We're Expanding Internationally! Um, What Next?

December 6th, 2010 15:14

So you’ve decided to start marketing your mobile product(s) internationally. Good for you. Don’t quite know where to start from a carrier billing standpoint? Maybe I can help.

Generally speaking, I think there are six factors that should ultimately determine which markets are a right fit for you and your organization to enter: market size, costs/fees, set up time, ease of set up/integration, growth opportunity, and market intangibles. I’m going to go through each of these factors and make some suggestions as to which markets will be the best fit depending on which variables are most important to you.

Market Size

This is obvious - whenever you’re marketing a product, you want to “fish where the fish are.” So one of the easiest and most sensible variables to take into account for international expansion is the size of the market. It goes without saying that there is certainly a lot more you need to take into account, but market size is definitely a great place to start.

Here are some of the largest wireless markets in terms of total subscribers:

-China - 679 million

-India - 479 million

-Russia - 216 million

-Indonesia - 163 million

-Brazil - 160 million

Emerging markets such as those listed above can be excellent markets to enter. But, you’ll have to keep in mind that these markets are EMERGING. Carrier payouts are often very low - in Brazil, for instance, you’ll usually end up netting around 22% of gross after fees and taxes. Additionally, the successful billing rates are usually awful (often due to a high percentage of pre-paid subscribers) and tariffs are much lower than anything you’d be used to in the US.

Costs/Fees

Some markets have insanely high set up costs. It’s important to take this into account when making a determination about which markets to enter. For instance, in Canada the annual cost for a unique shortcode is approximately $5,000. Considering the fact that Canada is a great market which is kind of a no-brainer to enter when you’re already in the US (more to come on this later), this is a pretty great price. Contrast that with Brazil where any unique code must generate at least $50,000 in monthly revenue to avoid being heavily penalized and you’ll quickly see why you have to take costs very seriously when performing a market analysis. The real kicker is that the $50,000 minimum is for one carrier, TIM, only. So you could be generating several hundred thousand in monthly revenue on your code and still get hammered with penalties. Pretty crazy.

Set Up Time

We live in a real time world with real time information and stats. This has made most of us pretty impatient. So, we obviously want to be able to get set up quickly in any international market we opt to expand to.

This is a tough nut to crack because time varies drastically for each country based on which vendor you’re using and whether you’re getting a shared or unique code. But, I’ve taken the liberty of listing a few countries where you can get live pretty quickly if you want to:

-South Africa - If you turn around paperwork quickly and make sure your product is ready for testing by the time you’re provisioned, you can have a unique code ready to go in three weeks.

-Malaysia - The market isn’t very crowded yet so you can get a code live within three weeks.

-UK - Most vendors should be able to get you a shared code to start testing traffic on within two weeks.

Ease of Set Up/Integration

Generally speaking, the more mature the market, the easier it is to get up and running. In the UK, for instance, the carriers don’t even test your product before you’re certified - they have everything running like clockwork and know any issues will arise pretty quickly once the product is brought to market. In Ireland, on the other hand, you have to go through painful application processes with ComReg (their regulatory body) which can tie you up for months. Let me get to the point...

Some of the easiest countries from an integration standpoint are:

-UK

-Germany

-Australia

-Canada

Some of the worst are:

-South Africa

-Ireland

-Argentina

-Brazil

Growth Opportunity

For most businesses, this is the most important factor. If there’s not much opportunity for the market to grow, it’s often not going to be a good opportunity unless you’re a very mature business looking for very safe markets to reinvest your extra capital in.

Most of the more mature markets will have limited growth opportunity. Italy might be one of the most crowded international markets around. They have mobile penetration of over 150% (90.6 million mobile subscribers and a population of 59.6 million) and incredibly intense competition. Argentina is also a country where the prospect for growth is pretty limited, even though their market isn’t really that mature. Everyone I’ve talked to who operates in the Argentinian market is talking about how a lot of conventional mobile content players are leaving the space because the only thing that performs well is “sensual” content (basically Maxim magazine style stuff). Way to keep it real Argentina.

Here are some of the most exciting countries (in my opinion) growth-wise:

-Brazil

-Indonesia

-China (good lucking figuring out how to find a billing provider though)

-India

-Mexico

-Nigeria

-South Africa

Market Intangibles

There are obviously way too many of these to cover in one article. The main point is there will be a lot of unique (and often odd) intricacies to each international market that you’ll have to take into account before entering. For fun, I’ve listed some of my favorite (by favorite I mean most perplexing) market intangibles below:

-In Brazil, the successful billing rate for PSMS is 10%-15%. For WAP billing, it’s above 90%. This is because PSMS transactions aren’t run till the end of each business day while WAP billing transactions are run immediately.

-In South Africa, they have something called “silent billing” which allows the content provider to bill the user on a daily/weekly basis without actually sending an MT to the handset (hence the name silent billing). This is only allowed for tariffs of R4.99 or less (about $0.70).

-In Mexico, one carrier (TelCel) controls about 75% of the market. They use this to their advantage by penalizing content operators by 20% if they offer their service to subscribers of other wireless carriers.

Conclusion

For those of you that skip the whole article and read the last paragraph for the main idea - this is for you. Everybody is going to have a different risk tolerance as well as varying resource availability to devote to international expansion. So, a lot of the suggestions I make might not fit your organization. But, make sure to look at all of these factors - there’s no way it can hurt you. To recap, you want to review market size, costs, set up time, ease of integration, growth opportunity, and market intangibles (I know “market intangibles” is a very broad factor but every country will have a ton of them so you’ve got to make sure to understand them inside and out to avoid getting hammered with some weird fee or penalty).

Now for the money shot. Here are my top 5 countries (in no particular order) that your typical US-based mobile content/entertainment/gaming company should consider if they’re planning on using carrier billing as a payment mechanism. Keep in mind that excluding Canada, smartphone adoption in all of these countries is pretty low. But I operate under the assumption that’s going to change rapidly with increasing cheap smartphone adoption (shout out to Darren, read this for more info):

-Canada - It’s basically the same market as the US in terms of rules and restrictions. Plus they just approved a $10 weekly price point on most carriers. It’s a no brainer.

-Indonesia - The premium mobile content industry is still young there but they have 163 million wireless subscribers. The country’s economy has been growing at 5%+ for the past 4 years and they’re on their phones (and Facebook) ALL the time.

-India - Another country which has a small carrier billing industry. But because the country is so damn big, small penetration still means big numbers (over $125 million monthly in carrier billing transactions). The tariffs and collection rates will be low but that is going to get better as the country continues its rapid economic growth.

-Brazil - Their mobile entertainment/content/gaming industry is booming. It’s difficult to find a good partner in Latin America (email me if you want recommendations) and you have to drive a lot of revenue to avoid fees. But the growth is through the roof.

-Mexico - One of the 15 largest economies in the world and their mobile content industry is really just getting started. Plus, entry into the market should be pretty easy.

The best part of expanding internationally? It’s a lot easier to convince yourself a trip to Rio is absolutely necessary for the success of your company ;)

About the Author

Adam Gillman, Director has written 11 stories on this site.

golivemobile.com


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