Amit Daniel Amit Daniel EVP Marketing and Business Development - cVidya

Making Sponsored Data Successful

  • The rapid rise in mobile data traffic is recasting the telecoms industry and its longstanding business models. As they withdraw unlimited mobile data plans, mobile operators are seeing opportunities to earn traffic revenues upstream, as well as downstream.
    recent announcement by AT&T points to a future in which some brands will pay for the transmission of content to consumers’ mobile devices. The U.S.’s largest telecoms company has unveiled a new ‘Sponsored Data’ service that will enable postpaid customers on its HSPA+ and LTE networks to receive content from some web sites and apps without eating into their data allowance. With the new service, qualifying data charges will be billed directly to the sponsoring company, rather than to the consumer - the usage will appear on the consumer’s monthly bill as “Sponsored Data.”

    Understanding the risks
    This innovative and forward-looking move by AT&T is likely to be emulated by other mobile operators. But before they implement such a strategy, senior managers need to consider the operational and reputational risks associated with a two-sided business model for mobile data traffic. The additional complexity of billing traffic upstream, as well as downstream, has significant revenue assurance and fraud management implications.
    The revenue assurance risks essentially revolve around three inter-related factors: incorrect data classification, data measurement, and incorrect settlement. For example, the sponsored data could be wrongly classified, so that either the wrong sponsor is charged for the data or the consumer is charged for the data. Another scenario is the incorrect classification of conventional data traffic as sponsored data traffic resulting in an upstream customer being wrongly charged for this traffic. Such mistakes could quickly damage the credibility of sponsored data services with both consumers and sponsors.

    Incorrect data classification may be the result of problems with ordering and provisioning configuration or it could be caused by challenges associated with monitoring data traffic using deep packet inspection (DPI) technologies. In particular, a DPI platform may fail to measure the volume of data correctly, causing over or under charging.

    Sponsored data services could also be targeted by fraudsters. One approach would be for a company or an individual to attempt to disguise their traffic as sponsored data, so a third-party pays for the transmission of that traffic. Depending on the agreement between the telco and the sponsor, this disguised traffic may also unjustifiably benefit from a higher quality of service. Conversely, some sponsors may attempt to disguise some of their sponsored traffic as conventional traffic, thereby wrongly passing the cost on to the consumer.

    To manage both the revenue assurance and fraud risks associated with sponsored data services, the telco will need advanced software, underpinned by robust settlement agreements, dispute mechanisms and processes.

    Matching sponsors with consumers
    Once these risks have been mitigated, the ultimate success of sponsored data services, and their impact on the bottom line, will depend in part on how well they are targeted. AT&T has outlined several potential use cases, including encouraging customers to try a new smartphone or tablet app, promoting movie trailers or games, providing patient healthcare support via wellness videos and encouraging customers to browse mobile shopping sites. Each of these propositions will need to be carefully targeted. Many teenagers, for example, may not respond to wellness videos, while senior citizens probably won’t be keen to try out a fast-paced video game.

    Ideally, mobile operators will use marketing analytics tools to identify those customers that are most likely to be receptive to sponsored data services. These solutions can reveal existing patterns of usage and help the mobile operator understand which upstream customers are likely to benefit most from targeting which consumers. If the telco builds the right partnership agreement with the content provider, the telco could also earn a commission if a customer clicks on the sponsor’s promotion or buys something from its website.

    Telcos could also use marketing analytics software to create packages that might appeal to specific sponsors. For example, customers who browse for sports content could be offered free data browsing if they view promotions by sports equipment vendors, broadcasters or events organizers.

    Furthermore, the telco itself could provide sports aficionados with a tailored sports proposition, featuring special offers, as part of their mobile tariff plan, thereby increasing downstream traffic revenues. For example, the telco could offer a sports fan a one-time speed booster to watch the World Cup final in HD quality.

    Managed and targeted carefully, sponsored data services could create an important new revenue stream for mobile operators. But their ultimate success will depend heavily on building trust with both upstream and downstream customers. Telcos, therefore, must ensure that the right party pays for the right data and that consumers aren’t bombarded with irrelevant offers and advertising.

    Amit Daniel
    About Amit Daniel Amit Daniel works as EVP Marketing and Business Development at cVidya
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