Can O2 Start a Revolution?
By Carlo Longino, Wed Aug 28 00:00:00 GMT 2002

mmO2's new Revolution revenue-sharing plan marks a big shift in the industry.


mmO2 recently announced Revolution, a new revenue-sharing system for mobile content providers. It's a pretty simple system, really: developers or content providers register their app or service (WAP or SMS) with O2, who vets it for quality and appropriateness and then links it to their online portals. O2 handles the billing and other back-office tasks, and in return takes 15% of the net revenue, leaving the content developer with the other 85%.

Tried and True


This of course, sounds familiar - it's the same system NTT DoCoMo has used to fan i-mode's flames. And although it's a simple program, it reveals a massive paradigm shift: a carrier making it worthwhile for a developer to create an application. It levels the playing field - now not only can media and entertainment giants like Disney, AOL Time Warner, Reuters, and the Financial Times, but even the smallest entrepreneur with an idea can launch an application or some content to mm02's 17 million or so European users.

It's no problem for the Wall Street Journal or CNN or Playboy to launch a pay site, be it on the wired or wireless Internet. They have the resources to create their own billing mechanisms and so on. But smaller players, no matter how compelling their content, it can be difficult to establish any sort of infrastructure - hence the booming growth of ASPs, credit card processors, and services like PayPal on the Web. Now just about anybody can set up a for-profit, pay Web business with a minimum of fuss, knowledge, and most importantly, cost.

But the shift goes deeper. O2 is a company that's had success with traditional WAP portals - its Genie offering has stuck out from the otherwise flat market - but Revolution could signal a shift to a different business model, one built on per-packet charges rather than content fees. Carriers' forays into the media business have been largely abysmal. Their attempts to pick and choose the content their customers can see - rather than letting the market dictate what's popular - failed miserably.

Opportunities


Their strengths lie in their customer base, their billing and back-office systems, and of course, their networks. So it only makes sense to play to those strengths, and concentrate on building the best data pipeline they can, as opposed to jumping into that pipeline with both hands and feet. While the importance of content can't be underestimated, after all, it's content and services that, all other things equal, draw in customers. But the way to get the best content is not for the carriers to create it themselves, but to set up an environment in which the experts - the content providers and application developers - can grow and prosper.

DoCoMo benefits from a self-fulfilling circle: customers are attracted to the content and services available on i-mode; content providers are attracted to the customers, and so on and so on. And it's this type of circle that carriers need to produce to maintain growth. Customers will only be attracted when one carrier offers them something another carrier cannot (simply look to J-Phone's success with picture messaging for proof of that).

This move will have to cause a shake-up in mobile content. While Kpn and E-plus (both DoCoMo franchisees) may already be using revenue-sharing plans, this will force other carriers (most notably Vodafone and Orange) to fall in line, lest they miss out on most content. There's very little incentive for developers to put their applications on those networks for little reward, especially considering mmO2's straightforward Carlo Longino is a freelance writer based in Austin, Texas. His previous experience includes work for The Wall Street Journal, Dow Jones Newswires, and Hoover's Online.