When looking for new business models, we shouldn’t forget that most of the trusted business models that we believed in and have crashed over the last two years.
In a panel discussion on defining new business models at ITU Telecom yesterday in Geneva, Media Futurist CEO Gerd Leonhard pointed out that what we thought were great business models have turned out to be vapor – just look to Lehman Brothers, Nortel, GM and Enron before that.
He suggests before telcos judge the likes of Facebook and Google for a lack of a model, “we should look at what we have believed in. On the web you do have to have a bit of imagination about where the money will coming from.”
Admob vice president for global alliances, Russell Buckley, pointed to the widespread reluctance of businesses – be it the music industry, publishing or telcos – to acknowledge that the economy is changing.
He said it’s interesting that when businesses are faced with fundamental change, they go through the same process as dealing with death. “They go through a denial stage, an anger stage and finally they come to acceptance and then start to change their business models accordingly.”
He said Admob started talking to lots of operators in the beginning but gave up because the conversations were taking too long – two to three years. “The telecom industry has finally woken up and that there is real revenue to made from mobile social networking and want to be part of it.”
Keith Willetts, chairman of the TM Forum and moderators of the session, said he agrees that it’s taking a long time for telcos to come to terms with the changes, and still continues to feel a sense of anger from some telcos because the web and media companies are unfairly getting a free ride on the network they spent billion developing.
“But what I don’t see is anyone figuring out what the model is for sharing that revenue,” Willetts said.
Willetts said the paradox is that with data the operator is not creating additional value as usage increases, like in the past with voice and SMS. Data plans depress revenue growth and require telcos to continue to invest in their networks to support the expanding capacity.
He fears the industry is heading toward the nightmare scenario of because it couldn’t figure out how to share revenue, it couldn’t renew itself and continue to provide cheap broadband. He asked the panel if the inverted business model is sustainable.
Leonhard noted that you can’t share when you’re not involved. “The lesson is that you can’t just sell voice and data. If you want to engage beyond voice and data, you going to have deal with content of some sort and with advertising and social networking.”
The ecosystem we’re going into, he said, is telecom, social network, advertising and content. “You’re going to have to engage with all four pieces. It’s not enough to simply have a network that’s really fast. That worked for a while. You have to move beyond this because we’re converging.”
Leonhard said for telecom operators this is the only way forward as operators want to move up the food chain to create more value. There is evidence that the bundling of content with telecom is a winning model because it creates data flow, interaction and advertising opportunities.
He gave the example of flat-rate music services, with revenue sharing. “Google has done this in China. You don’t have to wait to see this, these bundled models are already happening in Indonesia, Denmark and China.”
Buckley expects in the next couple of years 50% of the world’s operators to have a model in place that will allow customers to get a certain amount of free calls and SMS in exchange for targeted advertising.
He said a huge amount of money was going through the mobile advertising value chain and very little was going to carriers. “Operators need to work out how you can work with companies like us to deliver that value to your customers. That’s your big challenge.”