Worldwide app store revenues were over $40bn in 2015, according to Statista, a figure that is forecast to increase to just over $100bn in 2020.  Whilst carrier billing was responsible for just $3bn of this content in 2015, this figure is forecast to sky-rocket to more than $30bn by 2020.

Here, Sukey Miller VP of Marketing at MEF member, Bango, discusses the current state of the carrier billing market, which content categories dominate, and the influencing factors that will lead to growth of more than 10 times the current market value by 2020.

This article is taking from the fifth quarterly edition of MEF’s Mobile Money eBulletin, available as a free download here.

    Content has begun to branch out beyond the traditional apps and games, you can now purchase everything from bus tickets to software or physical goods.

The simplicity and security of carrier billing makes it an essential payment method for app store content including apps, games, video and music. Recent years have seen the breadth of content categories, where carrier billing is a payment option, grow to include physical and quasi physical goods, so what impact is this having on the market?

The evolution of carrier billing

Carrier billing was preceded in several forms, including payments via premium-rate SMS and premium-rate calls. However, the technology has seen significant evolution in recent years, with smartphone penetration and increased Internet access leading to birth of the app stores. The frictionless payment experience provided by carrier billing meant it became the natural choice of payment method for app stores.

Driven by an increasing understanding on the part of merchants and mobile operators of the value of carrier billing, recent years have seen the availability carrier billing spread across the globe, along with the variety of items that can be purchased. Content has begun to branch out beyond the traditional apps and games, you can now purchase everything from bus tickets to software or physical goods.

So how much is the market worth and what is the money being spent on?

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Entertainment dominates

Today’s carrier billing market is worth a cool US$3bn. Major trends include:

  • The constant broadening of content types available to purchase with carrier billing
  • Increased availability in emerging markets where credit card uptake is lower than smartphone penetration
  • Increased availability in developed markets as the security and dependability of carrier billing is recognized over credit cards – we see this in countries with high credit card penetration where carrier billing is still preferred because it is perceived to be safe despite the statutory compensation offered by credit card providers

Entertainment categories dominate the current carrier billing market. The overall app download market was estimated at US$37bn in 2015, with 118bn apps downloaded. Progressive Research estimates that 7 per cent of these were directly billed to mobile customers. This implies a global addressable market of $2bn to the carrier billing providers in 2015.

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Music is the highest seller in the media category, vastly outselling video and reading materials. Apps and games account for the majority of all sales, with a few leading titles including Clash of Clans and Candy Crush Saga dominating category sales. 80 per cent of carrier billing revenue comes from less than 5 per cent of developers.

Sales of physical goods are currently limited to Japan and Korea.

Quasi physical goods sales make a small contribution today, with a limited number of ticketing and virtual goods being trialed in several markets.

Where is the market heading?

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The value of the market will grow due to several key factors:

  • Operators will move away from using MSISDN (Mobile Station International Subscriber Directory Number) as the primary identity method. Instead using alternative, more secure methods such as storing a token or using encrypted values. This will allow any internet enabled device to offer carrier billing
  • Increasing transaction values. This can be seen already with Windows Universal store offering higher value software subscriptions, and Amazon, who in early April announced that Sprint subscribers can pay for their Amazon Prime subscription using carrier billing, again at much higher values than apps or games
  • More operators will activate carrier billing. There are over 700 mobile operators globally, in 2015 just 160 of them have implemented carrier billing

Combining an increasing number of mobile operators activating carrier billing, with a wider selection of available content sold at increasing transaction values, it is easy to see why the market will scale so quickly.

    Combining an increasing number of mobile operators activating carrier billing, with a wider selection of available content sold at increasing transaction values, it is easy to see why the market will scale so quickly.

Entertainment categories still dominate the market but as the breadth and availability of media content across stores increases, media content will deliver a higher proportion of carrier billed revenue.

A measurable contribution will be made from the rocketing value of physical goods sold, although the geographical market in which carrier billing is available for non-digital goods will still be limited. The biggest growth contribution is from quasi-physical goods, e.g. transportation and event ticketing.

The strength of carrier billing is realized where speed and convenience is important, or card payments are not practical.

Capturing the opportunity

Everyone in the carrier billing business agrees that the growth opportunity is massive, it’s simply a matter of how to best capture this opportunity.

Physical and quasi-physical goods remain attractive and will continue to grow in value and popularity, however the rate of growth in the next five years remains relatively low compared to digital goods. A primary focus on apps, games and media is crucial for operator success during this period.

Sukey MillerSukey Miller

VP Markting

Bango

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The vast majority of apps, games and media are now sold through a small number of major stores, with Google Play and Apple’s App Store dominating. Consequently, it is most important for operators to focus on optimizing this business to realize the potential of this huge opportunity.

Operators and app stores have moved from costly, time-consuming operator owned hubs and Do-It-Yourself (DIY) integrations, to adopting independent, industry platforms to integrate through, such as the Bango Payment Platform. Pushing payments into the cloud instantly gives the operators proven technical connectivity with all app stores, allowing them to start earning fast, minimizing costs to ensure higher profits and guarantee the quality of their customers’ payment experience.

The quarterly Mobile Money eBulletin delivers both a useful resource and important perspective on what’s happening in the sector.

Filled with insights, interviews and case studies from industry experts, we track the industry’s news and progress around the globe to help understand how the global mobile money ecosystem is taking shape.

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