In the short term, the mobile portal will suffer. Its share of airtime revenues will fall from 50% to just 5%. However, if it can significantly increase uptake of premium mobile services, it will reap more of the profits. In effect, Vodafone and Vivendi are taking away their protective cushion from Vizzavi, leaving it to flourish or perish on its own merits.
Vodafone and Vivendi have modified Vizzavi’s business model, eliminating indirect subsidies.
Vodafone and Vivendi Universal, the joint owners of mobile portal Vizzavi, have reworked its business strategy. The portal will place a much greater emphasis on revenues from ringtones, games and logos, with the view on migrating customers onto more advanced services such as location based services and multimedia content over time.
Previously, revenues from all services had been split equally between Vizzavi and the mobile operators it deals with (which are also owned by Vodafone and Vivendi). Now, Vizzavi will receive 80% of the revenue made on premium services whilst the operators will keep the remaining 20%. However, Vizzavi will now take just 5% of the airtime revenue generated when customers access its online services, while the operators will grab 95%. The shake-up within the organization will also mean 100 job losses across Europe.
In the short term at least, this restructuring will be of significantly greater benefit to the mobile operators, cutting their indirect subsidies for the loss-making portal business. Airtime is a much larger revenue source than content at present, as customer demand for data services (apart from SMS) has been sluggish so far.
As a result, some might take Vivendi CEO Jean-Marie Messier’s announcement that the new model demonstrates Vivendi Universal’s and Vodafone’s confidence in Vizzavi’s future with a pinch of salt. However, the new model does give a more realistic picture of Vizzavi’s purpose. The point of a mobile portal is to make money from delivering content.
In short, this is a risky strategy. In the best case scenario, it will help the joint venture to focus on its main aim, aggressively developing and marketing value added services. However, by cutting the cord between its powerful parents Vizzavi will lose one of its main competitive advantages. It now has to sink or swim by itself.