment compared to over 10% with PSMS. Payforit is clearly showing the industry where to go and Bango is already working with Sprint and AT&T in the US to deliver the same benefits to US consumers and vendors.