I have been thinking of this for some time .. The concept of ARPU may be out dated .. because ..
a) ARPU does not translate to the open mobile Web i.e. the new world of mobile data(see below)
b) It does not translate when one person has more than one SIMs
c) ARPU ignores the other models like advertising where revenue is tied to a service or a product and not a user
d) ARPU makes the telecoms industry think local whereas the Web is global.
e) ARPU mistakenly makes the telecoms industry think that it owns the customer
Recently, Vodafone CEO Arun Sarin said in the FT : The simple fact that we have the customer and billing relationship is a hugely powerful thing that nobody can take away from us
Many don’t take this position seriously – and the Register rightly says
At the heart of ARPU, lies the billing relationship – and that’s why the billing relationship is so sacrosanct
However, the billing relationship is changing – and with it – ARPU itself may become outdated.
This may have a knock on effect to both Telecoms and Media.
Nowhere is it apparent than with the iPhone.
Many focus on iPhone for its looks, user interface etc ..
But iPhone is just a phone .. iTunes is the real game changer ..
Verizon rightly spotted this threat when they claimed .. as they bypassed the iPhone deal ..
They(Apple) would have been stepping in between us and our customers to the point where we would have almost had to take a back seat … on hardware and service support,
Because consumers buying the iPhone need to have an iTunes Store account before they can activate the device
Once iTunes and not the Operator has the billing relationship, then all kinds of content can be sold from iTunes(and not the Operator) such as Widgets .. a trend I had indicated some time back. iTunes as a delivery mechanism for mobile widgets
Nor is the change confined to iTunes alone.
Independent of iTunes, Once the friction in buying from a phone is removed, then all kinds of content, goods and services can be purchased directly from ANY web site
Hence, the billing relationship is indeed significant but the ‘opening up’ of that relationship is a hugely disruptive step.
ultimately, ARPU denotes the value of a customer to the operator
The point however being, value will have more than one component for instance
a) subscription(conventional ARPU)
b) advertising and
So, ARPU may have to be complemented by AARPU(average advertising revenue per user). In addition, advertising alone is not enough. Once a use clicks on an advertisement, it leads to a service. At the moment, advertising and services are not tightly coupled – for instance – we click on an ad which is served up on a website and we end up at a service on a different web site. In other words, services(fulfilment) lead logically on from advertising and they may also be a component of the value the customer brings
What ties advertising and services together?
knowing Identity, advertisement and fulfilment can be tied together adding to the services component of the revenue.
Nor does this only affect the carriers. Media billing and rights relationships are also complex and arcane. While these relationships are global, they are actually composed of many local relationships and each are tied to geography.
This leads to issues like Place shifting
What happens when any content can be bought by anyone from any device merely by accessing an offportal web site and paying for it from the web site?
The technical pieces to make this happen already exist – but there is friction in the process – which hopefully will be smoothened out as we go along
Consequently, the billing relationship is under threat from both sides – from the Operator side (because in an open ecosystem there are multiple billing options and Operators think locally/nationally and not globally) and the content/media side(by factors like place shifting)
Thus, opening up the billing relationship could have profound implications for ARPU but also beyond
The game will then shift to a more complex dimension beyond what we see today. The closest parallel is Amazon who ‘own’ the customer because the customer wants to be owned by Amazon i.e. Amazon makes life easy for the customer and serve the customer. So does blyk – who also know their customer very well and are focussed on serving them
It will also shift to different relationships and licensing models – since existing licensing models are under threat and will evolve into something which we do not see currently
And the winner in all this is the customer!
The term AARPU was suggested by Werner egipsy souza