Annual news recap 2/5: payments

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Year 2018 in the consumer payments industry saw many new highs, but also lows - from the rise of mobile wallets to the fall of Bitcoin, it surely wasn’t a boring year. The border between cash, card and digital payments becoming less and less clear. Asian payments apps are already blending social media, commerce and banking. Check out what (mobile) payments news caught our eye last year and try to imagine what the future might bring in 2019.

Is self-distribution for mobile games making a comeback?

Is self-distribution for mobile games making a comeback?

Alternative distribution channels for Android apps used to be a hot topic half a decade ago. There used to be dozens of app stores available and we got our feet wet in the process as well.

These alternative stores never took off well and today, Google Play remains the primary channel for mobile game developers to distribute their apps on Android devices. The only notable exception here is China where alternative stores have won.

With Epic Games launching its Fortnite game outside of Google Play earlier this year, is it possible that alternative distribution channels are making a comeback? Probably not in the format popular some years ago, but Epic Games’ move does give some food for thought to other game developers.

At its simplest, app stores provide game developers with user acquisition, distribution and billing. The primary reason why alternative stores failed was that they didn’t get the user acquisition part right. Everyone already had access to Google Play, so there was no need for a secondary channel for app discovery.

But while game developers have focused on growth through app stores, streaming services have over the past few years been using alternative distribution with great success. Streaming companies have been using telcos to grow for quite some time now. Disney is a notable example of a company who has leveraged telcos for both their streaming and gaming content.

Telco partnerships for gaming

Streaming and telcos have been a good match because music and video are generic services that anyone regardless of their demographic profile will want to consume. While 5 years ago mobile games were still considered to have a niche audience, that’s no longer the case.

Today, almost half of gamers are over 35 years old. Taking Indonesia as an example, 6 out of the 20 top free apps are games. What does this mean for game developers? It means telcos are now also becoming more interested in partnerships with game developers. They are willing to provide the same things - acquisition, distribution and billing - to game developers that they have been working on with streaming services.

Unlike alternative app stores, which did not manage to solve the user acquisition part of the equation, telcos have the entire chain covered:

  • user acquisition: established B2C marketing channels with both online and offline presence

  • distribution: enabling service access and delivering digital content to consumers is the telcos’ core business

  • billing: with direct carrier billing (and telco-operated wallets in some countries) in place, any decides to make payments is able to do so

Telco partnerships will not be realistic for all game developers and it will not be the main driver of user growth. But much like streaming services, game developers can use telcos to establish themselves in new markets and create incremental revenue growth.

Annual news recap 1/5: mobile industry

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Happy new year, everyone! Hopefully you’re ready to make 2019 your best year yet. But before we start looking forward, let’s take some last glances back to 2018. We saw everything from GDPR to feature phones to multi billion dollar deals. A famous Estonian poet has said that the one who doesn’t remember the past, lives without a future. Well, let’s refresh our memories and see what past year brought to us in mobile industry news.

Netflix localized pricing in Asia - you should do it too

Netflix localized pricing in Asia - you should do it too

Last month Netflix said it’s trying localized pricing in Asia to attract more users. Netflix has set its sights on expanding in this region but its current price level is not affordable considering the local income levels. With digital streaming giants like Amazon or YouTube also tackling emerging markets, it’s crucial for Netflix to find the sweet spot of price range for local conditions.

Emerging markets are the largest tech device growth markets. Digital merchants who want to sustain their user base and revenue growth need to focus on these countries. This includes a customized, localized approach to user acquisition, monetization and retention.

Charging all the customers the same price is neither fair nor effective. A customer in India does not have the same purchasing power as a customer in the UK. By charging them a flat price, you will end up overpricing some customers, underpricing others.

When entering emerging markets, localization is crucial for targeting and acquiring new clients. Fortumo has emphasized the importance of price localization for years now. This is a hot topic for merchants of all shapes and sizes - either you’re Netflix or a small scale digital service.

How you choose to localize your price will depend largely on your customer base, your product and brand positioning, and what markets you want to tap for future growth. Even though there is no universal way to do it, thankfully there is a variety of methods to choose from. Testing your heart out is the key to finding the best solution for you.

Netflix also revealed they’re experimenting with their pricing to find the appealing fit for local customers. This might mean a totally different fourth tier of pricing options or even an alternative version of the service.

Some points to consider for price localization:

  • Purchasing-power parity - compare the comparable by finding indicative data that better resonates with the purchasing power of the potential customers of your service. For example use the Big Mac Index.
  • Check out the competition - if any of your competitors are operating on the same market, it’s possible that they have already done the pricing research on your behalf. For example Southeast Asian video-streaming service iflix offers its users free video streaming that will be supported by advertising. Spotify has localized their Premium prices around the world - it costs around $10 in the US, $17 in Norway and $3 in the Philippines.
  • Ask the payment providers - payment processing companies usually know the user payment behaviour for each market very well. For example Fortumo’s data map gives a good overview of carrier billing trends.
  • Painted door A/B test - display your current pricing to 50% of users in a country, and localised pricing (for example in the context of a “discount campaign”) to the other half. If users do click on the local pricing, you can have a note saying “sorry, this package is not available yet”.
  • Sell smaller pieces - instead of local pricing you can break your service into smaller parts - for example daily package instead of a monthly subscription priced accordingly. Getting a taste of the service will become more affordable to the customer while the total cost remains the same.

Bundling dictionary 101

Bundling dictionary 101

Bundling is actually a quite common marketing strategy (Happy Meal, anyone?), but it’s only lately spread to the digital services frontier. About 5 years ago it became popular to bundle digital services with physical goods - for example headphones with music streaming.

Co-marketing through bundling has become widely popular in the telco industry during the past few years, with mobile operators partnering up with video and music streaming service providers. Often the companies target the same audience and in this case it’s an option to include several products in the same offer.

Here is a short dictionary to give you a better understanding of the mobile operator bundling partnerships.

Bundling - grouping various services as a package to increase the appeal to potential customers and reduce advertising, marketing and other expenses associated with delivering multiple services.

Hard bundles - mobile operators often sell service packs where the consumer pays a fixed amount for a fixed amount of call minutes, text messages and mobile data. Third party services are bundled in the same way, with access to the digital service coming as part of the fixed price pack. As long as the consumer keeps using the telco service itself, he/she also has access to the digital service. It’s the main model of cooperation today.

It’s mostly used to sign up new subscribers or have existing ones upgrade to a more expensive service pack. Hard bundles work great for postpaid subscribers where the mobile operator has the capability to charge users on a monthly basis.

Soft bundles - the digital service is not directly tied up with a fixed price pack, but offered to mobile operator subscribers as an add-on. Soft bundles enable service providers to tap into the dominant prepaid audience of emerging markets.

Bundle partnership - the service provider(s) and the telco who join forces to offer a combined offer to their consumers. Today streaming services are still the main bundle partners for telcos, but more and more services are being consumed through smartphones. Fruitful partnerships could also sprout from productivity tools, communication apps, transportation, etc.

Mini-bundle offers - when users unsubscribe and churn after the bigger bundle deal runs out, tailored offerings can be created to bring those users back to the service. For example, an initial offering might involve getting 3 days of free service with the purchase of a $0.5 SIM card. If such a user activates the bundle offer but then does not continue as a paying customer, a follow-up offer can be sent: “Load 5GB of data onto your account and get 2 weeks extra access”.

Bundle upselling - marketing the bundle offer so it reacher more subscribers. Launching a bundle offering has a fixed cost. Potential growth on the other hand is not limited and the return on investment depends on how many existing and new subscribers can be convinced to participate.

Reselling - telcos are partnering up with OTTs by becoming their vendors and setting up digital storefronts through which they sell OTT services to their subscribers, effectively becoming digital experience enablers. Bundling and reselling aim to achieve different goals and are not mutually exclusive. While for bundling the goal of telcos is to upsell subscribers and achieve bigger sales of the telco’s own services, reselling provides an opportunity to earn revenue from the sale of digital services directly.

Reverse bundling - when a consumer buys a digital service, they get free or discounted data from the mobile operator. This nudges the consumer’s habits towards mobile data consumption. Reverse bundling works better for emerging markets where consumers are not keen on making the switch from prepaid to postpaid.

Trident Bundling Platform - Fortumo's open platform for co-marketing. Trident can be used to launch bundles and reselling for new user acquisition, monetisation and retention.

Learn more from our other bundling themed articles and white papers on our blog.

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