Two large mobile operators recently shared research that showed that their personal clouds significantly reduced churn. This post delves into the dynamics of how operator clouds do this.
Let's start with a description of an operator cloud so we are on the same proverbial page. An operator cloud stores important content from a user's phone - their contacts, photos, videos, music, files and calendar - in the user's personal cloud account. The user can add other devices to their cloud, such as a computer, tablet, or another phone, and the content on all is auto-uploaded to the cloud and synced in a smart way across devices for easy access. The user can connect their cloud to external sources of photos, videos and files, e.g. Facebook, Dropbox and Gmail, for the convenience and peace-of-mind of having this in one place. The personal cloud aggregates a user's important content - their digital life - to secure it and make it easy to access and share.
The cloud also organizes their content by type e.g. photos are in one place, videos in another, and into timelines. It's like a personal assistant that keeps your digital content neat and tidy. For people who want to further organize their content, they can use albums (photos and videos), playlists (music) and sets (for files), to make things easier to find and access when you have a lot of content. The cloud performs other functions, such as freeing up space on phones, making it fast to share large content such as video, setting up a family to share photos, videos and documents, viewing cloud content on TV, and more.
How does this reduce operator churn?
Personal clouds are typically marketed using a freemium model. Freemium is a natural for smartphones as who doesn't want important stuff to be backed up for free, in particular, contacts, which people are loathe to lose. But even if someone has thousands of contacts, they don't take much space. If contacts average 1K bytes each and you have 5,000, that is 5M which is 1/200th of a Gb, and most personal clouds give away 2+ Gb.
Operator clouds also store rich media, with photos and videos using a lot more space. When people take photos and videos on their phone, they either want to keep them or they don't. If they do, the operator cloud automatically picks them up for safekeeping along with other important content.
When people's operator cloud account gets full, there are a few ways they typically respond. If the person likes a service and the upgrade cost is nominal, upgrading is a path of least resistance that lets people keep using their phone without worry. In this case, the purchase is made on the spur of the moment, without much thought - it is not a considered purchase. The person is not comparing prices with other clouds (as long as the price is nominal). This is consumer behavior 101. Before the person thinks too much, they have upgraded their cloud for a few dollars that is added to their phone bill and life goes on.
This contrasts to a service like Dropbox or Google Drive. When those users run out of storage, they must decide whether to pay $10 a month, which is beyond nominal for many people. They start to compare this with things like Netflix or Spotify. They may think that basic cloud storage is free, why pay for it. Many people delete content in their cloud to free up space or open another free account.
With operator clouds, before long, the mobile subscriber has gradually amassed a critical mass of content. Again, as long as they like the service and it doesn't cost much, many are ok with it. If a subscriber wants to switch operators for some reason, one of their considerations becomes how to get the important stuff in their operator cloud, such as contacts, on their new phone.While nothing prevents moving content from an operator cloud, it is not as simple as copying files, as with a cloud drive. This is because the operator cloud is more than a cloud drive. It stores structured data (contacts and calendar), it frees up space on phones, it has other info that people have added such as folders, family setups, or use on additional devices, all of which adds to its switching cost. It's not that this cannot be replicated, but for many people, if it ain't broke, don't fix it. This applies whether it is one's home internet or TV service, or their mobile service, and it is the reason why people don't switch from these en masse - these services breed loyalty as their switching cost exceeds the benefit of change. This habit forming intensifies for operator clouds as they become more entrenched in people's daily lives, as people use them with more devices, content and people - it is why operators are seeing their clouds significantly reduce churn.