Apple move into carrier billing changes the game

POSTED BY Windsor Holden
Earlier today, a German blogger named Carsten Knobloch discovered a game changer on his desktop, and unsurprisingly he was keen to flag it to the rest of the world. And thus the news of the game changer began to spread: Apple had gone for carrier billing.

Where to begin? Well, this represents a quite dramatic strategic shift on the part of Apple, which has previously insisted on either have a credit/debit card or a gift card registered to enable payments on an iTunes account. While Apple is so far only dipping its toe into the water – one operator (O2) in one market (Germany) – the opportunity for Apple to monetise new markets and new demographics is significant.

Firstly, new markets. Owners of Apple devices have historically been the (relatively) well-heeled, and the well-heeled in turn typically have bank accounts and credit or debit cards. However, iPhones are being refurbished and finding their way back onto the market, increasingly into the hands of those who might not necessarily have bank accounts or cards. This left Apple in the uncomfortable position of being unable to monetise its customer base.

Not any more.

Secondly, as we observed in our content business models report earlier this year, in just about every market where it has been deployed, carrier billing has resulted in an uplift in conversion rates for both first-time users and repeat purchasers. Bango told us earlier this year that they were seeing first-time conversion rates for operator billing of 70%, compared to typical conversion rates on first-time users of credit cards of 10-12%. The uplift is particularly pronounced for small value transactions (less than $10).

Thirdly, the beauty of the direct carrier billing process is that, post the decision to download content, it can be facilitated by a simple one-click (trans) action. In this regard it is ideal for impulse purchases.

Fourthly, it can be used to monetise content across an array of devices – tablets, desktops, connected TVs. So while today Apple can monetise content on the iPhone, the solution should also enable billing on iPads and quite possibly Apple TVs as well.

Finally, there’s those new demographics flagged earlier – younger teens tend not to have debit cards, but are rather keen to buy content for the smartphones. Well, young man or young lady, now you can, without having to get a gift card.

Meanwhile, it also allows the operators to retain a foothold in the content space, and one which plays to their strengths. Just over 7 years ago, the death knell for the MNOs direct participation in content sounded when the App Store hove into view. Today, Apple is offering them a way back, and one which doesn’t involve dressing up portals as storefronts and hoping vainly that customers will choose your limited portfolio over the riches offered by the boys from Cupertino.

The game is about to change: for Apple, for operators, for carrier billing providers, for consumers.