An MVNO is a Mobile Virtual Network Operator. This is one of the more unique industries available today because the MVNO sector is very buoyant. It receives lots of interest from all of its market participants and is continually focuses on new opportunities that may occur in the future. The MVNO business model has a number of variations to it, from fully integrated network activities to community-based options.
Sometimes the business model is to take on a brand partnership above anything else. Red Bull Mobile is proof of this.
So what makes a company like Virgin Mobile become stable and successful, but other companies fail over time? It all boils down to the selecting the right business model.
Is Market Integration the Best MVNO Business Model?
These virtual network operators are using an established network that is being leased from another agency to provide services. This means that their level of participation with network servicing and maintenance is going to be a key factor in the charges that they will face to provide services. For Virgin Mobile, many of the services that are required of a traditional network operator have been incorporated into the MVNO.
For other companies that are primarily ad-funded, they are finding that the margins are just too low to be manageable for mobile services. Some MVNOs try to compete on price alone as their business model and these companies are getting squeezed out of the market consistently year after year. This happens because there is no differentiation or value between the virtual and the traditional service providers.
To counter this, big brands have come together to support an MVNO opportunity. A great example of this is the partnership between Tesco and O2. Times might be changing, however, as MVNOs look to potentially copy a page out of the social gaming business model.
Could Freemium Services Be the Future of the MVNO Business Model?
When you download a free game from your preferred app store, you are given the option to pay for premium upgrades. Sometimes games will allow limited upgrades if you’re willing to watch advertisements that are 15-30 seconds in length. This gaming profile is called “freemium” and new MVNOs are looking at this as a way to increase revenues exponentially.
Here’s how this MVNO business profile works. Users will sign up for the brand’s services, which typically include an unlimited talk, text, and voice plan today. In return for lower plan costs, users of the MVNO are asked to watch up to 45 seconds of advertisements immediately upon signing up for the service. They are then subscribed to watch more videos every other hour throughout the day.
Some might think this type of business model is crazy for an MVNO, but it is working. Wifog, which is based in Sweden, has seen their market share goal of 1% reached already. The advertising arrangements help to cover the costs and the extra advantage is that the required engagement results in a higher-than-average CTR rate for advertisers.
This means a company like Wifog can command higher advertising rates because they can prove bigger results. It also sets the stage for international expansion, something that has often been out of reach for the MVNOs of the past.
Is a Multilevel Approach the Best Business Model?
Many MVNOs are looking at a diversified system of services and tools that will bring in multiple revenue streams. Sometimes this means purchasing data rates at wholesale prices and then turning around to resell that data to consumers at retail prices. Some MVNOs like Voiamo in the UK are offering retail partners the chance to become their own MVNO with a comprehensive packages of ready to implement services that can take a company live in 12 weeks.
In looking at the MVNO business models that exist today, it is clear that the fracturing of this industry is going to continue for some time. New business are likely to find a more innovative approach, while giants like Virgin Mobile are going to stick with their more traditional approach.
What we can learn from this industry is that an individualized business profile is sometimes the best course of action to take. Just because one business has found success in a specific way doesn’t mean that your new business will see the same success by adopting the same profiles and plans.