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By Chen Feng

Why matching is king

Content, applications, users and terminals/PCs are integral aspects of holistic service provision, and a variety of viewpoints exist regarding which is the most important.

Content, for instance, is obviously intrinsic to service experience, yet a large proportion of available content remains out of reach for most users given that the information overload characterizing today's era. Content, therefore, is difficult to be processed and applied. This can be illustrated by NTT DoCoMo's diversified i-mode services - 70% remains not only under promoted, but also broadly untouched by subscribers.

Users are the lifeblood of profits and an operator may lose its dominant market position should it not provide the right content package. Further exacerbating this problem for fixed network operators is the rapid emergence of SPs and CPs. Increasing numbers of operators are realizing that the delivery of an appropriate information bundle to a given user represents the sole means of escaping the information maze. Specifically, this type of matching enables users to access desired content easily. A clear reduction in transaction costs coupled with improvement of user potential can increase profits for operators. So in the information era, matching is king.


Core capabilities of matching

The value chain of the telecom information service comprises several important roles: telecom operator, SP/CP, terminal provider, and operating system provider. Moreover, SPs and CPs are further sub-divided into GAMEY, which includes Google, AOL, MSN, eBay, Skype, and Yahoo!. Increased value chain openness and fierce competition demand that any positional dominance depends upon the value that an enterprise can convey to end users. In-depth needs' analyses and a coherent reactive strategy are prerequisite to accomplish successful value delivery.

Content aggregators, telecom operators and operating system providers are aggressively competing to prevail in the industry's value chain. Legacy conditions, standards and the nature of competition have created completely different situations in fixed and mobile networks. Content aggregators dominate the fixed field, while telecom operators lead in the mobile arena. Nevertheless, these current positions lack any meaningful stability.

Dominance can be maintained in the long-term by giving users access to services at minimal transaction costs, including those associated with information, study, searches, and credit. Dominance is maintained also by gaining subscribers at the front layer, aggregating content at the rear layer, and matching content with users.


Attracting users

The key to securing subscribers is to cultivate their user habits. Competition in this field mainly focuses upon terminals and desktops. A variety of roles in the value chain are active, and content aggregators have launched browser plugins such as the Google search toolbar, and desktop tools, including shortcuts for QQ, IM and games. Telecom operators are customizing terminals and presenting their portals on desktops such as China Mobile's Monternet and China Telecom's ChinaVnet. At the same time, operating system providers are setting their websites as default homepages for users.

In terms of gaining subscribers, mobile operators seem to have more advantages than fixed operators for a number of reasons.

• User characteristics
  
  The voice and data terminals used in mobile networks are mobile phones, and they provide a consistent operation mode and help users transfer from voice service to data service. Mobile data users possess greater requirements for convenience and intelligent operation, and mobile operators cater to users' needs via customized terminals and portals that feature step-by-step operations.
  
  Fixed data terminals on the other hand consist of PCs other than fixed phones, which presents an obstacle for fixed data users, because users have to learn basic IT knowledge, gain sufficient information resources, and process an ability to bypass the portal.
  
  
• Competition in operating systems
  
  Microsoft Windows has been enjoying a position of absolute dominance in the PC operating system field. Other parties in the value chain are severely disadvantaged when negotiating prices with Microsoft. In terms of mobile phones' operating systems, Symbian, Windows Mobile and Linux are currently competing for a leading position in a constantly changing market. Consequently, terminal and operating system providers are in turn competing to customize mobile phones for telecom operators.
  
  Mobile operators seem to be better positioned than fixed operators to control users due to differences in their abilities to customize terminals coupled with users' ability to bypass terminals. However, home gateway combined with IPTV services have provided an excellent opportunity for fixed operators because it ameliorates the two key weaknesses, integrates Femto and Wi-Fi access, and can smoothly evolve to FMC.
  
  France Telecom, for example, launched its Livebox service in July 2004 and achieved great success. Livebox integrates and unifies the ADSL modem, Ethernet, Wi-Fi, and blue tooth interfaces to provide access to various services including web surfing, IPTV, VoIP, video-phoning, and games. To promote sales, France Telecom has customized service packages at different levels and has bundled services such as wireless broadband, VoIP, and mail.

Aggregating contents

Terminal and desktop competition will eventually culminate in a unified portal from which users can purchase all the services they need. To achieve this, the portal must aggregate and effectively organize as much content as possible. Many operators have already begun cooperating with leading content aggregators, such as BT with Yahoo!, SBC with Yahoo!, and Verizon with MSN.


Matching powers

Excluding technological factors, the matching-based value proposition conveyed to users can be divided into the following four phases:

Universal search is represented by the services provided by Google and Baidu, and professional search by KooXoo. Similarity recommendation is employed to predict users' consumption trends based on previous habits, and gives recommendation accordingly. Cross-domain recommendation derives users' deep-level preferences and requirements from previous behavior and makes corresponding predictions and recommendations. On a higher level, quantitative, multiple layer consumption analysis can be conducted to anticipate needs of which users themselves are unaware, thus further bridging the relationship between providers and consumers.

In general, matching is developed from the passive "pull" of users' search requests and the active "push" of content and services towards users by predicting their needs through intelligent algorithms. This trend has resulted in targeted advertising as opposed to the random bombardments seen in previous years. Consumers are expected to exit the mire of information overload, and it is anticipated that providers will invest their limited resources in potential users, thus increasingly blurring the boundary between advertisements and information.

Some telecom operators have come to realize the considerable power that matching exerts and have initiated cooperation with search providers. Best Tone is a comprehensive information service platform launched by China Telecom through access code 114 and it provides users with various types of information closely related to their daily lives, including clothing, food, housing, travel and recreation. The objective of Best Tone is to fully explore and consolidate information concerning subscriber numbers, and to extend and develop traditional directory enquiries' in order to meet users' real and potential needs. If the service is accessed in order to obtain travel directions regarding companies based on unit name, service scope, branch office, website, e-mail, real name, and industry, the platform will broadcast the companies and routes of the relevant businesses under signed contracts.

In 2006, China Telecom and Microsoft officially began their cooperation in Internet searches for services, thus allowing Best Tone to be transferred from voice to Internet. Best Tone now provides its users with a one-stop Internet searching service that covers web pages, yellow pages, music, video, pictures, blogs, and forums.

Operators themselves enjoy a range of unique advantages in terms of matching, specifically, user databases and BOSS systems. Through data mining and user action analyses, operators can design more effective customized services and create a favorable environment for precision marketing aimed at targeted users.


Seizing opportunities to create value

Telecom operators must fully realize the strategic significance of matching in the context of transaction cost saving and value creation, thus improving their core capabilities. Firstly, opportunities from IPTV deployment have to be exploited to maximize the attraction to users by introducing home gateways to households. Secondly, telecom operators need to construct core services and cooperate with GAMEY to provide one-stop content services. Thirdly, telecom operators must take full advantage of user databases, BOSS systems and content and service data in order to connect providers and consumers via search services and push/pull activities.

With the establishment of core matching capabilities, operators are sure to regain their strength and vitality from the innate non-duplicable "one bill for one login" feature in conjunction with flexibly designed tariff packages.

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