Mobile operators and over the top (OTT) players are coming together to form mutually beneficial partnerships. These arrangements enable operators to differentiate their services and extend their reach, but what do they offer operators in terms of revenue potential?
Collaborative arrangements between operators and over the top (OTT) players are becoming more commonplace, as operators seek to generate new revenue streams, provide a broader range of services to their subscribers and increase customer loyalty.
At the moment these partnerships are, on the whole, simple implementations designed to support new target marketing initiatives. For example, in the UK Vodafone gives an option of free Netflix or Sky Sports to its Premium data customers, while in Switzerland Spotify is bundled with a number of Orange tariffs. Evolving these joint marketing initiatives into flexible ‘mashup’ arrangements with revenue share is a natural, if elusive, next step. But what is the business opportunity for operators who pursue partnerships as a revenue stream?
AsiaInfo commissioned independent research consultants Northstream to explore the business case for mobile operators to partner with OTT players, and quantify the size of the opportunity.
Northstream looked at the potential gross profits that could be achieved through operators’ existing partnership arrangements with OTTs, commonly characterized by manual integration of both parties’ systems, as compared with the predicted outcomes enabled by a partner collaboration platform. Northstream quantified this forward-looking opportunity, concentrating on two existing OTT partnership models: Service Bundling and Sponsored Data.
According to the Northstream study, the existing non-platform approach to OTT partnerships has the potential generate €160 million in gross profits for Western Europe operators over the next three years. With a partner collaboration platform in place, operators could generate an additional €2.2 billion in gross profits over the same period. This is because the platform enables operators to offer more services, involving more partners, to a wider range of subscribers. Critically, it enables the operator to do all those things ten times faster than existing integration arrangements.
Northstream’s predictions for €2 billion in additional profits are based on existing partnership use cases. But with a collaboration platform in place, operators will be a in a position to experiment more with new models, mash ups and mini offers and future-proof their Partnership Collaboration strategy; moving from their current position of using partnerships as a marketing-driven retention/ acquisition tool to ongoing innovative revenue creation. So, in reality, the profit potential could far outstrip what Northstream has estimated in its study.
The Northstream results support a sea change in the operator approach to OTT Partnership collaboration – moving from the current state of play where operators are focused on a small number of strategic partnerships with powerful OTT players, to generating modest amounts of revenue from a much larger pool of partners and services.
Small revenues x many partners = a business case
To be successful then, operators must grow the number and types of services they provide with partners (i.e. more partnerships and more use cases), and target them to wider customer segments. The ability to scale up the number of partners (and services) makes a case to invest in the collaboration platform and realize new revenue streams that would otherwise be unreachable. A collaboration platform, such as AsiaInfo’s Veris OP, is therefore critical in unlocking the potential in a way that is not achieved through the traditional approach.