App payments crucial for operators as OTT services erode revenues

Operators are set to see their share of mobile content and commerce revenue drop from 44 per cent in 2011 to 31 per cent in 2016 globally, according to the latest forecasts from Informa Telecoms & Media. This is due to services such as mobile messaging, music, TV and video streaming, location-based services and social-networking increasingly going over-the-top in the next five years.

However, this drop in market share would be more severe if it wasn’t for the growing role that operators will play in mobile app payments.

Operators may have been firmly shut out of Apple’s mobile apps ecosystem, as through iTunes, the firm has a direct billing relationship with millions of digital media users. However, the likes of Google, Microsoft, Nokia, RIM and Samsung still need carrier billing to get paid for downloads from their app stores.

Therefore, services such as carrier billing and app-download and in-app payments being charged to mobile phone bills will allow operators to claim an increasing share of revenues over the coming years. Informa predicts that that the slice of app revenues going to operators will grow from ten per cent in 2011 to 17 per cent in 2016.

“Operators could miss out on the opportunity afforded by carrier billing if they don’t make it more affordable and accessible to app-store owners and developers, and if they do not introduce more efficient and flexible systems than the clunky and unreliable PSMS,” said Guillermo Escofet, senior analyst at Informa Telecoms & Media.

He added that more compelling alternatives are already appearing in countries such as Russia, where instant-payment terminals in streets allow users to turn cash into e-money to spend on digital goods.

“Operators’ slice of app revenues will grow not because they will increasingly act as a direct retail channel for apps, but because they will increasingly act as enablers of paid-app downloads on third-party stores,” said Escofet.

The need for carrier billing is even more pressing in emerging markets, where bank accounts and plastic money are rare, and premium SMS is the main method of paying for digital goods on phones.

Emerging markets make up the lion’s share of mobile subscribers globally, and that proportion is constantly growing. App stores that that have embraced carrier billing are the most relevant to emerging markets, such as Nokia Store, Google Play and BlackBerry App World, according to Informa.

The research firm predicts that mobile content revenues (total data revenues minus internet access and P2P messaging) will grow from $40.7bn in 2011 to $131bn in 2016.

Informa’s forecasts only take into account direct end-user revenues – i.e. money paid by users for content and services – and do not include indirect revenue sources, such as advertising.