Kicking The ARPU Infatuation
By Mike Masnick, Wed Mar 02 02:00:00 GMT 2005

In what should be a shocker to very few people a new study is claiming late adopters are late adopters for a reason. They don't see much of value out of existing providers. That doesn't mean they should be ignored however.

This new study seems to state the extremely obvious: mobile operators shouldn't expect late adopters to bring in as much money as earlier adopters. The most basic interpretation is simple: late adopters don't see enough value at the prices being offered. However, if services were cheaper, they might be interested. Being late adopters, though, means they're unlikely to value new services like mobile data very much initially.

This isn't necessarily a bad thing -- unless you judge everything by ARPU. Unfortunately, many operators have joined the church of ARPU, and if they can't get more revenue out of each user, they feel like they've failed. Wall Street punishes operators who see ARPU decline -- even if it really means they've figured out how to provide services more efficiently to users. In focusing solely on the average revenue per user, operators miss out on two very important things. First, they ignore new users (those late adopters) to whom service can profitably be provided, but who are unlikely to spend all that much. Second, it makes operators miss competitive threats from cheaper alternatives.

The focus is always about what high revenue services can be provided, rather than what useful but profitable services can be provided. This leads to things like operators chasing after questionable opportunities in mobile music and mobile video because they seem like high revenue opportunities, rather than offerings that people really want, and which can be provided for more revenue than they cost to offer.

This also means that the features and services that subscribers actually want, such as better coverage and reasonable prices, often get ignored. Companies are spending so much on what they hope will be high revenue services when there are untapped "late adopter" markets who can bring in decent profits, if not tremendous revenue per user. While other operators are off spending big on "high revenue" opportunities that may not actually interest users, operators have an opportunity to focus on lower revenue, but stable late adopters who can provide actual profits.