Mobile Content: Diversification of Services

In the beginning of the year 1991, with a call by the developing Petersburg company Delta-Telecom, a market for cellular connections appeared in Russia. In the year 2004 the scope of the market amounted to $8.2 billion. In February of 2005, according to the research of ACM-Consulting, the quantity of subscribers had reached 81.7 million, and the level of penetration amounted to 56.3%.

The greatest weight of the cellular connections go to accessorial services (VAS -- value added services), mobile content. In 2004, by the data of Prime Consult, mobile content brought in 5.6% of the gains from the industry of cellular connections, the share of value added services in the ARPU (the average proceeds from one subscriber) of cellular operators totaled 12.5%. By the calculations of the company J'son & Partners, there were more than 30 million users of SMS and approximately 250-300 thousand users of MMS in Russia in the beginning of 2005. The majority of analytics suggest that the value of the scope of the market for content in 2004 was $300 million; from the beginning of the year it multiplied by no less than 2.5. In 2005, according to experts, the market will also drastically expand and the quantity of branches will reach about $600 million, a figure comparable to the scope of the film box-office sales.

Historically, as did other high-tech markets, a market for Russian cellular connections emerged in Saint Petersburg. This is explained by the presence in the city of strong higher education institutions, a powerful educational potential, and a high concentration of companies working in the area of information technology development. The majority of staff-members of content providers previously worked with the Internet, cellular connections, and other information technology. SPIK became the number one Russian provider of value added services in 2001. After a short period of time, INFON and SPN Digital came into the market. After them appeared Jippii and i-Free. The newness and potential of the market, high profits, large demand for the services, and increasing functional ability and accessibility of cellular telephones resulted in a dramatic increase in the quantity of content providers. In the present day in Russia among the toughest of competitors, experts name INFON, i-Free, Inform-Mobil, Next Media, Jippii, Sibius, Nikita, Solvo. All in all about 250 content providers work in the Russian market; 80% of the market falls to the leading ten companies.

With the growth of the industry and the stiffening of competition, it is more complicated for new companies to enter the market. The primary barrier — a network of a small number of cell phone operators working within a small area and high advertisement expenditures where the existing content providers possess the existing advantages at the expense of the economy of scale. "By our predictions, the year 2005 will be a year of merging and absorption between market contenders," remarked Kirill Petrov, the acting director of the company i-Free. "We are not expecting the appearance of new leaders among the Russian competitors, but a possible influx of popular foreign brand names. The main path of their entry into the market will be by the purchase of existing companies."

Kirill Petrov proposes the following classification for secondary services: telephone personalization; informational recreation content services; games and applications; value added communications; and transaction services. In agreement with the data of Margarita Zobnina, an expert from the mobile network company Prime Consult, towards the year 2005, 53% of the VAS market will go to logos and ringtones, to personals and communication - 12%, to informational services - 13%, media content - 14%, mobile games - 6%, and other services - 2%.

In the beginning of 2004, logos and ringtones were already bringing in more than 70% of content provider earnings. The wild of growth of this sector led to tough competition between providers which, in its turn, brought a drastic increase in advertisement expenses and a decrease in the profitability of logo and ringtone sales. Market competitors had to carefully diversify into other sectors, of which the most promising are considered to be Java games, media projects, products and services in the sphere of mobile marketing, and also communication and personals. On the other hand, products for telephone personalization are expanding: from black & white pictures and monophonic ringtones to color screens and polyphonic tones, to audio and video players. Not long ago the company series (PlayFon, Nikita, Teleclick, and Fidel) beginning making ringtones for mobile phones in MP3 format and realtones (of melodies and soundtracks, for incoming calls). In 2004, all the main cellular operators launched the ability to send MMS. For example, the service "My Moment of Glory" (Megafon-Moskva) allows its subscribers to send pictures and photographs in a special gallery on the operator’s WAP site. The company SeeStorm proposes a new direction of development of MMS services: its product, primarily in technology of 3-D talking characters, is included in the service "Vocal Post Office" of cellular phones and enables one to visualize vocal conversations, automatically converting them to multimedia (voice and synthetic video) MMS, which are delivered straight to the mobile phone of the recipient.

In 2005 the greatest growth is expected in the sector of media integration services, particularly in connections with the television. The principal competitors in this market are Edmar+, i-Free, INFON, Next Media, SMS Media Solutions and Inform-Mobile. On youth and recreational channels (MTV Russia, Mus-TV, STS) nearly all programs are mobile-interactive (lotteries, voting, quizzes, gambling, tele-chats, congratulating on the "streaming line") inviting viewers to directly participate in the programs and their accompanyting content. By the words of Alexey Chukina, the acting director of Edmar+, voting (weekly eliminating one participant), feedback (support of the studio audience to the location of the participants) and chat (communication of reality TV show fans) in the program "Hunger" (TNT) in 3 weeks brought in more than 600,000 SMS (about 7,000 SMS per day). SMS voting on the program "The Last Hero", organized by the company i-Free, brought in the participation of more than 400,000 Russians. SMS Media Solutions conducted SMS voting in the finale of the contest "Eurovision" which took place May 15 of 2004. 10 minutes of voting accumulated traffic equaling more than 100,000 votes. SMS voting "Support your idol", production of "Star factory-3", brought more than $1 million to their founders within two months.

Great capabilities of VAS services are rendered to radio stations. By SMS it is possible to send messages to the radio DJ while on air, organize voting for the hit parade, make SMS quizzes, request songs, conduct interactive games or propose voice services such as "Traffic jams", organized by Next Media. The first SMS service for the radio was founded in Russia about two years ago by the company Sibius which is now the leader. In the opinion of Alexandra Serova (Sibius), the Russian market for SMS interactives on the radio will grow to $6 million in 2005.

Ratings, feedback (commentary, questionnaires, questions for the editor), content, user creations, warnings and announcements, interactive quests, comics, crosswords, tasks for observation — this is far from the full list of services which content providers can offer printed media. For example, the joint project "Annonce" of the magazine "Hacker" and i-Free supplies readers with operational information: they can receive a short summary of each new issue of the magazine on their mobile phone, only a few days after it comes out.

The broadcast spectrum of services allows for voting portals of cellular operators and content providers as well as information services (weather, advertisements, exchange rates, events listings of clubs, cinema listings) and recreational services (jokes, toasts, horoscopes, etc.). Ordering ringtones for mobile phones can be done through vocal portals. By the words of the general director of the company "Teleclick" Dimitry Baltrukov, IVR services, where the subscriber receives all by vocal instructions, may become one of the paths for increasing the level of interactivity of subscriber participation in TV and radio programs.

Among new information VAS products one can note the service "SMS Navigator", with the help of which a subscriber can find out the price and availability of a mobile phone on the retail network Telecom Point immediately by an SMS inquiry. The service "SMS Translator", allowing operators to translate words and short phrases from English to Russian and vice versa, was developed by specialists in the area of technological development of automatic translation by the company PROMT and the content provider i-Free. The operator Megafon-Moskva on the 8th of March launched a service designed specifically for women, including an SMS subscriptions to cooking recipes, trendy diets, recommendations by cosmetologists, celebrity secrets and advice about love and relationships.

The majority of developing Russian mobile games until recently gave little attention to the domestic market, but rather was oriented toward foreign clients. By the data of SmartMarketing, in 2004 in Russia more than 5 million game unit programs for mobile telephones were sold (domestically as well as abroad), amounting to the sum of $12 million. Experts predict active development of the sphere of mobile games, including in this speculation improvements of quality of the applications themselves and expansion of telephone capabilities.

The mobile telephone may also be a useful instrument for completing transactions: m-banking, account management, and account payment from a telephone account. In Southeast Asia for example, one can purchase a Coca-Cola from a vending-machine by mobile phone. But for the moment this sector of services is very weakly developed in Russia because of the imperfection of legal foundations and certain apprehensions of cellular operators.

One of the promising trends in mobile phone services today is mobile marketing. Companies such as Bravo, Tinkoff, Alfa Bank, Contex, Daewoo, Samsung Electronics, McDonald's and many others use SMS-solution. Mobile marketing enables successful completion of tasks to stimulate sales, promotion and bolstering of brands, acquisition of consumer feedback, collection of data about price statistics, and effectiveness of distributive networks and regional markets. Moreover, it gives the unique ability to receive objective ratings of advertising mediums and information channels.

Mobile value added communications include MMS, SMS, personals, chat, messaging and network games. The market leaders of mobile personals are considered to be the Moscow-based companies Nikita and Inform-Mobile. In autumn of 2004, the company i-Free launched a fundamentally new product in the area of value-added communications — Jamango. With no existing equivalent, it is the first SMS service in the world, similar to its functional opportunities for communication services available in the Internet. In the first dimension of this unique brand and of the visualization medium "on-line" are communication lines mediums included in the most popular SMS services — personals, interactive games, informational services, downloading melodies, horoscopes, fortunetelling, jokes, etc. All of these services, and also chat, communication by interest, and personal event notifications are accessed by the single number 4441 in the service Jamango. The goal of this new product is to break down world borders through mobile connections, by providing for the creation and development of free virtual communication, allowing millions of people to find each other, establish contacts and converse, irrespective of one's cellular network subscription.

The visualization of the interface Jamango was produced in the form of geographic maps of virtual tropical islands, each object of which introduces an independent interactive mobile service. The choice of this or that service takes place in the course of the subscriber's travel, by virtual maps of the islands. The islands are settled by various characters, actively cooperating with each other and with real subscribers. All of this creates a bright virtual world, replete with informational and communicational mediums, by which subscribers locate new acquaintances, converse with each other, play games, and receive and announce content in a dimension of specialized services. Aside from this, the subscribers are involved in topics and events taking place on the islands, which are visualized in the form of animation films and comics, distributed through massed media.

Jamango has become the first simple SMS interface capable of developing the complicated function of Internet-community: particularly, the ability has materialized of creation of personal user pages, where information about oneself and one's personal records are stored. From information about the subscriber, dispersed on personal pages, it is possible to simultaneously take a look at an unlimited quantity of users, that in sum creates a complementary convenience for subscribers and decreases their expenditures in comparison to usual mechanisms of SMS chat. Moreover, thanks to the worlds first created dual-user SMS quest, providing for simultaneous instant communication between several users, progress is being made toward adaptation of computer network games for mobile telephones.

This product has been created using the most modern technological approaches and latest user instruments of communication. Among these are presence, instant messaging, contact lists and group management, alerting systems, contextual help, blogs, and many others. Work is currently taking place on the development of technological support for MMS, J2ME and BREW, that allows for the creation of a colorful user interface direct on the screen of the mobile telephone to supplying an individual profile of a subscriber by personal photographs and galleries, in the dimension of models for instant messaging to develop "one to many" and "many to many" communication paradigms. Within the first three months from the moment of the launching of this product, more than 600,000 users had been registered, sending about 200,000 premium SMS per day and a quantity of active users equaling approximately 100,000. More than $1.5 million was invested in the project, and the earnings from the first three months amounted to over $500,000.

All in all, few years have passed since the appearance of secondary services for cellular connections. The first SMS in the world was sent from a personal computer to a cellular telephone in 1992, by the English company Vodafone. In 1997, Nokia created the first mobile phone game, Snake. In the same year the forum WAP was created by mobile network operator leaders, and in the following year mobile Internet became a reality. In the year 2001, at the Hannover exhibition CeBIT of the company Ericsson demonstrated the transmission of MMS communication. Now VAS services have turned into the most promising and quickly developing world market, the rate of growth and diversity of which transcends the Internet boom of the late 1990s. And consumers are ready to pay for VAS services, in the rest of the world as well as in Russia.