Transforming from traffic management to content management, where should operators start?

The comfortable life of living on a mountain of gold since the 2G era has made operators lose the motivation to innovate. However, the development of the times has given birth to and strengthened the once marginal industries, and it has reached the point where operators must fight again. China Telecom President Liu Aili's public complaints and even complaints during his speech at the 2018 Mobile World Congress Shanghai Station have shown that operators have reached a crossroads in choosing their direction. Regardless of whether the communications industry has reached a consensus, current operators need to further transform into content management.

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1. The inflection point of traffic-to-revenue ratio has emerged, and operators’ traffic management may face the risk of failure

Data released by the Ministry of Industry and Information Technology show that in 2017, my country's Internet and related service companies (referred to as Internet companies) completed business revenue of more than 710.1 billion yuan, an increase of 20.8% over the previous year, and the growth rate increased by 3.4 percentage points year-on-year. The latest data from the Ministry of Industry and Information Technology shows that from January to May 2018, Internet companies completed business revenue of 332.5 billion yuan, a year-on-year increase of 23.9%, and the growth rate increased by 3.9 percentage points over the same period last year. From January to May 2018, the cumulative revenue of telecommunications business was 557.6 billion yuan, a year-on-year increase of 4.2%, and the growth rate fell by 0.3 percentage points from the previous month, while the total volume of telecommunications business increased by 129.1% year-on-year during the same period. There is also a set of data that operators need to pay special attention to, that is, from January to May this year, the Internet industry's R&D investment was 14.45 billion yuan, a year-on-year increase of 17.3%. The Internet industry is still increasing its R&D investment, and continuous innovation will inevitably bring stronger competitiveness to the industry.

In sharp contrast to the rapid growth of Internet companies' revenue, the communications industry's revenue growth rate continues to decline, and the huge volume-to-revenue gap is reflected in the difficulty of increasing revenue. Moreover, with the cancellation of traffic roaming fees on July 1 and the expectation of a 30% drop in traffic unit prices within the year, it is believed that the trend of operators' difficulty in increasing revenue will be further aggravated. In addition, the signed article "The proportion of traffic to revenue has dropped sharply, and operators' business strategies urgently need major adjustments" analyzes in detail the problem of operators' traffic revenue to revenue ratio in May. See the table below for relevant data. In fact, to a certain extent, this has already shown that operators' traffic operations are facing the risk of failure, or at least facing the pressure of not being able to successfully achieve traffic operations. Of course, we can also believe that operators' traffic transformation has been achieved. After all, the proportion of traffic to revenue reached 48.3% in April this year, which is very close to the expected landmark target of 50%. The website of the Ministry of Industry and Information Technology can temporarily cover up the fact that the proportion of traffic to revenue of operators has dropped with incorrect data and descriptions, but for operators, the policy adjustment needs closely related to this fact may be ignored. Regardless of whether the regulators do so intentionally or not, the operator industry must have a full understanding and remain sober enough.

2. Whether it is self-help or help from others, operators cannot avoid the threshold of content management

The article "Where Should Operators with Anxiety Go?" published by C114 China Communications Network analyzed the options available to operators and provided a solution for China Telecom, which is to "become an integrated service provider and an operator of "pipeline + platform + content"". China Telecom's choice can be summarized as a transformation to content. I believe that before China Telecom proposed such a solution, it must have gone through careful research and analysis, and called on its peers through the platform of the World Mobile Congress to call on everyone to move in the same direction. There must be many reasons for this. Here we only give an example to illustrate that traffic management cannot support the future of the communications industry, especially the development after 5G. At the end of 2017, the DOU of mobile users nationwide was 2752MB, and this data had reached 3.97GB at the end of May this year. This is equivalent to an increase of more than 1.28GB per household in less than half a year. This is a considerable increase, because it has exceeded the DOU of mobile users at the end of 2017 (the DOU of users in April 2017 was 1.3GB). Moreover, with the implementation of various speed-up and fee-reduction policies, as well as the full promotion of unlimited + sharing by operators, the increase in user DOU will further accelerate. It is initially estimated that user DOU will reach or even exceed 5GB in October this year. However, the increase in average DOU per household has not brought real money to operators. After long-term research and analysis, we believe that in the post-4G era and the future 5G era, user DOU will better reflect the operator's ability to acquire and retain customers.

Even if the regulators relax the control of speed increase and fee reduction, or even further reduce taxes on operators, this itself cannot enhance the innovation and competitiveness of the entire operator industry, and may even further weaken the motivation of operators to innovate. In the upstream and downstream related to operators, one end is the traditional industry and the other end is the Internet industry. To extend to the traditional industry, not only does it require the network coordination support of 5G+NB, but also requires the maturity of related industries and the long-term cultivation of businesses. Therefore, only the transformation to the Internet industry is a more convenient and more relevant way out. Compared with the lack of funds and Internet genes, what operators lack more is the attempt to transform and innovate in the direction of the Internet. Every industry has its own routine for growth and development, and this is even more true for the Internet industry. No matter which industry you are in, you are required to follow the local customs. Therefore, the problem of Internet genes, objectively speaking, is whether operators are willing to follow the rules of the Internet industry. Here we might as well give another example, that is Migu. We are not sure whether Migu can be an attempt by operators to successfully transform to the Internet industry. However, Migu's performance in the competition for broadcasting rights during this year's World Cup and its daring to "play" at the World Mobile Congress have shown that it has begun its journey to the Internet.

3. Finding the right way out is equivalent to finding a shortcut to success

At this stage, content management is mainly in the field of consumer Internet, and it is nothing more than the following aspects: video, games, e-commerce, information, etc. According to the data of the Ministry of Industry and Information Technology, in recent years, Internet companies have been constantly innovating in mobile payment, sharing economy, life services and public service platforms, driving the steady and rapid growth of Internet information service revenue. If it is further subdivided, the e-commerce market has the largest revenue share, accounting for more than one-third; followed by the game market revenue, which accounts for about one-quarter of the entire Internet industry revenue; and then the video market revenue accounts for about one-fifth. In fact, this has pointed out the way out for operators to transform content management. Although each of the above-mentioned sub-segments has produced its own leader, which has long held the top spot. But for operators, this is both an obstacle and a goal.

Recently, two events have attracted great attention. The first event is the "Tencent vs. Toutiao" war, which is the unfair competition and life-or-death struggle that Toutiao triggered when it broke through Tencent's siege. It can even be said that it was a fight between two parties. The second event is Baidu's strengthening of cooperation with operators, especially the strategic cooperation agreement with China Mobile in June for in-depth integration and development, and the launch of the first cooperation result, Baidu Card, on June 29. These two examples are given here to illustrate the ways and means for operators to transform into content operations. They can either fight alone like Toutiao and directly impact the industry leader, or they can work closely with the industry leader and carry out strategic integration in the future.

Regardless of how they carry out the transformation of content management, whether it is active or passive, it will be inevitable for operators. This is because the era when operators dominated the development of related industries has passed. Whether in the past, present or future, only enterprises that actively meet the needs of the market and users can be invincible in competition and development.