Digital is accountable, but is it sustainable?

Digital is accountable, but is it sustainable?

Author | Noor Fathima Warsia | Wednesday, Sep 26,2012 1:10 AM

Digital is accountable, but is it sustainable?

Mobile operators such as Vodofone have become a crucial part of the digital value chain in India. And according to Jonathan Bill, SVP - Innovation and Business, Vodafone India, it is fair to say that India is at present a nascent digital market, especially for mobile. “Mobile adoption is big in India and a number of 800 million users is testimony to that. But while India is the third biggest internet population, soon to become the second largest following China, the digital economy is one of the smallest – perhaps the size of Belguim,” said Bill.

He went on to explain that numbers from the Vodafone network itself show that smartphone penetration in India is picking up, which is healthy for the growth of the business. Vodafone today has 35 million browsers, 35 million active subscribers who download and over two million plus 3G subscribers, which again is an encouraging number. He estimates the number of android devices to reach 30 million on the Vodafone network in the next 18 months.

The size of the market is big but the need is to be able to make money, and in a number of ways. The monetisation loop begins with the users, where operators make money by traffic, leading to targeted advertising. Money is made here by selling or shifting traffic. The next peg is to ensure user interest through creating content or a message that can also engage the user further, at which stage monetisation can come in by ways such as making websites. Following this, the business should be able to make a proposition that would lead to transaction where money is made by selling. “In India, the loop does not close for transaction models,” informed Bill.

However, he pointed out that traditionally in any kind of new media, a precedent of which is seen in the case of digital, conventional marketers join the race 12-15 years later. He says, “We saw that in digital too when the first to advertise on portals were other digital companies because they understood the medium, they knew its benefits and potential. The pioneers for mobile too would be other businesses and content owners in the space, not the big brands.”

Bill is of the opinion that while players know the subscribers, where they live, how often they are paid, history of internet usage, estimated purchasing power, what they respond to and so on, they don’t know how they want to play in this market. Vodafone’s business approach follows some basic principles in order to grow the business. The first in this is the customer-first DNA, where customer information is guarded, no spam is allowed and permission based messaging takes place.

Vodafone also follows an open platform approach that it believes is a catalyst. “We have changed the revenue share model and the app developers get 70 per cent of the share now so that they are able to reinvest the money in marketing in other networks to drive further customer activity. Direct-to-consumer transactional revenue is another key driver and we are starting to see an uptake for developers as well,” said Bill.

The growth of advertising would be driven by different factors and one of this is the ability of mobile, as a medium, to reach beyond traditional markets. One characteristic unique to Indian consumer is that they come from a place where they are used to paying for value added services, and Bill believes that this makes India a potent market. Also unique to India is the fact that there are no businesses if there is no revenue in it, which Bill believes is a part of the Indian DNA.

Nonetheless, one key challenge facing India is that the mobile business model is yet to evolve. “There is a tendency to commoditise, and there is a concern that India is a low ARPU (average revenue per user) market but we should not allow mobile to take the same process. Digital is an accountable media - we need to think how we build it as a sustainable media,” pointed out Bill.

Some challenges in the process are finding the right incentivisation and application for the abundance of skilled development capability, the current regulatory environment, language complexity, quality of sales process, commodisation tendency, agency understanding and lack of established regional markets.

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