wordpress blog stats
Connect with us

Hi, what are you looking for?

Q309 Call: Why OnMobile Did The SIMCA Deal; Ad-RBT National Rollout Plan

Why OnMobile Did The SIMCA Deal

The content deal with SIMCA was a special situation, OnMobile Global CEO Arvind Rao told MediaNama on the companys earnings conference call. We were wondering how their margins have been impacted, now that they have entered the content space, and Rao was fairly forthright, saying that they did the deal “for a very specific reason, because there was a threat that SIMCA and a lot of the south Indian artists and music companies that generate the content were running into financial trouble, and that they may actually not be able to supply us with the content. There was nobody else willing to fund them and help them out of that situation. So it was a special situation. In the long term we are going to be content neutral, and a very large aggregator and distributor, but we are not going to be in the content space. So I don’t think that you should read too much into that on a long term basis.” The content deal has resulted in a significant increase in the companys content costs, and there was growing concern among analysts.


Status: An operator has decided to go live with the Advertising RingBack Tone (AdRBT), after the trial.
Performance: OnMobile claims a high brand recall rate, “several several times higher other digital media, including the Internet. The 2nd thing is that the adoption rate was really high; the percentage of people was way above the 5-6% adequate response rate. Granted that all these transactions were done for only a sample size of 10,000-15,000 customers, so I am a bit hesitant to say that you can extrapolate that very widely…”
Revenue Potential: “In terms of what revenue potential is…if things go according to the projections that we believe are do-able then it could provide 15-20% of the revenue of the company, in India. Now the question is that to get to that scale it would take multiple years and it would necessarily involve deploying it across all operators. So from a technical standpoint it requires a lot of effort but it has very large revenue potential…Frankly speaking to be honest with you, I think in FY09 or FY10 we will begin to see revenues beginning to come from this project. But if you see meaningful revenues in terms of when it is significant and has an impact then it would be around 2010-11. When you think about it, if you look at RBT today for us, in India we are receiving high revenues but then there are about 20 to 25 million users who are driving that revenue, so if we want to get to the point of achieving such results then we would have to rise to the scale of such users. While we are improving our technology to handle it, it is basically up to the operators to promote it heavily and roll it around. Participating people include selling agent, operators and us. We have decided on some numbers to share the revenue between the 3 of us. It depends on when we actually roll it out, the agencies are fine and the operators are fine, so there is not going to be delay due to commercial negotiation, we are ready to roll.
CPC or CPM? “It would be a combination of both, but you know at many places our philosophy on the whole advertising spectrum is to make it much less CPM or exposure basis because we don’t believe in that philosophy. I mean very frankly, if we rolled out ad RBT the way we are planning to do, we could be generating almost 150-200 million impressions a day. Now pricing it to advertisers at that volume does not make sense, and we don’t want to trash the market and drop advertising prices for everyone. So we would have to it more intelligently in terms of personalizing it, mass customization, one on one and interactivity, which is the key. So we have a process in place and a pricing model but you know a lot of it is still very early in the process, I mean lets face it, the ad industry has been around for about 40-50-60 or a 100 years and you know we are trying to revolutionize it in 6 months, it is not going to happen.  
Competitive Ad-RBT Products: There are 2 components to the thing if you look at it broadly, one is the technology side, technology in terms of RBT. Second one is getting the ads. As far as technology is concerned we are the definitely superior and on the ad side we are not the ones. 

International Ops And Acquisition Plans

Sanjay Uppal, brought in as President and COO, is going to play a key part in taking the company far more international in the next 3-4 years, expanding the range of products, and managing the margins.
Markets: The company has applied for registration in South Africa and Nepal. The company has operations live in Bangladesh, Pakistan and SriLanka. They’ve had a significant win in Europe, with an operator with around 10 million subscribers; it’s a part of a large family, so this could open other doors. 
Acquisitions As A Market Entry Strategy: The problem with acquisitions right now is the quality of the asset. “We are in fact evaluating and looking for options for market entry into certain places. The problem was market entry, as opposed to IP, is that the geographic scope of what you are buying is restricted and therefore the multiple and the valuation that you can place on such a company is lower because you know if you buy a really good product IP, it has global product appeal. But if you buy a company in Argentina who can access only the local market that surrounds it, then it would be unlikely that that company would be able to help you to break into Germany or Canada for example.” They’ve walked away from a couple of deals where either the price was not right, or where they couldn’t negotiate the terms. Not going to do a bad deal just for the sake of using money.
Difference Between Operating In India And Globally: Rao said that the sales cycle is significantly long, with a long pre-revenue stage. “So that’s sort of a negative on our margins and we absorb that as a part of our core business. In some cases it is relatively quick, for example where we can use a reference from an existing customer to piggy back and step into their parent or their related operator somewhere else. Once we deploy our service you know typically in the first year or so the margins on that, the contribution margins are going to be low, because you have taken all the cost upfront and you have put in the investment of a team which is on-sight. So for any one deployment the margins improve over time because you have operating leverage in that you thoughts are more towards the fixed side of the spectrum whereas your revenues are ramping up based on your revenue share.”

Developer Platform
First application from the OnMobile Developer Platform has gone live. Currently, 6 developers have been signed up.

Retail Kiosk
Developed a retail kiosk, where it is possible for consumers to go to operators retail stores, experience content and download it on the mobile. 

Market Situation
Does low VAS ARPU in India mean restricted growth? Pressure from operators to renegotiate terms?
“We are not seeing pressure from operators to renegotiate terms because the whole philosophy about revenue share is that it is not a one time deal.Also it is a function of being able to deliver a continuous stream of innovation to the customer wherein the customer understands that the money that they are paying you is being recycled into RND to give them new products in the future to grow the revenue pie.And as you talk about plateaus, we have not seen any plateauing, and as far as any plateauing might be going on I can say that it could be as a result of the negative trend in what the other suppliers might be supplying the operators.

Are deployments slowing?
“The way we measure it you know is like little bit like an hour glass, sometimes these operators you just see plugging and plugging and plugging some times you don’t know whether you are making profits or not and sometimes you can see the light at the end of the tunnel but you are not still there. So as I said before that in many of these cases we have been plugging away for a long period of time and we were beginning to see results. In case of the European operator where we have launched ring back tone, we put people on the ground in Europe almost one and a half years ago. They kept plugging away and plugging away and plugging away and the first dam has burst and you know we have been hoping that more dams would burst in quarters to come. Some of these are actually results of long term investments that we have been making that are now bearing fruits. 

Related: OnMobile Posts Net Profit of Rs 204.2 M; Content Costs Up 18.5%; 6 Apps On Developer Network

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like


Mobile number porting requests increased by 28.7% to 7.53 million requests in July 2020, compared to 5.85 million porting requests reported in June 2020....


While Reliance Jio added 2.5 million active connections in July, Vi, formerly Vodafone Idea (down 3.8 million) and Airtel (down 0.45 million) saw declines....


Telecom infrastructure company Bharti Infratel has decided to proceed with its imminent, but long delayed, merger with Indus Towers, the company said in a...


In-flight internet services should be available only over Wi-Fi and only when a flight reaches an altitude of 3000 metres, India’s civil aviation regulator...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2018 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to Daily Newsletter

    © 2008-2018 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ