An addressable market of over 30 million is sure to attract the attention of many entrepreneurs, and indeed it has. The mobile value added service industry in Kenya generates billions in gross revenue annually, making bank for mobile operators, licensed providers and third parties who leverage connectivity infrastructure offered by the providers.
The nature of the business model is revenue share, meaning on any given transaction revenues are split either two or three ways with a bulk of the revenue for many services going the operator’s way based on the cascading volume model adopted.
The main ways users interact with services is by via SMS and USSD. SMS is the more common mode of engagement as it offers lower operating cost. The downside to SMS is the limited depth of interactions that can be built in without knocking off balance the service experience. USSD has higher operating costs with no revenue share and is therefore often used as a customer funnel. On mobile banking, where USSD has been widely adopted, costs are recovered from fees levied on customer accounts. On content subscriptions, the cost of engagement is often recovered from the first content item a consumer receives on subscription. The potential of voice, which in my opinion has higher ubiquity than SMS, remains untapped due to scalability issues. Over-the-top content (OTT) providers are a rapidly growing global phenomenon and I foresee, in the near future, innovation around how content and services are delivered and billed.
The industry is not without its challenges, top of which are illegitimate onboarding of mobile subscribers onto premium services and poor customer service. The mobile operators have done their bit by introducing service delivery platforms that sit between their infrastructure and that of licensed providers and their clients. This moat provides a first layer of management but this is not enough. I believe a second layer of self regulation is needed. There are global associations, such as the Mobile Marketing Association, with local chapters that ensure members follow best practice and therefore preserve the integrity of the industry. Supported by the Communications Authority and the mobile network operators these associations will flourish and ensure continued consumer trust, helping educate the market and weeding out rouge elements.
Mobile value added services can be applied across all sectors in business to consumer or business to business use cases. Best of all, you do not need to own and operate your own infrastructure.