Last month, I willingly gave Apple £25. In return, I received several songs, a couple of movies for those long plane rides and a few apps for my kids’ favorite toy – the iPad. All at the exact moment that I wanted them. However, if you had asked me at the beginning of the month to pay that money in advance for the promise of some great content in return, I would have steadfastly refused.
Between my phone bills, my data card bill, my Netflix (movie streaming) bill, my cable TV bill and a slew of other utilities, the last thing I want is yet another monthly service charge. Along with billions of others, I am afflicted with what is affectionately known in the telecoms industry as ‘Subscription Fatigue’. Simply put, I have too many content and service subscriptions and I am tired of them. However, I am nowhere near satiated with my consumption of content and services. This is why the Apple model works so well. A 99p song here, a £1.99 app there are easy micro-transactions, which I gladly pay when and where I want them.
In my position, I spend a lot of time with consumer electronics and automotive companies, helping them develop a connected device strategy. The thing that strikes me is how much energy is spent on figuring out the technology and so little on the business model. Sure, there are technological complexities that must be addressed and the M2M ecosystem is doing great things to simplify efforts here. However, when it comes to services used by consumers, the most important thing is to get the consumer to actually buy the service.
It seems that our personal experiences with network operators has conditioned us to believe that any connected service must be delivered through a monthly subscription, committed typically for 2 years or more. Just as Apple has successfully proven that this no longer need be the case, it is time for consumer electronics and automotive companies to set aside old models and embrace what consumers clearly want – the ability to buy content and services when and where they want it.
Micro-transactions allow subscribers to purchase digital content on-demand, and it is these ‘impulse’ buys that hold the key for expanding revenue streams in the connected device market. Of course, saying this and actually delivering on it are two very different things.
With a potential to connect more than 38 million types of devices other than mobile phones and laptops, including personal navigation, e-readers, gaming, healthcare, tracking, and in-car navigation systems, the possibilities for micro-transactions are endless. According to industry analysts Berg Insight, the number of connected consumer devices shipped is set to almost double during 2011 to reach 39 million units and grow to more than 270 million devices with embedded cellular connectivity by 2015.
Transparency is key to the consumer uptake of micro-transactions. To ensure sales, the automated purchasing process must appear effortless to the consumer. Operators must ensure they can eliminate the complexity associated with micro-transactions and have the necessary tools in place to support recommendation engines, simplified billing and instant provisioning systems.
It’s easy to underestimate the various issues surrounding each micro-transaction and OEMs and service providers must be equipped to process and bill for a multitude of small payments, often from a multitude of currencies. By partnering with Connected Device platform providers, OEMs and service providers can harness the necessary intelligence required for the nuances of micro-transaction provisioning.
Finding a flexible business model that takes into account the unique usage profile of devices, across all demographics, can also help OEMs to optimise costs. An M2M platform provider can offer the intelligent rate plan management and sophisticated automation necessary to support this ever-changing market.