Yahoo Eyes Mobile Growth In New Markets, Puts Content On Super-Basic USSD Data Channel

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Yahoo’s strategy to grow its business in mobile has largely been focused around what the company is doing with apps for smartphones and tablets. But a piece of news today points to how it is also exploring low-end channels as part of a more global push outside of its home market of the U.S. Myriad Group says it will now start to push Yahoo News content over USSD — a GSM data channel that can be accessed by even the most rudimentary handsets and networks.

Olivier Bartholot, chief revenue officer for Myriad, tells me that the deal is due to roll out first in India, initially with Vodafone India and later also with Aircel. Starting first with Yahoo News, he says that Yahoo is also looking to add Yahoo Mail and Messenger to the platform in the later part of this year.

While Myriad’s USSD services are typically ad-free and sold by carriers as additional, paid services for customers, Bartholot says that Myriad is currently working on ways of loading advertising on to the channel, something that he says Yahoo would ultimately like to do to make its USSD content tariff-free, like the rest of its services. “Yahoo is interested in making this free to end users though so we are looking at ads,” he says.

A screenshot of how the news app looks, and the ad placements look, are illustrated here.

This follows in the vein of companies like Facebook, which has been looking for ways to zero rate its services on low-end devices as much as they can. Bartholot believes that this eventually could lead to a “power battle” between carriers and these OTT content players, since carriers already make revenue from these services today. So far relationships have remained stable, he says.

Myriad, you may recall, is the company that has worked with Facebook and Twitter to port their services to USSD. It’s a business that Olivier Bartholot, chief revenue officer for Myriad, tells me has now has 24 million unique monthly visitors across 24 countries, with four more getting deployed now. Those uniques are up from 17 million in December 2013, with daily active users and monthly active users doubling between Q4 of 2013 and Q1 of 2014.

“We are on track for great growth this year,” he says. Facebook, the first mover into USSD and the world’s biggest social network, makes up of the vast majority of usage at the moment.

Emerging market opportunities

The idea for Yahoo, as it has been for Facebook and Twitter, is that by tapping into USSD, it can extend its mobile reach to the segment of consumers in fast-growing mobile markets that have yet to switch to smartphones, or may own smartphones but live in areas with patchy or no mobile data reception, or simply lack the means to pay for data tariffs all the time.

(A typical price differential between mobile data and USSD can be seen in a Myriad USSD service recently launched in Morocco. While some mobile operators are offering Facebook access for 30 dirham per month, USSD is being charged at only 1 dirham per month.)

India is a typical market for a USSD service: after China it’s one of the very biggest mobile markets around, but relatively speaking still in early stages compared to the U.S. and Europe.

In 2013, there were 247 million handsets shipped in the country, according to research firm CMR, but of those only 41 million were smartphones, just under 17%.

Compare that to the UK, where 88% of all handsets sold in the first quarter of this year were smartphones, according to Kantar figures out today. And that’s before you consider the ubiquity and affordability of always-on data connections much used by smartphone owners.

For Yahoo in particular, India is an interesting market: last year the company claimed to have a 60% market share in search in the country, and it has singled out mobile as a way to hold on to that and grow its ad revenues there.

“We are aggressively tapping the mobile space, as we believe this is where the main Internet usage will come from,” Nitin Mathur, Yahoo’s marketing head in India, said last year.

Important to note that as with the deals with Facebook and Twitter, Myriad approached Yahoo with this idea, but the company, he says, “immediately saw the potential,” although it has taken nine months to integrate the service. The hope longer term is that these users will eventually migrate to smartphones and more data services, and when they do they will be loyal to their Yahoo products.

The bigger picture for Yahoo outside of the U.S. is equally significant here. The company, which says it now has some 435 million users of its mobile services monthly, needs to kickstart its international sales if it wants to avoid the risk of looking like it’s abandoning interest in growing abroad and limiting itself only to the U.S. (Its partial divesture in Alibaba, lucrative as it is, could be seen as another mark of Yahoo’s shift in focus.)

In Yahoo’s quarterly results released earlier this month, while GAAP revenues in the Americas were up 3% to $867 million, they declined 3.4% to $92 million in EMEA and declined 14.3% to $174 million in Asia.

Advertising over USSD, one of the services that Bartholot says it is working on now, could help boost Yahoo’s revenues in regions where the service gets rolled out. Bartholot says that in those cases, carriers would also geta revenue share of the service, since they need to “turn on” the functionality and they control the gateway for sending content to users. As with the other deals, Myriad’s financial deal is with operators to provide the content, not with Yahoo, which gets access to the channel free.

Bartholot believes that while one-way information broadcasting, as you get with news (and what Twitter is building is USSD proposition around right now), is popular and used for content on the USSD channel, messaging products like those that Yahoo plans to add later in the year present a strong opportunity based on how USSD is being used now.

With Facebook, he says that Messenger over USSD is “definitely” the most popular service. “The ability to do peer-to-peer messaging is big,” he says. USSD has a 182 alphanumeric character limit, making it ideal for short messages on mobile devices.