How Mobile Operators Can Cash In On Personal Clouds

By Hal Steger

Mobile operators are contemplating whether to offer a self-branded, white-label personal cloud service that competes with the likes of Apple iCloud, Google cloud services, Amazon Cloud Drive and other over-the-top (OTT) and device-centric personal clouds.

At the heart of the matter is who owns the customer's mobile data. The general belief is that whoever owns the data, owns the customer. This has been a truism since the beginning of high tech. It is the capturing of customer data that led to the tremendous growth of companies such as Oracle, Google and Facebook.

The maxim is true because it is tedious and difficult for customers to switch providers once their data resides somewhere. Retaining customers, reducing churn, increasing customer loyalty – whatever you call it, is significantly enhanced when customers store their mobile data in your cloud rather than somewhere else. Owning the data also provides a significant ability to offer related products and services to customers to generate revenue. Despite this potential opportunity, the track record of mobile service providers in offering consumer Internet style services has been poor. Attempts to provide operator email or social networking have fared poorly. On the other hand, operator services for voice, SMS and mobile data have been wildly lucrative. Where would a personal cloud service fit in and how can operators cash in?

With respect to successful operator services such as voice, SMS and mobile data, operators were in the driver's seat. They were first to market, innovative and did not face threatening competition from other sources. For consumer services such as email and social networking, operators were late to the game with “me-too" services. By the time they figured out their strategies and offered solutions, other services were so far entrenched that there was little an operator could do to compete against an insurmountable head start.

Internet companies move at rapid speed while operators have moved at comparatively slower paces. If operators want to provide a service that is viewed as innovative and valuable, they must deliver the service to market before others.

When it comes to the personal cloud, there currently exists a different set of conditions. The personal cloud is a new phenomenon. There are no entrenched players that dominate the market. There is ample opportunity for newcomers, as long as they get to market quickly.

Existing personal-cloud services are point solutions that only partially address the needs of users. Personal-cloud services are ideal for people with multiple mobile devices from different vendors. Not many people have only one brand of mobile devices, whether all Apple, Google or Microsoft. We live in a world of choice. The ability to support cross-device and cross-platform devices is not only a natural for a personal cloud, it is a requirement. Otherwise, people would need different clouds to store, sync and share their mobile data, and this "splinternet" is a recipe for confusion and discontent.

The initial generation of personal cloud services falls short of the mark. iCloud works mainly with Apple products. Same for Google cloud services, and now that Google purchased Motorola, guess which hardware Google cloud will be integrated with best? Amazon, with its Kindle tablets and which may be developing a smartphone, has its own hardware agenda, which will skew the devices it optimizes for.

Operators must support multiple brands and types of mobile phones and devices. Who better to offer a personal cloud service that works with all of one's devices? In addition, operators are already organized around selling plans of voice and services such as SMS to families. As families have heterogeneous mixes of devices, it is only natural that operators could offer family clouds that support all of their devices.

At a recent industry conference, a presenter talked about how one family had 14 mobile devices, including smart and feature phones, tablets, laptops, mp3 players and game players. The need for these devices to connect to the Internet and to share data and content is only going to exponentially grow. Clouds from Apple, Google and Amazon are not going to support all of these different devices. They will result in splinternet, not family harmony.

This is why personal clouds are different from other consumer value-added services. The time is right and operators are in a favorable position. It does, however, require them to move more quickly than they are normally accustomed to avoid being late to market.

A major question that operators face with personal-cloud services is how they make money. If Apple iCloud gives away 5G of free storage, Dropbox 2G, and Microsoft SkyDrive 25G, where is the opportunity? Are cloud services going the way of consumer email as a loss leader that can only be subsidized by the deep pockets of companies such as Google and Microsoft?

There are several ways to monetize personal-cloud users. The best way depends on factors such as the type of user, why they are using a personal cloud (i.e. is the main benefit storage, convenience, backup, access to data), where they are located and more. The prevailing ways to monetize personal clouds are.

• Premium storage i.e. providing free storage and charging when users want more
• Mobile data i.e. selling more mobile data plans so people can remotely access cloud data
• Retention i.e. whoever owns customer mobile data keeps customers longer
• Commercial content i.e. selling music, movies, games, etc. via a personal cloud account
• Advertising; and
• Selling related hardware and premium services, such as data restore services

These methods can generate significant revenue and benefits such as retention. The key is to have a large base of users, because monetizing a personal cloud requires large numbers to be successful. With a large user base, there are multiple ways to monetize users, similar to services such as Facebook and Twitter that first focused on attracting a large population and then determining the best way to make money.

For example, an operator might find that in certain geographies, there are enterprise or small and medium-sized business users that are ripe for personal-cloud services and willing to pay for them. In other markets, they may find that consumers are eager for personal-cloud services, but are unwilling to upgrade to premium storage, therefore, an alternative such as selling content or advertising may work better.

The key to success is to treat the service like a startup, with a laser focus on delivering a killer experience to a large number of users and figuring out how to maximize monetization. To do this, flexibility is the order of the day. It will not do an operator any good to go to market with a one-size-fits-all, black-box solution that cannot adapt to the needs of the market. Otherwise, the operator will end up with an undifferentiated, non-appealing service.

In summary, mobile operators have a golden opportunity to provide personal cloud services to customers. They have a unique advantage in supporting cross-device and cross-platform devices. It requires speed, focus and flexibility, but the result can be another major source of revenue as it allows operators to capture customer mobile data and increase their value.

Hal Steger is vice president of worldwide marketing at Funambol.