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Aggregators: Removing a Blockage from the Supply Chain

Aggregators: Removing a Blockage from the Supply Chain

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.

Mobile Content
The global growth in SMS is a fascinating case for two reasons. First, a user interface that at first seemed too unwieldy has given way to a basic human need - instant nonverbal communication. Second, following its success in person-to-person messaging, SMS has also become the platform of choice for mobile content.

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
Mobile content providers come and go, many with great ideas, and often they have died as a result of not being able to effectively distribute their content. In much the same way as a new product must sell its soul to get onto the supermarket shelf, content providers have in the past had to negotiate with the dominant channels to market - the operators.

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
Most people in Internet or media businesses are familiar with the role of an aggregator - a player who acts as a node between content providers and end users. In mobile content and services, the traffic aggregator acts as a node in the delivery of mobile content - mostly SMS and premium SMS messages today.

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.

Removing Complexity
To deliver content or services to users of all operators in a market requires a lot of time and effort. In the case of Denmark with four major operators, just to deliver push SMS and premium SMS will require the development of eight different APIs for the platform, and that is after the commercial negotiations have been settled. This is prohibitive in cost and time for most content providers, and many of the large ones are not technology companies. Rather than negotiating agreements with all operators to get content and services to a whole market, aggregators offer a content or service provider with a node to distribute their content.

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
Aggregators enable content or service providers to lower the costs of delivering mobile content and services. Given their position in the value chain, aggregators maintain the relationships (both technical and commercial) with operators at an efficient cost. This includes reducing the set-up costs (and time) that would be required should the provider do this themselves.

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.

Short Codes
Another benefit relates to marketing. Content providers or companies using mobile as a channel for marketing campaigns need to provide an easy access point for their users to send SMS to (often to request or pull content). The "short code" is usually a 4- or 5-digit phone number that makes pulling content easier, and looks better on advertising. Short codes are expensive for most content providers to purchase on their own (in Denmark, a price of about 50,000 Euros will buy a short code with access to the major operators; for an event like "American Idol," separate short codes were used for each contestant!).

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
A further benefit relates to enabling charging and billing for content. In some markets, the simplest way to charge for mobile content is to use the operators' premium billing platforms. While some form of premium charging is possible in most countries, the method and regulations differ. For example, in Australia users pull content by dialing a premium-rated number and the content is delivered separately. In Denmark users order premium-rated content via SMS and the resultant content is premium rated (usually an SMS or accompanied by an SMS).

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
We currently work with clients in a number of markets and, in some cases, with clients who wish to operate services or marketing campaigns across multiple markets. Not all markets have aggregators, and in some cases when they do, they do not coincide in the way they work. Key differences between markets include the format of short numbers and the way they work and are administered. This means that it may be impossible to use the same short number in different markets.

Is There a Downside?
Of course sharing with others means you don't get to eat all of the cake. Aggregators will typically charge set-up and hosting fees, traffic fees, and also take a slice of the revenue when premium charging.

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
Depending upon the market, aggregators may take on a number of different forms. In mature markets, aggregators have grown from larger content or service providers who wish to leverage their platform to earn revenues from other content providers. Aggregators may also provide enabling services on top of the traffic platform including content management, portals, or modules that support mobile marketing campaigns.

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.

More Stories By Andrew Martyn

Andrew Martyn is director of business
development for WorldManuals.

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Most Recent Comments
Tim Saarela 04/25/03 05:15:00 PM EDT

Hey that was very nice piece. It clearly show the road map US should also take. It is still a long road for us US aggregators to travel to the success that our European operations have. Operators are the key, once they allow the billing on SMS via aggregators, it will make their (and our) revenue to explode.
I particularly enjoyed the piece that very accurately described our organization:
"In mature markets, aggregators have grown from larger content or service providers who wish to leverage their platform to earn revenues from other content providers. Aggregators may also provide enabling services on top of the traffic platform including content management, portals, or modules that support mobile marketing campaigns."
Take care,
Tim