Q1-09 Call: OnMobile Partners With Vodafone, GroupM For Ad Ring Back Tones; Local Advertising, CPC Model, 25-30 Pc Revenue Share

OnMobile Global has tied up with Vodafone to pilot advertising supported ring-back tones (Ad RBT) in India, and has inked a strategic partnership with media buying agency GroupM to bring advertisers on board. Arvind Rao, Chairman of OnMobile said during an earnings conference call that the pricing will be such that an Ad-RBT does not cannibalize on the the revenue shares for both operators or OnMobile – the ARPU will remain the same. Mouli Raman, CTO of OnMobile said that the revenue share from Ad-RBTs for OnMobile, will be between 25-30 percent. Rao mentioned that the company will be targeting local advertising – shopkeepers, restaurants – the proverbial long tail. They estimate that the Ad-RBT could be as large as 1/4th-15th the size of the advertising market.

Cost-Per-Click Model?

The revenue model hasn’t been frozen yet, and OnMobile is still testing the service. But some inputs on the pricing – Ads will have different rates based on the level of profiling and the number of exposures. The money will be split between the sales commission agent, the operator and OnMobile. If you’re press #* while listening to an ad, you will be delivered an m-coupon or an SMS with additional information. So the company can charge, dynamically, much higher rates. For an unprofiled customer, the rate would be X. For a slightly profiled customer, the rate would maybe be 3X. “If it’s a highly profiled customer, we could charge 10x,” Rao said.

Users who deploy the service will be offered either free talktime, free SMS, wallpapers etc. Initially, the advertising will be based on the called party, but eventually they will also incorporate ads based on the calling party too.

Download AdRBT specific excerpts from the call (9MB)

Telisma (acquired by OnMobile for around $18 Million)
Has marginal losses as of now, and had revenues of 3Million Euros (around $4.6 Million). Rao said that replacement of Nuance with Telisma will not save OnMobile money, but it will help them gain access to international markets like Africa and Asia by developing language models for specific countries and languages. Replacement of Nuance with Telisma is not going to happen overnight – it’s a live system with 30-40 million users a month, and “we need to test and improve the product before deployment. We’re not buying a product, but a technology. It’s going to take a while for the technology to have an impact on the bottomline and topline.”

Download Telisma specific excerpts here (6MB)

Inputs on Revenue Breakup, Phone Backup, Sachet pricing of RBTs –

Pressure on pricing? What operators want…
“When we talk to the operators at the CEO, CMO level…I’ve not had a single customer talk to me about price. The only thing they talk to me about is – how many more products have developed, and what can we launch. And what can we do in terms of tweaks and micro-marketing tactics, feature changes to increase revenues. This is not a cost game right now, so we’re not likely to be squeezed on price.”
“We have to launch new products every six months – that’s the mandate of the product teams.”

Revenue breakup
— Voice Portal services like Cricket, Ringtones etc accounts for 35-40 percent
— RBT accounts for around 40-45 percent and the balance is data services like on-device portals.
— Overseas revenue is around 15-16 percent
— VoxMobili accounts for almost all of the the difference between consolidated and standalone revenues.

Phone Backup
Revenue share varies from 25-35%. The service has gone live with Airtel and BSNL in India, and they have signed up with Vodafone and Idea. In the overseas market, it’s live with Maxus and Indosat.

Ringback Tones
OnMobile has completed the deployment of RBT on Airtel – covering 5 states, 20 million subs, and 3 million active users. They’ve also signed up for replacing the RBT platform for an operator in the UAE. That explains the SIMCA content tie-up we had reported earlier – both the UAE and South India are key markets for this content. In India, CRBT penetration, where OnMobile is working, is around 20-27 percent of the user base.

Sachet Pricing, Rural Rollout
“We’re not sensing that. We’ve done something called “Tariff Re-balancing. Instead of Rs. 6/min, there are calls at Rs. 1-2/min, but these are supplemented with subscription packs of Rs. 30-50 per month.” The pricing may drop, but as PxQ (Price x Quantity) increases. For example, Cricket – Rs. 60/series to listen to commentary. When it was dropped to Rs. 5 per match, more users come in and total revenues goes up.
Only one operator has launched dynamic packaging. It’s like the shampoo sachet model. We will be using micro-pricing and micro billing more effectively to cater to lower ARPUs. The rural market in particular offers challenges – “How do you price and package services to make them affordable. We’re launching products that give them access to quality information that give them access to finance, health and education.”

Rollouts:
— in advanced stage of talks with two large operators in Africa.
— signed up with an operator in UAE, where they are replacing their RBT service.
— is one of our largest country plays outside of India – with 3 out of 5 top operators and in discussion with two. We have launched the Bahasa language model, with Urdu in Pakistan and Bengali in Bangladesh.
live with Maxus in Malaysia – launched with them 3 quarters ago.

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