A couple of days back the hottest news reported was that of the potential acquisition of WhatsApp by Facebook. Although both the companies have come forth subsequently and denied such an eventuality, it was a plausible story while it lasted. Facebook, with advertisement as a major source of revenue is not able to have a successful model around mobile devices – where they have lesser scope to place ads. Messaging could be the opportunity for Facebook and WhatsApp with billions of messages going through it is an interesting option (although business pundits indicated why it is not so).
To the people who are not in the know, there are indications that WhatsApp, an ad-free application for mobile devices currently delivers messages (text only, as well as, rich content) for free; all it takes is an Internet connection!
This has put the cash-cow service – Short Message Sevices (SMS / Text services) – in jeopardy of being the next service to be disrupted by an OTT service.
Pricing Is Still Relevant
While this interesting news about WhatsApp acquisition was being viraled on the feeds, I also had the privilege of being in a meeting with the Chief Executive of a European operator to whom I raised the question about messaging disruption caused by WhatsApp. He responded back by indicating that WhatsApp has not caused much disruption in his market! His explanation about why this is so was simple and interesting…
He explained that in his market, broadband connection is not offered as large bundles! When I asked him if he meant not offered as “unlimited”, he corrected me stating that he meant “large bundles”. This means that you may get a certain amount of free access to WhatsApp but beyond a point of usage you have to contend with the price point of having exhausted the basic bundle.
From his explanation, it was clear that smart pricing of base bundle and add-on bundle can really keep even free OTT services from disrupting indeed!
Of course, the operator should not have committed unlimited bundles or large-sized base-bundles in the market; othersie they will face the backlash of public opinion.
Apart from pricing, there is yet another way of keeping OTT from being disruptive too. This I came across based on a presentation by an Equipment Vendor. That discussion was about Multimedia Messaging Service (MMS).
MMS, unlike its glorious predecessor – the SMS, did not even take off. The world got WAP as a technology, but early experiences were often ersatz web experiences and suffered this comparison. The arrival of smartphones, GPRS, UMTS put paid to MMS as a service.
The Equipment Vendor had explained that they have the technology to host MMS System in a manner where it is possible for Operators to have partitioned use of the hosted infrastructure – a Cloud Based Model!
Whenever a service becomes commoditized in a market due to OTT disruption, if the operators in the market could get together and create a Cloud setup of this service from which they can deliver this service, it is possible that great economies of scale can be achieved and the infrastructure can compete really well with that of the free OTT service.
Can this model work?
No reason why it shouldn’t. In Australia, where Hutch and Vodafone compete with each other to provide mobile services, have been able to form the Vodafone-Hutchison Alliance (VHA) as a shared-services operator and have been able to operate even the Network as a shared entity!
The important learning from these two meetings that I got was that to overcome disruptive forces of Over The Top Service Providers, smart pricing and “cloudifying” the disrupted commodity can help Service Providers.