Blog Post

Telcos could be the key to Twitter’s revenue model

At WWDC this year Apple and Twitter announced a new partnership to bring Twitter to iOS (s aapl) devices. While this is impressive, the total number of new iOS users is dwarfed by the number of people who use feature phones worldwide. So how will services like Twitter bridge this opportunity gap?

The answer may be found in BlueVia, a prime example of the next generation of developer-friendly telco platforms. BlueVia is a spin out from Telefonica, itself a large telecommunication provider. The BlueVia platform exposes a simple set of REST APIs that enable developers to use SMS, MMS, location, and other services previously obscured with telco-only technologies like IMS and ParlayX. Perhaps more importantly, it is based on an attractive business model: pay developers for using telco APIs.

Unlike prior telco approaches that required developers to pay thousands of dollars in advance for blocks of text messages they may never use, BlueVia offers developers a revenue share for sending messages on behalf of Telefonica customers.

Twitter will be launching a phone-based photo service based on MMS, and the word is out that BlueVia APIs will be used as a key part of this launch. This could help solve Twitter’s business model problem by generating cash payments to Twitter from the operators for each MMS message sent. I sat down with the architects of BlueVia, Jose Valles and Ruben Mellardo, to get a better understanding of why a web company like Twitter would be interested in using telco APIs. The result is a heavily edited Q&A below:

What is BlueVia?
Valles: BlueVia is a business proposition to developers to take the core assets of an operator and release that power into the hands of developers. It’s about giving them functionality that can be used in their software, offering them the chance to easily earn money from our customers and helping them to get in front of as many of our customers as possible.

Why did you launch it?
Valles: Telefonica had been working for several years with developers with little success. We weren’t focusing in our core assets. We were doing scattered things in innovation labs. We were missing the real scale of Telefonica that means giving developers a chance to work with more than 270 million customers. We weren’t using the right technologies. And probably the most painful thing was the business approach to developers. The old model is to charge the developer up front – before the developer sees any revenue from their app. We turned that model around and said, “Let’s share our revenue with developers.” I’m proud to say we’re the first operator to do this.

What are the most important assets to open up to developers?
Mellardo: We want developers to be able to innovate on classical enablers like SMS and MMS, faster than we can, and with new ideas. SMS is universally available but there are many more applications that could be invented. This increases SMS usage, bringing new revenues to Telefonica and we share this revenue with the app developer.

What other enablers are important?
Mellardo: The Payment API is crucial. We’ll expose others over time like Call Management and Voice. I think it’s important for them because they can do business with us beyond the classical “application downloads” business model. If you are going to use APIs, this is recurring revenue for the developer. This is a moral issue where we can be equable and share with developers.

What kinds of things can now be done that couldn’t be done before?
Valles: As the APIs are cloud based APIs, you can embed Telco capacities in any connected device, no matter if it’s a smartphone, a PC, a tablet, a connected car, or a TV. For example, Otter uses our APIs in an Android app to get paid whenever a customer sends an SMS. This has enabled Otter to change its pricing model. You can find it in the Android Market Place in US for $4.99 but it can be found in Telefonica Movistar Argentina for free. Another example is TextDeck, a Mac app that allows you to send SMS to your Google contacts straight from the Dashboard. The developer gets 20 percent of each SMS sent.

Mellardo: In terms of Telefonica, it’s very easy for a developer to start working with SMS and MMS. You can just sign up on the web, and developers with web skills can work with us, instead of having to know a lot about telecommunications infrastructure. The developer can now receive SMS and MMS in their applications directly, and simply. The Payment API for developers will allow them to charge customers using the phone bill. This is very simple and straightforward. They can solve the HTML5 in-app billing and charging problem.

How does this fit with the evolution of telcos/operators over the next few years?
Valles: One of our main struggles has been being able to address growing demand of customers: more and more specialized services. We are good at doing big things – deploying fiber, 3G, and LTE – but not about addressing the demand for customized services.

Mellardo: But in the internet world you have a lot of services with lots of personalization for a few users. That’s the new model and that’s not something we can do. In a year, we can launch 10 or 20 services, but not 1,000 services. So we need the community to have a lot of services, and the only way we can get there is by having third parties innovate and build. And we need to grow financially, and this is the only way to do that sustainably in the long term.

What’s the biggest surprise?
Mellardo: When we launched BlueVia, I expected a lot of criticism and cynicism from the community. But then I saw the community of developers say “Hey, these guys are changing; these guys want to do business with us; they want to give us a revenue share from their core assets; maybe these guys are going to be fair with us.” This was a really pleasant surprise.

Sam Ramji is Vice President of Strategy at Apigee, a company that manages APIs. Prior to Apigee, Ramji led open source strategy across Microsoft.

14 Responses to “Telcos could be the key to Twitter’s revenue model”

  1. The $$$ model isn’t there. At least I don’t quite see it.

    I love the idea of allowing DEV’s to access sms and mms api’s. That makes sense. Trying to create new functionality and usage of old’skool messaging platforms that most mobile users know is simplistically brilliant. (And a wonderful demonstration of recycling of older tech.)

    But by paying the DEV to use the API’s – that is subsidizing bad code. You pay the DEV when users are using his/her end product. Subsidizing is the MS approach to creating an ecosystem isn’t? Pay users to search with Bing….pay dev’s to initially get mobile apps into the Win7MobileAppStore. And I don’t think that has proven successful. It does synthetically create some initial “creation” but that quickly peters out to a newer, lower equilibrium.

    If the API’s are good. An entrepreneur will realize their power and start creating wild use cases for mashing services together. (In the spirit of how some tech passionate’s use rss, Instapaper, and Twitter together to consume/save/repost/etc automatically.

    I would love to see the Yahoo Pipes ‘idea’ extended here actually.

    Do we really want to see the telco’s start cutting into particular ip data services that have been up to now: the data portion of your cell bill – all aggregated altogether as a lump sum. It’s bad enough that there are line items on a cell bill for ringtone downloads, etc. (e.g. you sent 200 mms messages via twitter or you sent 100 sms messages that were longer than 140char via ‘tweetlonger’).

    I would rather see my mobile bill broken down by voice and data only. And I can tolerate a 3rd column for mobile phone related extras (purchasing from the provider’s mobile store, etc.). Though in truth, I would love to see the voice side of the bill not only broken by mins/location/ld but the data bandwidth that the call is equivalent to. Eventually the bill can just be a number. Just like the power meter # on the outside of your home.

    Isn’t that the same kind of concern expressed over net’neutrality? That certain apps/content will be treated differently because of prearranged toll roads or “free” roads depending on the carrier…


    Someone tell me I am wrong.

  2. Guys let’s tone down the hyperbole. SMS is not disappearing anytime soon. Voice is still alive and doing quite well, email is still alive and doing well. You might on the bleeding edge using the flavor of the month to post your micro-thoughts over data, but the majority of the world is not.

    1. MNOs are always going to take very small steps when allowing outsiders in. Spend billions on infrastructure in a cut throat acquisition environment and see how open you act.

    2. SMS can serve as a useful gateway between a mobile phone and the internet. Again not everyone has access to the mobile web in their daily lives.

    3. MNOs are traditionally giant walled gardens. The fact that one is opening an API and offering a rev share is a significant step forward.

    4. 20% seems low, but then again think about it this way: this is access that you traditionally would have to pay for and instead they are paying you. It is only going to work for certain types of models, but for a company like Locatrix this is a great opportunity.

    5. SMS is generally bill and keep across operators. There is a movement to change the model to more of a traditional voice setup where one operator pays for the delivery of an SMS onto another network. BlueVia could be a very forward thinking play.

    6. I am curious if they have had a problem with arbitragers. I could see SIM gateways having a field day with this API.

    It’s nice to see an “old” technology get opened up. If you have ever run serious traffic over a mobile network, you would know that they almost always think of themselves first, and have a tendency to “shoot first ask questions never” policy when they see their network being used in a way they did not intend.

    • Tim Behrsin

      > Again not everyone has access to the mobile web in their daily lives.
      Are these people really using Twitter ?
      If so… isn’t this a niche market that leads only to negligible revenue for Twitter ?
      If so… what’s the point ?

      • It’s neither hard nor expensive to build an SMS to Twitter gateway. It is also not an expensive service to maintain.

        There are enough people on this earth who have internet in their home or work, but not in their pocket to justify building that gateway.

        What is negligible? If you got paid one tenth of a cent on 10 million tweets a day you would have 3 million a year in profit. That’s assuming it cost a half million to run the gateway.

        This isn’t a sexy product, but its not hard to run and there is a market for it. Don’t think about the US, think about the rest of the world.

    • “6. I am curious if they have had a problem with arbitragers. I could see SIM gateways having a field day with this API.”

      I’m asking the same question

    • Peter A

      No monumental shifts like the one you mentioned happen “in a year or two”. Without a universal, patent free messaging API, SMS will continue to rule.

    • why do people think that SMS service is going to end? I highly doubt it will end in the next 2-5 years, it has the widest reach, its extremely cheap, and its the most popular form of text communication on mobile devices. The only thing you can argue is that the business model will change, meaning we won’t be getting charged as much as we do, or charged at all even, because of the data powered competition (bbm, whatsapp, imessage), but those devices require connectivity and require an application installed on both devices. SMS on the other hand is ready to go out of the box and no one needs a plan.

  3. uh, no?

    how many people pay for sms/mms?
    how many people just have unlimited plans?

    how many 3rd party twitter/photo apps there?
    how many photo sharing apps are there that post to link twitter?

    your analyisis is wrong, can we stop with the silly guest posts from people who think they know something? (aka: ex msft employees)

      • What’s the biggest surprise?
        Mellardo: When we launched BlueVia, I expected a lot of criticism and cynicism from the community. But then I saw the community of developers say “Hey, these guys are changing; these guys want to do business with us; they want to give us a revenue share from their core assets; maybe these guys are going to be fair with us.” This was a really pleasant surprise…
        it’s as easy as they believe developers …???