London — Running out of mobile data is a cliff-edge moment: you either buy more if you can afford it or wait if you can't. Upstream's Zero-D is a kind of free data purgatory before you get back to paid data heaven. Russell Southwood spoke to Upstream's Head of Zero-D Kostas Kastanis about what it's trying to do with what it hopes will become an advertising-supported platform
Zero-D's origins as a product were part of Upstream's business strategy of being a "digital revenue creation partner for mobile operators on non-core services." The insight came out of looking at subscribers using airtime as the equivalent of a digital currency.
"Whenever they wanted to buy, it failed because 50% of the time because there was no airtime. We thought how can we turn this situation into something more useful? How can we improve things when their data bundle runs out? The number of customers offline was often as high as the number of people online."
Zero-D is a free data platform (branded Flex for the Vodacom launch in South Africa) which allows users to stay connected with a more limited functionality:"When you run out of data, you get redirected (to the platform) either automatically or via a less automatic route."
Upstream's pitch is that Zero-D gives users access to the 80% of essential things they use all the time: search, reading media and social and communications activities. The search facility uses Microsoft's Bing.
The news aggregator is provided by Upstream and offers headlines and introductory paragraphs from multiple news publishers. The service cross-checks every hour with an algorithm against a Facebook API to identify the best stories by relevance and popularity. If users want to click through to read the whole story then it triggers a request to upsell by offering the data needed.
The social media and communications platform has also been developed in-house by Upstream and is not available on Vodacom's Flex. It provides the possibility for strangers to talk in a chat room so is not exactly a mirror of something like Facebook.
In the relatively short period since launch, there have been 700,000 sessions from 0.5 million users on Vodacom only. The plan is to launch with other operators as well. Kastanis says that the platform's traffic puts it in the top 12 websites in South Africa:"When we launch with other operators, we will be the number four website in the market after Google YouTube and Facebook. We'll be bigger than News.co.za."
People don't stay on Flex forever as they migrate back to paid data but the user stats are interesting. The average session is 4.2 pages. The average time spent on the platform is 5 minutes 45 seconds and there is a 45% bounce rate:"We're doing pretty good across all the metrics. We have the benefits of a captive audience but you can see it keeps people's interest."
For Upstream and its customers, the platform has three objectives: firstly, to provide a better user experience, eliminating the cliff edge cut-off point with data; secondly, from the operators' point of view, there's a chance to resell users more data than just once as they exit through an SMS; and thirdly, it wants to find advertisers to sponsor the platform. Currently, the operator and Upstream are sharing the costs of the "free" data: the operators pays for the data and Upstream for the upkeep of the platform.
At present it is selling the platform through partnerships with ad sales agencies but wants to add a programmatic sales functionality to sell inventory, integrating third party platforms. Kastanis makes the point that advertisers need a platform like this:"Half of data consumption is spent on ads that people had no intention of rendering. Brands are costing people money and are being penalized for this.'
"We have a strong competitive advantage because all the data is zero-rated. Users spend no money for ads being displayed on their phone. A 15 second video will take 2-3 MBs to download which is 10% of the average South Africa data allowance".
Upstream plans to work with advertisers to allow brands to offer paid data incentives to users to engage with advertising content and plans to launch that in South Africa by the end of the year:"In Brazil, there is a 30% view through rate for video ads. The data incentives there vary from 100MB for an app install to 10 MB for viewing a 15 second video advertisement."
Zero-D has been sold by Upstream as a new product. There was a pilot in Ghana in July and it has been rolled out in DRC, Tunisia and Brazil:"We have a big pipeline of targets in the next quarters. We want to expand in South Africa and roll out in Nigeria, Kenya and Ethiopia. Outside the continent, we want to roll out in South-East Asia and in Colombia in Latin America."
On the upside, Zero-D and its branded variants are a good way of keeping a daily Internet habit among those who might otherwise go to hot-spots or simply not access the Internet. They stay in the pool of data users and over time understand the daily internet needs they have.
On the downside, it means operators can avoid the logical next step which is to find ways of reducing mobile data prices - particularly in South Africa, where they are disproportionately high. Those who buy the small average bundles are paying higher rates than those who can afford larger, longer bundles. Time limiting data is insane if you want users to develop a daily habit and operators throughout the continent need to understand now is the time to play fair with users.
At this point, it's not clear whether the platform's users are those who struggle to afford data or simply those who are price-sensitive and want to avoid paying for data. Getting advertisers to pay for those who 'can't pay' rather than 'won't pay' is a smart move but it's unclear whether advertisers have the appetite when there are many other competitive online mobile platforms.