Aggregators: Removing a Blockage from the Supply Chain
Aggregators: Removing a Blockage from the Supply Chain
By: Andrew Martyn
Jan. 1, 2000 12:00 AM
By banding together via aggregators, lots of smaller companies can make a proposition the operators can't ignore.
One of the most frustrating experiences for mobile content or service providers is negotiating a profitable channel to market with mobile operators. The negotiation process itself can be tough, but even getting to the meeting table is difficult. And on the other side, marketing and business development managers at the operators are constantly inundated with approaches from content and service providers; evaluating all the possibilities is a drain on their resources. Thankfully, mobile traffic aggregators can make it cheaper and easier for content providers, and grow traffic for operators. At the most basic level, aggregation is about volume, and volume buys a seat at the negotiating table.
This is strange given that SMS is not a session-based protocol and better technologies for content and services are available. Perhaps it has something to do with simplicity and ubiquity or maybe the start content - ringtones and picture messages - serves other modern human needs such as personal identity and individuality.
SMS is used in a variety of ways to enable content and services. "Pull" content enables users to request content that can be used to personalize their mobile phones or add to SMS messages with picture messages. SMS is also being used as a basis for more interactive services such as voting on TV programs, chat services, entering competitions, and even mobile banking services. And now MMS provides a multimedia messaging platform for delivering content (text, images, audio, and video), including new formats such as Java and polyphonic ringtones that take content possibilities a step further.
Another growth platform for content is short audio messaging. Recorded audio content can be pulled or pushed to any phone (although mobile phones are most personal) to delivery information or entertainment content.
Mobile content may be growing up, but getting it to the end user is still a problem. Bottlenecks in the supply chain still remain. Traffic aggregators have exploited this opportunity in more advanced markets and are proving useful to both content providers and operators. While aggregation can apply to any type of mobile data, our focus is on SMS as it is the major platform for mobile content delivery today.
There's a Bottleneck in My Supply Chain
As a content or service provider, sending an SMS to thousands of users requires specialized systems and a route to the end user, often through multiple operators. At a basic level, a mobile phone can be connected to a server to send and receive SMS messages. With higher volumes however, an SMSC (Short Messaging Service Center) or virtual SMSC will do the job better. Charging the end user requires a billing platform, and a relationship with each operator is the easiest way to bill premium content.
Because of their relationship with end users and their control of messaging and billing platforms, operators have traditionally been seen as necessary partners for content providers. In Europe and many other countries, operators have taken what many see as unfair fees to deliver content to end users and bill them in the case of premium-rated content. In today's mobile content markets, a direct relationship with operators is not always a necessity. They remain a powerful channel for marketing mobile content if you have a large budget or killer idea, but they can also be seen purely as the owner of the infrastructure used to deliver the content in much the same way the post office is.
Aggregators Are a Natural Market Evolution
Mobile traffic aggregators operate platforms that help content and service providers reach any mobile user in a market, and in many cases, this means international connectivity. They have established links to all mobile operators in order to receive or deliver SMS messages (and now MMS, WAP gateways, etc.) and to consolidate charging and billing where required.
While many content and service providers operate an around-the-clock service, others have only short-term requirements for the use of a mobile communications channel. A good example of this is in mobile marketing, where a brand may run a competition or direct marketing campaign over a certain period of time (usually up to 3 months). Negotiated agreements with every operator (or even one operator) are not achievable for these types of projects.
Lowering Costs for Content Providers
It also includes lowering traffic costs given their ability to negotiate lower wholesale rates with operators based upon larger volumes. Dealing with aggregators also makes sense for the operator, as the cost of maintaining a single relationship is lower than with each individual content or service provider.
Aggregators will often operate at least one short code that can be shared by content and service providers. This means identifying SMS messages meant for one content provider by an "alias" at the beginning of the SMS. Where the channel is experimenting with the mobile channel or does not have the business case to invest in purchasing their own short code, sharing an aggregator's code is the only option. In opposition to this strategy, sharing a short code may not be appropriate for larger brands when it could mean advertising the same number as used by late-night TV SMS chat.
Charging and Billing
Different countries using this method also differ in the technical solution, and other factors such as the limits on the amount that can be charged. Given these complexities and the need to establish technical and commercial agreements with the billing party (usually an operator), working with aggregators can deliver a faster time to market and a competitive revenue-sharing agreement.
Not Available Everywhere
Is There a Downside?
Over the past year, I have worked with both large and small content and service providers in the Nordic market. In all cases we have recommended they use aggregators. In one case, a large banking client bought their own short-code number providing the marketing value and control they required, but they too plan to outsource the whole connectivity and hosting to an aggregator.
The Future for Aggregators
For example, in Denmark today there are approximately 10 SMS traffic aggregators - all with different value propositions for content or service providers. SMS traffic prices alone vary between different players in the market by as much as 70%. Certain aggregators provide higher capacity communications networks to support such services as SMS TV polls. Some aggregators support more complex content types such as MMS, Java downloads (using WAP push), and video streaming.
Companies such as Netsize and Ideation House offer connectivity throughout multiple markets in Europe, while others are local players who are also content providers. CEO of Ideation House, Brian Larsen believes that regional connectivity is important in some markets and consolidation is already becoming evident. Larger content providers expect support across associated markets, as is the case in Scandinavia.
"Most large content and service providers expect connectivity across different markets," says Larsen, who has expanded his InAphone platform from Denmark into Sweden, Norway, the UK, and Germany. "There will be consolidation in the aggregator business; margins tend to be reducing, and many smaller operators do not have enough traffic to survive. Adding to this, the operators are still in a position to take large slices of premium SMS revenues."
As some aggregators are also competitors to their customers (on the content front) in the medium term, they will need to choose one competency or the other. But in the short term, more traffic means lower prices. The operators are big players, so getting content and services onto their networks when you're not News International isn't easy. By banding together via aggregators, lots of smaller companies can make a proposition the operators can't ignore.
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