The growing popularity of the iPhone and other powerful mobile devices ensures that mobile ads will become more ubiquitous, but predictions for the growth of the business vary widely. “We see mobile as a huge growth opportunity for us,” Susan Wojcicki, vice president for product management at Google, said in an interview. “We see an opportunity working with AdMob to really accelerate our efforts in an important industry for Google.”

Google is already ahead of its rivals, Microsoft and Yahoo, in one segment of the mobile advertising business: ads linked to search queries. The acquisition of AdMob, whose ad clients include Procter & Gamble, Adidas and Land Rover, will help it expand into display ads.

The all-stock deal is modest for Google, given its roughly $177 billion market value. But it is the company’s third-largest acquisition, behind the $3.1 billion deal last year for the advertising specialist DoubleClick and the $1.65 billion acquisition of YouTube in 2006.

The objective of this paper is to examine the business model that BuzzCity operationalizes in Thailand.

BuzzCity is a developer of global wireless communities and consumer services. Established in 1999 in Singapore, BuzzCity today operates the world’s leading wireless community - for two distinct audiences: the newly connected emerging middle class in developing markets and the blue collar sector in developed regions. These “unwired” consumers are accessing the mobile Internet on their phones due to widespread and affordable wireless access

The number of myGamma users in Thailand is 110, 000.

HG: How can you tell that users are from Thailand if they access it over the PC internet? If they access it over the mobile, then it would be possible to capture the country.

PS: Not sure.

HG: How many of these users access it online?

PS: Don’t know

RS: Need more recent numbers from BuzzCity. 2007 too old.

BuzzCity’s main business is over the mobile internet. This is due to the following reasons:

–The mobile internet can be accessed via the mobile phone using a 3G, GPRS data plan.

- –Most new handsets are equipped with internet surfing capabilities.

- Cost of mobile internet surfing has been decreasing.

-Due to limited screen space, mobile sites are generally simple and straightforward.

–Users are on mobile internet because mobile devices are always on, at hand, personal and rarely shared and affordable.

–Some users may never own a personal computer hence their only way of accessing internet is via the mobile internet.

–Moreover there is emergence of media convergence in online and mobile media. Mobile site has become an alternative to website, television and billboard for advertising.

–Mobile web is used as extension to wire-line internet for knowledge workers with smart-phones such as iPhone and Blackberry and as primary tool of accessing internet for blue collars with mass market phones.

BuzzCity used to mainly deal with telecom operators; now they deal more with advertising agencies. Only about 2 – 3% of revenue comes from telecom operators.

BuzzCity serves as middleman to match advertisers with publishers in mobile advertising business.

Discussion on chart (not available for viewing)

RS: How come you don’t have a line with broadcasters but have with telecom operators?

HG: How do you define e-commerce?

PS: Commerce over the internet.

RS: If stakeholders talk to each other, have two-way arrows. Also have another set of arrows (apart from services rendered) showing how the money flows between stakeholders.

RS: Why are certain entities in the diagram who are not directly linked with BuzzCity in the chart? Have different diagrams. Also, the fact that the search companies are in the system but not directly linked with BuzzCity is interesting.

PS: All the players were included in the chart to show the eco system.

HG: Is there data being transferred between players or is it only communication? Another two relationships need to be shown: data transfer and money transfer.

HG: Who are content aggregators?

RS: Content aggregator gathers informations and provides the operators with information. Information is collected from content providers. Operators tend to not like to deal with content providers directly.

RS: Push-pull relationship between these players, etc need to be explained. Definitions needed.

BuzzCity primarily deals with advertisers, publishers, content providers or content aggregators and mobile operators or carriers including of access providers.

BuzzCity also works with advertising agencies and media houses or broadcasters to persuade more advertisers to join BuzzCity mobile advertising network; and with service providers dealing with billing and mobile internet site building and hosting.

The advertisers can freely set advertising campaign and target on any country, region, telecommunication companies or carriers, time, handset, platform and publisher channel for their campaigns.

Advertisements are served on myGamma, as a publisher, and on more than 2,000 publisher sites globally. Advertisers can set target channels through many publishers including of myGamma.

RS: How does myGamma manage use by geographical regions?

PS: There is a local language version of BuzzCity in Thai.

RS: Any other way of differenting audience other than language? Generally in e-commerce, targeting is not good.

The advertisers can select graphical banner and text banner to appear on screen. Advertisers can work on their campaign budget through bidding system. They can bid anything higher than the minimum price of USD 0.01 per click. The higher they bid, the more frequent their advertisement will appear. On average costs per click (CPC) are different across countries.

HG: Is payment only through clicks?

PS: As far as I know, yes.

RS: Do users pay through view?

PS: As far as we know, no.

HG: Does BuzzCity make money through advertisers placing an ad and then further by users clicking on the ad?

PS: Yes.

RS: What is the point of banners if they only get money through clicks?

Publishers with their own sites will be offered both cost per click and cost per impression models on both graphical and text advertising on the network. Publishers can select various types of ads to appear in their pages which are graphical ads, text ads, ad page (a link to an ad page), WAPMaster ToolBox (a link to WAP tools such as community, groups, moblogs, classifieds, weather, wikipedia, etc.) or their combination.

RS: Who is a publisher?

PS: MyGamma (owned by BuzzCity) and other external ones.

HG: BuzzCity offers services to other publishers and earns money through clicks and impressions.

They can accept or reject individual ads. They can select the category of advertisers they would like to serve ads for. On average, publishers are offered 65% of revenue whereas the rest belongs to BuzzCity.

Merchants can sell their mobile content through myGamma. Payment interface is based on unified currency, called Gamma Dollar (G$). Merchants integrate the Gamma Wallet onto their sites in order to charge their visitors and reach the community of myGamma members, who have G$ to spend on their contents.

BuzzCity provides the myGamma developer platform to allow them to create networking applications that leverage the growing popularity of the mobile internet. The platform provides developers seamless application with myGamma and access to community of mobile internet users. •Approved application will appear as a link in developers’ myGamma profile page and in the myGamma application page.

MyGamma has connected the wireless social networking. Majority of users are between 20-35. They are lower middle income users who are looking for connecting with others and feeling accepted.

Mobile communities have been growing owing to several factors.

–Firstly mobile internet data cost is time-based flat or quasi flat rate. The mobile internet charges are segmented into business users and mass market users.

–Secondly it is now easy to use the mobile community applications and the handsets.

–Lastly there are no predatory practices by mobile operator.

In global market BuzzCity is acting as middleman to link advertisers with publishers. The major players in billing network are Bango, IPX and C365 whereas in social networking websites are Peperoni, TagTag and Waptrick. The major players in long-tail ad network are Admob, Google and Decktrade and in mobile advertising network are Thirdscreen, Enpocket and Screentonic.

Buzzcity found that the margin on billing network business is thin. Currently the content provision business is dominated by mobile operators. Premium content market is shrinking globally. BuzzCity generates revenues from advertising on myGamma and advertising network comprising third-party publishers; member’s spending in myGamma; and mobile billing commissions from content providers selling into the myGamma community.

Major revenue sources are from mobile advertising, taking into account of 90-95 percent of total revenues, and the rest of revenues are generated from mobile billings. Revenue from mobile billings includes of revenue from merchant business via selling mobile contents, billing content aggregators or carriers, selling virtual items or votes in myGamma and topping up Gamma dollar via WAP and premium SMS. BuzzCity’s gross margins on myGamma are 50 percent whereas gross margin on merchant business is very small, 10 percent.

HG: How do users buy myGamma dollars?

PS: They pay through the mobile operators. Most users are prepaid, so they buy credit and use that for the service.

HG: Operator pays BuzzCity and recovers money from the user.

RS: What % will be taken from the phone company? And what is the minimum or maximum Gamma dollar purchase? Please look into this.

HG: What does merchant business mean?

PS: They develop the application, and then when BuzzCity approves, it appears on myGamma.

By employing social networking, myGamma, BuzzCity has offered mobile advertising in forms of graphical or text ads. The advertisers will be charged cost per click or pay per click at one bath per click or cost per thousand impression (at USD 2 per thousand impressions. The advertiser charges can be pre-paid or via auction network, which is conveniently operated in BuzzCity website. The gross margins on mobile advertising business are relatively high, comparing to mobile billing business, at 97 percent on myGamma; and at 30-40 percent on external publishers. Typically in mobile advertising business, 3 percent of revenues are collection and remittance fees and 65 percent is revenue shared to publishers.

RS: Terminology clarification needed.

RS: Suggestion: do different diagrams for different show the base show how the money is divided across the value chain: when BuzzCity is the publisher, when there are other publishers, when myGamma dollars are used, etc. Have a revenue stream and then show who gets how much (%-wise). Diagrams will be help. Then do a pie-chart showing % revenue coming from myGamma and external publishers.

HG: Why is BuzzCity getting 97% from internal publishers (myGamma) and only 30 – 40% from external publishers? Doesn’t make economic sense. Where does the 3% go?

PS: That also goes to BuzzCity

HG: Suggestion: explain all the revenue sources, then explain each type of transaction.

HG: Is there data showing the % of revenue coming from myGamma and external publishers

PS: Will look into this.

SL: From your interactions with BuzzCity, have you got any sense whether myGamma is popular among users compared to other publishers?

RS: We had the earlier impression that myGamma was the most popular publisher. Need confirmation or refutal of this through evidence.

Thailand is considered as potential market for mobile internet because mobile subscribers in Thailand have been continuously increasing. Mobile internet is increasingly popular. Mobile internet penetration rates are 17 percent for population age under 25 and 7.5 percent for population age over 25 in the first quarter of 2008

As for advertising network outreach, Thailand has a daily average of about 1 million exposures. The main distributor is AIS, TRUE and others. Fifty nine percent of users are male and rest is female. The major location of users is Bangkok (56 percent).  •Most of users are in age of 20-25 years old (33 percent), 25-30 years old (31 percent) and 30-35 years old (16 percent). •Thai users have various characteristics ranging from government officials, small business owners to employees in large enterprises.

HG: Does this data refer to myGamma or BuzzCity? What does exposures mean? Do they know how many users log in per day? Please double-check what BuzzCity mean by exposure.

RS: It looks like a user survey has been conducted. Please look into this.

The evidence shows that users hold high educations from secondary school, diploma or college to university or postgraduate degree . Their income level is not very high. Most of them earn less than 10,000 baht. Some earn 10,000-20,000 baht (24.21 percent) and 20,001-30,000 baht (24.94 percent). They are mainly adults who work as freelancers; administrative, retailing and sales assistance personnel; and service personnel or having own business.

HG: Is the data from the BuzzCity user survey?

PS: Yes

Eighty two percent of respondents use the mobile internet to communicate with friends via chat, blogging and discussing groups. Very few use the mobile internet for entertainment (such as playing game), surfing for information, education and email.

Thai go online more frequently than users from other countries. Seventy percent access on mobile internet more than five times a day and 19.85 percent less than once a day.

Most of Thai visit mobile internet sites at home (76.47 percent) and at work (7.6 percent).

HG: Do we have data on whether users have different modes of access to a computer (such as home vs. work)?

In Thailand, through BuzzCity, content providers mostly provide ringtones (50 percent), mobile game (20 percent), horoscopes (20 percent) and photo wallpapers (10 percent). Thai consumers purchase ringtones (30 percent), photo wallpapers (30 percent), mobile game (20 percent) and horoscopes (20 percent).

There are very few Thai advertisers since mobile advertising is very new and there is no advertising agency in Thailand who actively encourages their clients to advertise through this media. Even in the agency, there is no media buyer who is responsible for mobile advertising.

However there are some foreign advertisers targeting Thai users.

Therefore, as a whole, advertisers targeting to Thai users are in content provision business (60 percent) such as N-content and Mobafone; fast moving consumer goods (20 percent) such as drinks, mobile accessories, contact lens; and small and medium enterprises (20 percent) such as massage chairs.

Since small and medium enterprises do not have large marketing and advertising budget but aim to venture global, advertising through BuzzCity ad network can fulfill their goals.

In case of Thailand, mobile operators’ revenue sharing is as high as 60 percent whereas the rest of revenue belongs to content providers and aggregators.

Moreover, mobile operators, such as AIS, the largest mobile operator in Thailand, exercise its dominant power over the network and play the dominant role in content provision business. As a result, the small and medium content providers exit the market.

RS: Are these operators publicly-traded companies? If so, we can see what % is from VAS and voice respectively. Since Thais are not into SMS, it is likely that most VAS will come from other services such as BuzzCity.

In Thailand, the roles of advertisers, merchants and publishers are not definitely defined. Some of firms can play all of roles. For example, Grammy (the largest music company in Thailand) can advertise new album through ad net work, sell music content via myGamma and with its own websites allow ads from other advertisers to appear in Grammy website.

Business model of BuzzCity in Thailand is similar to BuzzCity in other countries.

Although the number of Thai advertisers and publishers are negligible, there are a lot of potential in Thai market as perceived by BuzzCity.

The factors determining the potential success of business model in Thailand

Technology

Service targeting

Organization

BuzzCity has developed simple platform for developers to create networking applications and has created mobile ad network and international billing network. Standardization processes and open interfaces are seen as essential for an effective and fast development of mobile content services.

Voice is getting commodified and profits are declining. People are not taking up more-than-voice services because they do not have money and see mobile as a consumption good. If, on the other hand, it is seen as a production good, something that puts money in the pocket, is it not realistic to think that it will be better for the operators?

LBO has carried an interesting piece based on the exchanges at the LIRNEasia presentation to industry on March 4th. Perhaps the readers have more to say?

Sri Lankans low income customers of mobile communications, used phones least for business related activities in the region, potentially opening up a new marketing opportunity for celcos, a new study has found.

The so-called bottom-of-the-pyramid (BOP) mobile customers in Bangladesh used phones most for business, financial or work related activities a new study by the policy think tank, LirneAsia has found.

“Sri Lanka is at the lowest end where only 21 percent people said they used the phone daily for business related transactions” said Harsha de Silva, lead economist of LIRNEasia said.

“Whereas in case of Bangladesh where we heard so about phones and using phones as ways of getting out of poverty. And micro finance entrepreneur use was very high, whereas in Sri Lanka it was very low.”

Faster networks and lower rates also help. Having to wait for an advert to download, while being charged for the privilege, was unlikely to inspire warm feelings about the product being advertised. But with download speeds increasing and flat-rate “all you can eat” data plans, mobile services and applications are becoming more popular—and, increasingly, funded by advertising.

For more than two years, a large group of engineers at Google have been working in secret on a mobile-phone project.

As word of their efforts has trickled out, expectations in the tech world for what has been called the Google phone, or GPhone, have risen, the way they do for Apple loyalists before a speech by Steve Jobs.

But the GPhone is not likely to be the second coming of the iPhone and Google’s goals are very different from Apple’s.

Google wants to extend its dominance of online advertising to the mobile internet, a small market today but one that is expected to grow rapidly. It hopes to persuade wireless carriers and mobile-phone makers to offer phones based on its software, according to people briefed on the project. The cost of those phones may be partly subsidised by advertising that appears on their screens.

Google is expected to unveil the fruit of its mobile efforts later this year, and phones based on its technology could be available next year.

Some analysts say that the Google project’s effect on the wireless industry is not likely to be as profound, at least initially, as that of Apple’s iPhone, whose revolutionary look and features have redefined consumer expectations for mobile phones.

“The iPhone was a milestone in terms of how people use a mobile device,” says Karsten Weide, an analyst with IDC. “The GPhone, if it does come out, will help Google with distribution for their online services.”

At the core of Google’s phone efforts is an operating system for mobile phones that will be based on open-source Linux software, according to industry executives familiar with the project.

In addition, Google is expected to develop mobile versions of its applications that go well beyond the mobile search and map software it offers today. Those applications may include a web browser to run on mobile phones.

While Google has built phone prototypes to test its software and show off its technology to manufacturers, the company is not likely to make the phones itself, according to analysts.

In short, Google is not creating a gadget to rival the iPhone, but rather creating software that will be an alternative to Windows Mobile from Microsoft and other operating systems, which are built into phones sold by many manufacturers. And unlike Microsoft, Google is not expected to charge phone makers a licensing fee for the software.

The essential point is that Google’s strategy is to lead the creation of an open-source competitor to Windows Mobile, according to one industry executive, who did not want his name used because his company has had contacts with Google. They will put it in the open-source world and take the economics out of the Windows Mobile business.

Some believe another major goal of the phone project is to loosen the control of carriers over the software and services that are available on their networks.

“Google’s agenda is to disaggregate carriers,” says Dan Olschwang, the chief executive of JumpTap, a start-up that provides search and advertising services to several mobile-phone operators.

Google declined to comment on any specifics of its mobile-phone initiative. But its chief executive, Eric Schmidt, has said several times that the mobile-phone market presented the largest growth opportunity for Google. “We have a large investment in mobile phones and mobile-phone platform applications,” he says.

Industry analysts say that Google, which has little experience with complex hardware, faces significant challenges.

“Running a website and a search engine is one thing,” says Weide of IDC. “But developing a phone is a whole different game. It will not be easy for them.”

Weide adds that Google’s impact on the industry will depend to a large extent on its ability to sign deals with wireless carriers that distribute hundreds of millions of phones each year and often control what software and services run on them.

Some carriers, especially in the United States, are likely to give Google a cool reception. Companies such as Verizon Wireless and AT&T have spent billions of dollars building and upgrading their networks, establishing relationships with customers, subsidising handsets and creating their own mobile internet portals. Now they want to make sure those investments pay off, in part, through mobile advertising, and they see Google and other search engines, which are after the same ad dollars, as competitors.

As a result, most carriers in the US have chosen to shun the major search engines for now. Instead, they have promoted the search engines and ad systems of small technology companies such as JumpTap and Medio Systems, whose services they can stamp with their own brands.

Most carriers declined to comment on Google’s plans. But Arun Sarin, chief executive of Britain’s Vodafone Group, which offers the Google service on its phones, says it is not clear what compelling functions Google will offer that are not already available.

“What is it that is missing in life that they are going to fulfil?” Sarin says. “It is not a no-brainer. You can reach Google already through a number of devices. You don’t need a Google phone to do that.”

Google’s desire to loosen the carriers’ control over their networks has hardly been a secret. The company recently lobbied the Federal Communications Commission to impose rules on any carrier that wins a coming auction for valuable wireless spectrum. The rules, which the FCC adopted despite opposition from Verizon and others, require that the network using a portion of that spectrum be open to any handset and software applications from any company.

Google says it is considering bidding for some of that spectrum. But regardless of who wins it, phones based on Google’s software will be able to take advantage of it.Google’s lobbying, as well as its work on a phone software platform that will be open to other applications, represents an effort to bring to the mobile internet the dynamics of the PC-oriented internet, which is free of control by network operators. Google is hoping that it can beat competitors in an open environment.

The mobile-phone project at Google is built in part around Android, a small mobile software company it acquired in 2005. An Android co-founder, Andy Rubin, had founded Danger, which created the popular T-Mobile Sidekick smart phone.

Rubin works at Google’s headquarters in Mountain View, but another part of Google’s team is reported to be in Boston, where Android’s co-founder, Rich Miner, another veteran of the mobile-phone industry, is based.

Some analysts say there are no guarantees that Google will be able to replicate its online success in the mobile world.

“The wireless market does not have the same global scale and scope efficiencies, nor the lack of transactional friction, of software on the internet,” says Scott Cleland, a telecommunications industry analyst who recently testified before the US Senate against Google’s proposed acquisition of DoubleClick.”

It is a completely different world and completely different set of economics,” says Cleland, who has opposed Google on a number of policy issues.

Microsoft, whose mobile operating system has been available for years, has distribution agreements with 48 handset makers and 160 carriers around the world. Still, only 12 million phones sold this year will be based on Microsoft’s software, giving it 10 per cent of the smart-phone market, according to IDC.

Microsoft declined to comment on potential competition from Google.”The market is huge and our partners are really motivated to bring Windows Mobile phones to market,” says Doug Smith, director for marketing of Microsoft’s mobile communications business.

Mahesh Veerina, founder and chief executive of Celunite, which makes mobile-phone software based on Linux, says Google’s offering is likely to be attractive to small carriers, which may see it as a competitive weapon.

But if Google-powered phones prove to be a hit with consumers, other carriers may feel pressure to follow suit, says Richard Doherty, director for the Envisioneering Group, a consulting firm.

“No one wants to be the last carrier to endorse Google,” he says.