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Alvin Yap Talks about Monetizing the Feature Phone Industry [INTERVIEW]

Alvin Yap Talks about Monetizing the Feature Phone Industry [INTERVIEW]

| September 6, 2012

Readers may recall when we discussed feature phone business opportunities in Indonesia with Andy Zain. Continuing that discussion, we spoke with Alvin Yap, the founder and CEO of mobile gaming developer TMG and KotaGames, about the monetizing strategy and opportunity from the feature phone market in Indonesia. Here’s what he had to say.

Can you monetize in the feature phone industry?

We found out that we monetize better than [social games provider] Zynga. Zynga monetizes about 1.2 percent of its monthly active users (MAU). Over the last thirty days, if we look at the monetizable users, we [monetize] anything from 20 to 25 percent. So that’s about 20 times higher than what Zynga does.

Of course in our market, users have less money to spend compared to Zynga’s market. Zynga’s average revenue per daily active users (ARPDAU) is about 0.046, ours is about 0.038. So we’re about 22 percent lower than Zynga. But because we monetize 20 [times] more people, we are actually higher in terms of revenue potential compared to Zynga. For more information you can refer to our online [data] (pictured below). So can we monetize? Hell yeah we can monetize.

What are some of the key reasons behind that?

With feature phone users, they have less money to spend, but they are more willing to spend. But why?

Number one, unlike you and I, they have no access to TVs, and to regular internet services. For you and I, when we see a game that we have to pay for, we immediately stop playing it. Why? Because we have a lot of other options. Instead of Warcraft, we can play Starcraft. Instead of Cooking Mama, we can play Diner Dash. We can play anything we want, we have so many options. Instead of paying for songs, we can download them for free, instead of watching a movie of $2, we can stream it online. But for regular feature phone users, where majority of the market does not have this privilege. That is why they are more willing to pay.

Number two is because it’s cultural. They are not internet service users, they don’t have the notion that everything is free on the mobile web, they don’t have that notion. So they’ve been so accustomed over the last couple of years paying for content, paying for SMS subscription, paying for horoscope, paying for everything. So this is a common thing for them, they need to pay for content. There are people like us who are used to getting things for free, why should we need to pay for this? I will never pay anything online before because I know that if I look hard enough, I will find these things.

Does this apply specifically to Indonesia?

[This applies] in all new markets, in all emerging markets, where there’s a big income divide. Where you have the elite, and the majority of the market. In majority of the market where they don’t have regular internet access. Where they’re not educated in terms of internet access, you will see the same situation. I would say that this is a common denominator in all emerging markets: Indonesia, Thailand, India.

How much money are feature phone users usually willing to spend?

For us, we sell virtual credits for anywhere from five cents (IDR 500) all the way up to a dollar (IDR 10,000). You will never see Zynga doing these types of things, for them the starting price maybe is from $5 (IDR 50,000). So we are pricing our group at a denomination that users can actually afford. But if you go to many services, they’ll think that this [the pricing scheme] is too small.

For regular mobile users, at any one point at a time, their total credit is less than 80 cents (IDR 8,000). So if you charge anything more than a dollar, then good luck.

How do you reach these users?

We work a lot with telcos. Telcos serve the biggest paying service for first time internet mobile users. By working with [telcos], we get visibility and users get to know who you are. There’s a fair amount of word of mouth as well. That’s why we’re not active on online blogs, we’re not so active on email marketing, or online media because it doesn’t work for us. Our target doesn’t live there.

We work together with handset manufacturers like OEM, Nexian, Nokia, Opera Mini. We work with stakeholders from the mass marketplace, but we don’t work so much with Apple because our target market doesn’t use Apple.

If we had to pick a handset manufacturer to work with, who would it be? Nokia for sure. It still commands the biggest market share for mobile feature phone. If we have to work with browsers, we don’t work with Mozilla, because our users don’t know about Firefox, but they know what Opera Mini is, that is why we work with Opera.

How do you get the visibility from that cooperation?

It can be anything, maybe when working with telco, then naturally if they go to the telco website or when they try to find services they will see KotaGames. Or if you work with a browser, then they will see you from the speed dial. So that’s how we get user visibility, that’s how you know about our service. Sometimes we do SMS marketing, sometimes for example on certain Nexian devices, you will see us on its bookmark whenever you go to its apps section.

What should a company do if they want to partner with telcos too?

Everybody’s open to partnership. I think the challenge is how you can derive value. They are not easy to work with, because many people I think don’t understand how telcos achieve their needs. Because so many people want to work with telco, so naturally it is very competitive. Not everybody will get [to] work with telco, but you just have to know how to position yourself and how to be different than the other guy.

It also helps to have a personal and long lasting business relationship with them, we’ve been in the industry [for] about two or three years, so we know several people, and it helps when getting in touch with the telco. For fresh companies, it could be difficult because you will not understand the internal dynamic.

What do telcos want?

Everybody wants revenue, so you need to have a service that can monetize. Every telco wants reduced churn. If you have a service that helps a user stay with a particular telco, then you will be very valuable, and they will want you because a telco earn money by the number of subscribers.

How many feature phone are online? Who are they?

There are around 180 million mobile users in the market with maybe 30 to 40 million mobile internet users because it is still so new to the users. And this is a good thing because the 30 million can grow to 80, 90, 100 million as we go on.

If you look at Singapore’s emerging market, most users were early internet mobile users. While in Indonesia it’s still in an educational process. One fundamental point is that [Indonesian] users do not want mobile internet, but they want services. They don’t give a shit about what the mobile internet is, but they want Facebook and they play games. But they don’t know that that it’s all mobile internet. That is why telcos have been very intelligent in selling Facebook packages, Twitter packages, Kotagames packages. Because users don’t understand the mobile internet, but they understand services.

I don’t know the exact mobile internet demographic, I know that [the majority] are definitely between 15 to 29, and they are 70 percent male. Why? The early adopters of technology, they are males. How many technology magazines do you see catering to female? What is the probability of you seeing a hot girl on a cover of tech magazine compared to a hot guy? Almost exclusively you see more of a hot girl, because the target market is men. So technology early adopters are almost [all] men. Beyond 29, they are more difficult to change, because they are not open to new stuff.


On the future phone market

Regarding the future of phone industry, Alvin said that in three to five years, he believes that Android will start to take over, but even when that time arrives, feature phones would still be in the market to the tune of 30 to 40 percent. Feature phones will get smarter until one day there will be a blur on the distinction between smartphones and so called dumb phones — we eventually will just have phones.

Alvin explained that just because Android devices will get cheaper, it doesn’t mean that people will automatically have $20 (IDR 200,000) to spend on apps. Their usual income will still be the same. This will then cause the smartphone users’ ARPU (average revenue per user) to balance out. So there will still be a divide between the elite and the majority in the future smartphone market.

By the way, TMG is now hiring. For more details you can take a look at the slides below.

[Picture source: akuinginhijau.org]

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