Friday, January 9, 2009

Vringo-can video ringtones crack the subscription model?

I met Haim Cohen-Mintz from Vringo at the Mobile Web Europe conference in London in September and he exuded a quiet confidence about both the prospects of the Vringo content proposition and its (nicely executed) business model.

True to form, the company has been progressively announcing a number of recent deals in both France and Turkey to provide their video content on deck with various operators.

What is interesting about their deal with Avea in Turkey is that Vringo will break new ground by launching a carrier led video ringtone subscription model. It is interesting because in many ways we are at an inflection point in the traditional models of mobile revenue generation, particularly when it comes to mobile content.

Pure advertising-supported business models are beginning to creak as the need for a balanced revenue mix imposes itself on content providers to both smooth revenues and cashflow as well as to increase the sustainability of revenue generation.

What we also see is increased divergence between the 'mature' mobile markets and the nascent or 'emerging' ones that are characterised by heavy mobile internet penetration. The consumers of the latter market have not 'evolved' from PC web to mobile web, thus do not suffer from the same degree of eyeball saturation.

Traditional revenue models (such as those entirely dependent on advertising) may well work in the emerging markets (at least for a while) but there is little doubting that a new market imperative is beginning to emerge in mature markets. Mass mobile consumers here will develop greater resistance to mobile advertising and since most large players will be slow to adapt, my belief is that nimble startups focused on niche content or niche market segments will have at their grasp interesting revenue opportunities.

Where does this leave Vringo? Vringo innovates in a mature (premium ringtone) market, so should be able to do well for a while. However, the market in mature countries appears to be shrinking, so the focus on emerging markets will be critical in sustaining future revenue growth ceteris paribus.