measuring the total economic impact of content delivery using mobyle tv platform

WIZE MOBILE SDN BHD

Measuring the Total Economic Impact of Content Delivery Using MobyleTV platform

A Multi Company ROI Analysis

Project Director: Maha

Prepared for WiZE Mobile Sdn Bhd


TABLE OF CONTENTS

Executive Summary .........................................................................................................................3 Purpose.............................................................................................................................................3 Methodology......................................................................................................................................3 Delimitations and definitions..............................................................................................................5 WiZE Mobile Overview.......................................................................................................................6 WiZE Mobile Solution.........................................................................................................................7 Highlights............................................................................................................................................7 TEI Framework ..................................................................................................................................9 Costs ..................................................................................................................................................9 Benefits .............................................................................................................................................13 Risk....................................................................................................................................................17 TEI Framework: Summary.................................................................................................................18 Study Conclusions..............................................................................................................................20 Appendix A: Total Economic Impact Overview ..................................................................................21 Benefits ..............................................................................................................................................21 Costs ..................................................................................................................................................21 Risk.....................................................................................................................................................21 Flexibility.............................................................................................................................................21 Appendix B: Glossary.........................................................................................................................22


Executive Summary

MobyleTV is more personal. It's also easy for end users to find the content that they want to watch.

Consumers can choose their content, whether through a tailored package of TV channels or through video

streaming and downloads. It also offers a new level of direct interactivity back through the mobile network.

Viewers are drawn into the action, participating in quiz shows, making bets, adding their opinion, and making

purchases. MobyleTV brings operators more directly into the media world and opens opportunities for new

industries to develop. MobyleTV might not follow the path of traditional multichannel TV but could deliver a

combination of unicast, multicast and broadcast services including new interactive services using the return

channel which would represent a new opportunity for innovative multimedia services.

As mobile video services enter the awareness of consumers, the industry will need to reorganize itself in

new ways. Which market actors will benefit from this, and which will be eliminated as a result? The

purpose of this presentation is to develop knowledge of, and produce a theoretical framework surrounding,

consumer value attribution and actor value constellations of mobile TV services. Through an iterative

research methodology these concepts are then applied to a variety of potential future market scenarios in

order to describe strategies on a practical level.

Investments in streaming content can play a part in improving the efficiency and effectiveness of content

delivery within an organization’s online presence. WiZE Mobile found that an increase in investment

around streaming content resulted in increases in the ability of customers to provide secure, dynamic

content to their users and customers at potentially greater cost efficiencies compared with progressive

download

The conclusions are that there are two variables impacting future market structure; the level of demand for

services enabling consumer coproduction, and the level of cooperation between industry actors

Purpose

The purpose of this study is to provide readers with a framework to evaluate the potential financial impact

of investment in streaming media. WiZE Mobile aim is to clearly show all calculations and assumptions

used in the analysis. Readers should use this study to better understand and communicate a business case

for increasing their investment in customer engagement.

Methodology

Total Economic Impact (TEI) methodology, not only measures costs and cost reduction (areas that are

typically accounted for within IT) but also weighs the enabling value of a technology in increasing the

effectiveness of overall business processes.


Four fundamental elements of TEI in modeling the impact of streaming content delivery

1. Costs and cost reduction.

2. Benefits to the entire organization

3. Flexibility.

4. Risk.

Delimitations and definitions

On-demand service - A video or movie service which allows the viewer to access the desired content

immediately. Examples of such services include YouTube and Hulu.com

Broadcast content - A stream of linear content, making consumption restricted to a preprogrammed

schedule as set forth by an aggregator. Examples of this include the TV channels of traditional TV

broadcasts.

Table 1: Composite Company ROI, Risk-Adjusted

Total benefits

Initial Year 1 Year 2 Year 3 Total NPV

Total costs

RM8,000 RM30,254 RM30,254 RM30,254 RM98,761 RM83,237

Total benefits

RM61,258 RM87,512 RM87,512 RM236,282 RM193,762

Total

RM(8,000) RM31,005 RM57,258 RM57,258 RM137,521 RM110,526

Return on

investment

96%

Payback period

12 months


WiZE Mobile Overview

WiZE Mobile is a fully Bumiputra owned organization which was incorporated on the 27 Oct 2009 and

located in Seksyen 6 Shah Alam. MobyleTV is an Independent Mobile Border Cast Station providing a

Platform for Content Providers and Service Provider both Free or Premium Channels and move more toward

a Google type business model that will exhibit, initially, 6 special interest mini channels to mobile phone

users that have Wi- Fi or subscription to Telco 3G data platform, that allows viewers to watch programs

entirely at their convenience, as many times as they wish, for free.

The 6 mini-channels are targeted to special interest groups where there is a quantifiable demand for

programming that hasn't been satisfied ... a programming need waiting to be filled. It is expected that

additional premium content mini-channels will be offered to third party content providers which enable users

to subscribe daily, weekly or monthly direct to the CP accounts. As public awareness increases and the

number of viewers grow, MobyleTV shall increases its content thus encouraging local production houses to

develop more mobile based content programmed.

WiZE Mobile Solution

WiZE Mobile TV solution currently runs totally via IP accessible via local WIFI or 3G (Data Charges Apply)

System Requirement (Mobile)

IP = mobyle.tv

Streaming = 250 Kbps/

Device Requirement = Flash Lite 3,

Smart phone Devices = iphone, Android, Palm

WiZE Mobile solution supported Device

Nokia N78, Nokia E65, Nokia N95 8GB, Nokia N95, Nokia N73, Nokia N81, Nokia 6120 Classic, Nokia

E51, Nokia N81, 8GB Nokia E71, Nokia N96, Nokia N82, Nokia 6110, Navigator Nokia 5320, Nokia 5700,

Nokia E50, Nokia E66, BlackJack II, Samsung SGH-i780, T-Mobile Shadow, T-Mobile Wing HTC-Pro

S621(Same as T-Mobile Dash), HTC S740, HTC Touch Cruise P3650, HTC Touch Diamond, HTC Touch

P3452, HTC TyTN II P4551, Motorola Q, Motorola Q9c, Motorola Q9h (CDMA), Motorola Q9m, Motorola

Q Norman (same as Moto Q 9h(GSM), Palm Treo 700w, Palm Treo 750, Palm Treo Pro, Samsung SGH-i607

BlackJack I, Samsung SGH-i617


WiZE Mobile solution supported Country

Kuwait, Malaysia, Mexico, Netherlands, Norway, Panama, Peru, Philippines, Poland, Portugal, Romania,

United States of America, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Spain, Sweden,

Switzerland, Taiwan, Turkey, UK, United Arab Emirates, Argentina, Australia, Austria, Belgium, Brazil,

Canada, China, Columbia, Costa Rica, Czech Republic, Denmark, Finland, France, Germany, Greece, Hong

Kong, India, Indonesia, Ireland, Israel, Italy, Japan.

Independent Mobile Broadcasting Station

Brief Historical Introduction

One of the most major reasons why the use of mobile video services has not become widespread is the cost to

the consumer. Operators have tried to promote their own content features by charging data transfers by the

megabyte, if the transfers extend outside the realm of the operator. As a consumer has no idea of the size of

the video (or image) available, there is a large uncertainty as to the actual cost of watching it. Even if the size

is known, the cost is steep.


Highlights

A total of seven new business module scenarios were conducted for this research/study, involving the

following organizations:

1. A non-profit organization providing archival content as part of its online exhibitions to the public.

2. A global organization providing an online video platform media that serves companies, businesses,

and organizations worldwide to publish and distribute video on the Web.

3. A media and entertainment company that provides streaming and progressive content through

multiple branded sites for both free and paid for content.

4. A global entertainment organization providing free and subscription-based content through

progressive and streaming media.

5. A global provider of media and entertainment services that provides its users both on-demand and

downloaded entertainment applications, allowing the organization to promote and advertise third-party

content and products.

6. A news and media organization providing timely news content through its Web channel.

7. A provider of interactive virtual worlds

The seven in-depth scenarios uncovered several key common challenges and themes that drove their

investment in streaming content delivery. These included:

• Need for secure content delivery. For many of the organizations interviewed, the need to provide

secure, protected content was the key reason for choosing streaming download.

• Ability to better control the customer experience. Organizations also saw the ability of streaming

content delivery to dynamically provide consistent content delivery to a variety of user devices.

• Need to maximize bandwidth efficiency and delivery. Several organizations saw the potential for

using streaming content to ensure that they are charged for bandwidth on content that is viewed as

opposed to just downloaded.

The composite organization created from the results of the customer scenarios represents a - media and

entertainment organization with online presence in Malaysia. The organization uses both streaming and

progressive downloads as a way of delivering free and subscription content to users by means of a CDN. The

organization delivers, on average, 12 million file views per month with a monthly TB commitment of 150TB

(153,600 GB)., consisting of both high-definition (Bit Rate of 1-3 Mbps and standard-definition files (Bit Rate

of 300-500Kbps). Prior to increasing its investment in streaming, the organization delivered roughly 80% of


all files via progressive download. With the investment in streaming, the number of files delivered via

progressive download decreases to 20% moving on average 92,160 GB per month to streaming.. Table 2

illustrates the characteristics of for the composite organization.

Table 2: Representative Organization Characteristics

Delivery Characteristic

Total monthly Views

High-def (Bit

12,000,000 Rate) 1-3

Mbps

Standard-def

(Bit Rate)

300-

500Kbps

% Streaming — pre-

investment

20% 2,400,000 50% 50%

% Progressive

Download — pre-

investment

80% 9,600,000 60% 40%

% Streaming — post-

investment

80% 9,600,000 50% 50%

% Progressive

Download — post

investment

20% 2,400,000 60% 40%

Downloads moved to

streaming –Number

7,200,000

Downloads moved to

streaming –

Total GB

92,160

Downloads moved to

streaming -

Percentage

60%

Monthly TB

commitment

150

TEI Framework

Introduction

From the information provided in the in-depth research, WiZE Mobile has constructed a TEI

framework for these organizations considering increasing their investment in streaming content. The

objective of the framework is to identify the cost, benefit, flexibility, and risk factors that impact the

investment decision.


Composite Organization

Based on the research with the seven existing customers, WiZE Mobile constructed a TEI framework,

a composite company, and an associated ROI analysis that illustrates the areas impacted financially.

The composite organization that WiZE Mobile synthesized from these results represents a - media and

entertainment organization.

Framework Assumptions

Table 3 lists the discount rate used in the PV and NPV calculations and time horizon used for the

financial modeling.

Table 3: General Assumptions

Ref. General assumptions Value

Discount rate 10%

Length of analysis Three years

Research organizations typically use discount rates between 8% and 16% based on their current environment.

Readers are urged to consult with their finance department to determine the most appropriate discount rate to

use within their own organizations.

Costs

Costs of increasing an organization’s use of streaming content will vary by organization. However, the

customer views and broader survey results do provide a snapshot as to the types of costs that organizations are

encountering as a result of increasing their level of streaming content delivery through a CDN.

A couple of common themes resulted from the customer views.

• Incremental costs around increasing the level of streaming content include a combination of internal

costs to switch existing content over to streaming format as well as directly billable costs to the CDN.

• The incremental costs billed to the CDN varied considerably between customers. In some cases, the

cost difference between streaming and progressive download was minimal due to (in part) to the

volume of content delivered. Organizations that had a smaller delivery requirement could expect to

pay a higher price premium to stream content.

• Investing in increasing the number of media delivered through streaming also required the

interviewed organizations to take into account costs that were considered both direct and indirect to

maximize the success of their investment. For example, indirect investment in training is incorporated

with direct investments in hardware, software, and development, to measure the full impact of the

investment.


As part of this analysis, the model includes incremental server costs for development, development costs to

convert the existing progressive file to streaming, the cost of content delivery billed to the CDN, and the cost

of development training.

File Conversion and Testing

For those organizations that moved from progressive downloading without Flash to Flash with Streaming, the

cost of file conversion to Flash was considered minimal among the researched organizations. However,

organizations considering increasing their streaming footprint should consider these costs as a part of the

overall investment. For the purpose of this analysis, these costs include the cost of server resources, the cost of

internal development, and the cost to train developers on the file conversion. To calculate these costs, the

model assumes the organization purchases one development server to test and encode the files moved to

streaming format at a cost of RM 8,000. In addition, the organization incurs an annual recurring cost of RM

1,440 in support and maintenance, or 18% of total server cost. Table 4 illustrates the calculations used

Table 4: Cost Of Server Infrastructure

Ref Metric Calculation Value

A1 Number of servers purchased 1

A2 Cost per server RM 8,000

A3 Annual operations cost as a %

of total 18%

A4 Initial cost A1*A2 RM 8,000

A5 Annual recurring cost A3*A4 RM 1,440

In addition to incremental hardware costs, the cost of development time required for file conversion of files to

Flash format. Development costs will vary depending on the amount of content converted by the organization

and include upfront testing as well as ongoing development. To calculate these costs, the model assumes the

organization will need to incur roughly 120 hours yearly in development time annually for testing and file

conversion. Assuming a blended development cost of RM80 per hour, the total annual cost of development

equates to RM 9,600. Table 5 illustrates the calculation used.

Table 5: Conversion Cost


B1

Development hours per

month

10

B2 Number of months 12

B3 Development cost per hour RM 80

B4 Annual development cost B1*B2*B3 RM 9,600


The cost of training represents another cost category considered as part of the analysis. This included the cost

of training related to testing and converting the files over into streaming format. Researched organizations

noted the cost of any incremental training was minimal compared to the overall cost of streaming. To

calculate these costs, the model assumes three developers trained for a period of 20 hours at an hourly cost of

RM80, yielding an annual training cost of RM 4,800. Table 6 illustrates the calculation used.

Table 6: Internal Training


C1 Number of developers 3

C2 Number of hours trained

annually

20

C3 Cost per hour RM 80

C4 Annual cost C1*C2*C3 RM 4,800

Hosting and Professional Services Costs

As part of this model, we assume the organization will invest in external resources to build and host several

specific campaign initiatives. This fee is separate from internal development work completed for the

company’s core Web presence. While the actual monthly costs may vary depending on the size and scope of

the initiative, the model assumes an average monthly cost based in part on the data from our research. Table 7

illustrates the equation used

Table 7: Hosting and Professional Services Costs


D1 Monthly billable cost —

delivery

(price per TB)

RM174.08

D2 Number of TB delivered 150

D3 TB shifted to streaming 90

D4 Estimated price premium —

streaming

5%

D5 Incremental cost —

streaming

D1*D2*D3*D4*12 RM 9,400

ISP Testing Costs

Several of the organizations an external ISP for the purpose of delivering HTML content to their CDN. As

part of the movement to streaming format, the role of the ISP was a key part in ensuring the quality of the user

experience. As a result, several of the organizations interviewed noted the cost of reviewing and testing their

ISP technology to ensure a smooth delivery of content. Table 8 illustrates the calculations used.


Table 8: ISP Testing Costs


D5 Annual cost — delivery RM 9,400

E1

Transmission charge — %

of

delivery

15%

E2

Annual cost — transmission

charge

D5*E1

RM 1,410

Total Costs

Table 9 illustrates the total cost components for the representative organization, including both upfront and

recurring costs.

Table 9: Total Costs — Non Risk-Adjusted

Cost category Initial Year Year 1 Year 2 Year 3 Total PV

Hardware RM8,000 RM1,440 RM1,440 RM1,440 RM12,320 RM11,581

Development

costs

RM9,600 RM9,600 RM9,600 RM28,800 RM23,874

Hosting —

incremental

cost of streaming

RM9,400 RM9,400 RM9,400 RM28,201 RM23,377

ISP —

transmission

charge

RM1,410 RM1,410 RM1,410 RM4,230 RM3,507

Training RM4,800 RM4,800 RM4,800 RM14,400 RM11,937

Total cost RM8,000 RM26,650 RM26,650 RM26,650 RM87,951 RM74,276

Benefits

Benefits are the positive impacts the representative organization receives from its investment in increasing

their streaming footprint. As with costs, while the benefits of streaming content delivery will vary by

organization, the research provide a snapshot of the key drivers in measuring the financial return.


A couple of common themes resulted from the research:

• Common incremental benefits included improved protection of delivered content, greater user

engagement of delivered content, and improved bandwidth efficiency.

• Providing secure, protected content was the key benefit in increasing their streaming footprint.

Several of the organizations in our research were delivering content produced by third-party

organizations, mandating strict content protection of delivered content.

• Cost avoidance was a key metric included as part of the justification. However, several of the

organizations did note that the improved capabilities of streaming content did provide a way to

improve their organization’s top line revenue. This occurred in cases where improving the user

experience allowed the organization to attract and retain paid subscribers of subscription-based content

or improve usage of free content where accompanied by advertisements.

Improved Content Protection

Improved content protection was a key benefit for increasing an organization’s streaming footprint.

Organizations saw the need to protect their content compared with progressive download. The impact of not

protecting content was — for some organizations — not an option. Several organizations noted the cost of

having to find and recover breeched content was a significant factor in choosing to stream content. Of the

organizations interviewed, a common approach to measuring an increase in protected content was to look at

the potential cost of investigating and recovering the content. To calculate this benefit, the model assumes the

organization has roughly 144 million annual downloads with an estimated 7.2 million away from progressive

toward streaming download. Based on customer interviews, of those downloads, roughly .001% are

compromised resulting in 14 annual downloads that have been misappropriated. For the organization, the cost

of discovery and investigation of the compromised download is estimated at RM300 while the cost of

recovery of the file is estimated at RM2,000 resulting in a total cost per compromised download of RM2,300.

As a result, the organization estimated it could avoid an annual savings of RM32,000 of costs associated with

the discovery and recovery of compromised content. Table 10 illustrates the calculation used.

Table 10: Improved Content Protection

Ref Metric Value

A1 Number of annual views 144,000,000

A2 Number of downloads moved to

streaming

7,200,000

A3 Number of unique user downloads 1,440,000

A4 Likelihood of potential compromise 0.001%

A5 Number of compromised files 14


A6 Average cost of

discovery/investigation

300

A7 Annual cost of

discovery/investigation

RM4,200

A8 Average cost of recovery RM2,000

A9 Annual cost of recovery RM28,000

A10 Total savings RM32,200

Improved User Impact

In addition to enhancing the user experience for existing customers, a key part in the strategy of the

interviewed organizations was to attract and keep users retuning to the site and using its content. All

organizations saw the ability to improve user experience as a way of increasing retention of their user base,

leading (in certain cases) to potentially higher ad revenue through increased ad click-through. In addition to

improving usability of free content, several of the organizations that provided subscribed content saw the

direct relationship of improving user experience and increasing subscription retention of premium content.

To measure the impact of increasing an organization’s streaming footprint on ad revenue, the representative

organization assumes roughly 20 third-party ads associated with the delivery of its free content. Of the total

user base, the organization receives an average of roughly 5,000 monthly clicks through with revenue per

10,000 click-through of RM3,000. Through the use of dynamic streaming and the ability to provide users with

greater control over downloaded content, the organization assumes it can drive more users to streaming

content, increasing the potential of higher click-through of third-party content. Based on these metrics, the

projected revenue increase resulting from advertising equates to RM18,000 per year. Table 11 illustrates the

calculation used

Table 11: Improved End User Impact — Increased Ad Revenue


B1 Number of third-party ads 20

B2 Monthly click through’s 5,000

B3 Revenue per 10,000 click

through’s

RM3,000

B4 % increase in monthly click

through’s

5%


B5 Incremental revenue increase B1*B2(B3/10,000)*B4*12 RM18,000

In addition to increased ad revenue, the representative organization also saw through the ability to provide

more dynamic content delivery and the ability to increase retention of its subscriber content, thus increasing

subscription revenue. The representative organization currently has 12,000 paid subscribers for premium

content on its site. The model conservatively estimates that as a result of the move to more dynamic content

delivery, the organization can retain and increase its subscriber base by 10% per year. Assuming the

annualized value of subscribers is RM120 and a cost margin of 20%, we can calculate the annual revenue gain

is RM28,800. Table 12 illustrates the calculation used.

Table 12: Improved End User Impact — Increased Subscription Retention


C1 Number of subscribers 12,000

C2

Average annualized value —

subscribers

120

C3 Cost margin 20%

C4 %increase in subscribers 10%

C5 Incremental revenue increase C1*C2*C3*C4 RM28,800

Greater Bandwidth Efficiency

Being able to improve the bandwidth efficiency of delivered content was another area of potential savings

noted by several of the interviewed organizations. One organization noted in particular, with traditional

progressive download, users download the entire file even though in some cases they may not watch the entire

content. With streamlining, users download only what they consume, allowing for the organization to pay

only for bandwidth that is being consumed.

While organizations noted the potential for increasing their bandwidth efficiency, it should be noted the

ultimate value gained is dependent in part on type and length of content streamed. Content that is fresh and

relevant, for example, may increase the chance of engaging the reader regardless of the type of delivery

method. For this analysis, we assume the representative organization is delivering timely and relevant content

to its users. To measure this impact on the representative organization, the model assumes with an average

download file size of 800MB, roughly 10% of those downloads are not fully completed. Of those downloads

that are not fully viewed; we estimate roughly 30% of file was delivered but not consumed if those files were


delivered progressively. Assuming the average cost per TB equates to RM174, we can calculate the total

estimated savings in this case to be RM29,376. Table 13 illustrates the calculation used.

Table 13: Greater Bandwidth Efficiency


D1 Number of full downloads 144,000,000

D2 Downloads moved to

streaming

7,200,000

D3 Average download size

(Mb)

800

D4 % of downloads not

completed

10%

D5 Average unutilized 30%

D6 Number of MB per TB 1024000

D7 Cost per TB RM174

D8 Total savings ((D1*D2*D3*D4*D5)/D6)*D7 RM29,376

Total Benefits

Table 14 illustrates the total benefits from an investment in streaming content delivery. Benefits are reduced

by 30% in Year 1 to take into account the time to implement and begin receiving benefits from deployment.

Table 14: Total Benefits — Non Risk-Adjusted

Benefit category Year 1 Year 2 Year 3 Total PV

Improved security of

content

RM22,540 RM32,200 RM32,200 RM86,940 RM71,295

Improved ad revenue RM12,600 RM18,000 RM18,000 RM48,600 RM39,854

Improved subscription

revenue

RM20,160 RM28,800 RM28,800 RM77,760 RM63,767

Improved bandwidth

efficiency

RM20,563 RM29,376 RM29,376 RM79,315 RM65,042


Total benefits RM75,863 RM108,376 RM108,376 RM292,615 RM239,958

Risk

WiZE Mobile defines two types of investment risk associated with this analysis: implementation risk and

impact risk. Implementation risk is the risk that a proposed technology investment may deviate from the

original resource requirements needed to implement and integrate the investment resulting in higher costs than

anticipated. Impact risk refers to the risk that the business or technology needs of the organization may not be

met by the technology investment, resulting in lower overall total benefits. The greater the uncertainty, the

wider the potential range of outcomes for cost and benefit estimates. Quantitatively capturing investment risk

by directly adjusting the financial estimates results in more meaningful and accurate estimates and a more

accurate projection of the return on an investment.

The following implementation risks are identified as part of this analysis:

The cost of required software and hardware resources are greater than anticipated.

Internal development cost can be higher and may take longer than originally planned.

The incremental cost charged to the CDN for streaming may be higher than originally anticipated

The following impact risks are identified as part of the analysis:

New customer conversion may be lower due to changing market conditions.

Ad and channel partner revenue may be lower than originally expected due to lower customer

adoption of the Web channel.

Bandwidth efficiency may be lower than originally anticipated.

The number of security breaches that are processed may be lower than originally anticipated, leading

to lower cost avoidance.

Steps for Measuring Investment Risk

Risk factors are used in TEI to widen the possible outcomes of the costs and benefits (and resulting savings)

associated with a project. TEI applies a probability density function known as triangular distribution to the

values entered. At a minimum, three values are calculated to estimate the underlying range around each cost

and benefit estimate. The expected value — the mean of the distribution — is used as the risk-adjusted cost or

benefit number. The risk-adjusted costs and benefits are then summed to yield a complete risk-adjusted

summary and ROI. In this study, incremental improvements in customer engagement is a relatively low-risk

endeavor, as expressed by the interviewed organizations, and is applied a risk factor of 103% to the costs and

98% to the benefits to arrive at a risk-adjusted number. Table 15 provides a risk-adjusted breakdown of the

costs received. Table 16 provides a risk-adjusted breakdown of the benefits received.


Table 15: Total Costs — Risk-Adjusted

Cost category Initial Year 1 Year 2 Year 3 Total PV

Hardware RM8,000 RM1,440 RM1,440 RM1,440 RM12,320 RM11,581

Development

costs

RM9,600 RM9,600 RM9,600 RM28,800 RM23,874

Hosting —

incremental

cost

of streaming

RM12,534 RM12,534 RM12,534 RM37,601 RM31,170

ISP —

transmission

charge

RM1,880 RM1,880 RM1,880 RM5,640 RM4,675

Training RM4,800 RM4,800 RM4,800 RM14,400 RM11,937

Total cost RM8,000 RM30,254 RM30,254 RM30,254 RM98,761 RM83,237

Table 16: Total Benefits — Risk-Adjusted

Benefit

category

Year 1 Year 2 Year 3 Total PV

Improved

security of

content

RM16,100 RM23,000 RM23,000 RM62,100 RM50,925

Improved ad

revenue

RM10,080 RM14,400 RM14,400 RM38,880 RM31,883

Improved

subscription

revenue

RM16,800 RM24,000 RM24,000 RM64,800 RM53,139

Improved

bandwidth

efficiency

RM18,278 RM26,112 RM26,112 RM70,502 RM57,815

Total benefits RM61,258 RM87,512 RM87,512 RM236,282 RM193,762


TEI Framework: Summary

Considering the financial framework constructed above, the results of the costs, benefits, and risk sections

using the representative numbers can be used to determine a return on investment, net present value, and

payback period. Table 17 shows the consolidation of the numbers for the composite organization

Table 17: Composite Company ROI, Risk-Adjusted

Ref. Total benefits Initial Year 1 Year 2 Year 3 Total NPV

H1 Total costs RM8,000 RM30,254 RM30,254 RM30,254 RM98,761 RM83,237

L1 Total benefits RM61,258 RM87,512 RM87,512 RM236,282 RM193,762

P2 Total RM(8,000) RM31,005 RM57,258 RM57,258 RM137,521 RM110,526

P3 Return on

investment

96%

P4

Payback

period Less

than

12 months

It is important to note that values used throughout the TEI Framework are based on in-depth research with

seven organizations and the resulting composite organization built. WiZE Mobile makes no assumptions as to

the potential return that other organizations will receive within their own environment. WiZE Mobile strongly

advises that readers use their own estimates within the framework provided in this study to determine the

expected financial impact of investing in customer engagement


Study Conclusions

WiZE Mobile in-depth research with organizations, which had made tangible improvements in customer

engagement, yielded two important observations:

Organizations can realize benefits in the form of increases in the ability of organizations to

provide secure, dynamic content to their users and customers.

Factors contributing to higher returns included the price premium paid by the CDN to the

customer for streaming content, the amount of content shifted from progressive to

streaming content delivery, and the characteristics of the content delivered. Readers are

urged to apply their own estimates to this analysis to determine the actual ROI for their

unique circumstances.

The financial analysis provided in this study illustrates the potential way an organization can evaluate the

financial impact of increasing customer engagement. Based on information collected in six in-depth customer

interviews, WiZE Mobile calculated a three-year risk-adjusted ROI of 96% for the composite organization

with a payback period of 12 months. All final estimates are risk-adjusted to incorporate potential uncertainty

in the calculation of costs and benefits.

Based on these findings, companies looking to increase customer engagement can see benefits in terms of

customer effectiveness and efficiency. Using this TEI framework, many companies may find the potential for

a compelling business case to make such an investment.


Appendix A: Total Economic Impact Overview

Total Economic Impact is a methodology developed by WiZE Mobile that enhances a company’s technology

decision-making processes and assists vendors in communicating the value proposition of their products and

services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value

of IT initiatives to both senior management and other key business stakeholders.

The TEI methodology consists of four components to evaluate investment value: benefits, costs, risks, and

flexibility. For the purpose of this analysis, the impact of flexibility was not quantified.

Benefits

Benefits represent the value delivered to the user organization — IT and/or business units — by the proposed

product or project. Often product or project justification exercises focus just on IT cost and cost reduction,

leaving little room to analyze the effect of the technology on the entire organization. The TEI methodology

and the resulting financial model place equal weight on the measure of benefits and the measure of costs,

allowing for a full examination of the effect of the technology on the entire organization. Calculation of

benefit estimates involves a clear dialogue with the user organization to understand the specific value that is

created. In addition, WiZE Mobile also requires that there be a clear line of accountability established

between the measurement and justification of benefit estimates after the project has been completed. This

ensures that benefit estimates tie back directly to the bottom line

Costs

Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the

business units may incur costs in the forms of fully burdened labor, subcontractors, or materials. Costs

consider all the investments and expenses necessary to deliver the proposed value. In addition, the cost

category within TEI captures any incremental costs over the existing environment for ongoing costs

associated with the solution. All costs must be tied to the benefits that are created.

Risk

Risk measures the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is

measured in two ways: the likelihood that the cost and benefit estimates will meet the original projections and

the likelihood that the estimates will be measured and tracked over time. TEI applies a probability density

function known as ―triangular distribution‖ to the values entered. At a minimum, three values are calculated to

estimate the underlying range around each cost and benefit.

Flexibility

Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits

can typically be the primary way to justify a project, WiZE Mobile believes that organizations should be able

to measure the strategic value of an investment. Flexibility represents the value that can be obtained for some

future additional investment building on top of the initial investment already made. For instance, an

investment in an enterprise wide upgrade of an office productivity suite can potentially increase


standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration

feature may translate to greater worker productivity if activated. The collaboration can only be used with

additional investment in training at some future point in time. However, having the ability to capture that

benefit has a present value that can be estimated. The flexibility component of TEI captures that value.

Appendix B: Glossary

Discount rate: The interest rate used in cash flow analysis to take into account the time value of money.

Although the Federal Reserve Bank sets a discount rate, companies often set a discount rate based on their

business and investment environment. WiZE Mobile assumes a yearly discount rate of 10% for this analysis.

Organizations typically use discount rates between 8% and 16% based on their current environment. Readers

are urged to consult their organization to determine the most appropriate discount rate to use in their own

environment.

Net present value (NPV): The present or current value of (discounted) future net cash flows given an interest

rate (the discount rate). A positive project NPV normally indicates that the investment should be made, unless

other projects have higher NPVs.

Present value (PV): The present or current value of (discounted) cost and benefit estimates given at an

interest rate (the discount rate). The PV of costs and benefits feed into the total net present value of cash

flows.

Payback period: The breakeven point for an investment, or the point in time at which net benefits (benefits

minus costs) equal initial investment or cost.

Return on investment (ROI): A measure of a project’s expected return in percentage terms. ROI is

calculated by dividing net benefits (benefits minus costs) by costs.

A Note On Cash Flow Tables

The following is a note on the cash flow tables used in this study (see the Example Table below). The initial

investment column contains costs incurred at ―time 0‖ or at the beginning of Year 1. Those costs are not

discounted. All other cash flows in Years 1 through 3 are discounted using the discount rate shown in at the

end of the year. Present value (PV) calculations are calculated for each total cost and benefit estimate. Net

present value (NPV) calculations are not calculated until the summary tables and are the sum of the initial

investment and the discounted cash flows in each year.

Example Table

Ref. Category Calculation Initial cost Year 1 Year 2 Year 3 Total

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