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 Even
as all that remains of the dot com carnage are a few wounded
survivors, Yahoo India has been scouting for new revenue streams.
With the launch of mobile services using SMS, and with mega
plans for the future in this space, Yahoo definitely seems
to have an ace up its sleeve, say Ivor Soans and Rajneesh
De
Economic
meltdowns spare very few. Internet bellwether Yahoo has been
no exception. With net revenues slithering from $310.9 million
in Q4 2000, to $166.1 million in Q3 2001, it would be an understatement
to say that Yahoo is feeling the pressure, even with its 210
million unique users worldwide and 1.25 billion page views
a day.
Even as Yahoo struggles globally to expand revenue streams,
some initiatives in India and the A-PAC region seem to provide
a pointer to where Yahoo might look in the not-too-distant-future
in its quest for not just Internet dominance, but highly profitable
Internet dominance.
Centred on mobile telephony, these initiatives are based on
cellular phone-based Short Message Service (SMS), arguably
the killer app of today’s times. Leading Yahoo’s
charge on this front is Arun Gupta, head, business development,
Yahoo Web Services India, and according to him, revenues from
mobile services are expected to contribute anywhere from 15-20
percent of Yahoo’s India revenues by end-2002, and perhaps
far more in the years to come. In a country where PC penetration
is low, and cellular penetration is outstripping PC penetration,
this certainly seems a wise tack.
What’s significant is that India is the first country
in the world where Yahoo has launched Yahoo Mail on SMS and
the second after Singapore for Yahoo Messenger on SMS. And
now, India will become Yahoo’s hub from where mobile
services will be rolled out to the Middle East, CIS countries
and Sub-Saharan Africa, thus ensuring even greater revenue
potential for Yahoo India.
Instant revenues
Yahoo
Messenger on SMS is currently available in Hutchison Max Telecom
controlled cellular operations in four circles (Orange in
Mumbai, Essar in Delhi, Celforce in Gujarat and Command in
Calcutta). While Gupta refused to reveal exact figures, he
admitted that close to 100,000 users have got on this service
as of now, with around 60 percent using it on an almost-daily
basis, sending an average of 8-15 messages per day. And while
the Hutc-hison-Yahoo deal will remain an exclusive one for
at least the
next three years, Gupta says a nationwide footprint for this
service should be in place within three months from now. Interestingly,
Yahoo India is contemplating non-exclusive arrangements in
the other 18 cellular circles. Obviously, Yahoo wants to target
all cellular subscribers in India and nearly 50 percent of
them will be missed in the case of exclusive deals. To explain,
while Orange has a clear lead over rival BPL Mobile in Mumbai,
the fact remains that BPL Mobile still commands over 300,000
subscribers, and in Delhi, Bharti’s AirTel is far ahead
of the Hutchison-Essar combine.
Yahoo India is tight-lipped on the revenue model from mobile
services. While Gupta refused to confirm or deny reports that
revenues accrued to Yahoo from every SMS message sent from
a cellular phone to Yahoo Messenger, he revealed that Yahoo
India did get a development and maintenance fee based on the
number of subscribers using the service. And according to
him, the service has become a significant differentiator in
the cellular circles where it is available. With over 1.9
crore users registered on Yahoo Web properties from Indian
IP addresses, and with a million more Indian customers signing
on every month, Yahoo Messenger is a giant in the instant
messaging space and Gupta feels the availability of the service
from Hutchison cellular operators makes customers choose them
over rival cellular players. While independent
confirmation was not available from Hutchison Max Telecom,
Gupta claims the four Hutch-ison operators have
seen a
noticeable gain in the number of subscribers who have chosen
their service over rivals, thanks to the availability of Yahoo
mobile services. Besides, customer acquisition costs for cellular
operators, which range from $300-400, have also come down.
Eyeing the big moolah
Interestingly,
even as cellphone penetration and SMS usage explodes in India,
Yahoo is targeting not just individual users, but more importantly,
the lucrative corporate segment. According to Gupta, close
to 60 percent of usage on the Yahoo Messenger on SMS service
is by corporate users, and he expects the number to grow.
He claims that some financial institutions have made it mandatory
for executives to log on to the service as soon as they step
out of office premises.
Gupta feels that corporates are taking to this service because
SMS is cheaper than cellular airtime (incoming messages are
not charged, so a message going from a PC in some firm to
an executive’s cellphone costs zilch), and also because
it offers 24/7 availability. A key segment of users are globetrotters
who use roaming services here the service is literally used
as a free global pager to continue receiving updates from
home base, even as the user travels across India or the world.
Hutchison and Yahoo India corporate marketing teams are now
including this service as a key element in their sales pitches
to corporates. And Gupta adds that phone rental companies
are also being wooed actively, since their customers (primarily
corporates) too would be heavy users of this service. MNCs
with global operations and NRIs, who are always looking for
a cheaper way to contact relatives in India, are other key
focus groups. In fact, since phone-to-phone SMS is severely
restricted between the US and India (US networks are mainly
on the CDMA standard, rather than GSM) an NRI in the US can
send messages for free from his PC to a cellphone user in
India.
Another factor that must be kept in mind is that corporates
are always far more willing to pay for what they perceive
as value, as compared to individual customers. At a time when
Web-based services are increasingly taking the paid route
over the free route, and even as Yahoo says it will bring
in premium, paid services into India within the next six months
to a year, cellular operators could start charging for this
service, or even provide extra value-adds or Quality of Service
(QoS) assurances to corporates for a fee thus bringing in
further revenue. Yahoo already provides customised e-mail
management services to corporate users, and has three customers
who use this service in India.
Advertising, a major part of Yahoo’s revenues, will also
receive a significant boost thanks to Yahoo’s mobile
services. With Yahoo able to offer definite reach to Net users
who own cellular phones and who have significant disposable
incomes (a huge number of Indian Net users are students with
limited spending ability), advertisers will be able to target
these users with focused, relevant ads.
Yahoo India being slotted as a regional hub for mobile services
should also bring in more revenues for Yahoo India. Gupta
says that Yahoo is the No 1 Net player in the Gulf (including
Israel) and Africa. With cellular and SMS penetration quite
high in some of these countries, Gupta has been busy spending
time there to put in place deals with cellular operators to
introduce Yahoo’s mobile services on SMS. As mobile services
grow here, and from India to neighbouring regions, Yahoo India
itself will gain importance in Yahoo’s global scheme
of things, and also become a model for Yahoo’s operations
in other geographies.
And while Yahoo Messenger and Yahoo Mail on SMS are already
up and running, Yahoo India is busy giving final touches to
its plans for other mobile services. According to Gupta, mobile
greetings (picture SMS) would be introduced within the next
two quarters, and other services like news, stock quotes and
cricket scores are also in the pipeline.
According to Gupta, Yahoo’s aim is to become an essential
part of a customer’s life, be it through his PC or his
cellphone. “Once that happens, revenues will automatically
follow,” he says. And by all accounts, Yahoo India’s
first-mover advantage and the strategies it has put in place
in this segment are definitely taking the Indian arm of the
global Net giant right there right where it wants to be.
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