The Russian VAS market in 2006-2007
Parallel to the web universe, the Russian mobile world is rapidly emerging. In 2006, the Russian value-added services (VAS) market developed steadily and continued its growth in the first quarter of 2007, reaching USD 615 million, a year-on-year growth of 34%, ComNews Research reported. The three main players in the VAS market, operators, content providers (CPs) and aggregators, as well as subscribers, are growing with it. The main Russian mobile operators introduced more aggressive and assertive policies in the VAS scene, launching new WAP portals and services and drastically reducing the number of content partners. The share of VAS in the general revenue structure of operators reached 14% in the first quarter of 2007. With the launch of the first 3G networks in 2007-2008, Russian operators will increase their content offer. Consolidation and stricter policy by operators reduced the number of core content providers to 80-100 companies. In the past year, CPs honed their skills in providing IVR and RBT services, driving more video content, mobile gaming, and community services.
The main CPs drove a better quality content offer, the introduction of new products and the expansion of the global market. Today, the winning formula of the Russian VAS market is to guarantee the quality of the content and the diversification of products and services. IVR, SMS-based TV lotteries, RBT and mobile games starred in the most popular and successful section of content services. IVR services captured “Lady Luck” of revenue in 2006. In addition, continued growth in WAP penetration, mobile community services and user-generated content promised a positive year this year.
However, the otherwise resurgent market has its pinch of salt. Piracy is on the rise, while low content quality and SMS spam remain a major obstacle to faster market development. Finally, the remaining high WAP traffic rates and the high share of operators’ revenues serve as an additional burden on market developments.
What is the name of the game?
Pavel Roitberg, Head of the Department of Products and Services of MTS, pointed out at the last Mobile Content Forum held in Moscow in June 2007 that “we have changed the rules of the game”. Whereas before MTS, the largest Russian mobile operator, had between 250 and 300 content partners, the analysis showed that 70% of all revenue comes from 15 top partners, 20% from 20 CPs and 10% from 35. partners. As a result, MTS terminated contracts with ineffective partners, thereby reducing its total number of partners to about 100 companies. And this is more or less the same situation for its rivals, VimpelCom and MegaFon.
Poor content quality, as well as an abundance of fraudulent offers, reduced subscriber trust in CPs and led to a sharp drop in content sales in 2005. Learning from that negative experience, major operators and content providers are They rushed to ensure a better quality of happy mobile. For example, MTS created a content quality control program that makes its partners directly responsible for the quality of content. At the same time, the major Russian PCs created an association to control mobile content offers.
In 2006, sales of “heavy” and expensive content increased further, as subscribers became more familiar with videos, games, software applications, and mp3 full tracks. The purchasing power of subscribers in major urban areas has increased, and they are satisfied paying more money for “heavy” content. A notable trend of 2006 is the revival of operator activities in the VAS niche. Several Russian mobile operators created and promoted their own portals. , and participated in joint promotion with some of the major content providers. In addition, operators launched new billing methods, such as WAP-rate: MT-charge and WAP-clic.
WAP networks grow even more
iKS-Consulting estimated an average monthly WAP audience in Russia of 14 million users. An average user is male (65%) in the age group 17-23 (60%), says WAPStart research. The highest growth rates of new subscribers are in the peripheral regions. 71% of subscribers browse WAP through pre-installed mobile browsers. As of April 2006, there were more than 80,000 Cyrillic WAP sites. However, only about 20 WAP sites have a large daily audience.
Below is the TOP-5 of WAP searches in May 2007:
1. Porn – 42.00%
2. Free stuff — 29.49%
3. Software (ICQ, Jimm, Opera, AV Programs) – 7.23%
4. Homosexuals – 2.75%
5.Mail.ru – 2.65%
Source: poisk.wapstart.ru
MTS has been among the most active mobile operators in the development of the VAS niche. Launched a new well-designed WAP portal and optimized its cooperation with content providers, facilitating the content aggregation market. The direct competitor of MTS and the number 2 operator in Russia, VimpelCom (“BeeLine”), successfully launched the Voice-CPA and WAP-CPA programs.
In 2006, major mobile content providers significantly diversified their services and continued their expansion to the neighboring CIS market as well as globally, such as INFON (Belarus), InformMobil (Tajikistan, Georgia and Kazakhstan), i-Free (Brazil and India) and PlayFon (South Africa, Germany, Latvia, Lithuania, Estonia). Other content providers, such as A1 and Interactivi, honed their skills in mobile marketing and intellectual branding services. For example, A1 actively improved the main FMCG brands in Russia and launched its new Java-based mobile community services “Ogloblya”. Similarly, Interactivi reported that during 2006 the company worked with around 1 million subscribers in Russia and organized more than 60 successful promotional activities.
There were also changes in promotional strategies. Many CPs admitted that the efficiency of TV advertising is declining, while the prices to place an ad are skyrocketing. As a result, many CPs have shifted their advertising budgets to the WAP area and the development of B2B partnerships. However, some CPs still rely on TV advertising, for example, Nikita Mobile ranked 13th in the TOP-100 list of top advertisers in 2006.
bumpy road
Despite the steady growth of the mobile content market, several challenges remained unresolved. One of the most pervasive was the lack of creative content and services. In general, the low quality of the content and the lack of education among subscribers significantly reduced the faster acceptance of the market. For example, low-quality SMS-based television contests undermined the trust of subscribers: in many cases, subscribers received a large number of SMS-spam. In addition, many market analysts pointed out that the revenue share of mobile operators was too high and that this resulted in an increase in the price of content. In addition, the high costs of WAP traffic have added to the burden of increasingly expensive “heavy” content for mobile subscribers.
All about XXX: mobile game sales will grow
Some 15 million copies of mobile games were sold in 2006, Playmobile estimated. Mobile gaming is perceived by many market analysts and gamers to be among the future revenue-generating giants. Adult and branded games generated the most revenue and will continue to be popular in 2007, DDM said in its mobile game research. Erotic games generated almost 50% of revenue, while branded games accounted for 20-40% of revenue, followed by casual games. Other potentially interesting products include multiplayer games, ad games, and PC games.
TOP-3 mobile game developers:
QPlaze-RME
clover games
hero craft
TOP-3 Russian publishers of mobile games:
QPlaze-RME
mobile content factory
hero craft
TOP-5 Russian mobile game distributors:
Playphone
information
iricom
Nikita
playmobil
Mobile games — main sectors:
casual games
brand games
adult games
Source: MDD, #1 2007
Quarter Dynamic VAS
In the first quarter of 2007 the market continued its dynamic growth. According to ComNews Research, during this period the Russian VAS market totaled $615 million, an increase of 3% over the fourth quarter of 2006 and a year-over-year growth of 34%. The participation of VAS in the general revenue structure of the operators reached 14%.
ComNews Research highlighted the growing popularity of WAP services, as well as the continued growth in prices for end users. Both sides blamed each other for the price increase: the operators think the problem lies in the inability of the CPs to produce quality and meaningful content, while the CPs believe the operators have an inflated revenue share.
20% of the operators’ revenues came from the VAS segment. The total structure of the VAS income (gross) was as follows:
Service base – 6% (USD 36 million)
Content – 20% (USD 124 million)
Internet M – 20% (USD 123 million)
Messaging – 54% (USD 332 million)
Source: ComNews Investigation
In the first quarter of 2007, mobile Internet brought operators some USD 123 million, almost equaling the revenue from mobile content (USD 124 million). The main trends in 1Q 2007 are broadly similar to those in 1Q 2006. Revenues from personalization services are falling, while IVR and RBT remain in demand. Other new segments are community services and m-commerce. Therefore, i-Free reported the successful launch of Jamango, a mobile community portal, in several global markets, including India and Singapore. Other trends include the personalization of mobile phones at the production stage and the popularity of SMS-based contest technology.
However, content operators can no longer ignore the new trend: the active promotion of the operators’ own portals. Their sales increased significantly to almost 35%.
The average revenue share structure between CP and operator in the first quarter of 2007 was 61% and 39% respectively, ComNews Research said.
Mobile Content Revenue Structure:
Personalization – 34%
Mobile Commerce – 3%
Games – 14%
Infotainment – 16%
Chat/Community – 9%
M-Marketing – 6%
Media projects – 18%
Sales outside of the portal prevailed over those of the portal, with 65% and 35% market share, respectively.
What does the future look like? According to Playmobile, the growth in sales of the brand and erotic games will continue in 2007. The company estimates that some 25 million copies will be sold this year. Multi-role playing games and PC title games will increase. However, ComNews Research predicts that in 2007 the mobile content market will grow only 16% and reach $520 million. To sustain their income, PCs will have to think about diversifying their business, moving into corporate business areas.