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T H E D O L L A R S
S E N S E O F
C O N N E C T I V I T Y
OGILVYRED
THINK SERIES
VOLUME 2
MARCH 2016
AND
2
Meanwhile, Gens X, Y, and Z probably don’t
give much thought to the word, if any at
all. The difference in perspective exists for
many reasons, but the primary one is the
fundamental shift in the definition, scope,
and impact of telecommunications. This
report will explore the brand and marketing
opportunities presented by that shift and
cite potential scenarios for leveraging it.
BOOMERS
BABY
THE WORD “TELECOMMUNICATIONS” MAY CONJURE
LANDLINES, ANALOG DESK SETS, AND POSSIBLY
EVEN A SHOE PHONE.
FOR
3
WATER ENERGY.
MOBILE CONNECTIVITY’S EXPLOSIVE
GROWTH IN THE PAST 15 YEARS HAS
MADE IT AKIN TO A UTILITY, LIKE
Telecommunications corporations
have essentially become utility
companies, providing something
that people need rather than
something they simply want for
entertainment, or to connect
with family and friends, perform
transactions, and do their jobs
on the go. With this in mind, it’s
interesting to note that access
to mobile devices worldwide is
growing much faster than access
to many of life’s bare essentials.
or
4
DIGITAL TRANSFORMATION IN ACTION
Source: World Development Report 2016: Digital Dividends, The World Bank.
%ofthepopulation
100
80
60
40
20
0
1990 1995 2000 2005 2010 2015
ON THE ONE HAND, that’s a
sobering trend, dictated by the local
availability and quality of internet
service, not to mention the would-
be customer’s financial wherewithal
(what devices and service can they
afford?). At the same time, access
to baseline necessities (clean water,
sanitation, energy) tends to rise
with the tide of increased mobile
connectivity. This is illustrated
well in places such as India, China,
Russia, and sub-Saharan Africa,
where mobile service and access
is growing rapidly, but not as well in
poorer developing nations.
Mobile broadband
Internet
Mobile phone
Improved sanitation
Secondary school
Electricity
Improved water
5
By 2020, mobile technology will reach an
estimated value of $4 trillion worldwide,
which represents more than 4 percent of the
global Gross Domestic Product. Two factors
are driving the expected growth, in a simple
supply-and-demand equation: increased
mobile access among people who have
never been connected will produce more
(paying) subscribers to existing services,
and the drive to create more services to
meet the rising demand.
THAT MOBILE TECHNOLOGY CAN BE A FORCE
FOR GOOD — AND NO DOUBT WHATSOEVER
THAT IT IS AN ECONOMIC FORCE.
THERE’S LITTLE DOUBT
“Access to the Internet is a
fundamental challenge of our time.”
- Mark Zuckerberg, Founder of Facebook
2,346
2008
3,210
2012
4,470
2019
2,798
2010
4,191
2017
3,636
2014
2,569
2009
4,020
2016
3,463
2013
4,596
2020
3,013
2011
4,336
2018
3,838
2015
(Millions)
UNIQUE SUBSCRIBERS BY REGION
Asia Pacific
Commonwealth of Independent States
Latin America
Europe
Middle East & North Africa
North America
Sub-Saharan Africa
Source: GSMA: The Mobile Economy, 2015
6
IN SHORT, mobile connectivity can
provide the means to fulfill fundamental needs, like
healthcare, education, and social interaction, as well
as to utilize advanced services such as financial
support, business information, real-time navigation,
and banking and commercial transactions. But giving
more people the ability to live more efficiently and
increase their personal wealth is just part of mobile
connectivity’s promise. The growth of machine-to-
machine (M2M) communication has created billions
of new connection points among the internet of
things (IoT), from smart-home devices (thermostats,
fridges, televisions, etc.), to connected cars and
agricultural machinery. More connection points
means more interactions, which in turn creates more
brand and marketing opportunities.
This produces yet another
potential economic driver: The
network of connection points is
growing exponentially, and with
it the demand for more data
bandwidth and IP addresses, as
well as lower latency.
7
GLOBAL MOBILE DATA TRAFFIC
(Per month, PB)
2013 2014 2015 2016 2017 2018 2019
Source: Cisco VNI Global Mobile Data Traffic Forecase Update, 2015-2020.
1,480
2,523
4,175
6,765
10,666
16,140
24,314
8
While continuing to be
profitable businesses, carriers
face an increasing challenge
to financially support (e.g.
through investments) the
increasing demand for data and
voice services. Infrastructure
costs in developing markets
are dropping, thanks to the
development of more efficient
hardware. But that’s just one
part of the economic equation,
and carriers now face a
conundrum. The increase
in demand creates more
connection points and data,
which in turn require more
infrastructure.Thefundamental
problem is that the increase in
demand doesn’t guarantee the
returns necessary to justify the
investment in infrastructure
growth. This is especially
true because many of the
new users (that is, the people
and businesses creating the
demand) that carriers would
like to bring online are low-
income. Carriers rely on a
certain average revenue per
user (ARPU) not only to make
a profit but also to invest in
infrastructure to ensure growth.
Things start to unravel if
users are ultimately unable or
unwilling pay for the increase
in connections and data
bandwidth at the carriers’
required rate.
9
While the benefits of connectivity
are well documented, actual
access, together with the desired
bandwidth and data for mobile
devices, is restricted by a diverse
set of factors. They range in scale
from personal (an individual’s
ability to pay for service) to
infrastructure (insufficient reach
and bandwidth, and regulatory
constrictions). A complex network
of industry players has built the
infrastructure to enable wide-
spread access as well as the
required bandwidth. At the core
of this network sit mobile carriers,
or Mobile Network Operators
(MNOs), that typically own the
end-consumer relationship for
businesses and individuals.
10
For non-telco brands and marketers,
everything noted to this point provides
important context for their ultimate goal:
to engage with customers on their mobile
devices. However, the marketing industry
still struggles with finding the right value
offer to a customer, value which would make
consumers engage with a brand. Marketers
have struggled with developing the right
engagement mechanisms for existing users
(mobile display ads only take you so far and
don’t yet leverage the creative potential that
mobile broadband offers). The emergence
of a new audience presents an additional
challenge, one whose solution is highly
unlikely to be found by traditional means.
And so, marketers should not
simply apply legacy advertising
mechanics to a fundamentally
new engagement ecosystem. New
strategies are required to leverage
mobile connections in a more
meaningful and effective way.
11
This paper, the second in the REDThink
series by OgilvyRED, acts as springboard for
companies, vertical markets, and brands, which
will directly or indirectly benefit from enhanced
connectivity around the world. It will draw a
high-level picture of the current ecosystem and
its constraints. It will also highlight innovative
concepts currently being used to meet the
challenge of providing internet accessibility
through mobile broadband. We hope to provide
thought starters for carriers as well as for
marketers on how to think about new ways
to create winning propositions that benefit
customers, carriers, and other members of the
connectivity ecosystem.
12
1
WHO’S CONNECTED,
WHO ISN’T,
AT WHAT COST?
13
1
7 B I L L I O N
Regardless of which source you believe — the United
Nations or the U.S. Census Bureau — the world population
stands at about 7 billion. Mobile broadband has emerged as
a standard utility in technologically developed markets, but
elsewhere it is scarce to nonexistent.
14
THREE GROUPS
People who are connected to
the internet and use its services
People for whom internet service is
available but unaffordable (due to
prohibitive data costs for instance)
Those who are unconnected
THIS MEANS THAT THE UNIVERSE OF
THE INTERNET BREAKS DOWN INTO ROUGHLY
O1
O2
O3
The latest available research
indicates that the number of internet
users worldwide grew from 1.6
billion in 2008 to 2.9 billion by the
end of 2014. This means that more
than 4 billion people — or about 60
percent of the world population —
are unconnected. About 10 percent
to 15 percent of the latter group live
in remote and/or badly impoverished
places, where internet service simply
doesn’t exist.
Current estimates put 3G coverage at
5.2 billion people worldwide. However,
only 2.5 billion people are connecting
to the internet. This means that while
another 2.7 billion people may have
access, they are not using it.
15
Mobile costs hit poor
nations the hardest. As
a result, people decline
data plans, and carriers
lack profits to improve
networks.
THEBITE
OFMEGABYTES
Brazil
China
U.S.
Turkey
India 39.25
15.2
13.2
12.83
8.79
HOURSWORKEDTOPAY
AMOBILEPHONEBILL
India
Brazil
China
U.S.
Turkey
1,240
355
200
76
286
HOURSWORKEDTO
PURCHASEASMARTPHONE
India
Brazil
China
U.S.
Turkey
57
43
77
96
49
%OFSMARTPHONEUSERS
WITHADATAPLAN
Based on Minimum Wage
Sources: McKinsey, ITU, Nielsen,
Forbes August 2015
16
But even in developed markets,
the ability to pay for connectivity
is neither a given nor factored into
household budgets. Consumers
are very conscious of their data
allowances and turn to wifi as
often as possible.
Consider the statistics:
Among the smartphone-dependent
population of the United States, 51
percent of users report exceeding
their mobile plan’s data allowance;
among those people, 15 percent say
they “frequently” tap out of data.
It’s safe to conclude that restrictive
allowances are a significant
bottleneck for people who rely
heavily on mobile-data usage.
About 20 percent of smartphone
users say they considered it a
financial burden.
AFFORDABILITY AND DISCRETIONARY
INCOME ARE FUNDAMENTAL DETERMINING
FACTORS FOR BEING CONNECTED.
In developing nations,
17
In many cases the costs are
“invisible.” If a user has a contract
that charges $60 a month for up
to 6GB of data, a 360MB game
app costs $3.60 for the download
alone. Streaming Netflix for an hour
under the same plan, at a medium
download rate, costs about $7.
The people who complain about the
high cost of using a smartphone
are not simply whining. With the
widening income gap and major
carriers increasingly targeting high-
income customers with plans that
cost $60-plus a month for a single
device, a significant portion of the
population in developing markets is
very self-conscious as to when they
use their data plan vs. tapping into
the increasing amount of free wifi
options. This situation is projected
to worsen, as more devices per
household become connected at the
same time that the per-household
cost of connectivity increases.
18
THE BOTTOM LINE IS that the cost of
being connected is a significant
line item in the household budget
-- one that proves prominent on
consumers’ minds to the extent that
it can potentially be prohibitive to
certain segments of the population.
19
2
WINNERS
LOSERS
MOBILE-CONNECTIVITY
ECOSYSTEM
IN THE
20
2is in some respects a social
equalizer, in many ways it
benefits some more than others.
To understand this apparent
contradiction, it’s helpful to know
the three basic components of, or
players in, the mobile-connectivity
ecosystem:
WHILE MOBILE CONNECTIVITY
21
INFRASTRUCTURE PROVIDERS,
AND IN PARTICULAR,
CARRIERS.
Carriers — also called telcos or
providers — play the most pivotal
role in the ecosystem. They include
such companies as Vodafone,
Verizon, Airtel, Claro, Singtel, and
SK Telecom. The carriers’ power
(and thus their value) derives from
acquiring or licensing access to
the infrastructure that connects
consumers with providers of
services and content. The providers’
primary function is the very thing
that enables mobile connectivity.
They operate the network and
provide the access point for devices
and consumers.
O1
22
PROVIDERS OF
SERVICES AND
CONTENT.
This diverse group includes services
such as entertainment companies
(Netflix), finance and payment
services (PayPal), information
providers (news outlets, directories,
maps, traffic), educational products,
ecommerce outlets, OTT messaging
or social media platforms. While the
majority of interactions of services
and content involve actual consumers,
there will be a dramatic increase in
machine-to-machine (M2M) protocols
as more “objects” beyond mobile
devices go online (see IoT). To date,
content and service providers have not
played a key role in providing access;
rather, they have simply relied on the
connectivity supplied by carriers, to
serve consumers.
O2
23
CONSUMERS OF
SERVICES AND
CONTENT.
“Consumers” is a bit of a misnomer
in this context. For the most part, in
the mobile-connectivity ecosystem,
the term applies to individuals,
businesses, or government entities
that benefit from the services
provided. Consumers have paid
carriers for baseline connectivity,
and occasionally for access to select
services, based on the providers’
service model. With the advent and
growth of the IoT — essentially,
machines connecting to the
infrastructure — we expect a dramatic
increase in the exchange of data
between machines in the IoT to either
individuals (this is called an M2P
interface) or machines (as mentioned
above, this is an M2M connection).
O3
24
INFRASTRUCTURE
CONSUMPTION SERVICES & CONTENT
Education, Health Care, Navigation,
Entertainment, Cities, Financial
Services, Messaging & Social
Individual, Business, IoT
Carriers, Infrastructure Providers
CONSUMERS OF
SERVICES & CONTENT
25
are multidimensional and
well documented on several
geographical scales: local, city,
regional (often, rural versus
urban), and national.
The extent of a nation’s mobile
connectivity, and the benefits
arising from that connectivity,
depends on many factors.
Figuring into the equation are
things such as the size and
health of a nation’s economy
(often, as measured by the GDP
and per-capita income); literacy,
poverty, and employment rates;
technological progress; and a
variety of socioeconomic and
cultural factors, such as racial
and gender equality and access
to healthcare.
THE BENEFITS OF
MOBILE CONNECTIVITY
“Around 400 million people in the last
year got a smartphone. If you think
that’s a big deal, imagine the impact on
that person in the developing world.”
- Eric Schmidt, Executive Chairman, Google
26
In developing nations with low connectivity, programs to increase connectivity can show dramatic
results. For instance, access to information and transparency about political instability, nutrition, the
environment, and living conditions can help predict the outbreak of an infectious disease. A nation’s
agricultural production and economy can improve quickly when mobile connectivity gives farmers
access to information about such basic things as weather forecasts and commodity prices. Villages and
communities that emerge from isolation thanks to mobile connectivity are often able to introduce better
health and education programs.
27
In developed nations, the benefits of higher bandwidth may seem more trivial, providing
such luxuries as access to video streaming or graphics-and-data–intensive mobile
games. Higher bandwidth can also instantly improve productivity in businesses that
rely on data-heavy formats. Research by companies such as Google and Huawei
estimates that “increasing the internet connectivity by 10 percent in a country increases
the GDP by up to 1.4 percent.”
28
Smart cities constitute another
focal point of development, with
the promise of faster predictive
emergency response, more
efficient energy management,
better traffic control and more
effective municipal servicing.
29
HIERARCHY OF
CONNECTIVITY NEEDS
basicaccess
developedmarkets
highspeed,lowlatency
developingmarkets
ENTERTAINMENT
BASIC PROVISIONS (UTILITIES)
AUTOMATED LIVING & BUSINESS
EDUCATION
BUSINESS INFRASTRUCTURE
HEALTHCARE
EXTENDED INFORMATION ACCESS
30
The many potentially profit-generating benefits
to a company also include access to a larger
group of consumers/customers outside of
their direct physical reach as larger groups of
the population connect more frequently.
At the company or business level, Verizon
predicts that some of the world’s top
corporations could become 10 percent more
profitable by 2025, if they use IoT products
and solutions intensively.
31
2GREATEST
CHALLENGE
TO THE ECOSYSTEM?
What is the
32
If the benefits of greater mobile
connectivity and bandwidth are all but
guaranteed, it’s fair to ask why the
services aren’t universally available.
The answer is complicated. To achieve
greater coverage and meet increased
demand, carriers must invest significantly
in infrastructure. They must do so in a
highly competitive environment, with new
carriers entering the market, questions
about consumers’ ability or willingness to
pay for the voice and data services, not
to mention government regulation and
taxation. Despite all of the variables, one
thingisforsure:demandisandwillcontinue
to increase rapidly, so not investing in the
delivery system (spectrum acquisition,
hardware and cell sites, 5G infrastructure)
is simply not an option.
4G3G
GLOBAL MOBILE BROADBAND POPULATION COVERAGE
22%
0%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
34%
0%
43%
5%
2%
50%
56%
11%
66%
19%
73%
26%
76%
35%
81%
44%
84%
50%
86%
56%
86%
60%
86%
63%
Source: The Mobile Economy 2015, GSMA
33
— in some cases, with significant investments.
In the U.S., T-Mobile’s recent network upgrades
reportedly cost $4 billion. That’s just part of
category-wide capital expenditures (CapEx)
expected to reach $1.4 trillion globally by 2020.
Not surprisingly, there is risk associated with this
kind of capital outlay. An analysis of 45 carriers
by the telecommunications research firm Ovum
published in 2014 found a CapEx increase of 3
percent year-over-year but revenue growth of
just 0.6 percent. According to Ovum and GSMA,
the largest association of mobile carriers in the
world, the industry’s compound annual growth
rate (CAGR) between 2014 and 2019 will improve
to as much as 2.5 percent. In past years, that
number reached as high as 4 percent.
The low return on investment puts
pressure on carriers to find new ways
to increase revenue, which is tricky
in a market that is still developing,
highly competitive, and that faces
increasing costs to comply with new
government regulations.
CARRIERS ARE RESPONDING
34
(US$ BN)
TOTAL GLOBAL REVENUES
(US$ BN)
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
1,029
1,085
1,148
1,244
1,321
1,382
1,124
1,200
1,284
1,353
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
161
183
216
233
236
250
198
229
233
244
GLOBAL MOBILE OPERATOR CAPEX
Source: GSMA: The Mobile Economy, 2015
35
In developed markets, carriers are
struggling to justify consumer-service
pricing. Criticisms include a lack
of transparency and a bias toward
wealthy users, which invites scrutiny
by consumer-advocacy groups. The
core financial issue, which we alluded
to earlier, is whether investing in new
infrastructure will provide sufficient cost
savings and revenue enhancement to
offset the decline in consumer pricing.
For now, the answer appears to be “no.”
36
Accordingtoonereport,providers’total
cost of operations (TCO) for mobile
broadband networking is projected
to fall by a factor of three through the
year 2018, while selling prices per GB
of data are projected to fall by a factor
of 10. Increased competition in the
marketplace contributes to the falling
revenue. The unbundling of long-term
service contracts and phone subsidies
is driving an increase in churn rates in
developed markets. Hence, carriers are
increasinglyseekingnewrevenuesources
beyond simple data-plan charges.
EBITDA Margin
GLOBAL PROFITABILITY FOR CARRIERS
Source: GSMA: The Mobile Economy, 2015
36.6%
36.4%
33.5% 33.5%33.3%
34.9%
36.9%
Q1-Q3
2008 2009 2010 2011 2012 2013 2014
237
SUPPLY
DEMAND
The
EQUATION
38
Let’s look at sticking points and solutions
on both the supply and demand sides.
SO, HOW CAN CARRIERS
ADDRESS THE MARKET CHALLENGES?
39
In the mobile market, supply consists
primarily of the carriers and their
services, as well as the adjacent
supplier infrastructure. With lower
data rates in developing markets and
higher churn rates in developed markets,
ARPU is decreasing.
SUPPLY
O1
40
which they are seeking to capitalize on
by replacing unlimited data plans with
tiered plans. Interestingly, carriers are
now adding service contingents (e.g.
free usage of messenger platforms)
for additional fees on top of their tiered
plans to capture incremental revenue.
In urban areas, however, larger carriers
are facing competition and a decreased
demand for data services, as new
companies offer wifi solutions. At the
same time, infrastructure sourcing
is becoming more complex and
competitive, also due to the entrance
of new companies to the market. They
are offering higher bandwidth with
lower latency, and also more readily
employing new technologies — satellites
and drones, for example — to introduce
connectivity in developing areas.
CARRIERS IN DEVELOPED
MARKETS ARE SEEING AN
INCREASE IN DATA CONSUMPTION,
41
Traditional carriers are also facing
competition from significant players,
such as Google, that are providing
direct-to-consumer data solutions
as mobile virtual network operators,
or MVNOs. Currently MVNOs are
addressing certain segments in the
population with specific needs (e.g.,
low-cost, specific long-distance
destination calling etc.). They do
not necessarily provide the largest
network or best bandwidth. However,
more players besides Google with
significant market access might be
testing their way into this market soon.
42
Regulation and taxation can also be an issue;
generally speaking, they vary greatly depending
on market and do not support a highly innovative
business environment.
Faced with slowing revenue growth from voice
and text services, carriers are seeking new
sources of income through value-added services,
or VAS. Over-the-top (OTT) providers, such as
Skype, WhatsApp, and Line currently own this
competitive environment. Carriers are responding
now with a GSMA supported platform called RCS
(Rich Communications Services). This platform
allows carriers to offer similar services as OTT
messaging providers (e.g., image or file sharing
and VoIP), but without having to tap into the data
allowance of the consumer. The success of this
platform is likely going to succeed or fail with the
quality of the user experience.
OTT messenger platforms
43
Demand for basic connectivity
and increased data is driven by
three factors:
A significant increase in consumers
being connected to voice or voice/
data services.
A significant increase in the number
of connected devices in the IoT.
New services requiring higher
data bandwidth (video and games,
for instance) and lower latency
(connected cars, for example).
DEMAND
O2
O1
O2
O3
44
Ericsson predicts mobile data usage
will grow more than tenfold by 2021,
with video streaming accounting for
almost 70 percent of traffic. The vast
majority of the so-called next billion
— that is, masses of new users — will
go online via mobile devices. GSMA
estimates 1 billion new mobile users
over the course of the next five years
until 2020, which represents an
increase of 27 percent from today’s
3.6 billion users.
(PB per month)
VIDEO FUELING STRONG
MOBILE DATA GROWTH
Source: Cisco VNI Global Mobile Data Traffic Forecase Update, 2015-2020
Web/data
File sharing
Video
Audio streaming
2,523
4,175
6,765
10,666
16,140
24,314
2015 2016 2017 2018 20192014
45
not only because of the increase in new
users, but also because data-intensive
services grow as connection speeds
increase, and people become more
comfortable with smaller screens (which
is definitely the case). From a consumer
perspective, video is by far the No. 1
driver for exponential growth in data
demand.
At the same time, the growth of the IoT
will produce more connection points and
data exchanges. According to Cisco,
by the year 2019 more than 10 billion
devices will exchange an estimated
35 quintillion bytes of information per
month. (We don’t have room for all of the
zeros here, but for the record, a quintillion
is a million raised to the power of 5.) You
heard about the traffic jams in New York
when the Pope visited? That’s going to
be a picnic compared to the radio-wave
congestion caused by the increase in
connected devices in the IoT.
DATA DEMANDS
WILL INCREASE
46
So, consumers need more bandwidth,
and 5G is part of the answer. In fact, 5G
is even more important to industries such
as healthcare and driverless cars. 5G
promises to reduce latency and increase
data speeds to the extent that autonomous
cars will be able to make driving decisions
in milliseconds based on real-time
information from a variety of sources
around them.
47
3
TACKLING
CONNECTIVITY
CHALLENGE
HOW ARE INNOVATORS
the
3
The connectivity market place is
complex, and challenged. But it is
equally obvious, that the benefits
of enhanced connectivity and
increased access to the internet
are tremendous and desirable.
The logical conclusion is a market
that sees a great amount of
innovation both from incumbents
as well as new entrants.
48
ACCESS SPONSORHIPS
O1
CARRIER SPONSORED ACCESS AND DATA
BRAND/PROVIDER SPONSORED MODELS
DIRECT-TO-CONSUMER INFRASTRUCTURE
1.1
1.2
1.3
LOCAL EMPOWERMENTO2
IOT
O3
FINANCIAL SERVICES
O4
49
In any case, zero-rating certain
data packages provides a
fundamental pillar for later
business opportunities. Since
consumers, by definition, don’t
bear the cost of zero-rating
service, it is covered by either
carriers, brands or content
services. Let’s look at various
sponsorship scenarios.
Typical access sponsorship is
making use of a practice called
“zero-rating,” which means
providing access to certain
content or services at no charge
to the consumer. Zero-rating,
if misused, draws scrutiny and
sometimes harsh criticism, as
evidenced by the controversy
that surrounded Facebook’s
recent attempt to introduce its
Free Basics service in India.
ACCESS SPONSORSHIPS
ACCESS SPONSORSHIPS CAN COME IN A VARIETY OF FASHIONS.
O1
The majority of access sponsorships are underwritten by
the carriers, which provide limited data and bandwidth for free.
In some cases, this free data
is used to gain a competitive
product advantage, as T-Mobile
did with Binge On. In other cases,
fronting partners provide content
for free but have agreements with
the carriers not to charge for the
engagement, as is the case with
Facebook’s Free Basics.
Either way, carriers have
an incentive to zero-rate
in order to enhance their
product, engage users
who will eventually pay for
services, and upsell existing
subscribers more expensive
data plans.
1.1
ACCESSANDDATA
CARRIER-SPONSORED
50
ACCESS SPONSORSHIPSO1
ACCESS SPONSORSHIPS
51
FREE BASICS/
INTERNET.ORG
O1
Launched in developing markets
to provide free low-bandwidth
connectivity. Content developers
are welcome to provide their
products via Free Basics at no
cost. As a business tool, it works:
about 50 percent of Free Basics
users upgrade to paid data plans
after their initial free trial expires,
providing carriers with a base for
subscriber acquisition.
O1
52
Launched in 2012 and reportedly
now reaching 600 million people
in 60 countries, Wikipedia Zero
provides free access to its content.
Data is positioned as educational,
and access is being paid for by
about 80 carriers who believe
there is a halo effect on their
brands by being associated with
an ostensibly educational effort.
WIKIPEDIA
ZERO
O2
ACCESS SPONSORSHIPSO1
53
T-MOBILE U.S.
BINGE ON
Following the success of its Music
Freedom initiative, which lets users
stream music services like Spotify at
no cost, T-Mobile launched Binge
On. It enables subscribers to watch
low-bandwidth (480p) versions of
certain video services over their
network. Services include Netflix,
Hulu, and HBO Go. T-Mobile hopes
to pick up more subscribers, but
there’s a hitch: the current service is
under scrutiny as a violation of net-
neutrality, because only select video
services are offered.
O3
ACCESS SPONSORSHIPSO1
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APP-BUNDLED
DATA PLANS
Strictly speaking, this is not a zero-rating
practice, since consumers do have to pay
for them. Providers, however, such as
Singtel in Singapore, are offering prepaid
data plans that include free (up to a daily
limit) use of prechosen social or messenger
apps, such as Facebook, Line or WhatsApp.
The consumer essentially pays a flat fee
for all data used by the specifically chosen
app. Interestingly but not surprisingly, the
free use of WhatsApp does not include the
use of its VoIP solution for voice calls. Cell
C and other African carriers are pursuing
similar offer packages.
O4
ACCESS SPONSORSHIPSO1
In some cases, content
companies will pay carriers to
compensate for the increase
in data usage.
1.2
SPONSOREDMODELS
BRAND/PROVIDER
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ACCESS SPONSORSHIPSO1
56
to a limited set of Google
services (search and Gmail),
but are prompted to pay
if they surf “too far away”
from the original property,
but executing multiple click-
throughs from a single
search. Google reimburses
carriers for Free Zone access.
App developers can be
incentivized to co-sponsor
content access through
“free data,” and Google is
charting the technological
waters for certain Android
apps to provide “free access.”
A recent report noted that
Google’s version of zero-
rating goes beyond a one-
off deal, allowing developers
to create apps that live on.
Google also offers sponsored
access via Google Free Zone,
where users have access
India’s largest carrier, which
also has significant presence
in Africa, recently confirmed
that it is launching Airtel Zero,
which will allow companies
to buy data in order to offer
their apps to consumers at
no cost.
ACCESS SPONSORSHIPSO1
O2O1
57
&
ACCESS SPONSORSHIPSO1
O3
program (non-Prime members
can still access the entire
content catalogue for a
rental fee per movie/show),
and Amazon has found a
new outlet to acquire new
Prime members on the fly,
so to speak.
Amazon Prime members are
now able to stream Amazon
Prime video content for
free over JetBlue’s inflight
network. It is a win-win deal
for the companies. JetBlue
is offering an extremely
competitive entertainment
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ACCESS SPONSORSHIPSO1
O3
on its head, by rewarding
consumers with free data for
clicking on ads. The mCent
app provides over 30 million
consumers access to free
apps. For each app trial that
consumers undertake they
are granted free data, paid
for by the app advertiser. This
model enables advertisers,
which include app developers
Zynga, Hulu, Saavn, and Kakao
to create a trial with a well-
documented but previously
unengaged audience. Jana
has integrated the system
into the billing systems of
311 carriers in 93 countries.
Used almost exclusively in
developing nations, this is
essentially an advertising
platform for marketers
and brands to engage
with consumers via their
mobile devices. The model
works around a well-known
impediment to the success
of mobile advertising, namely
that consumers know that
clicking on ads will count
against their data plan. Jana
has turned this principle
59
passing along the cost to
the advertising app/brand.
Opera has also introduced
a sponsored web pass,
which enables consumers
(especially, first-time mobile
users) such things as a
free day of mobile-internet
usage, or a free hour
on Twitter. Advertisers
sponsor these offerings.
Through a feature called
App Pass, carriers provide
subsidized data access to
applications. Carriers can
present app offers through
the browser, allowing cost-
free use of the apps, albeit
for a limited time. Carriers
decide whether they want
to provide this access for
free, and capitalize on it
with their own brand or
by generating revenue by
ACCESS SPONSORSHIPSO1
O5
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Another way to provide
access is based on an
ad model where the
advertising revenues pay
for access through wifi.
1.3
INFRASTRUCTURE
DIRECT-TO-CONSUMER
ACCESS SPONSORSHIPSO1
LINKNYC
This ambitious project will provide New York City
with free, super-high-speed wifi in all five boroughs.
LinkNYC is being built by a newly founded company
called Intersection. The company builds digital
billboards that double as wifi towers. The project is
funded by the advertising revenue from these digital
billboards (OOH). Intersection and the City of New
York will share this revenue. This project allows
users to dramatically reduce their data usage while
in the city (and thus potentially the revenue for
carriers) and it allows tourists from outside of the
country to omit roaming fees for data services. The
first “links” have already been fired up, and the group
expects to have over 2,000 installed throughout the
city within a year.
O1
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ACCESS SPONSORSHIPSO1
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LOCALEMPOWERMENT
Especially in developing
markets we are observing
a variety of projects to
provide basic accessibility
by empowering local
groups to establish self-
sufficient access points.
O2
LOCAL EMPOWERMENTO2
Tone is a OTT service which
provides a platform to locally
empower communities.
It provides connectivity
and service in previously
underserved regions. One
such empowerment program
is mFish, in Indonesia. Tone
is providing a kit to local
fishermen that includes a
phone, an educational set,
and a SIM card for a local
carrier. The data is not free,
but it comes at a lower rate for
a promotional period to allow
the fishermen to understand
the value of having access
to services such as GPS,
local weather, fish maps and
chat functionality. The idea
is that the service will pay for
itself, and thus be “free,” by
enabling fishermen to realize
cost savings by running their
business more efficiently.
Just as importantly, mFish
overcomes the challenge
of digital literacy with an
educational introductory
kit. This allows local NGOs
that work with Tone and
the carrier on the ground to
educate the fishermen on
the usage of the phones. The
kit also comes with a solar
power-based charger for
the phone to overcome any
electricity shortages. Local
NGO employees also have the
opportunity through Tone’s
software to directly chat with
the fishermen and support
them with any queries.
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O1
64
Tone reinvests 20 percent of
profitsinsocialandenvironmental
initiatives. Carriers are paying
Tone a portion of the data
revenue for this acquisition effort.
The government subsidizes
the original infrastructure – for
instance, the cost of installing cell
towers – through a fund to which
local carriers contribute.
This Gilat Satcom offering provides
internet infrastructure via a private
satellite network to what the company
calls a nano-ISP. Examples of nano-
ISPs include schools, shops, and
churches, where the carrier installs
hardware to receive the satellite
signals. The carrier resells the signal to
nano-ISPs for a very low cost. Prices are
expected to be as low as $1 a month,
and the network is designed to scale
up. It thus enables local entities (nano-
ISPs) to become small businesses.
65
LOCAL EMPOWERMENTO2
O2 VILLAGE ISLAND
66
allowing locals internet access and real-time
upstream and downstream data sharing
to optimize the supply chain to the local
kiosks and measure the efficiency of power
generation. In addition, this connectivity allows
for a range of other services to be considered,
such as real-time medical information sharing
or access to market prices for agricultural
products. EKOCENTER is run as a social
enterprise, meaning it combines philanthropic
and commercial interests of Coca-Cola and
its partners. For Coca-Cola, there are not
only clear, tangible benefits (increased sales
inpreviously undersupplied regions), but also
intangible benefits to generate positive brand
impact with stakeholders and consumers.
EKOCENTER
At Mobile World Congress 2015 (MWC),
Ericsson and Coca-Cola revealed the
“EKOCENTER” project, which is intended to
bring safe drinking water, solar energy and
mobile connectivity to communities in the
developing world. EKOCENTER is a modular
community market (kiosk) that is run by a
local entrepreneur and supplies basic goods
and services to underserved communities.
Functionality that can be added beyond safe
water, electricity and connectivity to jump-
start community development includes social
facilities and entertainment; power generation
for charging phones; cooling/refrigeration
of vaccines; education opportunities; and
much more. Connectivity is fully integrated,
O3
LOCAL EMPOWERMENTO2
This company addresses the lack of
energy availability in certain parts
of some developing nations, which
ironically are within reach of service
but unable to use it for lack of a
power source. Intelligent Energy thus
addresses two essential elements of
connectivity: network availability and
power. Intelligent Energy develops
portable fuel cell systems that can
remotely power phones without access
to “the grid,” thus overcoming another
large barrier in developing countries
that are struggling with energy more
than with connectivity provisioning.
67
LOCAL EMPOWERMENTO2
04
68
IOTINITIATIVES
O3
69
When it comes to connecting the internet
of things, the most prominent efforts from
a consumer-facing perspective seem to be
made in the area of connected cars. AT&T
just announced a major deal with Ford to
bring more than 10 million connected cars
to the street within 5 years. AT&T also now
allows users to add their car as another
device in a data plan. While adding a car still
comes at the cost of a monthly fee, Tesla is
offering 3 years of free connectivity to AT&T’s
3G network within its innovative EVs. Carriers
including Vodafone and Deutsche Telekom
are creating models similar to AT&T’s.
CONNECTED CARSO1
IOT INITIATIVESO3
IOT INTEGRATION AT SCALEO2
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IOT INITIATIVESO3
Many major carriers have announced and
piloted IoT connectivity platforms aimed at
specific verticals. Telefonica, AT&T, Verizon,
Deutsche Telekom, Orange, Telstra and
others are tackling topics such as smart
cities, connected homes, health tracking,
manufacturing and even cattle tracking.
In some instances, these platforms have
been built for a certain vertical or challenge,
while in other examples they are a direct
collaboration with a specific brand, such as
Coca-Cola or Nestle. At the moment, neither
of these platforms seems to drive significant
revenue compared to the core business, and
remains an innovation opportunity rather
than a scalable business play.
71
FINANCIAL
SERVICES
O4
72
Arguably, the industry that has embraced
mobile accessibility the most and made huge
strides is the financial services industry –
specifically providers of payment solutions,
credit/lending services and insurance,
particularly in developing nations. In this
space, start-ups, established banking players
and carriers are working together to provide
these services. Vodafone’s m-pesa service in
Africa, India, and Eastern Europe is one of the
more prominent and successful examples of
this. In 2015 in South Africa, the local bank FNB
offered its customers pre- and post-paid cell
coverage. It currently uses a specific carrier’s
cell towers, but says it is open to expanding to
other carriers as well. The service is a natural
extension of the bank’s financial services
business, which includes a rewards program
and mobile bill-pay capability.
FINANCIAL SERVICES CARRIER INTEGRATIONO1 WITH
FINANCIAL SERVICESO4
73
(2001-2014; year-end)
NUMBER OF LIVE MOBILE MONEY SERVICES BY REGION
2001
1
2002
1
2003
1
2004
4
2005
5
2006
6
2007
10
2008
16
2009
38
2010
66
2011
116
2012
174
2013
232
2014
255
As of December 2014, there
were 255 live mobile money
services in 89 markets.
Sub-Saharan Africa
South Asia
East Asia & Pacific
Latin America
Middle East & North Africa
Europe & Central Asia
Source: GSMA: The Mobile
Economy, 2015
DELIVERING THE BUSINESS CASE AND ROADMAP TO BUILD
A MOBILE COMMERCE PLATFORM IN EAST AFRICA
MOBILE CONSULTING FOR GLOBAL CPG
74
Through in-depth market
research, OgilvyRED was able to
convince local carriers in Africa
that their mobile payments
system should be evolved
from a peer-to-peer system
to a system that allows for
payments at retailers. Costs for
the SMS, that were required to
make payments, were absorbed
by the carriers. This in return
created brand preference for
these carriers in a market, where
consumers would typically carry
multiple SIM cards.
Furthermore, mobile payments
were introduced for payments
along the supply chain from
distributor to retailer. The
risk of fraud and simple cash
theft was mitigated and all
transactions could electronically
be accounted for.
75
4
WHAT IS
OPPORTUNITY?
the
76
As carriers are trying to identify new
sources of revenue and potential investors
in the ecosystem, there is an opportunity
for companies and brands to step in to
collaborate for success. Beneficiaries
differ based on the region and their state
of technology maturity. Some (few)
companies might be looking towards
becoming connectivity providers with
direct contact to the end consumers of
such services.
But the majority should probably be
looking at opportunities to create value
for the company through sponsorship or
subsidizing deals. Third-party platforms,
such as Jana and Opera Max, have already
shown success by tapping into this
space to garner advertising dollars. The
challenge with this model will be whether
pure sponsoring can be a sustainable
tactic given the relatively negative
sentiment towards advertisements
among consumers.
Meanwhile, verticals that will benefit
from a more connected ecosystem
through IoT are starting to form alliances
with automotive and manufacturing
companies. While Verizon and AT&T are
currently focusing much of their attention
on connecting mobile devices to their
networks, both appear to be placing
greater emphasis on IoT connections and
management.
77
MOBILE-ENABLED PRODUCTS AND SERVICES IN THE DEVELOPING WORLD
Source: GSMA: The Mobile Economy, 2015
Note that others include disaster response, energy access, green networks, midentity, NFC and smart cities
PRE 2009 2009 2010 2011 2012 2013 2014
0
200
400
600
800
1000
1200
1400
Health MoneyLearning Others
78
4
WHY
BRANDS
SHOULD
CARE
79
BRANDS ARE STILL STRUGGLINGwith
how to engage with consumers on
mobile devices beyond buying media
to gain click-throughs. This model is
quickly becoming outdated in a new
era of consumer behavior. Simply
put, mobile users dislike the current
mobile-advertising model, and are
rejecting it by not clicking through.
Companies planning to enter the
connectivity space for branding
and marketing purposes have to re-
evaluate how they can produce value
for their enterprises beyond ad clicks.
80
This new way of thinking and acting as
a marketer does not obviate the need to
establish and move toward a commercial
goal, albeit with greater transparency
to consumers. Brand benefits do not
necessarily have to be directly tied to
revenue or margin (tangible benefits). They
can also provide intangible (emotional,
psychological) benefits. It also may
not be limited to individual companies
making investments in providing access
and connectivity, as it is likely more
economical to form consortiums or
industry associations.
“BRANDS THAT DO: BUILDING BEHAVIOR BRANDS,”
In its paper
OgilvyRED explains how modern brands take action to create value
instead of just asserting the brand’s message and raison d’étre.
The basic tenet is that marketing is a service that delivers
real consumer benefits, such as mobile connectivity.
81
4TANGIBLE
BENEFITS
82
THROUGH LONG-TERM
BUSINESS MODEL INNOVATION
For example:
TANGIBLE BENEFITS
New pricing, new revenue
sources, new product pipelines.
Bringing the next billion online
will create a huge market for
direct-to-consumer offerings.
Increased levels of income will
improve consumer ability to pay
for incremental goods.
Fundamental cost-structure
enhancements. In healthcare,
for example, better data may
be voluntarily provided by
patients (mobile users) to help
healthcare providers with risk
assessment, to reduce the cost
of insurance products.
O1 O2
83
DIRECT REVENUE INCREASE
THROUGH INCREASED SALES
TANGIBLE BENEFITS
For example:
Through mobile commerce and
direct-to-consumer sales. For
example, fast-food restaurants
could own car connectivity, and
the in-car screen for preordering
when driving near restaurants.
By increasing sales outlets,
as the Coke EKOCENTER
example illustrates.
Product bundling and co-
marketing, as shown in
the collaboration between
JetBlue and Amazon Prime.
O4O3 O5
84
TANGIBLE BENEFITS
Through efficiency gains achieved
with better value-chain visibility,
decreased cost of acquisition, and
decreased cost of advertising.
In the example of mFish, in
Indonesia, brands get direct and
highly targeted access to specific
groups, directing acquisition
investments to the precise
audience for a brand.
By capturing government
subsidies or tax breaks.
With more efficient customer
servicing rerouting calls to
messaging services using
Facebook Messenger as a
customer service outlet.
O7O6 O8
For example:
BY INDIRECT
BOTTOM-LINE CONTRIBUTION
85
BY INDIRECT
BOTTOM-LINE CONTRIBUTION
TANGIBLE BENEFITS
By enhancing business decision-
making capabilities, such as
demand-based pricing on the fly,
or using real-time data analysis.
Insurance companies, for
example, could tailor premium
pricing in real time according to
data they can collect if they “own”
the consumer’s connectivity.
11
For example:
(CONTINUED)
By providing mobile connectivity
to previously unconnected users.
Direct marketing through OTT
services such as WhatsApp
are especially relevant in this
case. Messenger platforms are
increasingly being used not just
for communication but also as
transaction touchpoints (e.g.,
WeChat).
Through an increase in
customer base and brand
exposure, using physical
or digital trials, such as
Jana has.
1009
86
4INTANGIBLE
BENEFITS
87
Increase perception of brand as a digital and
contemporary leader. Brands that have previously
not been perceived as technology leaders can
gain advantages. In agriculture, for instance,
technology is making vast strides to enable better
decision-making, with such simple products as
mobile weather forecasting, and data-gathering
and data-analysis tools.
Improved positioning vis-a-vis indirect stakeholders,
such as governmental bodies, NGOs, and supply
chain partners (see Coke Ekocenter).
Using mobile connectivity to enhance
consumers’ perceptions of brands
as innovative and service oriented.
For example, Tesla is now updating
its cars’ operating systems through
a 3G connection, which frees owners
from having to schedule a service
appointment.
Allow consumers to see brands as
beneficial to communities, as Coke has
done with the Coke Ekocenter.
CAPITALIZE ON
BRAND DIFFERENTIATION
INTANGIBLE BENEFITS
For example:
01
03
02
04
88
By driving an innovation
agenda and introducing
opportunities for first-time
mobile users to test and
learn about a product.
Through talent acquisition
and retention.
By building a company’s
capabilities, exposing it to new
technologies, and introducing it
to new partners.
INCREASE COMPANY
FUTURE PROOFING
INTANGIBLE BENEFITS
For example:
05 06 07
89
4BARRIERS
KEY ISSUES
SOLVE
to
90
Net Neutrality
91
NET NEUTRALITY
According to Wikipedia, “Net neutrality…
is the principle that internet service
providers and governments should
treat all data on the internet the
same, not discriminating or charging
differentially by user, content,
site, platform, application, type of
attached equipment, or mode of
communication.”
The moment that companies (whether
they are brands, social platforms, or
carriers) provide access to content
for free or for a lower price than other
services, the issue of net neutrality
kicks in. The aforementioned example
of Facebook’s attempted introduction
of Free Basics in India illustrates
this point precisely. The message
to marketers is that any potential
opportunity or proposition must
be vetted to ensure that it does not
discriminate by limiting access to a
single provider, or by allowing access
to a single competitor’s product.
Services like Jana have solved this
equation, since it can be used to
access any content or service.
O1
92
Transparency of Business Models to the Customers
93
TRANSPARENCY OF BUSINESS
MODELS TO CUSTOMERS
The mobile connectivity ecosystem
is not considered by consumers to
be transparent. Companies that
want to enter the ecosystem should
make transparency a priority, to
avoid alienating consumers or
attracting the scrutiny of regulators.
Consumers are not easily fooled
and understand the popular phrase,
“If you are not paying for it, you are
the product.” Examples of success
through transparency include
Tone, which makes it clear that the
company is making money from
the mFish solution. This is tolerated
and even appreciated by consumers
because they perceive mFish as
beneficial to the community due
to the (transparent) way it has
structured deals with the carrier and
government. In the United States,
Google Fi is showing carriers what
it means to communicate with
their customers in a simple manner
about pricing, avoiding jargon or
hidden fees.
O2
94
Digital Literacy and Relevancy of Offers
95
A key obstacle for many developing
markets is digital literacy. People
are often not aware of the benefits
of the internet, if provided through
mobile devices, which are not
affordable to large parts of the
world’s population. Educational
campaigns need to start here, and
should not assume that everyone
would be online if they just had
access to a connection. The second
obstacle is that it takes training to
become familiar with navigating
the offers and services including
the pitfalls (e.g. spam, data
security). The simpler the offer and
value proposition, the better. Last
but not least, many services have
not been fully adapted into local
context (language, data speeds).
Especially in developing markets it
cannot be assumed that English is
the spoken language. Any service
which adapts to local language
and available bandwidth will have a
clear advantage.
DIGITAL LITERACY AND RELEVANCY OF OFFERS03
96
5
THOUGHT
STARTERSWHY SHOULDN’T WE...
97
the car’s telematics data. Healthcare
providers could sponsor connectivity
for underserved communities in
exchange for using the data to move
from reactive to proactive prevention
mechanisms.
By sponsoring access in highly
frequented areas, companies could be
granted exclusive access to data that
is being collected within these areas,
allowing for dynamic pricing or product
adjustment concepts. Think about an
insurance company sponsoring all
mobile access along highways, and
thus being able to monitor real-time
traffic behavior and adjust premium
pricing accordingly. An insurance
company could also simply pay for the
car’s data contract, taking that burden
off of the consumer in exchange for
TAKE ADVANTAGE
RETURN ON INSIGHTS (DATA)
THAT MOBILE CONNECTIVITY PROVIDES
of the
01
“One of the myths about the Internet of Things is that
companies have all the data they need, but their real
challenge is making sense of it. In reality, the cost of
collecting some kinds of data remains too high, the
quality of the data isn’t always good enough, and it
remains difficult to integrate multiple data sources.”
— Chris Murphy, Editor, Information Week
98
If the healthcare industry could
monitor compliance of medication
intake in a real-time manner, it
would be able to save billions in
post-symptomatic treatment costs
by preemptively improving positive
outcome rates. Connected pillboxes
are making a slow entry to the
marketplace, but there are currently
no scaled concepts in place to provide
them free of data cost or to sponsor
the data it takes to communicate with
healthcare providers or caretakers.
USE MOBILE CONNECTIVITY
INTAKE OF MEDICATION
02
to monitor
compliance of
99
SOCIAL ENTERPRISE CONCEPT
TO INCREASE BRAND IMPACT
CPG/FMCG companies in particular
struggle for differentiation because
of the broad exposure of their brands
and products. Becoming a sponsor
of connectivity or empowering local
communities through, for example,
helping to overcome digital literacy
barriers, could significantly boost
their value proposition beyond the
product, and create a more favorable
selling environment. Think about a
CPG company helping local women
to become small business owners
as resellers of data plans, or simply
providing them with access to
information to build new communal
marketplaces. Or, consumer brands
might sponsor the local adaptation
of non-native content and services
into the local language and data
ecosystem.
Use the
03
100
RETAILERS
As carriers are connecting more and
more devices, is there a chance to
become a retailer for more than just
phones and tablets? What if household
appliance manufacturers or home
electronics companies sold their
goods through the ecommerce sites
of carriers?
04
CONSIDER CARRIERS
as
101
Carriers already bill for data plans to
their customers, and some (though
few) other regular billing activities
can be processed through these
carrier bills. Are there efficiency and
convenience gains to be conceived
by integrating other regular billing
activities (e.g. utilities, media
subscriptions) through a carrier’s
system? This would potentially allow
for a more comprehensive data view
of individuals’ financial transactions
and would also provide acquisition
opportunities for subscription-based
models (especially if these services
are based on data usage).
05
FINANCIAL SERVICE COMPANIES
CONSIDER CARRIERS
as
102
As we are connecting more and
more devices, including our cars,
will these brands be selling us
connectivity and data plans as
well connecting into a multitude of
carriers in the background through
soft SIM cards? What if major
marketplaces or financial service
providers become MVNOs? This
would let them take ownership of
consumer/customer data, contact,
and reward activity, directly,
through sponsored data.
06
MVNOs
CREATE NEW
103
SPONSOR
ACCESSACCESS
CONTENT
With the advertising industry
struggling to find meaningful
ways to engage consumers on
their phones, could content and
the sponsorship of access to
content become positive value
components in the lives of the
consumer and the brands?
Consider, for instance, the
WhatsApp video channel from
Coca-Cola bringing consumers
exclusive World Cup video
coverage, free of data charges.
07
104
Any company that already has or
is looking into opportunities to sell
directly to consumers might have
an interest in expanding its potential
customer base by providing them
with free access to their mcommerce
sites. Could marketplaces like OLX,
eBay or Amazon or a consortia of
brands look into creating unique, “free-
of-charge” DTC offerings, providing
more convenient and potentially more
cost-effective ways for consumers
to shop on their phones or tablets?
This model could become especially
interesting if carriers were paid for
data-based on revenue share instead
of fixed per-MB pricing.
ENABLE
E-COMMERCE
08
more
105
Messenger apps (Whatsapp, FB
Messenger, Line, Kik, KaKao Talk)
have seen a massive surge in person-
to-person traffic. Some of these
platforms (e.g. FB Messenger) have
already openly started to use their
platform for business-to-person
communication, opening the system
up for customer service channels or
even machine-initiated messaging
(access or confirmation codes, etc.).
Given that messaging is moving
towards more video-based platforms,
brands might innovate their customer
service experience through video chat
functionality, with the chat traffic paid
for by the brands themselves.
USE MESSENGER SYSTEMS
CUSTOMER SERVICE
09
to
provide
106
If brands engage in larger-scale
provisioning or sponsorship of
accessibility, should governments
not provide them with tax breaks as
the brands are actually creating a
community service?
10
PROVIDE RE-COMPENSATION SCENARIOS
GOVERNMENTAL INCENTIVES
through
107
Loyalty programs are struggling with
creating proper value exchange to
promote for repeat engagements with
their underlying brands. In developing
markets, loyalty programs have long
embraced “airtime” as one of the most
coveted currencies to their consumers.
Can data plans for connected devices
not simply be paid off with loyalty
points? If a customer can pay for taxis
in New York with American Express
Membership Rewards points, why
can’t the same customer have an
American express phone that is paid
for via American Express purchases
made with the mobile payment option?
Why could frequent flyer programs not
cover roaming charges with mileage?
11
LOYALTY PROGRAMS
BETTER INTEGRATION
for
PROVIDE
108
With communities or public/private
partnerships providing cities with
“free” wifi services that still need
individual authentication (e.g.,
LinkNYC), can companies with
preexisting accounts (Amazon Prime,
Facebook, carrier accounts) not
automatically pre-authorize access?
And if these companies tracked
movements through these networks,
are there relevant offers they could
provide in context, e.g. transportation
subsidies by knowing when and where
their customers are traveling (“Ikea
just sponsored your subway ride to our
store”)?
12
FREE ACCESS PROGRAMS
with
in cities
INTEGRATE BRANDS
109
13
INCREASED ACCESSIBILITY
through
ENGAGE IN GLOBAL TALENT DEVELOPMENT
Certain industries (e.g., software, tech
sectors) are struggling to grow and
identify the right talent going forward.
If increased connectivity means more
access to education, can there be a
long-term investment goal to bring this
connectivity to regions where talent
will most likely be sourced in the next
10 to 20 years?
110
Parts of the world are or will soon be
struggling with ways to better serve an
aging population. If accessibility and
connectivity mean better education,
improved medical care, and potentially
higher mobility, should a consortia
from the public and private sectors
not invest in overcoming certain levels
of digital illiteracy and provide people
with generation-specific services
independent of a person’s financial
capability? Ogilvy & Mather Singapore
worked with Singtel to redesign the
functionality of a smartphone that
was then distributed to Singapore’s
aging population. The restructuring
dramatically simplified the phone’s
interface and functions, allowing less
digitally savvy customers to take
advantage of basic functions such as
games, camera and emergency calls.
14
AGING, CONNECTED POPULATION
to serve anPOSITION BRANDS
111
CLOSING
THOUGHTS
112
Not really.
Certain institutions have demanded “the
internet” be considered equal to basic
life requirements like air and water. But
this does not mean that the internet
is equally as accessible and abundant
(after all, clean water is certainly not
ubiquitous or always free). It still requires
an enormous amount of investment to
keep the internet infrastructure operating,
and the cost for this is not as easily
redistributed throughout the complex
ecosystem that has sprung up. The
benefits the internet brings are in some
cases hard to measure or attribute to the
providers within the ecosystem.
These market forces are not trivial, as they
relate to trillions of dollars in investment
and trillions in potential revenue.
?
INTERNET
“FREE”
FOR
Will we ever have
113
Do we have
A HOMEMADE
INNOVATION
DILEMMA? To me the biggest question for the future is will we
really continue in the future to license spectrum – do
governments license oxygen? No. The Internet is oxygen,
it’s water.”
– Vittorio Colao, CEO of Vodafone Group
Currently governments are generating a
significant income from auctioning off
spectrum to carriers. Carriers, in turn,
are forced into high-stakes auctions for
this spectrum to remain competitive.
The lease investment required, however,
is directly subtracted from the carrier’s
ability to invest further in infrastructure
extension. The lack of this investment
slows down growth in the economy, at the
countrylevel,from enhanced connectivity.
Is it worth re-doing the math to see if the
benefits of an extended infrastructure
investment would not overcompensate
for the short term gains from these
auctions at the federal level?
“
114
WILL WE, IN 5 YEARS,
REALLY CARE
The simple answer is “maybe.”
who provides us with access?
Google Fi and Apple are already providing
services that are carrier-independent.
In many developing countries people
carry two SIM cards and phones because
the individual carriers services are either
cheaper or better based on whether
someone is in a rural or metro area, or
whether people are making short or long
distance calls. Carriers will obviously do
everything to keep their brands relevant
through a combination of direct (network
strength) and indirect (value-added
services) value propositions.
In a best-case scenario, consumers do
not have to worry about connectivity
at all, because their devices will be
automatically switching to the strongest
signals, and their services will be
provided by a third party that is invested
in the content and service platform
rather than the sheer connectivity.
115
WILL CARRIERS
BECOME B2B PLAYERS?
If the scenario just described prevails,
then carriers could find themselves
becoming B2B players at scale and target
resell partners (such as banks as MVNOs).
This might dramatically decrease their
individual cost of acquisition, as they
might be selling in bulk. The effect on
competition and innovation potential will
have to be evaluated in this scenario.
?
WHO ARE
BUYERS
THE
and if so
116
THE
OPPORTUNITY
FOR ALL When asked what lessons she
would provide the audience
about marketing in the digital
age, Linda Boff, the CMO at GE,
said: “Be sherpas for what is
new and what is next. I think
there is a real role today for
marketers to identify what’s
around the corner and then to
translate that into business
terms to help drive growth.”
This applies to all companies
and brands, whether they
provide infrastructure and
access, services and content,
or are looking to profit from an
increasingly connected global
population.
117
and then, together, they might just be able
to create a brighter, more connected
world while also doing good business.
MOBILE ECOSYSTEM PLAYERS,
WILL NEED TO COLLABORATE & COEXIST
But the
whether new
or incumbent,
118
CREDITS OGILVY CONTRIBUTORS:
Carla Hendra
Caylin Lo
Chelsea Jones
Devon Cottle
Elizabeth Stroud
Emily Arnold
Jay Kurahashi Sofue
Jeremy Katz
Jess Kimball
Joe Bargmann
Mary McFarland
Peter Fasano
Priyank Mathur
Sarah Tran
Seth Greenberg
Spencer Schrage
Sydney Sadler
EXPERTS & SOUNDING BOARDS:
Colin O’Donnell
Chief Innovation Officer, Intersection
Derk Hendriksen
VP Business Integration & GM EKOCENTER,
The Coca-Cola Company
Harald Neidhart
Founder & Curator at MLOVE
Mark Kaplan
CEO and Founder, Tone
Nathan Eagle
CEO & Co-Founder, Jana
DESIGN:
Lori Argyle
AUTHOR:
Martin Lange
Global Consulting Partner, OgilvyRED
119

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OgilvyRED - Dollars and Sense of Connectivity

  • 1. 1 T H E D O L L A R S S E N S E O F C O N N E C T I V I T Y OGILVYRED THINK SERIES VOLUME 2 MARCH 2016 AND
  • 2. 2 Meanwhile, Gens X, Y, and Z probably don’t give much thought to the word, if any at all. The difference in perspective exists for many reasons, but the primary one is the fundamental shift in the definition, scope, and impact of telecommunications. This report will explore the brand and marketing opportunities presented by that shift and cite potential scenarios for leveraging it. BOOMERS BABY THE WORD “TELECOMMUNICATIONS” MAY CONJURE LANDLINES, ANALOG DESK SETS, AND POSSIBLY EVEN A SHOE PHONE. FOR
  • 3. 3 WATER ENERGY. MOBILE CONNECTIVITY’S EXPLOSIVE GROWTH IN THE PAST 15 YEARS HAS MADE IT AKIN TO A UTILITY, LIKE Telecommunications corporations have essentially become utility companies, providing something that people need rather than something they simply want for entertainment, or to connect with family and friends, perform transactions, and do their jobs on the go. With this in mind, it’s interesting to note that access to mobile devices worldwide is growing much faster than access to many of life’s bare essentials. or
  • 4. 4 DIGITAL TRANSFORMATION IN ACTION Source: World Development Report 2016: Digital Dividends, The World Bank. %ofthepopulation 100 80 60 40 20 0 1990 1995 2000 2005 2010 2015 ON THE ONE HAND, that’s a sobering trend, dictated by the local availability and quality of internet service, not to mention the would- be customer’s financial wherewithal (what devices and service can they afford?). At the same time, access to baseline necessities (clean water, sanitation, energy) tends to rise with the tide of increased mobile connectivity. This is illustrated well in places such as India, China, Russia, and sub-Saharan Africa, where mobile service and access is growing rapidly, but not as well in poorer developing nations. Mobile broadband Internet Mobile phone Improved sanitation Secondary school Electricity Improved water
  • 5. 5 By 2020, mobile technology will reach an estimated value of $4 trillion worldwide, which represents more than 4 percent of the global Gross Domestic Product. Two factors are driving the expected growth, in a simple supply-and-demand equation: increased mobile access among people who have never been connected will produce more (paying) subscribers to existing services, and the drive to create more services to meet the rising demand. THAT MOBILE TECHNOLOGY CAN BE A FORCE FOR GOOD — AND NO DOUBT WHATSOEVER THAT IT IS AN ECONOMIC FORCE. THERE’S LITTLE DOUBT “Access to the Internet is a fundamental challenge of our time.” - Mark Zuckerberg, Founder of Facebook 2,346 2008 3,210 2012 4,470 2019 2,798 2010 4,191 2017 3,636 2014 2,569 2009 4,020 2016 3,463 2013 4,596 2020 3,013 2011 4,336 2018 3,838 2015 (Millions) UNIQUE SUBSCRIBERS BY REGION Asia Pacific Commonwealth of Independent States Latin America Europe Middle East & North Africa North America Sub-Saharan Africa Source: GSMA: The Mobile Economy, 2015
  • 6. 6 IN SHORT, mobile connectivity can provide the means to fulfill fundamental needs, like healthcare, education, and social interaction, as well as to utilize advanced services such as financial support, business information, real-time navigation, and banking and commercial transactions. But giving more people the ability to live more efficiently and increase their personal wealth is just part of mobile connectivity’s promise. The growth of machine-to- machine (M2M) communication has created billions of new connection points among the internet of things (IoT), from smart-home devices (thermostats, fridges, televisions, etc.), to connected cars and agricultural machinery. More connection points means more interactions, which in turn creates more brand and marketing opportunities. This produces yet another potential economic driver: The network of connection points is growing exponentially, and with it the demand for more data bandwidth and IP addresses, as well as lower latency.
  • 7. 7 GLOBAL MOBILE DATA TRAFFIC (Per month, PB) 2013 2014 2015 2016 2017 2018 2019 Source: Cisco VNI Global Mobile Data Traffic Forecase Update, 2015-2020. 1,480 2,523 4,175 6,765 10,666 16,140 24,314
  • 8. 8 While continuing to be profitable businesses, carriers face an increasing challenge to financially support (e.g. through investments) the increasing demand for data and voice services. Infrastructure costs in developing markets are dropping, thanks to the development of more efficient hardware. But that’s just one part of the economic equation, and carriers now face a conundrum. The increase in demand creates more connection points and data, which in turn require more infrastructure.Thefundamental problem is that the increase in demand doesn’t guarantee the returns necessary to justify the investment in infrastructure growth. This is especially true because many of the new users (that is, the people and businesses creating the demand) that carriers would like to bring online are low- income. Carriers rely on a certain average revenue per user (ARPU) not only to make a profit but also to invest in infrastructure to ensure growth. Things start to unravel if users are ultimately unable or unwilling pay for the increase in connections and data bandwidth at the carriers’ required rate.
  • 9. 9 While the benefits of connectivity are well documented, actual access, together with the desired bandwidth and data for mobile devices, is restricted by a diverse set of factors. They range in scale from personal (an individual’s ability to pay for service) to infrastructure (insufficient reach and bandwidth, and regulatory constrictions). A complex network of industry players has built the infrastructure to enable wide- spread access as well as the required bandwidth. At the core of this network sit mobile carriers, or Mobile Network Operators (MNOs), that typically own the end-consumer relationship for businesses and individuals.
  • 10. 10 For non-telco brands and marketers, everything noted to this point provides important context for their ultimate goal: to engage with customers on their mobile devices. However, the marketing industry still struggles with finding the right value offer to a customer, value which would make consumers engage with a brand. Marketers have struggled with developing the right engagement mechanisms for existing users (mobile display ads only take you so far and don’t yet leverage the creative potential that mobile broadband offers). The emergence of a new audience presents an additional challenge, one whose solution is highly unlikely to be found by traditional means. And so, marketers should not simply apply legacy advertising mechanics to a fundamentally new engagement ecosystem. New strategies are required to leverage mobile connections in a more meaningful and effective way.
  • 11. 11 This paper, the second in the REDThink series by OgilvyRED, acts as springboard for companies, vertical markets, and brands, which will directly or indirectly benefit from enhanced connectivity around the world. It will draw a high-level picture of the current ecosystem and its constraints. It will also highlight innovative concepts currently being used to meet the challenge of providing internet accessibility through mobile broadband. We hope to provide thought starters for carriers as well as for marketers on how to think about new ways to create winning propositions that benefit customers, carriers, and other members of the connectivity ecosystem.
  • 13. 13 1 7 B I L L I O N Regardless of which source you believe — the United Nations or the U.S. Census Bureau — the world population stands at about 7 billion. Mobile broadband has emerged as a standard utility in technologically developed markets, but elsewhere it is scarce to nonexistent.
  • 14. 14 THREE GROUPS People who are connected to the internet and use its services People for whom internet service is available but unaffordable (due to prohibitive data costs for instance) Those who are unconnected THIS MEANS THAT THE UNIVERSE OF THE INTERNET BREAKS DOWN INTO ROUGHLY O1 O2 O3 The latest available research indicates that the number of internet users worldwide grew from 1.6 billion in 2008 to 2.9 billion by the end of 2014. This means that more than 4 billion people — or about 60 percent of the world population — are unconnected. About 10 percent to 15 percent of the latter group live in remote and/or badly impoverished places, where internet service simply doesn’t exist. Current estimates put 3G coverage at 5.2 billion people worldwide. However, only 2.5 billion people are connecting to the internet. This means that while another 2.7 billion people may have access, they are not using it.
  • 15. 15 Mobile costs hit poor nations the hardest. As a result, people decline data plans, and carriers lack profits to improve networks. THEBITE OFMEGABYTES Brazil China U.S. Turkey India 39.25 15.2 13.2 12.83 8.79 HOURSWORKEDTOPAY AMOBILEPHONEBILL India Brazil China U.S. Turkey 1,240 355 200 76 286 HOURSWORKEDTO PURCHASEASMARTPHONE India Brazil China U.S. Turkey 57 43 77 96 49 %OFSMARTPHONEUSERS WITHADATAPLAN Based on Minimum Wage Sources: McKinsey, ITU, Nielsen, Forbes August 2015
  • 16. 16 But even in developed markets, the ability to pay for connectivity is neither a given nor factored into household budgets. Consumers are very conscious of their data allowances and turn to wifi as often as possible. Consider the statistics: Among the smartphone-dependent population of the United States, 51 percent of users report exceeding their mobile plan’s data allowance; among those people, 15 percent say they “frequently” tap out of data. It’s safe to conclude that restrictive allowances are a significant bottleneck for people who rely heavily on mobile-data usage. About 20 percent of smartphone users say they considered it a financial burden. AFFORDABILITY AND DISCRETIONARY INCOME ARE FUNDAMENTAL DETERMINING FACTORS FOR BEING CONNECTED. In developing nations,
  • 17. 17 In many cases the costs are “invisible.” If a user has a contract that charges $60 a month for up to 6GB of data, a 360MB game app costs $3.60 for the download alone. Streaming Netflix for an hour under the same plan, at a medium download rate, costs about $7. The people who complain about the high cost of using a smartphone are not simply whining. With the widening income gap and major carriers increasingly targeting high- income customers with plans that cost $60-plus a month for a single device, a significant portion of the population in developing markets is very self-conscious as to when they use their data plan vs. tapping into the increasing amount of free wifi options. This situation is projected to worsen, as more devices per household become connected at the same time that the per-household cost of connectivity increases.
  • 18. 18 THE BOTTOM LINE IS that the cost of being connected is a significant line item in the household budget -- one that proves prominent on consumers’ minds to the extent that it can potentially be prohibitive to certain segments of the population.
  • 20. 20 2is in some respects a social equalizer, in many ways it benefits some more than others. To understand this apparent contradiction, it’s helpful to know the three basic components of, or players in, the mobile-connectivity ecosystem: WHILE MOBILE CONNECTIVITY
  • 21. 21 INFRASTRUCTURE PROVIDERS, AND IN PARTICULAR, CARRIERS. Carriers — also called telcos or providers — play the most pivotal role in the ecosystem. They include such companies as Vodafone, Verizon, Airtel, Claro, Singtel, and SK Telecom. The carriers’ power (and thus their value) derives from acquiring or licensing access to the infrastructure that connects consumers with providers of services and content. The providers’ primary function is the very thing that enables mobile connectivity. They operate the network and provide the access point for devices and consumers. O1
  • 22. 22 PROVIDERS OF SERVICES AND CONTENT. This diverse group includes services such as entertainment companies (Netflix), finance and payment services (PayPal), information providers (news outlets, directories, maps, traffic), educational products, ecommerce outlets, OTT messaging or social media platforms. While the majority of interactions of services and content involve actual consumers, there will be a dramatic increase in machine-to-machine (M2M) protocols as more “objects” beyond mobile devices go online (see IoT). To date, content and service providers have not played a key role in providing access; rather, they have simply relied on the connectivity supplied by carriers, to serve consumers. O2
  • 23. 23 CONSUMERS OF SERVICES AND CONTENT. “Consumers” is a bit of a misnomer in this context. For the most part, in the mobile-connectivity ecosystem, the term applies to individuals, businesses, or government entities that benefit from the services provided. Consumers have paid carriers for baseline connectivity, and occasionally for access to select services, based on the providers’ service model. With the advent and growth of the IoT — essentially, machines connecting to the infrastructure — we expect a dramatic increase in the exchange of data between machines in the IoT to either individuals (this is called an M2P interface) or machines (as mentioned above, this is an M2M connection). O3
  • 24. 24 INFRASTRUCTURE CONSUMPTION SERVICES & CONTENT Education, Health Care, Navigation, Entertainment, Cities, Financial Services, Messaging & Social Individual, Business, IoT Carriers, Infrastructure Providers CONSUMERS OF SERVICES & CONTENT
  • 25. 25 are multidimensional and well documented on several geographical scales: local, city, regional (often, rural versus urban), and national. The extent of a nation’s mobile connectivity, and the benefits arising from that connectivity, depends on many factors. Figuring into the equation are things such as the size and health of a nation’s economy (often, as measured by the GDP and per-capita income); literacy, poverty, and employment rates; technological progress; and a variety of socioeconomic and cultural factors, such as racial and gender equality and access to healthcare. THE BENEFITS OF MOBILE CONNECTIVITY “Around 400 million people in the last year got a smartphone. If you think that’s a big deal, imagine the impact on that person in the developing world.” - Eric Schmidt, Executive Chairman, Google
  • 26. 26 In developing nations with low connectivity, programs to increase connectivity can show dramatic results. For instance, access to information and transparency about political instability, nutrition, the environment, and living conditions can help predict the outbreak of an infectious disease. A nation’s agricultural production and economy can improve quickly when mobile connectivity gives farmers access to information about such basic things as weather forecasts and commodity prices. Villages and communities that emerge from isolation thanks to mobile connectivity are often able to introduce better health and education programs.
  • 27. 27 In developed nations, the benefits of higher bandwidth may seem more trivial, providing such luxuries as access to video streaming or graphics-and-data–intensive mobile games. Higher bandwidth can also instantly improve productivity in businesses that rely on data-heavy formats. Research by companies such as Google and Huawei estimates that “increasing the internet connectivity by 10 percent in a country increases the GDP by up to 1.4 percent.”
  • 28. 28 Smart cities constitute another focal point of development, with the promise of faster predictive emergency response, more efficient energy management, better traffic control and more effective municipal servicing.
  • 29. 29 HIERARCHY OF CONNECTIVITY NEEDS basicaccess developedmarkets highspeed,lowlatency developingmarkets ENTERTAINMENT BASIC PROVISIONS (UTILITIES) AUTOMATED LIVING & BUSINESS EDUCATION BUSINESS INFRASTRUCTURE HEALTHCARE EXTENDED INFORMATION ACCESS
  • 30. 30 The many potentially profit-generating benefits to a company also include access to a larger group of consumers/customers outside of their direct physical reach as larger groups of the population connect more frequently. At the company or business level, Verizon predicts that some of the world’s top corporations could become 10 percent more profitable by 2025, if they use IoT products and solutions intensively.
  • 32. 32 If the benefits of greater mobile connectivity and bandwidth are all but guaranteed, it’s fair to ask why the services aren’t universally available. The answer is complicated. To achieve greater coverage and meet increased demand, carriers must invest significantly in infrastructure. They must do so in a highly competitive environment, with new carriers entering the market, questions about consumers’ ability or willingness to pay for the voice and data services, not to mention government regulation and taxation. Despite all of the variables, one thingisforsure:demandisandwillcontinue to increase rapidly, so not investing in the delivery system (spectrum acquisition, hardware and cell sites, 5G infrastructure) is simply not an option. 4G3G GLOBAL MOBILE BROADBAND POPULATION COVERAGE 22% 0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 34% 0% 43% 5% 2% 50% 56% 11% 66% 19% 73% 26% 76% 35% 81% 44% 84% 50% 86% 56% 86% 60% 86% 63% Source: The Mobile Economy 2015, GSMA
  • 33. 33 — in some cases, with significant investments. In the U.S., T-Mobile’s recent network upgrades reportedly cost $4 billion. That’s just part of category-wide capital expenditures (CapEx) expected to reach $1.4 trillion globally by 2020. Not surprisingly, there is risk associated with this kind of capital outlay. An analysis of 45 carriers by the telecommunications research firm Ovum published in 2014 found a CapEx increase of 3 percent year-over-year but revenue growth of just 0.6 percent. According to Ovum and GSMA, the largest association of mobile carriers in the world, the industry’s compound annual growth rate (CAGR) between 2014 and 2019 will improve to as much as 2.5 percent. In past years, that number reached as high as 4 percent. The low return on investment puts pressure on carriers to find new ways to increase revenue, which is tricky in a market that is still developing, highly competitive, and that faces increasing costs to comply with new government regulations. CARRIERS ARE RESPONDING
  • 34. 34 (US$ BN) TOTAL GLOBAL REVENUES (US$ BN) 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 1,029 1,085 1,148 1,244 1,321 1,382 1,124 1,200 1,284 1,353 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 161 183 216 233 236 250 198 229 233 244 GLOBAL MOBILE OPERATOR CAPEX Source: GSMA: The Mobile Economy, 2015
  • 35. 35 In developed markets, carriers are struggling to justify consumer-service pricing. Criticisms include a lack of transparency and a bias toward wealthy users, which invites scrutiny by consumer-advocacy groups. The core financial issue, which we alluded to earlier, is whether investing in new infrastructure will provide sufficient cost savings and revenue enhancement to offset the decline in consumer pricing. For now, the answer appears to be “no.”
  • 36. 36 Accordingtoonereport,providers’total cost of operations (TCO) for mobile broadband networking is projected to fall by a factor of three through the year 2018, while selling prices per GB of data are projected to fall by a factor of 10. Increased competition in the marketplace contributes to the falling revenue. The unbundling of long-term service contracts and phone subsidies is driving an increase in churn rates in developed markets. Hence, carriers are increasinglyseekingnewrevenuesources beyond simple data-plan charges. EBITDA Margin GLOBAL PROFITABILITY FOR CARRIERS Source: GSMA: The Mobile Economy, 2015 36.6% 36.4% 33.5% 33.5%33.3% 34.9% 36.9% Q1-Q3 2008 2009 2010 2011 2012 2013 2014
  • 38. 38 Let’s look at sticking points and solutions on both the supply and demand sides. SO, HOW CAN CARRIERS ADDRESS THE MARKET CHALLENGES?
  • 39. 39 In the mobile market, supply consists primarily of the carriers and their services, as well as the adjacent supplier infrastructure. With lower data rates in developing markets and higher churn rates in developed markets, ARPU is decreasing. SUPPLY O1
  • 40. 40 which they are seeking to capitalize on by replacing unlimited data plans with tiered plans. Interestingly, carriers are now adding service contingents (e.g. free usage of messenger platforms) for additional fees on top of their tiered plans to capture incremental revenue. In urban areas, however, larger carriers are facing competition and a decreased demand for data services, as new companies offer wifi solutions. At the same time, infrastructure sourcing is becoming more complex and competitive, also due to the entrance of new companies to the market. They are offering higher bandwidth with lower latency, and also more readily employing new technologies — satellites and drones, for example — to introduce connectivity in developing areas. CARRIERS IN DEVELOPED MARKETS ARE SEEING AN INCREASE IN DATA CONSUMPTION,
  • 41. 41 Traditional carriers are also facing competition from significant players, such as Google, that are providing direct-to-consumer data solutions as mobile virtual network operators, or MVNOs. Currently MVNOs are addressing certain segments in the population with specific needs (e.g., low-cost, specific long-distance destination calling etc.). They do not necessarily provide the largest network or best bandwidth. However, more players besides Google with significant market access might be testing their way into this market soon.
  • 42. 42 Regulation and taxation can also be an issue; generally speaking, they vary greatly depending on market and do not support a highly innovative business environment. Faced with slowing revenue growth from voice and text services, carriers are seeking new sources of income through value-added services, or VAS. Over-the-top (OTT) providers, such as Skype, WhatsApp, and Line currently own this competitive environment. Carriers are responding now with a GSMA supported platform called RCS (Rich Communications Services). This platform allows carriers to offer similar services as OTT messaging providers (e.g., image or file sharing and VoIP), but without having to tap into the data allowance of the consumer. The success of this platform is likely going to succeed or fail with the quality of the user experience. OTT messenger platforms
  • 43. 43 Demand for basic connectivity and increased data is driven by three factors: A significant increase in consumers being connected to voice or voice/ data services. A significant increase in the number of connected devices in the IoT. New services requiring higher data bandwidth (video and games, for instance) and lower latency (connected cars, for example). DEMAND O2 O1 O2 O3
  • 44. 44 Ericsson predicts mobile data usage will grow more than tenfold by 2021, with video streaming accounting for almost 70 percent of traffic. The vast majority of the so-called next billion — that is, masses of new users — will go online via mobile devices. GSMA estimates 1 billion new mobile users over the course of the next five years until 2020, which represents an increase of 27 percent from today’s 3.6 billion users. (PB per month) VIDEO FUELING STRONG MOBILE DATA GROWTH Source: Cisco VNI Global Mobile Data Traffic Forecase Update, 2015-2020 Web/data File sharing Video Audio streaming 2,523 4,175 6,765 10,666 16,140 24,314 2015 2016 2017 2018 20192014
  • 45. 45 not only because of the increase in new users, but also because data-intensive services grow as connection speeds increase, and people become more comfortable with smaller screens (which is definitely the case). From a consumer perspective, video is by far the No. 1 driver for exponential growth in data demand. At the same time, the growth of the IoT will produce more connection points and data exchanges. According to Cisco, by the year 2019 more than 10 billion devices will exchange an estimated 35 quintillion bytes of information per month. (We don’t have room for all of the zeros here, but for the record, a quintillion is a million raised to the power of 5.) You heard about the traffic jams in New York when the Pope visited? That’s going to be a picnic compared to the radio-wave congestion caused by the increase in connected devices in the IoT. DATA DEMANDS WILL INCREASE
  • 46. 46 So, consumers need more bandwidth, and 5G is part of the answer. In fact, 5G is even more important to industries such as healthcare and driverless cars. 5G promises to reduce latency and increase data speeds to the extent that autonomous cars will be able to make driving decisions in milliseconds based on real-time information from a variety of sources around them.
  • 48. 3 The connectivity market place is complex, and challenged. But it is equally obvious, that the benefits of enhanced connectivity and increased access to the internet are tremendous and desirable. The logical conclusion is a market that sees a great amount of innovation both from incumbents as well as new entrants. 48 ACCESS SPONSORHIPS O1 CARRIER SPONSORED ACCESS AND DATA BRAND/PROVIDER SPONSORED MODELS DIRECT-TO-CONSUMER INFRASTRUCTURE 1.1 1.2 1.3 LOCAL EMPOWERMENTO2 IOT O3 FINANCIAL SERVICES O4
  • 49. 49 In any case, zero-rating certain data packages provides a fundamental pillar for later business opportunities. Since consumers, by definition, don’t bear the cost of zero-rating service, it is covered by either carriers, brands or content services. Let’s look at various sponsorship scenarios. Typical access sponsorship is making use of a practice called “zero-rating,” which means providing access to certain content or services at no charge to the consumer. Zero-rating, if misused, draws scrutiny and sometimes harsh criticism, as evidenced by the controversy that surrounded Facebook’s recent attempt to introduce its Free Basics service in India. ACCESS SPONSORSHIPS ACCESS SPONSORSHIPS CAN COME IN A VARIETY OF FASHIONS. O1
  • 50. The majority of access sponsorships are underwritten by the carriers, which provide limited data and bandwidth for free. In some cases, this free data is used to gain a competitive product advantage, as T-Mobile did with Binge On. In other cases, fronting partners provide content for free but have agreements with the carriers not to charge for the engagement, as is the case with Facebook’s Free Basics. Either way, carriers have an incentive to zero-rate in order to enhance their product, engage users who will eventually pay for services, and upsell existing subscribers more expensive data plans. 1.1 ACCESSANDDATA CARRIER-SPONSORED 50 ACCESS SPONSORSHIPSO1
  • 51. ACCESS SPONSORSHIPS 51 FREE BASICS/ INTERNET.ORG O1 Launched in developing markets to provide free low-bandwidth connectivity. Content developers are welcome to provide their products via Free Basics at no cost. As a business tool, it works: about 50 percent of Free Basics users upgrade to paid data plans after their initial free trial expires, providing carriers with a base for subscriber acquisition. O1
  • 52. 52 Launched in 2012 and reportedly now reaching 600 million people in 60 countries, Wikipedia Zero provides free access to its content. Data is positioned as educational, and access is being paid for by about 80 carriers who believe there is a halo effect on their brands by being associated with an ostensibly educational effort. WIKIPEDIA ZERO O2 ACCESS SPONSORSHIPSO1
  • 53. 53 T-MOBILE U.S. BINGE ON Following the success of its Music Freedom initiative, which lets users stream music services like Spotify at no cost, T-Mobile launched Binge On. It enables subscribers to watch low-bandwidth (480p) versions of certain video services over their network. Services include Netflix, Hulu, and HBO Go. T-Mobile hopes to pick up more subscribers, but there’s a hitch: the current service is under scrutiny as a violation of net- neutrality, because only select video services are offered. O3 ACCESS SPONSORSHIPSO1
  • 54. 54 APP-BUNDLED DATA PLANS Strictly speaking, this is not a zero-rating practice, since consumers do have to pay for them. Providers, however, such as Singtel in Singapore, are offering prepaid data plans that include free (up to a daily limit) use of prechosen social or messenger apps, such as Facebook, Line or WhatsApp. The consumer essentially pays a flat fee for all data used by the specifically chosen app. Interestingly but not surprisingly, the free use of WhatsApp does not include the use of its VoIP solution for voice calls. Cell C and other African carriers are pursuing similar offer packages. O4 ACCESS SPONSORSHIPSO1
  • 55. In some cases, content companies will pay carriers to compensate for the increase in data usage. 1.2 SPONSOREDMODELS BRAND/PROVIDER 55 ACCESS SPONSORSHIPSO1
  • 56. 56 to a limited set of Google services (search and Gmail), but are prompted to pay if they surf “too far away” from the original property, but executing multiple click- throughs from a single search. Google reimburses carriers for Free Zone access. App developers can be incentivized to co-sponsor content access through “free data,” and Google is charting the technological waters for certain Android apps to provide “free access.” A recent report noted that Google’s version of zero- rating goes beyond a one- off deal, allowing developers to create apps that live on. Google also offers sponsored access via Google Free Zone, where users have access India’s largest carrier, which also has significant presence in Africa, recently confirmed that it is launching Airtel Zero, which will allow companies to buy data in order to offer their apps to consumers at no cost. ACCESS SPONSORSHIPSO1 O2O1
  • 57. 57 & ACCESS SPONSORSHIPSO1 O3 program (non-Prime members can still access the entire content catalogue for a rental fee per movie/show), and Amazon has found a new outlet to acquire new Prime members on the fly, so to speak. Amazon Prime members are now able to stream Amazon Prime video content for free over JetBlue’s inflight network. It is a win-win deal for the companies. JetBlue is offering an extremely competitive entertainment
  • 58. 58 ACCESS SPONSORSHIPSO1 O3 on its head, by rewarding consumers with free data for clicking on ads. The mCent app provides over 30 million consumers access to free apps. For each app trial that consumers undertake they are granted free data, paid for by the app advertiser. This model enables advertisers, which include app developers Zynga, Hulu, Saavn, and Kakao to create a trial with a well- documented but previously unengaged audience. Jana has integrated the system into the billing systems of 311 carriers in 93 countries. Used almost exclusively in developing nations, this is essentially an advertising platform for marketers and brands to engage with consumers via their mobile devices. The model works around a well-known impediment to the success of mobile advertising, namely that consumers know that clicking on ads will count against their data plan. Jana has turned this principle
  • 59. 59 passing along the cost to the advertising app/brand. Opera has also introduced a sponsored web pass, which enables consumers (especially, first-time mobile users) such things as a free day of mobile-internet usage, or a free hour on Twitter. Advertisers sponsor these offerings. Through a feature called App Pass, carriers provide subsidized data access to applications. Carriers can present app offers through the browser, allowing cost- free use of the apps, albeit for a limited time. Carriers decide whether they want to provide this access for free, and capitalize on it with their own brand or by generating revenue by ACCESS SPONSORSHIPSO1 O5
  • 60. 60 Another way to provide access is based on an ad model where the advertising revenues pay for access through wifi. 1.3 INFRASTRUCTURE DIRECT-TO-CONSUMER ACCESS SPONSORSHIPSO1
  • 61. LINKNYC This ambitious project will provide New York City with free, super-high-speed wifi in all five boroughs. LinkNYC is being built by a newly founded company called Intersection. The company builds digital billboards that double as wifi towers. The project is funded by the advertising revenue from these digital billboards (OOH). Intersection and the City of New York will share this revenue. This project allows users to dramatically reduce their data usage while in the city (and thus potentially the revenue for carriers) and it allows tourists from outside of the country to omit roaming fees for data services. The first “links” have already been fired up, and the group expects to have over 2,000 installed throughout the city within a year. O1 61 ACCESS SPONSORSHIPSO1
  • 62. 62 LOCALEMPOWERMENT Especially in developing markets we are observing a variety of projects to provide basic accessibility by empowering local groups to establish self- sufficient access points. O2
  • 63. LOCAL EMPOWERMENTO2 Tone is a OTT service which provides a platform to locally empower communities. It provides connectivity and service in previously underserved regions. One such empowerment program is mFish, in Indonesia. Tone is providing a kit to local fishermen that includes a phone, an educational set, and a SIM card for a local carrier. The data is not free, but it comes at a lower rate for a promotional period to allow the fishermen to understand the value of having access to services such as GPS, local weather, fish maps and chat functionality. The idea is that the service will pay for itself, and thus be “free,” by enabling fishermen to realize cost savings by running their business more efficiently. Just as importantly, mFish overcomes the challenge of digital literacy with an educational introductory kit. This allows local NGOs that work with Tone and the carrier on the ground to educate the fishermen on the usage of the phones. The kit also comes with a solar power-based charger for the phone to overcome any electricity shortages. Local NGO employees also have the opportunity through Tone’s software to directly chat with the fishermen and support them with any queries. 63 O1
  • 64. 64 Tone reinvests 20 percent of profitsinsocialandenvironmental initiatives. Carriers are paying Tone a portion of the data revenue for this acquisition effort. The government subsidizes the original infrastructure – for instance, the cost of installing cell towers – through a fund to which local carriers contribute.
  • 65. This Gilat Satcom offering provides internet infrastructure via a private satellite network to what the company calls a nano-ISP. Examples of nano- ISPs include schools, shops, and churches, where the carrier installs hardware to receive the satellite signals. The carrier resells the signal to nano-ISPs for a very low cost. Prices are expected to be as low as $1 a month, and the network is designed to scale up. It thus enables local entities (nano- ISPs) to become small businesses. 65 LOCAL EMPOWERMENTO2 O2 VILLAGE ISLAND
  • 66. 66 allowing locals internet access and real-time upstream and downstream data sharing to optimize the supply chain to the local kiosks and measure the efficiency of power generation. In addition, this connectivity allows for a range of other services to be considered, such as real-time medical information sharing or access to market prices for agricultural products. EKOCENTER is run as a social enterprise, meaning it combines philanthropic and commercial interests of Coca-Cola and its partners. For Coca-Cola, there are not only clear, tangible benefits (increased sales inpreviously undersupplied regions), but also intangible benefits to generate positive brand impact with stakeholders and consumers. EKOCENTER At Mobile World Congress 2015 (MWC), Ericsson and Coca-Cola revealed the “EKOCENTER” project, which is intended to bring safe drinking water, solar energy and mobile connectivity to communities in the developing world. EKOCENTER is a modular community market (kiosk) that is run by a local entrepreneur and supplies basic goods and services to underserved communities. Functionality that can be added beyond safe water, electricity and connectivity to jump- start community development includes social facilities and entertainment; power generation for charging phones; cooling/refrigeration of vaccines; education opportunities; and much more. Connectivity is fully integrated, O3 LOCAL EMPOWERMENTO2
  • 67. This company addresses the lack of energy availability in certain parts of some developing nations, which ironically are within reach of service but unable to use it for lack of a power source. Intelligent Energy thus addresses two essential elements of connectivity: network availability and power. Intelligent Energy develops portable fuel cell systems that can remotely power phones without access to “the grid,” thus overcoming another large barrier in developing countries that are struggling with energy more than with connectivity provisioning. 67 LOCAL EMPOWERMENTO2 04
  • 69. 69 When it comes to connecting the internet of things, the most prominent efforts from a consumer-facing perspective seem to be made in the area of connected cars. AT&T just announced a major deal with Ford to bring more than 10 million connected cars to the street within 5 years. AT&T also now allows users to add their car as another device in a data plan. While adding a car still comes at the cost of a monthly fee, Tesla is offering 3 years of free connectivity to AT&T’s 3G network within its innovative EVs. Carriers including Vodafone and Deutsche Telekom are creating models similar to AT&T’s. CONNECTED CARSO1 IOT INITIATIVESO3
  • 70. IOT INTEGRATION AT SCALEO2 70 IOT INITIATIVESO3 Many major carriers have announced and piloted IoT connectivity platforms aimed at specific verticals. Telefonica, AT&T, Verizon, Deutsche Telekom, Orange, Telstra and others are tackling topics such as smart cities, connected homes, health tracking, manufacturing and even cattle tracking. In some instances, these platforms have been built for a certain vertical or challenge, while in other examples they are a direct collaboration with a specific brand, such as Coca-Cola or Nestle. At the moment, neither of these platforms seems to drive significant revenue compared to the core business, and remains an innovation opportunity rather than a scalable business play.
  • 72. 72 Arguably, the industry that has embraced mobile accessibility the most and made huge strides is the financial services industry – specifically providers of payment solutions, credit/lending services and insurance, particularly in developing nations. In this space, start-ups, established banking players and carriers are working together to provide these services. Vodafone’s m-pesa service in Africa, India, and Eastern Europe is one of the more prominent and successful examples of this. In 2015 in South Africa, the local bank FNB offered its customers pre- and post-paid cell coverage. It currently uses a specific carrier’s cell towers, but says it is open to expanding to other carriers as well. The service is a natural extension of the bank’s financial services business, which includes a rewards program and mobile bill-pay capability. FINANCIAL SERVICES CARRIER INTEGRATIONO1 WITH FINANCIAL SERVICESO4
  • 73. 73 (2001-2014; year-end) NUMBER OF LIVE MOBILE MONEY SERVICES BY REGION 2001 1 2002 1 2003 1 2004 4 2005 5 2006 6 2007 10 2008 16 2009 38 2010 66 2011 116 2012 174 2013 232 2014 255 As of December 2014, there were 255 live mobile money services in 89 markets. Sub-Saharan Africa South Asia East Asia & Pacific Latin America Middle East & North Africa Europe & Central Asia Source: GSMA: The Mobile Economy, 2015
  • 74. DELIVERING THE BUSINESS CASE AND ROADMAP TO BUILD A MOBILE COMMERCE PLATFORM IN EAST AFRICA MOBILE CONSULTING FOR GLOBAL CPG 74 Through in-depth market research, OgilvyRED was able to convince local carriers in Africa that their mobile payments system should be evolved from a peer-to-peer system to a system that allows for payments at retailers. Costs for the SMS, that were required to make payments, were absorbed by the carriers. This in return created brand preference for these carriers in a market, where consumers would typically carry multiple SIM cards. Furthermore, mobile payments were introduced for payments along the supply chain from distributor to retailer. The risk of fraud and simple cash theft was mitigated and all transactions could electronically be accounted for.
  • 76. 76 As carriers are trying to identify new sources of revenue and potential investors in the ecosystem, there is an opportunity for companies and brands to step in to collaborate for success. Beneficiaries differ based on the region and their state of technology maturity. Some (few) companies might be looking towards becoming connectivity providers with direct contact to the end consumers of such services. But the majority should probably be looking at opportunities to create value for the company through sponsorship or subsidizing deals. Third-party platforms, such as Jana and Opera Max, have already shown success by tapping into this space to garner advertising dollars. The challenge with this model will be whether pure sponsoring can be a sustainable tactic given the relatively negative sentiment towards advertisements among consumers. Meanwhile, verticals that will benefit from a more connected ecosystem through IoT are starting to form alliances with automotive and manufacturing companies. While Verizon and AT&T are currently focusing much of their attention on connecting mobile devices to their networks, both appear to be placing greater emphasis on IoT connections and management.
  • 77. 77 MOBILE-ENABLED PRODUCTS AND SERVICES IN THE DEVELOPING WORLD Source: GSMA: The Mobile Economy, 2015 Note that others include disaster response, energy access, green networks, midentity, NFC and smart cities PRE 2009 2009 2010 2011 2012 2013 2014 0 200 400 600 800 1000 1200 1400 Health MoneyLearning Others
  • 79. 79 BRANDS ARE STILL STRUGGLINGwith how to engage with consumers on mobile devices beyond buying media to gain click-throughs. This model is quickly becoming outdated in a new era of consumer behavior. Simply put, mobile users dislike the current mobile-advertising model, and are rejecting it by not clicking through. Companies planning to enter the connectivity space for branding and marketing purposes have to re- evaluate how they can produce value for their enterprises beyond ad clicks.
  • 80. 80 This new way of thinking and acting as a marketer does not obviate the need to establish and move toward a commercial goal, albeit with greater transparency to consumers. Brand benefits do not necessarily have to be directly tied to revenue or margin (tangible benefits). They can also provide intangible (emotional, psychological) benefits. It also may not be limited to individual companies making investments in providing access and connectivity, as it is likely more economical to form consortiums or industry associations. “BRANDS THAT DO: BUILDING BEHAVIOR BRANDS,” In its paper OgilvyRED explains how modern brands take action to create value instead of just asserting the brand’s message and raison d’étre. The basic tenet is that marketing is a service that delivers real consumer benefits, such as mobile connectivity.
  • 82. 82 THROUGH LONG-TERM BUSINESS MODEL INNOVATION For example: TANGIBLE BENEFITS New pricing, new revenue sources, new product pipelines. Bringing the next billion online will create a huge market for direct-to-consumer offerings. Increased levels of income will improve consumer ability to pay for incremental goods. Fundamental cost-structure enhancements. In healthcare, for example, better data may be voluntarily provided by patients (mobile users) to help healthcare providers with risk assessment, to reduce the cost of insurance products. O1 O2
  • 83. 83 DIRECT REVENUE INCREASE THROUGH INCREASED SALES TANGIBLE BENEFITS For example: Through mobile commerce and direct-to-consumer sales. For example, fast-food restaurants could own car connectivity, and the in-car screen for preordering when driving near restaurants. By increasing sales outlets, as the Coke EKOCENTER example illustrates. Product bundling and co- marketing, as shown in the collaboration between JetBlue and Amazon Prime. O4O3 O5
  • 84. 84 TANGIBLE BENEFITS Through efficiency gains achieved with better value-chain visibility, decreased cost of acquisition, and decreased cost of advertising. In the example of mFish, in Indonesia, brands get direct and highly targeted access to specific groups, directing acquisition investments to the precise audience for a brand. By capturing government subsidies or tax breaks. With more efficient customer servicing rerouting calls to messaging services using Facebook Messenger as a customer service outlet. O7O6 O8 For example: BY INDIRECT BOTTOM-LINE CONTRIBUTION
  • 85. 85 BY INDIRECT BOTTOM-LINE CONTRIBUTION TANGIBLE BENEFITS By enhancing business decision- making capabilities, such as demand-based pricing on the fly, or using real-time data analysis. Insurance companies, for example, could tailor premium pricing in real time according to data they can collect if they “own” the consumer’s connectivity. 11 For example: (CONTINUED) By providing mobile connectivity to previously unconnected users. Direct marketing through OTT services such as WhatsApp are especially relevant in this case. Messenger platforms are increasingly being used not just for communication but also as transaction touchpoints (e.g., WeChat). Through an increase in customer base and brand exposure, using physical or digital trials, such as Jana has. 1009
  • 87. 87 Increase perception of brand as a digital and contemporary leader. Brands that have previously not been perceived as technology leaders can gain advantages. In agriculture, for instance, technology is making vast strides to enable better decision-making, with such simple products as mobile weather forecasting, and data-gathering and data-analysis tools. Improved positioning vis-a-vis indirect stakeholders, such as governmental bodies, NGOs, and supply chain partners (see Coke Ekocenter). Using mobile connectivity to enhance consumers’ perceptions of brands as innovative and service oriented. For example, Tesla is now updating its cars’ operating systems through a 3G connection, which frees owners from having to schedule a service appointment. Allow consumers to see brands as beneficial to communities, as Coke has done with the Coke Ekocenter. CAPITALIZE ON BRAND DIFFERENTIATION INTANGIBLE BENEFITS For example: 01 03 02 04
  • 88. 88 By driving an innovation agenda and introducing opportunities for first-time mobile users to test and learn about a product. Through talent acquisition and retention. By building a company’s capabilities, exposing it to new technologies, and introducing it to new partners. INCREASE COMPANY FUTURE PROOFING INTANGIBLE BENEFITS For example: 05 06 07
  • 91. 91 NET NEUTRALITY According to Wikipedia, “Net neutrality… is the principle that internet service providers and governments should treat all data on the internet the same, not discriminating or charging differentially by user, content, site, platform, application, type of attached equipment, or mode of communication.” The moment that companies (whether they are brands, social platforms, or carriers) provide access to content for free or for a lower price than other services, the issue of net neutrality kicks in. The aforementioned example of Facebook’s attempted introduction of Free Basics in India illustrates this point precisely. The message to marketers is that any potential opportunity or proposition must be vetted to ensure that it does not discriminate by limiting access to a single provider, or by allowing access to a single competitor’s product. Services like Jana have solved this equation, since it can be used to access any content or service. O1
  • 92. 92 Transparency of Business Models to the Customers
  • 93. 93 TRANSPARENCY OF BUSINESS MODELS TO CUSTOMERS The mobile connectivity ecosystem is not considered by consumers to be transparent. Companies that want to enter the ecosystem should make transparency a priority, to avoid alienating consumers or attracting the scrutiny of regulators. Consumers are not easily fooled and understand the popular phrase, “If you are not paying for it, you are the product.” Examples of success through transparency include Tone, which makes it clear that the company is making money from the mFish solution. This is tolerated and even appreciated by consumers because they perceive mFish as beneficial to the community due to the (transparent) way it has structured deals with the carrier and government. In the United States, Google Fi is showing carriers what it means to communicate with their customers in a simple manner about pricing, avoiding jargon or hidden fees. O2
  • 94. 94 Digital Literacy and Relevancy of Offers
  • 95. 95 A key obstacle for many developing markets is digital literacy. People are often not aware of the benefits of the internet, if provided through mobile devices, which are not affordable to large parts of the world’s population. Educational campaigns need to start here, and should not assume that everyone would be online if they just had access to a connection. The second obstacle is that it takes training to become familiar with navigating the offers and services including the pitfalls (e.g. spam, data security). The simpler the offer and value proposition, the better. Last but not least, many services have not been fully adapted into local context (language, data speeds). Especially in developing markets it cannot be assumed that English is the spoken language. Any service which adapts to local language and available bandwidth will have a clear advantage. DIGITAL LITERACY AND RELEVANCY OF OFFERS03
  • 97. 97 the car’s telematics data. Healthcare providers could sponsor connectivity for underserved communities in exchange for using the data to move from reactive to proactive prevention mechanisms. By sponsoring access in highly frequented areas, companies could be granted exclusive access to data that is being collected within these areas, allowing for dynamic pricing or product adjustment concepts. Think about an insurance company sponsoring all mobile access along highways, and thus being able to monitor real-time traffic behavior and adjust premium pricing accordingly. An insurance company could also simply pay for the car’s data contract, taking that burden off of the consumer in exchange for TAKE ADVANTAGE RETURN ON INSIGHTS (DATA) THAT MOBILE CONNECTIVITY PROVIDES of the 01 “One of the myths about the Internet of Things is that companies have all the data they need, but their real challenge is making sense of it. In reality, the cost of collecting some kinds of data remains too high, the quality of the data isn’t always good enough, and it remains difficult to integrate multiple data sources.” — Chris Murphy, Editor, Information Week
  • 98. 98 If the healthcare industry could monitor compliance of medication intake in a real-time manner, it would be able to save billions in post-symptomatic treatment costs by preemptively improving positive outcome rates. Connected pillboxes are making a slow entry to the marketplace, but there are currently no scaled concepts in place to provide them free of data cost or to sponsor the data it takes to communicate with healthcare providers or caretakers. USE MOBILE CONNECTIVITY INTAKE OF MEDICATION 02 to monitor compliance of
  • 99. 99 SOCIAL ENTERPRISE CONCEPT TO INCREASE BRAND IMPACT CPG/FMCG companies in particular struggle for differentiation because of the broad exposure of their brands and products. Becoming a sponsor of connectivity or empowering local communities through, for example, helping to overcome digital literacy barriers, could significantly boost their value proposition beyond the product, and create a more favorable selling environment. Think about a CPG company helping local women to become small business owners as resellers of data plans, or simply providing them with access to information to build new communal marketplaces. Or, consumer brands might sponsor the local adaptation of non-native content and services into the local language and data ecosystem. Use the 03
  • 100. 100 RETAILERS As carriers are connecting more and more devices, is there a chance to become a retailer for more than just phones and tablets? What if household appliance manufacturers or home electronics companies sold their goods through the ecommerce sites of carriers? 04 CONSIDER CARRIERS as
  • 101. 101 Carriers already bill for data plans to their customers, and some (though few) other regular billing activities can be processed through these carrier bills. Are there efficiency and convenience gains to be conceived by integrating other regular billing activities (e.g. utilities, media subscriptions) through a carrier’s system? This would potentially allow for a more comprehensive data view of individuals’ financial transactions and would also provide acquisition opportunities for subscription-based models (especially if these services are based on data usage). 05 FINANCIAL SERVICE COMPANIES CONSIDER CARRIERS as
  • 102. 102 As we are connecting more and more devices, including our cars, will these brands be selling us connectivity and data plans as well connecting into a multitude of carriers in the background through soft SIM cards? What if major marketplaces or financial service providers become MVNOs? This would let them take ownership of consumer/customer data, contact, and reward activity, directly, through sponsored data. 06 MVNOs CREATE NEW
  • 103. 103 SPONSOR ACCESSACCESS CONTENT With the advertising industry struggling to find meaningful ways to engage consumers on their phones, could content and the sponsorship of access to content become positive value components in the lives of the consumer and the brands? Consider, for instance, the WhatsApp video channel from Coca-Cola bringing consumers exclusive World Cup video coverage, free of data charges. 07
  • 104. 104 Any company that already has or is looking into opportunities to sell directly to consumers might have an interest in expanding its potential customer base by providing them with free access to their mcommerce sites. Could marketplaces like OLX, eBay or Amazon or a consortia of brands look into creating unique, “free- of-charge” DTC offerings, providing more convenient and potentially more cost-effective ways for consumers to shop on their phones or tablets? This model could become especially interesting if carriers were paid for data-based on revenue share instead of fixed per-MB pricing. ENABLE E-COMMERCE 08 more
  • 105. 105 Messenger apps (Whatsapp, FB Messenger, Line, Kik, KaKao Talk) have seen a massive surge in person- to-person traffic. Some of these platforms (e.g. FB Messenger) have already openly started to use their platform for business-to-person communication, opening the system up for customer service channels or even machine-initiated messaging (access or confirmation codes, etc.). Given that messaging is moving towards more video-based platforms, brands might innovate their customer service experience through video chat functionality, with the chat traffic paid for by the brands themselves. USE MESSENGER SYSTEMS CUSTOMER SERVICE 09 to provide
  • 106. 106 If brands engage in larger-scale provisioning or sponsorship of accessibility, should governments not provide them with tax breaks as the brands are actually creating a community service? 10 PROVIDE RE-COMPENSATION SCENARIOS GOVERNMENTAL INCENTIVES through
  • 107. 107 Loyalty programs are struggling with creating proper value exchange to promote for repeat engagements with their underlying brands. In developing markets, loyalty programs have long embraced “airtime” as one of the most coveted currencies to their consumers. Can data plans for connected devices not simply be paid off with loyalty points? If a customer can pay for taxis in New York with American Express Membership Rewards points, why can’t the same customer have an American express phone that is paid for via American Express purchases made with the mobile payment option? Why could frequent flyer programs not cover roaming charges with mileage? 11 LOYALTY PROGRAMS BETTER INTEGRATION for PROVIDE
  • 108. 108 With communities or public/private partnerships providing cities with “free” wifi services that still need individual authentication (e.g., LinkNYC), can companies with preexisting accounts (Amazon Prime, Facebook, carrier accounts) not automatically pre-authorize access? And if these companies tracked movements through these networks, are there relevant offers they could provide in context, e.g. transportation subsidies by knowing when and where their customers are traveling (“Ikea just sponsored your subway ride to our store”)? 12 FREE ACCESS PROGRAMS with in cities INTEGRATE BRANDS
  • 109. 109 13 INCREASED ACCESSIBILITY through ENGAGE IN GLOBAL TALENT DEVELOPMENT Certain industries (e.g., software, tech sectors) are struggling to grow and identify the right talent going forward. If increased connectivity means more access to education, can there be a long-term investment goal to bring this connectivity to regions where talent will most likely be sourced in the next 10 to 20 years?
  • 110. 110 Parts of the world are or will soon be struggling with ways to better serve an aging population. If accessibility and connectivity mean better education, improved medical care, and potentially higher mobility, should a consortia from the public and private sectors not invest in overcoming certain levels of digital illiteracy and provide people with generation-specific services independent of a person’s financial capability? Ogilvy & Mather Singapore worked with Singtel to redesign the functionality of a smartphone that was then distributed to Singapore’s aging population. The restructuring dramatically simplified the phone’s interface and functions, allowing less digitally savvy customers to take advantage of basic functions such as games, camera and emergency calls. 14 AGING, CONNECTED POPULATION to serve anPOSITION BRANDS
  • 112. 112 Not really. Certain institutions have demanded “the internet” be considered equal to basic life requirements like air and water. But this does not mean that the internet is equally as accessible and abundant (after all, clean water is certainly not ubiquitous or always free). It still requires an enormous amount of investment to keep the internet infrastructure operating, and the cost for this is not as easily redistributed throughout the complex ecosystem that has sprung up. The benefits the internet brings are in some cases hard to measure or attribute to the providers within the ecosystem. These market forces are not trivial, as they relate to trillions of dollars in investment and trillions in potential revenue. ? INTERNET “FREE” FOR Will we ever have
  • 113. 113 Do we have A HOMEMADE INNOVATION DILEMMA? To me the biggest question for the future is will we really continue in the future to license spectrum – do governments license oxygen? No. The Internet is oxygen, it’s water.” – Vittorio Colao, CEO of Vodafone Group Currently governments are generating a significant income from auctioning off spectrum to carriers. Carriers, in turn, are forced into high-stakes auctions for this spectrum to remain competitive. The lease investment required, however, is directly subtracted from the carrier’s ability to invest further in infrastructure extension. The lack of this investment slows down growth in the economy, at the countrylevel,from enhanced connectivity. Is it worth re-doing the math to see if the benefits of an extended infrastructure investment would not overcompensate for the short term gains from these auctions at the federal level? “
  • 114. 114 WILL WE, IN 5 YEARS, REALLY CARE The simple answer is “maybe.” who provides us with access? Google Fi and Apple are already providing services that are carrier-independent. In many developing countries people carry two SIM cards and phones because the individual carriers services are either cheaper or better based on whether someone is in a rural or metro area, or whether people are making short or long distance calls. Carriers will obviously do everything to keep their brands relevant through a combination of direct (network strength) and indirect (value-added services) value propositions. In a best-case scenario, consumers do not have to worry about connectivity at all, because their devices will be automatically switching to the strongest signals, and their services will be provided by a third party that is invested in the content and service platform rather than the sheer connectivity.
  • 115. 115 WILL CARRIERS BECOME B2B PLAYERS? If the scenario just described prevails, then carriers could find themselves becoming B2B players at scale and target resell partners (such as banks as MVNOs). This might dramatically decrease their individual cost of acquisition, as they might be selling in bulk. The effect on competition and innovation potential will have to be evaluated in this scenario. ? WHO ARE BUYERS THE and if so
  • 116. 116 THE OPPORTUNITY FOR ALL When asked what lessons she would provide the audience about marketing in the digital age, Linda Boff, the CMO at GE, said: “Be sherpas for what is new and what is next. I think there is a real role today for marketers to identify what’s around the corner and then to translate that into business terms to help drive growth.” This applies to all companies and brands, whether they provide infrastructure and access, services and content, or are looking to profit from an increasingly connected global population.
  • 117. 117 and then, together, they might just be able to create a brighter, more connected world while also doing good business. MOBILE ECOSYSTEM PLAYERS, WILL NEED TO COLLABORATE & COEXIST But the whether new or incumbent,
  • 118. 118 CREDITS OGILVY CONTRIBUTORS: Carla Hendra Caylin Lo Chelsea Jones Devon Cottle Elizabeth Stroud Emily Arnold Jay Kurahashi Sofue Jeremy Katz Jess Kimball Joe Bargmann Mary McFarland Peter Fasano Priyank Mathur Sarah Tran Seth Greenberg Spencer Schrage Sydney Sadler EXPERTS & SOUNDING BOARDS: Colin O’Donnell Chief Innovation Officer, Intersection Derk Hendriksen VP Business Integration & GM EKOCENTER, The Coca-Cola Company Harald Neidhart Founder & Curator at MLOVE Mark Kaplan CEO and Founder, Tone Nathan Eagle CEO & Co-Founder, Jana DESIGN: Lori Argyle AUTHOR: Martin Lange Global Consulting Partner, OgilvyRED
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