Traffic Trade Innovate Business Models and Traffic Value

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1 Traffic Trade Innovate Business Models and Traffic Value JC Dorng, Ph.D. The Rise of Digital Economy, APP Lifestyle and O2O Ecosystem Apple revolutionize digital world with smart devices. The world has adopted smart phones and tablets 10 times faster than it embraced personal computers in the 1980s, twice as fast as it logged into the Internet boom of the '90s, and three times faster than it joined social networks in the new millennium, according to the app-tracking firm Flurry. Furthermore, Apple APP delivers a new lifestyle. In the four years since the App Store opened, Apple customers have downloaded 40 billion mobile APPs; they downloaded 20 billion in 2012 alone. These are staggering figures given the fact that the total world population in 2011 is 6.9 billion. Billions of people now rely on pocket-sized smart devices to shop, play, read, date, learn, work out, take photos, and find directions. The app-driven life has kick-started a new computer revolution that has spread faster and become more intimate than any before. Deep smart phone penetration, greater adoption of social networks, an increase in the usage and advancement of QR/bar code technologies, cloud computing, mobile application and payment methods have all grown to varying degrees in the various markets. As the online and digital economy continues to grow in importance in consumers daily lives, enterprises have embraced the various resources and opportunities presented to them through this development. As seen, retailers have looked to online tools trying to raise sales effectiveness at their physical stores, replacing existing functions with online alternatives or leveraging online tools to provide complimentary functions to their physical stores. For example, Ikea has developed a Catalog App that enables its customers to view and purchase items, then picking them up at a selected Ikea store. Size and key product details are available to customers on the app, enabling them to choose suitable furniture whenever and wherever they want to and to go straight to the store to collect the items instead of looking for them in the store. An increase of 250% in web traffic to the Canadian Ikea website was recorded after the launch of the app, leading to greater sales both through the app itself and at the physical stores. Retail giant Walmart developed an app that doubled up as a product finder within their stores, providing customers with information on product locations, pricing and product details. In addition, the app can locate Figure 1, Ikea Catalog Data which Walmart the customer was in and push them details of in-store promotions. These features enabled Walmart to sell more effectively to the offline customers through online 1

2 channels. Traditional retailers have been able to make use of online resources to create an O2O ecosystem that effectively raises the performance of both its physical retail outlets and online offerings. In addition, enablers in the various markets have also led to the proliferation of opportunities to create successful O2O models. Sponsored Data Extend Mobile Market Facing declining traditional telecom services of voice and message and increasing OTT challenge, mobile operators are now shifting business focus from voice to data. Data are primarily for user access of mobile internet and digital services and data development is to increase user data consumption and data ARPU. Data traffic can be seen as a digital ticket for data access and represents network pipe value of operators. However, with fierce competition and technology development, data traffic unit price is gradually declining that has led to data revenue growth not match up with data traffic increase and cannot make up loss of traditional telecom revenues. Sponsored data is to transfer data traffic ownership from operators to business partners that then use traffic as a construct or element of its own operation. Sponsored data offers new business models of cooperation and collaboration between operators, enterprise and OTT players. There are three kinds of sponsored data business cases as follow: 1. Enterprises make arrangement with an operator to bundle data access into their products or services. Users of bundled products/services are able to access operator networks free of charge. For example, Amazon works with Sprint first and then ATT to bundle free data access into its e-book - Kindle. Kindle users can check and download books from Amazon without paying for network access or data traffic. 2. Enterprise or OTT purchase a lump sum of data traffic from operators and then provide users with traffic coupon or free access of their web sites or APPs. One of few known examples include Facebook Zero and leading China ecommerce player Taobao s free bachelor (Nov. 11) shopping day. 3. Advertise-sponsored browsing via aggregator Apps: where users browse Apps for free, but via an aggregator s app. Data is paid for by advertiser. For example, a company called Syntonic Wireless uses the feature in an app that promises to do many things from installing apps, to browsing online stores, and eventually streaming video, with none of these things will count towards user data limit. Sponsored data enables mobile operators to extend data business and traffic value development from consumer to enterprise market. Business APPs Drive New Traffic Opportunity and Transformation Enterprises and OTT players are developing APPs as their key online tools for marketing or products/services promotion, and customer engagement. App developers want users to download and sign up their APPs from time to time. To drive that, reward coupons, product/service discount or incentives are provided to encourage users to download or play APPs. Forward thinking mobile operators recognize that increasing market needs of APP distribution and promotion present them with opportunity to transform traffic from digital ticket for network data access to digital currency/media as exchangeable or tradable commercial 2

3 products. Enterprises or OTT players purchase data traffic from operators and give to the users that download or use their APP as gifts, rewards or bonus. Users can use traffic rewords as traditional digital ticket for data access, exchange traffic for other digital goods, or even grant traffic to other users. This App-led traffic based digital operation opportunity has following business characteristics: 1. Instead of simply selling sponsored data as raw material or digital ticket to end users for network connection, operators now sell sponsored data traffic as tradable and exchangeable currency or media. Furthermore, operators can add network and channel capabilities on top of traffic as bundled or semi-completed products to increase traffic value. 2. The ownership of traffic transfer from operators to enterprise or OTT which then use traffic as its own construct" or "element" of marketing or business operation. Some of successful App-led digital operation business cases are: 1. Traffic Mexico AM offers traffic reward when users click watch video AD. Pakistan CMPark provides free traffic package when subscribers click their ADs. Guangdong CMCC allow enterprises/ott players to reward traffic coupons or traffic bonus to users that download or sign up their APPs. 2. Networks Shanghai China Unicom (SCU) is cooperating with Youku, a leading content provider(cp) to promote video to Youku VIP members. To facilitate the cooperation, SCU opens up its networks and provides subscriber traffic Balance to CP that then triggers event to PCRF to issue policy of bandwidth control when user data package reaches thresholds. 3. Channels One of CMCC regional operator transform its physical stores as an APP display and demo center to help store visitors browse, find and download APPs that they are interested of very easily and conveniently. 4. Data Assets SCU has opened up its Big data and data mining capabilities to its business partners which can use operator data assets for customer insights, context based crowd movement, or market segmentation to improve marketing/sales. Digital Operation Platform to Transform Traffic as Tradable Digital Products To realize digital operation opportunity and, transform traffic from network data access to tradable and exchangeable digital products/currency, operators face the limitations of its legacy IT systems including: 1. Not easy to purchase traffic such as sponsored data and unable to customize traffic bonus size. 2. Unable to open and make network functions easy to use or control by partners, 3. Open and mine Telco Big Data to support marketing and promotion of partners. In the digital economy, fast-times-to-market, rapid and easy enablement and cost-efficiency are the key. Operators will need a new digital operation control paradigm which can support innovation while bypassing the limitations of the legacy IT systems. Two keys of digital operation control paradigm are: 1. Decoupling traffic amount from traffic tariff that is the first key to realize data operation and digital services. Unlike traditional traffic package traffic model, traffic amount offers 3

4 commercial products that can be exchanged or granted between clients or between merchants and clients easily and quickly. 2. An open digital operation platform with capabilities of: a) Use traffic to connect with millions of users which can enjoy rich entertainment and interaction based upon traffic. b) Open big data analysis, networks and channel capabilities to help enterprise develop business (customer development or product collaboration) and fulfill transformation of traffic productized and profitable business models. A traffic trade platform shown in Figure 2 is a Digital Operation Platform (DOP) to aggregate interested parties such as user, enterprise/ott, and operator and to facilitate multiple-way traffic trade and exchange, business collaboration, value chain and ecosystem development, innovative traffic services delivery and traffic value mining would be crucial for operators. Figure 2, Traffic Trade platform for Digital Service Control Key capabilities of traffic trade platform include: A currency-like commercial traffic products to facilitate easy and fast trade, exchange, bonus, rewards among parties involved, e.g., App developers would use rewards as incentive for users to download or open up their Apps. Provide user-centric internet-style operation platform to support different business collaboration, resource sharing and partnerships, e.g., B2B, B2B2C, C2C, O2O, etc. Decouple from legacy IT systems and replace with simple and easy payment mechanisms. Huawei VGS Deliver DCP as Traffic Trade Platform and Solution Huawei has developed an end-to-end traffic Value Growth Solution (VGS) that enable operators to develop and grow data business. VGS help operators target consumers (B2C) as primary focus initially and grow data subscribers and data usages with innovative data packages/offers, enhanced data experience and personalize marketing and campaign. For example, VGS has supported its clients to develop innovative data packages such as: + Add-on packages + Family or friends sharing, e.g., 4

5 + Apps/Content bundles, e.g., Facebook Zero, WeChat Wo, etc. VGS offers following capabilities: + Analysis - multi-dimensional user data analysis to develop deep customer insight + Product Design Support innovative data or service package design and bundles, + Precise marketing - perform marketing and campaign based upon user insight, + Monetization - Fulfill and monetize data traffic monetization + On-line Channel - Install-free and non-intrusive online channels for user self-care VGS has helped its client operators to deliver data business growth and traffic monetization. To enable data operation business such as Sponsored Data, APP promotion or O2O, VGS is expanded with Digital Operation Platform. Figure3 VGS Overall Architecture DOP ( Digital Operation Platform) is to support traffic trade, new business models (B2B, O2O, C2C), digital services delivery and ecosystem development. VGS DOP architecture is shown in Figure 4. Figure 4: VGS Digital Operation Platform 5

6 In essence, with DOP, operators are able to develop and offer new digital products through packages of its traffic, data assets and external products/services in cooperation with partners in order to monetize traffic and data asset values. The core of DOP consists of: Portals DOP consists of 3 portals: User portal, Enterprise portals, and Developer portals Management It provides Internet-style management functions including Marketing/Sales management, User validation, Order management, Channel management, Product management, Operation and Monitoring, Campaign management, Payment and Account balance. DOP provides users with following functions: buy traffic, earn traffic, traffic exchange and play traffic related services. DOP enables operators to support business clients for traffic wholesales, distribute traffic as gifts or rewards, and aggregate services and partners to build an ecosystem to facilitate new B2B, B2B2C or O2O business development. With VGS DOP, operators are able to extend its business from data communications to digital operation and leverage key assets of traffic, networks, channels and big data, expand business and services and monetize traffic value. Conclusion Mobile Broadband (MBB) data traffic has been increasing at a rate of almost 100% yearly, operators are struggling to transition to new growth models, for example, by transforming from traffic to service sellers, and from consumer sales to partnerships with enterprises and vendors. Compounding these challenges, operators are seeking to address issues related to outdated data operating capabilities as well as decreasing traffic value. Mobile devices and App deliver a lifestyle and mobile experience. Business APPs and innovative digital services are driving new business opportunity. Huawei VGS DOP for traffic trade is designed to enable operators to extend from a traditional consumer-facing (B2C) data communication model to business-facing (B2B) digital operational model that targets enterprises, SMB and OTT. The digital operation model provides enterprises or OTT players with sponsored data that can be used as promotional gifts to users, adopting the concept of "traffic as a red envelope." Those who receive the traffic red envelop can use traffic to buy digital products, or send it to others. Huawei DOP platform also makes it easy for enterprise/ott players to buy traffic, identify target customers using big data analysis methodologies together provided by operators. Through such collaboration, operators can help business partners promote products and services as well as recommend to customers using traffic as a currency for trading or exchange. 6

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