How Mobile Operators Can Avoid Becoming Dumb Pipes With Location Innovation

The announcement of AT&T acquiring T-Mobile is the most important of many indicators of a new trend: the carriers are back, and they are taking their rightful place at the table with Google, Facebook and Apple. The reason? The new media companies have been quietly replicating most of the key pieces of the carrier’s offering (see chart). The most innovative of the world’s carriers recognise the threat and also know that their business is changing in fundamental ways. Infrastructure costs are increasing and churn is a constant threat to the customer base, while revenues from traditional businesses are declining. Carriers have no choice – and 2011 is the year where the opportunities align for the industry to begin to reinvent itself.

What does reinvention for carriers look like? Location-based marketing and payments. Together, these represent the biggest new opportunities for the carriers. One of the most interesting facets of the AT&T/T-Mobile deal is the combined audience for new monetization streams like advertising. The merger would offer up 130 million subscribers with lots of interesting user data on a very personal device, representing an entirely new market for brands and businesses to reach consumers on the go. Clearly, advertising will play a more substantial role for AT&T and others as evidenced by the company’s announcement of their foray into daily deals this past week.

The other arena of fast-and furious carrier announcements is payments. Sprint just announced that it will launch Near Field Communications-based mobile payments this year. Close on their heels will be the mobile wallet project Isis – a joint venture between AT&T, Verizon, T-Mobile and Discover. Again the message is clear – carriers taking a share of the payments business is both an opportunity and a necessity.

As new subscriber growth slows and the fascination with apps begins to wear off, the epiphany for carriers has been that they might just take back control from Apple and Google’s native app stores, OS’s and sexy handset manufacturers and once again move to the forefront in the relationship with the consumer. And this trend is driving the two new dominant objectives for carriers in the developed world: continue to reduce churn, and to open up new sources of revenue from services.

Carriers have three unique attributes which they can employ for their comeback: a trusted relationship with the consumer, the location of a subscriber, and a device that is always with consumers, and always on.

No matter the ups and downs in the relationship, the fact is that in many markets consumers have entered into long binding relationships with their carriers. They trust the relationship enough to share their information and activity – and to date, carriers have a strong reputation for honouring that trust –despite the unevenness of their service.  Second, carriers have the advantage of always knowing where a phone is across their network – which is the foundation of location-based services. Third, they have a constant connection to the consumer through a device that is always with them, and always on. Taken together, these three key ingredients provide the recipe for a big comeback.

Mobile

Photo: Placecast

Smart carriers that embrace change will win. Already some of the sharpest organisations have expanded their advertising sales management teams. These operators are learning that value-added services done right can build a better, long-term relationship with subscribers that ultimately leads to loyalty and reduced churn. O2 in the UK is a great example of how to pursue this strategy effectively. Through strong branding and services like O2 More and their ‘You Are Here’ program, O2 customers are getting special deals and benefits for being loyal customers.Adding  these opt-in and location-based services to the mix, carriers are able to open up significant new sources of revenue while at the same time delivering services that consumers find genuinely valuable,  not intrusive. Imagine giving consumers the ability to choose the products, services and businesses they are interested in – and then their phone alerts them when the things they love are nearby. Now give consumers the ability to tie a credit card to the phone, and they can receive deals, and discounts and then transact with their favourite businesses, right in the moment.

The other reason for carrier interest in these two areas is the sheer size of the daily deals and mobile advertising markets. According to analysts BIA/Kelsey and Borrell, the daily deals market will approach $4 billion over the next four years, while mobile proximity marketing could generate another $6 billion and location based services $12 billion during the same timeframe. With their user data, location information and trusted relationship with consumers, carriers have a unique opportunity to tap into this new market and strike back in the battle for the mobile consumer.  

According to Google, two-thirds of all purchases, half of all transactions, and 80% of all digital content consumed will occur on mobile devices by 2015. And while 5 billion people will be on the web by 2020, there will be 10 billion mobile subscribers. As mobile becomes the dominant device for how consumers access content and interact with the world around them, carriers have the opportunity to be a force for good in consumers’ lives.

By focusing on a strategy of reducing churn through new value added services for their subscribers, carriers could see substantial benefits and increase the loyalty of their customer base.

What else can we expect to see? How about carriers beginning to share their networks? Or combining their audiences to provide greater reach through interoperability to advertisers, and sharing in the revenue? These and other strategies are all on the horizon for the future – which means more offers and deals, and powerful mobile wallets for consumers.

 

 

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