Telcos could be the key to Twitter’s revenue model

Telcos could be the key to Twitter’s revenue model

By Sam Ramji Jun. 26, 2011, 8:00am PT 5 Comments

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At WWDC this year Apple and Twitter announced a new partnership to bring Twitter to iOS 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.