Blog

Direct to Mobile Billing – More than just an API

The continuing growth in popularity of in-application billing was not unexpected and is the obvious revenue model for developers in the face of declining application prices driven by ever-growing competition among developers offering applications through the popular app stores. With revenues from the four major app stores forecasted to grow by 77.7% in 2011 to reach $3.8 billion and $8.3 billion in 2014, and with in-application billing expected to be a key driver of that growth (see http://cnet.co/k1Wr1N), the market opportunity for Service Providers offering a facility for in-application payments is clearly significant.

However, the emergence of this new model is also causing concern among both consumers and the App Store providers that developers will exploit the facility to maximize revenue through hidden or “less than explicit” charging resulting in large, unexpected bills to the consumer and headaches for the app store providers. In many ways this can be compared to the tarnished reputation around premium SMS several years ago as a result of similar behavior, and several recent high profile legal actions related to In-Application billing (see http://bit.ly/fTNztW for an example) serve to highlight this.

In-application billing now accounts for up to 50% of the revenues for many popular mobile applications and games, and many analysts believe that this proportion is set to increase significantly as the “Freemium” business model for the sale of applications increasingly becomes the dominant model. However, as we’ve seen from recent legal actions, in-application billing brings with it certain operational challenges that Service Providers need to address up-front, before choosing and implementing a direct-to-mobile billing platform.

One of these challenges is associated with the fact that once downloaded, many applications run on the handset independently (i.e. there is no interaction with an application provider’s server), therefore the in-app billing request passes directly from the handset application to the Service Provider’s Payment API. This introduces the need for security mechanisms that ensure that the application is both authenticated and authorized to carry out the payment request on behalf of the user. In addition, the In-Application billing facilities should support charging in a non-intrusive, yet secure, manner to provide maximum flexibility for the widest range of usage scenarios. Aepona has been working closely with industry bodies such as WAC (Wholesale Applications Community) to define a solution for this security mechanism, and our proposal based on the OAUTH standards (being developed by the Internet Engineering Task Force, IETF), has been accepted by WAC as the preferred approach.

However, the operational challenges for Service Providers presented by in-application billing go beyond security issues. As recent legal action shows, even if an application has been correctly authenticated and authorized, there is still the potential for users to run up large bills for in-application goods or services, without the bill payer’s consent. In one extreme case, a child playing a popular mobile game was reported to have spent over $1,400 on virtual goods.

To address these challenges, Service Providers must ensure that their Direct-to-Mobile Billing platform includes the essential capabilities required for a commercial service. In many instances, Service Providers provide a Payment API without the operational features that are needed – they focus on the set of parameters supported by the API and spend little time thinking about how to commercialize their service offering.

A successful Direct-to-Mobile billing service needs to balance the consumer protection with the benefits of convenience that in-app billing offers to both application providers and end users. It has been clearly demonstrated that such a low-friction billing mechanism greatly improves sales conversation rates for applications, so it’s vitally important that Service Providers optimize both the consumer and developer user experience to ensure success.

Aepona is focused on helping Service Providers to get this balance right. The advanced Payments and Settlement component of our Universal Service Platform has been designed from the outset as a full commercial solution for direct-to-mobile billing, and in-application billing in particular. This includes features such as control of spending limits, parent-child hierarchies, fraud management, monitoring, subscription management, repudiation management and customer self-service.

The challenge in implementing a successful Direct-to-Mobile billing service, including In-Application billing, is not simply in the design or exposure of a payment API. As recent legal cases have shown, offering a commercial Payment Service involves so much more than this. Service Providers need to ensure they can enable users to control how, when and by whom they are charged, whilst maintaining the required level of simplicity and convenience.

How can the Mobile Cloud address fragmentation?

Historically, fragmentation has been one of the major challenges facing application developers across the mobile industry, whether as a result of differing operating systems, technical standards, software tools and resources, or commercial models. With the advent of the smartphone and the recent phenomenal growth in the mobile applications market, fragmentation continues to be a significant talking point within the industry.

Indeed, fragmentation even exists within specific operating systems as well as between them, as is the case with the Android OS. According to research from Robert W. Baird & Co, 87% of 250 developers surveyed said Android fragmentation was a problem, with 24% stating that it was a “huge problem.” View the results of the survey.

So much for fragmentation on the device side of the apps equation, but what about the network side? There is growing interest amongst developers in the capabilities of the mobile network itself, as well as other mobile operator assets such as billing and customer intelligence. These capabilities can be used, either by themselves or in conjunction with mobile device capabilities, to differentiate applications, provide a better user experience and to offer new payment options such as in-application billing. In response to this, mobile operators have begun opening their network and billing capabilities to developers and other third parties using Web Service-based APIs: Rogers in Canada, with its Rogers Catalyst service, and Telefonica, with BlueVia, are two good examples of this.

However, with an increasing number of operators now opening their networks in this fashion, fragmentation could well persist in the network API domain, unless steps are taken to mitigate this risk. From a technology perspective, industry initiatives such as the GSMA’s OneAPI and the Wholesale Application Community (WAC) seek to address fragmentation by providing a common set of specifications for network, billing and informational APIs, so that developers don’t have to re-code their applications when interfacing with different network operators. This goes some way to addressing the problem, but developers would still have to sign multiple commercial contracts with every operator in a given geography if they wanted to reach all of the subscribers in that country.

The Mobile Cloud offers a solution that addresses both the technical and market aspects of network API fragmentation. The GSMA’s OneAPI commercial pilot in Canada, which went live in May 2010, is an example of a Mobile Cloud service that offers a single commercial access point and a single set of APIs that allows developers to reach the vast majority of subscribers in Canada, with Rogers, Telus and Bell Canada all connected to the platform.

More recently, as well as this industry-led initiative, commercial Mobile Cloud Providers are now entering the market to offer a full-blown Mobile Cloud service that connects multiple operators to the developer community, providing access to hundreds of millions of customers, via a single connection and single contract. A prime example of this Neustar’s Intelligent Cloud Service, which was announced in February and is due to go live later this month in North America, with other regions to follow throughout 2011.

So whilst fragmentation may well continue on the device side, particularly if the growth of Android continues at its current pace, the Mobile Cloud offers hope to developers that for network, billing and customer intelligence APIs, a solution to fragmentation is now emerging that will allow them to focus on developing great applications and services, rather than being distracted by the challenges of adapting their software to integrate with multiple, disparate networks.

Mobile World Congress 2011: A Review

It’s hard to believe the Mobile World Congress is over again for another year – it only seems like yesterday that the Aepona team was making preparations to fly off to Barcelona from our various home locations across the globe, but now we’re all back at base and are busy following up the many business opportunities generated during the event.

Now, having had time to reflect on this year’s event, we can safely say it was our best MWC yet. Our main event theme this year was “Bringing Mobile Intelligence to Cloud Computing” and we had a booth presence within the Cloud Zone in the App Planet hall. Throughout the week we had a high number of quality meetings with customers and partners, participated in numerous marketing activities across the show, and generated a lot of interest in our solutions with the help of numerous demonstrations both on our own booth and with our partners at the Neustar Chalet, the WAC stand and the GSMA’s OneAPI pavilion.

One of our key demos was the Identity Enabler demonstrator, in conjunction with the Wholesale Applications Community (WAC) and the GSM Association.  For this demo, Aepona implemented a centralized platform connecting to four live operator networks (AT&T, Deutsche Telecom, South Korea Telecom and Telenor). This central platform then exposed a harmonized customer identity API to a simple pizza ordering widget running on an Android device (both native Android and WAC Widget Runtime versions were shown).  This demonstrated the viability of providing a cross-network API service to device apps whilst solving the authentication, authorization and identity management challenges this presents.  The Identity Enabler demonstrator was shown at our booth, the WAC stand and also on GSMA’s OneAPI pavilion.

We also named the CabCall application, developed by Dublin-based WINICabs, the winner of the Aepona/Neustar Developer Challenge. Following this, we joined Neustar for a seminar to launch a new White Paper produced by the Yankee Group, entitled “The Mobile Cloud: Unlocking New Profits”.

Our other marketing activities included participating in a panel session entitled “Taking Apps to the Mass Market”, moderated by Caroline Lewko of the Wireless Industry Partnership and also featuring speakers from Nokia, MTV, America Movil, Smart Communications and Flirtomatic. During the event, we announced the launch of our Wholesale Services Gateway, generating significant interest from operators, our win with TDC for a Payments and Settlement solution, and our partnership with Bango. We were also named as one of the “25 Hottest Mobile Startups” in the UK Times’ “What’s Next in Mobile” supplement which was distributed at the show.

From an overall perspective, the theme of “openness” was prevalent across the event, with the big mobile players, such as AT&T, Telecom Italia and China Mobile, all calling for more openness across the mobile ecosystem. Even more so than last year, there was significant representation from the broader Internet and technology communities, with keynote presentations from Google, Twitter and Microsoft amongst others. This demonstrates that the mobile industry recognizes the need to collaborate with more closely with Internet players in order to be successful in the long term.  Both Google and Twitter re-iterated the importance of Mobile to their long-term strategies, and a recurring message from all of these companies was that the battle has changed from being about the device to being about the ecosystem.

As part of the openness and collaboration themes, there was a lot of attention on how much progress the Wholesale Applications Community (WAC) had made since its formation at last year’s event, and it stepped up to the mark by announcing its commercial launch, with 8 operators connected to the WAC platform and the availability of thousands of WAC-enabled applications. WAC also announced its plans to release specifications for network APIs (WAC 3.0) in September 2011, which is highly significant for Aepona given our focus on network enablers.

Apps and app stores continued to be a major focus at the event, in particular how to realize more flexible business models beyond the de-facto 70/30 split established by Apple and how operators can take a more value-added role in the apps value chain. Cloud-based services and content were a significant part of the apps discussion -  there was even a dedicated Cloud Zone within the App Planet, which is where Aepona had its booth.

Prompted in part by the Nokia and Microsoft alliance announced a few days before the show, operators were urged to focus their efforts on higher-value applications and services, such as solutions for Enterprise / B2B markets and emerging opportunities such as mobile marketing, mobile-enablement of business process applications, Mobile Money, mHealth and Machine-to-Machine.

Overall then, MWC 2011 proved once again that it is the definitive event in the global telecoms trade show calendar, and is rapidly expanding its appeal beyond pure mobile players towards the broader Internet, IT and technology community as mobile continues to become an increasingly important part of those organizations’ strategies. From Aepona’s perspective, this signals even more exciting times ahead as our Mobile Cloud solutions become increasingly relevant in bringing mobile network capabilities to a broad variety of applications and services.

Hyper-Local Mobile Marketing

This is the year for mobile marketing.  Sound familiar?  That’s because we’ve heard it all before. For years pundits and experts have been shouting from the rooftops: “mobile marketing is the next big thing!”  It is the most direct and personal way of getting in touch with customers but mobile marketing has yet to make the impact so many of us have been expecting.

But that’s not to say mobile marketing doesn’t have huge potential for brands, merchants and mobile operators. At the risk of sounding repetitive, 2011 could be the year to recognise the enormous value of marketing via mobile devices, enabled by the emergence of Mobile Cloud Computing. Most significantly, Mobile Cloud Computing adds a “hyper-local” dimension which could prove to be the catalyst for Mobile Marketing to hit the big time.

There are almost 5 billion mobile phone users worldwide, opening up endless possibilities for brands and merchants to engage with their customers, and yet typically mobile marketing has been a low priority in the marketing mix, used predominantly as an advertising tool.  To move forward the industry needs a better understanding of the added-value marketing services available through the mobile channel – particularly contextual relevance, which is where the hyper-local dimension comes in.

By combining real-time location information, using mobile cloud capabilities such as geo-fencing & auto-notifications, with key customer behavioral insights and demographic data, mobile marketing can deliver something not only relevant to the customer context but customized to their individual preferences and needs.  Mobile is no longer another just another advertising medium: it becomes a personal experience between the merchant and their customer.

Couponing works particularly well on the mobile channel as a part of hyper-local mobile marketing strategy. Retailers can mash up a geofencing API from the mobile cloud with customer buying history from the retail loyalty program so that a mobile phone user who comes within range of a retail store can receive a coupon via SMS or MMS that they can redeem for a discount in that store.  This hyper-local dimension to retail loyalty programs is something that has yet to be exploited, and would have a significant impact on retail footfall, increasing both sales and customer loyalty. Consumers will see the value in contextually relevant (i.e. hyper-local), personalized, and convenient coupons:  however in practice, the success of such initiatives will be dependent on whether the application can be seamlessly implemented across multiple mobile operators.

The Mobile Cloud enables cross-operator hyper-local marketing applications such as couponing, handling issues such as setting up location notification triggers across multiple operators, coupon delivery across a variety of channels (e.g. SMS, Mobile Barcodes) and centralized consumer privacy and consent management. Whilst the mobile operators themselves are an integral part of the mobile marketing ecosystem – they are the gatekeepers to the consumer – it is not enough for merchants or brands to target customers on one network. Hence the need for a cross-network solution, offered by Mobile Cloud Providers who specialize in working with brands, merchants and agencies and understand the dynamics of the marketing and advertising industry.

Recent research from the IAB and DMA suggests over 50% of people would be happy to receive SMS alerts from companies they already have a relationship with and already large retailers like Marks and Spencer in the UK have implemented location-based text couponing to drive footfall into their stores.  But in the Marks & Spencer’s case, this service is limited to customer of O2: with Mobile Cloud Computing, the service could easily be extended to all customers in the UK.

So is this the year for mobile marketing to reach its full potential? For this to happen, advertisers, agencies, merchants, mobile operators and mobile cloud providers need to recognize the potential of hyper-local mobile marketing – but with the advent of Mobile Cloud Computing, at last the technical and commercial barriers of the past are finally being overcome.