Colloquium: Business Models for Delivering Mobile Value-Added Services

Posted on July 13, 2009  /  1 Comments

This colloquium was conducted by Puree Sirasoonthorn.

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).

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.

Through its own portal, AIS provide mobile music and segmented content such as game through mobile, and other mobile internet services such as mobile map, mobile chat, self location, real-time traffic camera and real-time accident report. AIS’s mobile internet business has expanded. The proportion of mobile internet business is 96 percent from content and only 4 percent from mobile advertising.

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


Service targeting


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.

Ad optimization technology was developed to optimize click-through rate and frequency of banner appearance. This technology helps to enhance a bidding system. Ad targeting technology will target ads to appropriate publishers. Both ad optimization and targeting technology will be run every 15-30 minutes to search for the right number. Based on this technology, Buzzcity will maximize revenue.
SL: What do you mean by “right number”?
RS: Frequency of display on the site.
One of the key successes of BuzzCity’s mobile advertising business is that the advertisers can effectively manage and target their campaign directly to their audience, via ad targeting technology. Through BuzzCity mobile ad network, comprising of ‘myGamma’ social networking sites and thousands of mobile sites, audience will be reached widely and will be easily segmented according to their common characteristics. The size of audience worldwide with common characteristics is large enough for advertisers to effectively communicate with their target groups.
The division of roles in BuzzCity ecosystem is not clearly defined or separated. Incumbent may extend their operation to cover new roles. For example, mobile operator such as AIS can play the roles of advertiser, publisher or merchant at the same time.
Operators by nature already possess valuable information regarding their customers so they could also become important information providers. Telecom operators also already have a billing relation with most users of future services so they are expected to become powerful players within the emerging services. Network openness and rules imposed by operators to players that want to access their information are a crucial issue.
Mobility is the unique characteristic of mobile business. There are distinct advantages that mobile services can have to build their value proposition.
The benefits include of
– freedom of movement (the services can be used while users are on the move);
– ubiquity (the possibility of using services anywhere, independent of user’s location);
– localization (use’s location information can be exploited to offer location-based services);
-reachability (users can be reached anywhere, anytime, from selected persons and contexts);
– instant connectivity and
– personalization (personal device, apt to store personal information).
These are good characteristics for mobile advertising. They enhance mobile advertising business of BuzzCity. Mobility has some drawbacks including of limited and more expensive bandwidth and device limitations. Bandwidth limitations are a consequence of radio spectrum being a fixed and rare resource and its control being restricted to license owners.
Device limitations are due to the portability requirement of mobile handsets that have to be small and lightweight, letting limited space to be used for screen, batteries and input/output interfaces.These limitations do not hinder BuzzCity’s business growth since BuzzCity has already targeted to the lower middle income users who can own small mobile phones.
Network externalities can be direct or indirect. When customers are identified with network components, which are typical of two-way networks such as telecommunication networks, the externality is direct and results from the fact that a user joining a network confers a benefit to all other network users because the number of potential interaction increases.
These direct network externalities also exist in myGamma social networking.  The utility of joining social network is positively related to the number of its members. Network effects are in the forms of being able to communicate with a larger number of other members.
Due to the positive network externalities, BuzzCity can attract more advertisers to join ad network and to reach members in myGamma.
Communication network also show signs of indirect externalities, where users indirectly benefit from network size.For example an additional member potentially increases the number of services available to other members, because due to the increasing demand for services, service provision become more profitable and more firms (merchants and advertisers) would be willing to offer them.
Network externalities will affect players’ decision and behavior. For example users will consider network externalities when they decide whether to adopt a new technology or become member of myGamma and advertisers and publishers when they decide whether to join BuzzCity ad network.
In addition, BuzzCity’s long tail mobile advertising network aggregates around 2,000 smaller sites to capture value offered by the smaller sites so that advertisers are able to reach a diverse audience. Attracting few users from different sites is better than more users from the same site.
Network operators or mobile operators have control over their SIM card to their customers. Communications from and to a subscriber must pass through the operator network.
By controlling the network, the operator possesses a unique access to valuable user-related information such as a complete customer profile, call patterns, location information and so on. Therefore it is easy for mobile operators to enter into mobile internet business.
RS: You mentioned that AIS is entering into competition with BuzzCity. Is that correct? If you do the value-chain analysis that was mentioned earlier, and if you include the current competitors and potential ones under the different areas. This would strength your argument of the level of competition available.
RS: If you want this published, you need to convert this paper into something more than a casestudy. Then you can make the paper more generalizable, and have greater academic quality. This would help answer the question such as if BuzzCity is active and making money in Thailand, what about other countries?
RS: Earlier, the countries they were active in depended on the operators they had made agreements with. This was when it was a revenue-sharing model. Now is is an advertizing-based model. Hence, now why is it active and popular in Thailand compared to other countries such as India and Bangladesh which have higher population numbers. Please look into this.
AZ: Just a comment: when you talk about network effect, could it be that the network effect from these types of communication is greater than othe forms of services such as voice, where the latter depends on actually knowing the person, whereas in the former, one can communicate anonymously with each other.
CW:  Suggestion – more charts & figures needed in the presentation.
RS: If more graphics are used, this would help both you and others understand the business models. Definitions also needed (possibly in an annex).
RS:Our research needs to be critical of research conducted by other companies. Hence, when we re-publish other companies data, need to to check sample size, margin error, etc, to make sure the data is reliable.
RS: If you want this paper positioned as an academic paper, more literature is needed such as e-commerce and marketing journals, etc.
Need to check what other types of services similar to BuzzCity are available. Then run a Google search on what others have written about other programs such as SecondLife and compare revenue models with these types of software, for example.

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