It looks like we are again at a turning point in the Value Added Services space. Apparently this market undergoes at least one paradigm shift every three years.

The first happened in 2002, when premium SMS was introduced. Back then the market was based in bulk traffic sustained by Internet advertising. Massive traffic was generated by web sites, but when carriers opened the opportunity to attach a premium tariff to a text message a number of new services began to flourish, mainly connected to TV commercials and printed ads. Recurring subscription services became the most successful, with ringtones of the week being the undisputed king, at least in Europe. Meanwhile handsets grew MMS capabilities, colour displays, mp3-quality audio.

Then, in 2005 the Internet-mobile convergence became real, with interactive services that were paid on the phone but mostly used on the web. The best acquisition channel became Internet advertising, with Google Adwords and affiliation networks taking the lion’s share. This allowed the biggest companies in the market (which were Italian and German) to begin playing internationally (Internet is international by default, whereas TV commercials and printed ads are much more difficult to replicate abroad) and go conquering the rest of the world. Meanwhile 3G networks became common in many countries and with the advent of WAP2 handsets (who said WAP was dead?) started to offer a much better browsing experience and a camera.

Now it looks like we’re again at a new turning point, for a combination of different phenomena.

1. Many services grew a nice WAP interface and carriers are opening their on net space and allowing flat tariffs for data traffic. The ability to charge directly from a WAP link, with no SMS involved, is popping up in new countries every month. They call it WAP billing. After all, using SMS as an identification and payment method is weird when you’re trying to build a really interactive WEB/WAP service. And mobile advertising is becoming a business in itself, opening the door for WAP to become an important acquisition channel.
2. Internet providers want to emulate mobile carriers and provide subscription and billing connected to the DSL account. Imagine you are browsing on a web site and at some point they ask you if you want to but a service. You just enter your DSL password (or you just click on a button!) and they charge you on your balance. As simple as that. It works because they can track your identity on their RADIUS server, using your IP address.
3. I hate to say it, but the iPhone is the third breaking factor. They’re trying to redefine what phone browsing is. No WAP, just straight Internet and AJAX. No apps. No downloads. The iPhone experience is much similar to browsing from an Internet Café. You can access web sites, but you can’t get anything on your local disk. Except, maybe, if it comes from iTunes…

Anyway, we’ll see. It looks like an interesting 2008 is to come.