Mobile Revenue Models: The Economics

Mobile communications are on the cusp of the next big step, promising new applications and services that will change the way people live and work. The integration of the Internet, mobility and communications at the device, service and transport level creates a new set of business opportunities. The business challenge is bring together the three worlds with services that customers will pay for.

The impact of this convergence is not very clear. Few dispute that the structure of the new mobile data landscape is far more complex than the traditional voice-oriented business models and SMS. There is so much hype about how mobile will do this or that and how mobility changes traditional business models. But there is limited understanding of exactly what this means for companies and their bottom-line.

If "making money of mobile" were easy then why are mobile operators and venture-back mobile startups struggling? Why have large first-mover companies like OmniSky, Metricom, MobileStar, gone bankrupt? And, why are pioneers like Motorola struggling to monetize their innovations? Are their business and revenue models flawed in some way? Clearly, for mobile startups to survive they must figure out how to make money - quickly and consistently.

What is the difference between a business model and revenue model? 
A business model is the umbrella term used to describe the method - position in the value chain, customer selection, products, pricing -- of doing business. Simply put, a business model describes how a business positions itself within the value chain of its industry and how it intends to sustain itself, that is to generate revenue.

The revenue model lays-out the process by which a company actually makes money by specifying how it is going to charge (or subsidize in the case of advertising supported models) for the services provided.  The business model lays out the strategy -- what should be done or how to create value? The revenue model spells out the execution -- how to convert the value creation into cash-flow.

Different Mobile Revenue Models

• The Economics of Carriers and MVNOs  
• The Economics of Hardware Manufacturers  
• The Economics of Mobile Software Providers  
• The Economics of Content Providers  
• The Economics of Mobile Consulting  
• The Economics of Location-based Services
• The Economics of WiFi/802.11b and Bluetooth  
• The Economics of Telematics  
• The Economics of Mobile Toys/Aids

Changing business models define each new technology wave. Mobility is spawning multiple parallel clusters of innovation. The business models which the key players in each cluster and their partners choose  will have a high impact on revenue streams. We separated the analysis of each cluster to better capture the business and revenue model insights. For each cluster, the success and profitability of a company will depend on its ability to increase and monetize data traffic.