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In the first of an exclusive new video series supported by Bango, we examine the state of the carrier billing market. Here, Guillermo Escofet, principal analyst at Ovum, gives an overview of the space and explains its rapid growth since 2014…

Carrier billing is on a tear. After a period of stagnation, it is now growing faster than operator data income (by total transactional revenue). And by 2022, it will transact more than global SMS revenue.
So says Guillermo Escofet, principal analyst, digital media of market analyst Ovum. He’s well placed to comment, having studied the digital commerce space for 14 years.
Escofet has just completed the latest edition of Ovum’s exhaustive Global Carrier Billing Forecast report. The study analyses results from 67 countries and eight market segments: OS app stores, indie stores, online PC games, browser-based, messaging-based (PRS), mobile bundling/off-store, consoles/STBs, and physical goods/services.
The conclusion is that direct carrier billing (DCB) is now growing fast, and is fully rebounding from a flat period that lasted from 2012 to 2014 to a period of rapid regrowth.
“We’re forecasting that the market will go from just under $18 billion in total revenue to around $45 billion by the end of the forecast period, which is 2022,” says Escofet.
So what’s driving this dramatic turnaround?
Escofet has a simple answer: app stores.

The barriers are the same as before: the business model and the customer credit risk. I think the Payment Service Directive 2 in Europe could introduce a bit of clarity here, and give people the confidence to experiment a little more.

“The app stores make up the single biggest component of carrier billing revenue. About two fifths of it now,” he says. “And that will grow to about half by 2022. That growth is continuing with the roll out of carrier billing by Google Play, and there’s also a new element with Apple, which is accelerating its deployment. And then there’s China with its independent Android stores.”
Of course, Google and Apple have rolled out DCB for one fundamental reason: to make premium apps available to the millions of people who don’t have (or don’t wish to use) credit cards. In fact, Google now supports the payment method in nearly 50 counties form Kazakhstan to Vietnam.
With less fanfare, Apple has enabled pay by mobile bill in 25 countries.
Beyond app stores, the other key driver of re-growth has been streaming music and video. Though gaming dominates carrier billing, video and music providers are now changing the landscape. And their fundamental motivation is the same as the app stores’: to reach a broader addressable market.
Escofet says: “They’re expanding into emerging markets where there’s a large gulf between the number of people that have devices that are compatible with their services, and the number that hold a credit or debit card that would allow them to pay for these services.
“The growth curve (for the latter) is pretty flat. So there’s a growing gap between the two. And carrier billing is the most universal way to bridge that gap.”
However, music and video providers are ramping up their DCB activity in mature markets too. Here, the motivation is subtly different. It’s all about using billing as a trojan horse for distribution. They do this by creating trials and bolt-ons with mobile operators.
“The main motivation for bundling deals is distribution,” says Escofet. “They’re basically leveraging the operators’ direct billing relationship to acquire paying customers.”
OTT video providers are pursuing this strategy with particular zeal. They’re closing deals not just with mobile operators but also set top box providers. Escofet estimates that this strategy could see DCB account for 10 per cent of all OTT video revenues by 2022.
There’s no doubt that digital entertainment comprises the bulk of the DCB space. And it will continue to do so for the near term. So what about new use cases? Can DCB penetrate the ticketing and parking sectors? Will it gain further success in the physical goods sectors following the launch of DCB by Amazon Japan in 2017?
Escofet is cautious. But he does believe there will be experimentation, especially with imminent new financial regulations. “I know some operators talking about interesting new potential markets like bike sharing, charging stations and so on,” he says.
“The barriers are the same as before: the business model and the customer credit risk. I think the Payment Service Directive 2 in Europe could introduce a bit of clarity here, and give people the confidence to experiment a little more. Maybe companies that have an e-money licence can find new formulas take on away some of the risks. I can see that happening, and it will be interesting to watch.”

The Executive Insights: Carrier Billing Global Outlook and Opportunities Video Series is supported by Bango

One Comment

  • Tracy says:

    This is a great and we hope the SA regulators will allow billing for other use cases with DCB e.g. parking and ticketing because the subscribers are calling for it but inhibiting regulations have forced South Africa to deploy various e-wallets that the majority of those subscribers who could be benefiting from DCB do not even comprehend.