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.”