Research by Ovum, the analyst and consulting company, shows winning companies in the Wireless Internet market, will be those which charge users for content.
Providing content for free (that costs money to acquire) does not make for a long-term sustainable business model. Free content provision relies heavily on revenues from transactions, wireless marketing and portal tenancy fees. However, revenues from transactions and wireless marketing are small and won't grow in the medium term. Portal tenancy fees are reliant on a large customer base and a strong brand, which few service providers can offer today.
Content has long been given away for free on the fixed Internet. The availability of free material is one of the reasons cited for not being able to charge for content in the Wireless Internet world. However, there are strong indications that the days of free content are numbered. A growing number of Internet content sites and portals are introducing premium fees for content, including Salon.com and Asiawise.
Making content pay
A business model that hinges on paid for content typically shares the content fees with the content provider and combines this with secondary revenue streams such as transactions and wireless marketing. Eden Zoller, Senior Analyst, Ovum explains the benefits:
"The business model based on paid content is simple and transparent - content providers know what they want and what revenues they will get.
"Users will pay for content that has a high perceived value, that is personalised and delivered in a format that suits their device of choice," she says.
Examples of this valued content include information that has emotional or psychological pull (horoscopes) or is needed urgently (stock quotes). The information must be delivered in a personalised, location sensitive fashion to any device.
Ovum recommends that service providers offer a mixture of paid for and free content from the start. This immediately helps to instil a sense of value in the consumers' eyes - a clear message is sent that content is worth paying for. This also means companies will earn revenues from day one. A mixed content model offers basic services for free while a charge is levied for the more desirable, valuable premium content.
DoCoMo's i-mode service in Japan is proof that the payment for content model works. This approach is being embraced by other Wireless Internet service providers in Asia Pacific, Europe and North America. However, in Europe and North America operators typically want more than the nine per cent of content subscription fees taken by NTT DoCoMo.
Zoller notes that there 'soft' factors at play that have made i-Mode a success - including the characteristics of Japanese culture, DoCoMo's market dominance, partnerships with handset vendors and consumer attitudes to wireless services.
"Each individual market has its own inherent variations of 'soft' factors and without localised consideration, these will significantly impact the likely success of the Wireless Internet," she concludes.