Mobile Advertising and VAS: The Next Big Thing?

A recent report by Gartner says that India’s active mobile connections will exceed 900 million by 2016, which translates to 72% penetration. According to TRAI in January 2012 the number of active mobile connections in India reached 659.99 million and the total mobile subscriber base stands at 903.72 million. The ARPU (Average Revenue Per User) is also at an all-time high at USD 40 (It is still just one-third the ARPU in China).

Last year September YourStory.in spoke to Badri Sanjeev, COO of Mauj Mobile and he said, “The next killer mobile VAS application can come from any service provider and not just the operator.” At that time the mobile app market was valued at INR 4.5 billion. Currently, the Indian market is witnessing mobile apps occupying the major chunk of the mobile VAS market, which was earlier dependent on mobile portals.

Revenue generated by mobile VAS was INR 122 billion, as on March 2011. It is estimated to reach INR 482 billion by 2015, according to a study conducted by Deloitte. Mobile advertising is also on the rise and mobile apps offer a great platform for targeted advertising. Location and interest based in-app advertising has become common place now. The Deloitte study also revealed that the number of mobile advertisements served in India is the highest.

A study conducted by Juxt Consultants in 2011 revealed that only 14 million mobile users access internet through their phone. With 3G penetration slowly increasing and smartphone usage witnessing a spur mobile advertising is poised to scale greater heights. Mobile advertising presents advertisers with greater reach than most other mediums. Mobile marketing revenue has been steadily increasing. In 2010 revenue generated through mobile marketing was INR 0.4 billion. In 2012 that has increased to INR 0.6 billion and is expected to reach over INR 1 billion by 2015.

The revenue that telecom companies earn from data services comprise just 12% of their total revenue, which is among the lowest in Asia. SMS is responsible for the biggest chunk of data revenue and is followed by music downloads and GPRS. A recent Edelweiss report says, “The biggest impact from the roll out of mobile broadband services would be on data services as it would attract new players, change role of existing players, transform existing revenue sharing models and proliferate new services. Thus, the whole ecosystem comprising content aggregator, content owner, application and software developer and telecom operator will see a major shift in business models.”

In the mobile VAS industry, mobile network operators make 70% of the revenue and content providers account for only 30%. The reason for this is lack of reliable payment mechanisms. M-commerce in India is at a very nascent stage, but with time it will grow and that will present content providers the opportunity to directly sell to consumers.

To sum it up mobile advertising and VAS are on the cusp of big things. Mobile penetration rate in India is among the highest in the world and with smartphones prices dropping and m-commerce becoming a reality; we can expect to see a lot of action in this space. We will be following the developments in this sector, keenly. So stay tuned for more updates.