The largest share of value in communications services is the value of presence. How can communication services providers measure their performance in capturing this value?
Average Revenue Per User’s Relation (ARPUR) is a practical measure of presence value. ARPUR is Average Revenue Per User (ARPU) divided by some measure of user’s interaction with other users (relations). Such a measure might be the least number of users who account for in total at least 50% of the given user’s communication sessions, time, or revenue. The higher the ARPUR, the more the communication service is creating value through presence.
Persons typically value most highly the presence of family and friends. Limitations of time and attention, which good communication services can help to relax, constrain the number of family and friends that a person can sustain in daily interaction. The value of communication with the family and friends that persons do sustain is typically high and enduring. A good business plan for communication service providers is to capture a large share of this value. ARPUR is a metric of success in doing this.
While not often recognized as such, telephone service is a quintessential presence business. A study in the U.S. in the 1970s found that 50% of residential calls go to a set of five numbers. I think this has been roughly true for personal telephone service in most places throughout the history of telephone service. Creating more value in these relations creates value in this kind of communication service. It’s a presence business.
For contrast, consider an anti-presence communication service: telemarketing. Telemarketing involves mass distribution of information of interest only to a small number of persons. The telemarketer typically does not know any of the persons whom she contacts and does not typically repeatedly contact them. Moreover, most of her contacts probably wish that they did not know that she existed. A good communication service for telemarketing users might have a high ARPU. But its ARPUR would be near zero. It’s not a presence business.
ARPUR might help a new communication service provider steer its business between the imperatives of viral marketing and the long-term value of presence. Viral marketing, like infectious diseases, propagates most rapidly with some highly promiscuous agents. A communication service that wants to succeed virally needs to enable promiscuous agents. On the other hand, promiscuity is inconsistent with large presence value. The business challenge might be to manage change from low initial ARPUR to strongly rising ARPUR.
Suggested analytical exercise: Consider ARPUR for portraiture over the past 500 years. Take the user relation to be the gift of a picture of oneself to another person. What has been the trend in ARPUR? What has been the trend in total portraiture industry revenue? For relevant information on the economic history of the photography business, see Photographs and Telephone Calls in Sense in Communication.
Take-away message for busy communications executives: Get out of the telecom toilet and get your business purring. Stop sniffing ARPU and start making ARPUR!