The Smartphone Revolution How to increase ARPU with In-Browser Messaging

Executive Summary

Smartphones have changed the way subscribers use the Internet.

The growth in smartphone usage by wireless subscribers creates a unique

opportunity for carriers. To get the most revenue, search engines, portals and

other content sites are working hard to connect with their visitors. Using the

power of on deck and off deck communication, the carrier can leverage its

relationship to deliver a dynamic user experience – beyond the pipe.

Good use of customer data is important for success in this explosive market.

Keeping and satisfying a customer is a key part for increasing average revenue

per user (ARPU). Smartphones are a way for the carrier to personally talk to its

customers. Use them to promote offerings, increase loyalty and improve

satisfaction.

In order to play a part in this revolution, carriers need to act quickly.

Where is the mobile world going?

Increasing, mobile phone usage is about data, not voice. A survey1 of 1,800 users by AOL/Universal

McCann builds a blueprint of a typical smartphone user’s life. It looks at three perspectives:

smartphones work in the user’s lives; how marketers are able to catch and use understandings to

develop a more powerful strategy; and how users see the role of smartphones growing within the next

12 months.

The research showed that the smartphone is the product that changes its user’s life. It is not simply a

tool for telephone calls. Consumers in the survey said that this device is a great convenience. It allows

them to access services and connect with anyone from anywhere at any time. This is what is driving data

usage and growth in the mobile world.

Figure 1 shows that in 20082 (Apple’s App Store opened that summer) that a feature (regular cellular)

phone user had 15% data usage. (Voice and SMS is 85%) Smartphone users used their devices for data

1 Smartphone, Smart Marketing; AOL/Universal McCann, December 2009

Figure 1 - Smartphone Usage is About Data - Not Voice

41% of the time. This data usage gap between feature phones and smartphones continues to grow as

additional apps are developed, additional smart phones are released, and consumers continue to use

the Internet from their “phones”. Looking at the mobile market from the subscriber’s usage angle gives

a different outlook to the industry’s future.

Is it all about the apps?

While some may say that the digital frontier is closed3 and apps tame the “Wild Digital West”, Google

and other major players, need the Internet to be seen

through a traditional browser so that it can serve

advertising and continue to monetize Internet usage.

No matter what bloggers or a Silicon Valley CEO4 says

– browsing on a smartphone is far from dead.

According to a survey by Comscore5, 78 percent of

users used a browser on their smartphone. The graph

at the right shows that between April 2009 and April

2010 smartphone browser usage and smartphone

application usage was nearly the same. This is great

news for the carrier because there are existing proven

solutions6 and cost effective methods

6 for sending

messages direct to the browser. Sending similar

messages via smartphone apps would be a challenge,

since each app would require special formatting.

Using in-browser messaging, the only thing that

remains is a way to increase the carrier’s unique

relationship with the consumer.

What is the Carrier’s unique role?

The carrier can either choose to become simply a delivery mechanism for other applications or the

carrier can choose to use what it knows about the customer and deliver valuable services that improve

the customer’s experience.

3 Closing the Digital Frontier, Michael Hirschorn, July/August 2010.

http://www.theatlantic.com/magazine/archive/2010/07/closing-the-digital-frontier/8131/2/ 4 http://moconews.net/article/419-steve-jobs-heres-how-apple-will-beat-google-at-mobile-advertising/

5 http://www.comscore.com/Press_Events/Press_Releases/2010/6/Social_Networking_Ranks_as_Fastest-

Growing_Mobile_Content_Category 6 U.S. Patent 6,442,577 filed November 3, 1998: http://patft.uspto.gov/

Figure 2 - Smartphone Browser Usage is Keeping Up with App Usage

The Carrier’s Real Advantage

The carrier is uniquely positioned to leverage the network

to deliver higher value content and services.

The natural thing to do then is for the carrier to use the

customer relationship to monetize the use of the device to

the maximum extent possible. In the early years of the

public Internet, providers were left out of collecting

advertising revenue while search engines and portal pages

grew in popularity. With that popularity came advertising

revenue as subscribers viewed pages that were loaded with

ads.

Learning from this history, today’s opportunity for the

carrier is how to use the information they have about the

subscriber. This includes the subscriber’s usage on their

network and the subscriber’s interests. Then the carrier can

improve customer service, upsell existing products,

promote new offerings and drive traffic to their own

portals. By sending messages directly to their customers

with information that is relevant and interesting, the carrier

can improve the level of customer service.

Improving Customer Service Increases Average Revenue per User

Research shows that 16% of subscribers leave a carrier just to receive better customer service.7 One way

to improve customer service is to build upon their relationship and customer knowledge to market to

their subscribers on a more individual basis.

Segmentation marketing, where you identify your VIP customers - the top 5% most profitable users or

the 2% most active subscribers - can be extremely effective for improving the results of any marketing

campaign.8 Subscribers in similar segments may then be targeted with offers that appeal directly to

them. Targeted offers have a greater response rate and can increase revenue as well as loyalty with

increased bundled offerings.

7 Forrester Research: Broadband Customer Retention – Combating Churn in a Competitive Market. August 2008

8 The Customer Loyalty Solution; Arthur Middleton Hughes; McGraw-Hill – 2003; Chapter 8, Marketing to

Customer Segments.

Figure 3 - Yes, Carriers are still relevant!

History: Front Porch sees this as a great opportunity for the carrier to show the consumer that they provide

more than a connection to the Internet. In the last decade, many traditional wireline providers supplied

their customers a connection to the Internet, charged them a monthly service and then got out of the

way. Since the provider lacked a channel for communication and customer relationship, customer

service struggled to proactively build the relationship and thus churn increased as subscribers started

looking for a provider that would proactively communicate with them regarding outages, questions

about service or related topics.

In-browser Messaging In-browser messaging is a proven technology in the wired world and is used daily by providers to send

customer service or advertising messages to their subscribers. In-browser messages are formatted

either as HTML or Rich Text and are targeted at pre-identified groups of users. Many of these messages

contain links to web sites or other pages directing the user to take more actions.

In-browser messaging is used by American provider Windstream Communications to remind customers

that their payments are due. Combining in-browser messages with a more traditional phone campaign

reduced churn by 25% in the first year.

Other uses include China Unicom’s use of in-browser messaging to promote additional services, such as

web hosting and online game play to its customer base. In addition, this technology is used by providers

in many countries to serve advertising and subsidize competitively low Internet subscriber charges. In-

browser messaging popularity continues to grow, as additional uses are created by the providers.

Other providers are using in-browser messaging to:

• Send promotional offers for bundled services

• Increase Portal Traffic

• Notify users of bandwidth usage issues

• Advise subscribers of network status

Advantages of In-browser Messaging

Smartphones with their built in Internet browsers, offer an opportunity for carriers. An industry leading

in-browser messaging system will allow the provider to create groups that can be targeted with

marketing and promotional messages. As users in these groups take advantage of the offers that are

presented, they can automatically be removed from their original group and placed in other groups.

These messages can include redirection to a provider’s portal where visits can be monetized. This

provides for monetization of the traffic without directly sending advertisements.

Messages can be sent in a variety of methods. An interstitial message redirects the browser to a specific

page with a link to the originally requested page. Floating content messages appear to “float” over the

browser and can be made transparent so as not to obscure the content. Floating content messages are

extremely effective and are transparent to browser pop-up-blockers. These messages can contain

graphics, images, video and sound clips and can be made to appear on any web page9 or at any interval.

One key advantage of in-browser messaging is the ability to use anonymous subscriber information to

improve customer communication. Many segments can be created and messages and promotions can

be targeted to these segments. Customers may be placed in multiple segments (VIP, over 50, tech fan

for example) and each message appeals to their particular interest. Only the provider knows what kind

of service bundle is best for the subscriber and can offer it to them while they are browsing – when they

may not even be shopping for additional services. Using information that is available in the provider’s

systems and using a powerful API to download it to the in-browser messaging system will increase

ARPU, reduce churn and increase customer satisfaction.

What to look for in a Solution Provider While there are multiple solution providers in this space, the imperative is to look for one that can truly

partner with the carrier. Longevity in the marketplace, holder of patents, and a history with large

accounts are qualities that cannot be overlooked; but Front Porch believes that these characteristics are

basic requirements to compete in this market.

Privacy

Any time information is collected about a subscriber, privacy is a concern. Carriers need to be concerned

that a solution provider works with the carrier in protecting the subscriber’s privacy. There are basic

tenets that protect the carrier and their subscribers:

• Transparency – the subscriber should be informed what information is being collected about

them and their usage.

• Consumer Choice – the subscriber can be given a clear choice about participating in the program

• Personally Identifiable Information – Information that could identify an individual should not be

collected at all.

• Sensitive Information – Information regarding health issues or life styles will not be collected

• Sharing – Information collected will not be sold or shared with third parties except with written

consent.

9 Note the web page must contain Java script for the floating content message to work.

Partnership

The ability of the solution provider to work with the carrier in evaluating their network, installing the

right solution and then working with the various carrier teams in building a successful outcome is the

single most critical element in the ultimate success of the program. To assist the carrier with choosing

the right solution and partner, Front Porch suggests the following considerations:

� History of technical innovation

� Deployed around the world

� Track record of profitability

� Experience in the mobile market

� Many years serving Internet providers

� Serves millions of messages every day

� Stable management team

Summary Building for the future use of devices on the network should start today. Choosing partners that

understand the future of mobile device usage and who are ready to help you build for that future is

important. One of Front Porch’s values as you plan your move forward is our experience with the wired

world. It is this foundation for building for the future that helps us in choosing your next steps in the

mobile world. Front Porch looks forward to working with you in mapping out your strategy and

providing the best customer service and value to your subscribers.

Front Porch Can Help Contact us for a no-obligation, business survey to determine how we can improve your customer

service, generate revenue, increase portal traffic or increase advertising.

About Front Porch Front Porch, Inc. is the worldwide leader in direct-to-the-browser messaging for broadband Internet

providers. Our patented technology is the most powerful, scalable, cost-effective solution for reaching

subscribers with important messages and verifying their acknowledgments and preferences. Our

solutions are deployed in more than 40 countries and serve millions of users every day. Corporate

headquarters are located in Sonora, California. EMEA headquarters are in London, and a Chinese joint

venture is located in Beijing.

Provider Benefits Internet providers can reduce costs and increase revenue through the implementation of Front Porch

Messaging Solutions. Cost reduction solutions include billing, usage cap, copyright violation and network

alert notifications. Revenue generating messaging solutions include multi-play, up-sell and partner

promotions as well as third party advertising.

Installations Front Porch has provided innovative online advertising services and messaging solutions for ISPs since

1999. The patented and patent-pending core technology provides the only solution proven in networks

with several million subscribers. Implementation is out-of-path, inducing no risk of failure. As a result of

its industry-leading technology and services, Front Porch continues to grow profitability and revenues.

General Information Corporate

Headquarters

European Headquarters

email: info@frontporch.com

info: www.frontporch.com

14520 Mono Way Suite 200

Sonora, CA 95370

Phone: 800-728-1464

Fax: 209.288.5505

Anglesey House

Farnborough Road

Aldershot

Hampshire

GU11 3BJ, U.K.

Phone: +44 1252 357800

Fax: +44 1252 357801

These products and associated modules and services are protected by United States patent No. 6,442,577. Other patents

pending. ©2010 Front Porch, Inc. All Rights Reserved. PorchLight and frontporch are trademarks of FrontPorch, Inc. in the

United States and other countries.

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