The mobile content market in Russia is undergoing radical structural changes, both in terms of market participants and in terms of types of content.

Mobile operators, which gave way to content providers at the beginning of mobile content market development in Russia, are now actively expanding their businesses on this market by promoting their content Web portals, analysts said. Games and other applications offered via these Web sites are likely to show the biggest growth in the coming years, which is linked with the spread of smartphones with software supporting these types of content, analysts said, adding that the traditionally dominant segment of ringback tones (RBT), which is close to saturation, is likely to decrease its share in Russia’s total mobile content revenue.

The mobile content market showed a 26% year-on-year growth to U.S. $1.42 billion in 2010, J’son & Partners Consulting analysts said in a recent report, attributing the high growth rate to Russia’s lagging behind other countries in the development of mobile content services. The developed U.S., Japanese, Chinese, and South Korean mobile content markets grew 9% to 14% on the year in 2010 in terms of revenue, the analysts said.

Advanced Communications and Media (AC&M), meanwhile, estimated the growth rate in 2010 in Russia at 21% on the year and said the revenue growth had slowed down in 2010, but partly because of the worsening of positions of traditional content providers, which are not mobile operators. Content providers receive their revenue mainly via micropayments, which are vulnerable to fraud, AC&M Partner Oksana Pankratova said, adding that mobile operators fought against fraud in 2010 by blocking content providers’ short numbers, used for providing premium SMS content services. Also, micropayment-oriented content operators lost their popularity because of the spread of competitive payment systems and services, including those of mobile operators, Pankratova said.

Mobile content providers are likely to see their share in Russia’s total revenue decrease to 45% in 2012 from 78% in 2010, as mobile handset manufacturers and mobile operators expand mobile content sales via their online stores and increase market shares to 29% and 26% in 2012 from 12% and 10% in 2012, respectively, J’son & Partners Consulting analysts said.

The decreasing market share of traditional, so called off-portal, content providers, which have previously dominated in Russia, and the growing mobile content market share of mobile operators is one of the key trends currently being seen on the Russian mobile content market, Pankratova from AC&M said. “Mobile operators are improving their positions, because they are closer to subscribers and have bigger opportunities to promote mobile content among them,” Pankratova said.

The Russian market is thus moving closer to the Western markets in terms of the structure by market participants, Pankratova noted, adding that in Western countries content providers without mobile operations have never dominated the market because of the high level of development and popularity of electronic payment systems and bank cards, while in Russia the lack of their popularity in the early 2000s led to the wide use of micropayments as the means to pay for mobile content.

The structure of the Russian mobile content market is also changing in terms of the types of content, both Pankratova and J’son & Partners Consulting analyst Svetlana Yemelyanova said. The Russian mobile content market is entering a new stage of development, with multiplatform solutions and application stores providing the key opportunities for revenue growth, Yemelyanova said, adding that the main reason for the change is the development of mobile handset software, allowing users to access online content platforms and use purchased applications. The revenue of application stores doubled on the year in 2010 and accounted for 12% of Russia’s total mobile content revenue, J’son & Partners Consulting analysts said.

Games and other applications are gaining popularity also because of the spread of mobile handsets that support modern games and other applications, Pankratova from AC&M said.

Changes in the structure of mobile content in Russia are likely to continue, partly because the number of mobile Internet users is expected to grow to 44.5 million by 2012 from 13.6 million as of 2010, Yemelyanova from J’son & Partners Consulting said. Also, the active development of third generation (3G) mobile networks and an increase in smartphones’ share among all mobile handsets to 24% by 2012 from 10% as of 2010, Yemelyanova said.

The growing number of smartphones is likely to primarily affect the sales of mobile content via vendors’ stores, Yeme-lyanova said, adding that games and other applications sold via mobile handset vendors’ stores are expected to account for about 29% of the total revenue from mobile content in Russia in 2012.

Another content segment gaining popularity is mobile TV, Pankratova from AC&M said. “Mobile TV got its second wind with MegaFon’s and VimpelCom’s streaming mobile TV. It gained popularity, which is linked with the development of 3G networks, enabling increased data transfer speeds, but only partly, as streaming mobile TV is also widely used via second generation GPRS/EDGE technology,” Pankratova said.

Revenue from video content and mobile TV is likely to increase along with the growth in the number of smartphone users and the popularity of mobile Internet, Yemelyanova from J’son & Partners Consulting said.

RBT is still the dominant type of mobile content, accounting for 41% of the total mobile content revenue in Russia in 2010, compared with games’ 20% share and mobile TV’s 6% share, J’son & Partners Consulting analysts said.

RBT is likely to decrease its share to 35% in 2012, Yemelyanova said, adding that the decrease in the share is likely to be caused by the growth in shares of other types of mobile content, namely video content, games, and other applications, as well as by the slowing growth rate in RBT revenue.

The RBT segment has almost reached its saturation, Pankratova from AC&M said, adding that mobile operators are currently focusing on increasing average revenue per user (ARPU) from these services by offering some additional RBT services, for instance, allowing subscribers to copy ring-back tones from other subscribers. Revenue from RBT is expected to slow its annual growth to 15% in 2011 from 40% in 2010, Pankratova said.

The mobile content market structure in terms of the type of content is almost the same in all parts of the world, with only some exceptions, Yemelyanova from J’son & Partners Consulting said. Audio content, games, and video account for the major part of mobile content revenue, she said. The Russian market’s peculiarity is that video content accounts for a smaller part of mobile content of revenue, or about 10% in 2010, while in the U.S. and Japan this share was 23.5% and 36.8% in this period, respectively, Yemelyanova said.

Video content has, however, increased its share in Russia in 2010 from about 5% in 2009 and is likely to further increase the share to 19% in 2012, Yemelyanova added.

As for audio content, revenue in this segment is likely to grow mainly thanks to the development of mobile operators’ web portals offering content, such as MTS’ Omlet.ru and MegaFon’s Trava.ru, as well as the development of alternative audio services, Yemelyanova said.