As a relatively new market with rapidly evolving technology and different players in its value chain, mobile data has a wide variety of payment sharing practices. Not surprisingly, how much of the end consumer revenue stays with each value chain participant depends heavily on relative market power and value-added attributes.
Factors that can vary the allocation of revenue among the different players include:
- The mobile operator’s strategic objectives.
- The brand equity of the content, which in many cases is a function of the size of the non-mobile audience for the content. Content providers with a strong franchise in the brick and mortar world, like East African Breweries and CocaCola, can capture a higher percentage of the revenue than content that is less well known.
- Number of intermediaries. Direct to consumer content provisioning is likely to leave content providers more of the revenue stream than models that heavily involve 3rd parties such as PRSP’s (premium rate service providers) providing marketing and billing functions. However, these functions still need to be performed, and obviously have associated costs.
- Competition from other delivery modes. Downloading songs over the air from a mobile operator such as Safaricom on their Safaricom Live portal is only one of several ways to get music to listen to while on the go.Consequently, mobile operators in other regions are passing on as much as 85% of the download fee to the music publishers and rights owners.
- Regional effects. Different regional practices, particularly the degree to which mobile operators control content delivery, can affect revenue distribution.
Designer/developer business models
Given the relative short period of time in which there has been an active mobile data market, and the low number of different players and types of players in the market, the business models adapted to the African market are poised to evolve.
A lot depends on the type of content, and there is no one “best practice.” However, looking at the situation from the perspective of the content designer/developer, there are a few different models will dominate as common practice.
- Development for hire.
This is the simplest model, and is used in situations where, for example, a large content owner might see an opportunity for a mobile game based on a licensed character, but does not have the internal capacity to develop the game and optimize it for different mobile platforms. The content owner will hire a studio to create the game for a flat professional fee or time-and-materials, and will deal with the rest of the distribution chain itself. The Leti Games team of Wesley and Eyram are perfect candidate for this type of model. Leti has released Kijiji with two versions for the Iphone and J2ME handsets.
- Revenue sharing through publishers.
This model gives the designer/developer the opportunity to share in the rewards, if the content turns out to be particularly popular. Revenue sharing can be managed different ways, but a common one is for the entity that collects the revenue from the consumer—the mobile operator, for example, or an off portal retailer—to pass the revenue up the chain to the publisher, retaining an agreed-upon margin. The publisher then pays the designer/developer and any other parties to the transaction, such as a hosting service.
- Direct to consumer.
This model typically pertains to larger designers/developers, who have established a consumer brand identity with other products. In this case, the designer/developer will typically have a desktop and/or mobile website to promote and sell content directly. Say Royal Media Services or the Nation Group had a digital division that created game titles or other content to match societies mood, they would get much higher payouts as they have access to media and numbers.
- Advertising supported
Advertising is still a relatively new factor in the mobile space. Product placement in mobile content is one of the more promising avenues for incremental developer revenue. Some large companies could commission developers to create mobile content for promotional purposes, contests, etc., but a more common practice is for operators to follow something more like the television network model. An example would be the Ministry of Tourism commissioning a game that will be sold in the diaspora and markets that they are targeting for tourism with local hotels and lodges buying space or property on the game.
Another spin would be to work with ad sales partners like ScanAd or Mc Cann who have a large potential advertiser pool and can sell this inventory to appropriate advertisers by developing opportunities for ad content placement