Mobile Solutions CI

the role of mobile operators in the retail experience remains dominant

This post from tomi ahonen contains a basic but vital point which is still poorly understood in the mobile industry. The retail experience for handsets, which bring to life all web 2.0 experiences, remains very poor and dominated by mobile operators.

 

I have written many articles on this blog to explain the retail side of the mobile handset business. The mobile phone business is totally different from other high tech and consumer industries, like TVs, PCs, videogaming consoles, DVD players, digital cameras, MP3 players etc - where in those industries if you make a good product and sell it at a competitive price, you tend to have market performance commensurate with the 'merits' of your device and its price. That is not true in mobile phones. In this industry, the success of any handset brand is primarily controlled by the carriers/operators of the world. Look at the iPhone. Early on it sold only on one network in many markets such as AT&T in the USA, O2 in Britain, Softbank in Japan etc. When the iPhone expanded to more carriers, it achieved far bigger sales. And look at the Microsoft Kin youth phones. Even as these were highly praised and were expected big sellers, the sudden collapse of carrier support resulted in the phones being discontinued - in only six weeks. This even though Microsoft is the global IT giant who has thousands of resellers to its brand. When the carriers refused the Kin, no matter how 'great' Microsoft was, the handset was doomed.

In mobile phones, the success of any single phone is most determined by the support of the carriers/operators and their stores. In mobile phones, different from any other major home electronics or consumer high tech, there is a gatekeeper that decides who wins and who loses. It is the reseller channel, mostly controlled by the carriers/operators.

via communities-dominate.blogs.com

 

Blogs | Wireless Week

Leap/Cricket, along with MetroPCS, often have been thought of as “bottom feeders,” as Bernstein Research analysts said in a research note released today,but they’re emerging as the new middle market. Nearly all of the industry’s subscriber growth is now coming from the prepaid segment. Prepaid and reseller net adds accounted for an all-time high of 91 percent of the industry’s total net additions in the first quarter, according to Bernstein. In fact, the analysts figure that excluding “connected devices” – laptop cards, MiFi devices and others – it’s likely that the postpaid industry actually lost traditional subscribers in Q1 for the first time ever.

 

At the very bottom, the low-end prepaid subscribers are trading down to USF-assisted SafeLink (TracFone) and Assurance Wireless (Sprint) plans for low-income people who qualify, Bernstein says. At the high end are AT&T and Verizon Wireless, with Sprint (postpaid) and T-Mobile USA getting caught in the middle.

via www.wirelessweek.com

Here is the US wireless industry in a nutshell...

When you look at the structure of the value added content service deal mentioned (Muve) in that context it signals a huge opportunity for someone who recognizes Apple's (and Google's) dependency on consumers basing their activity on a PC and using mobile devices secondarily. Increasingly the middle and bottom thirds of the US market look like EMEA and APAC regions where internet growth happens off PC.

Why Android's app store will never rival Apple's

IDC released a report on mobile advertising that is receiving a lot of commentary. IDC estimates that Google’s $1 billion in mobile ad revenues is mostly coming from mobile web display and search ads. It's not rocket science given Google's last earnings call; here is what Google told us:

"Mobile is on an annualized run rate of over $1 billion. This means the people who are accessing our products and services through their mobile phones are adding a $1 billion annually to our existing revenue streams. Clearly, this is the future of search in the Internet, more people in more countries coming online from these smartphones. Our mobile search queries have grown five times over the past couple of years. And of course, a lot more of those queries are now coming from Android phones."

Apple's app store revenue has come mostly from their role as billing platform provider, which is an interesting distinction to think about. I'll write more about the differences between these two models later.

What caught my attention about IDC's report is what it implies for the many Android ecosystem partners who have been anxious for Google to pay more attention to developing and fostering android marketplace. Google has no incentive, and possibly a counter-incentive, to improve the marketplace and the app store model according to this report. Look at the last round of updates Google rolled out and consider what level of progress the marketplace has seen in two years. Not much.

Think about what that means for the Android UI and where it will evolve.

Apple will continue to be an app-driven experience, but Google is driving Android to be a browser-based experience. If you deliver content or services through an application you need a plan for how that will work in a browser-based UI. Where will discovery come from? How will cross promotion work?

These are big questions to unravel for service providers, OEMs, and content players.

Mobile Breakfast Series recap

This week I attended Chetan Sharma's Mobile Breakfast Event, which he recaps here. It was great to see some familiar faces and hear startup stories from a range of services. 

I'm grateful that Chetan puts on these events and brings such a focused community together.

Listening to the commentary on application distribution and startup's path to commercial viability is interesting now that I am sitting on the carrier side of the fence. While the audience is not as virulently anti-carrier as a SV meeting it was close which has always struck me as amusing. If eliminating carriers would be such a panacea why not just go to market only on the web?

Problem solved as is evident by the great number of web-only startups in 2009 and 2010 which have generated fast growing user bases with scaling revenue models...oh, wait. 

Beyond that equation there were some interesting discussions on time to market in general and the business model implications of aligning with carriers, OEMs, etc. Swype and Root had interesting stories to tell on this topic.

One topic which was interestingly absent was cloud computing or even HTML5. Has the iPad launch killed that hot topic for consumer mobile services? The app store route on iPhone and Android seemed a forgone conclusion to both speakers and audience, with one notable nod to RIM.

Without iPhone, ATT is losing contract subscribers

ATT reported earnings and in the wireless industry a key focus is tracking subscriber additions for carriers as basic health check. Smartphone share of post-paid (contract) additions is a particularly telling metric.

And interestingly the further ATT gets into its time with the iPhone the more reliant upon it they become.

AT&T reported adding 1.9 million wireless subscribers in the first quarter. At first glance that is an excellent number in a slow quarter. However AT&T activated 2.7 million iPhones. That means that without iPhone AT&T would be losing post paid customers. In fact most of its growth is coming from devices with limited value add from AT&T beyond basic network connectivity--"e-readers, alarms, and GPS". 

I noted yesterday that Apple had an astonishing quarter. It is only due to Apple's product and marketing that AT&T continues to succeed.

Connected devices in service rose 1.1 million in the first quarter to hit 5.8 million. Retail postpaid net additions were 512,000. 

AT&T now has 87 million wireless subscribers. As AT&T and Verizon increasingly dominate the US mobile landscape it's interesting to see how dependent each has become upon a single and simple crutch--AT&T in the iPhone, Verizon in the "Buy One, Get One" model of subsidizing BlackBerry and now some Android devices. Neither of those is a competitive differentiator which depends upon unique value brought by the company.

2009 - the year of the $500m mobile markets

Here are some interesting, and random, stats to consider:

Ebay generated about $600 million in mobile transactions over 2009, a 200% YoY growth from '08.

Apple's App Store (very) conservatively hit $500 million for CY 2009 (key guesstimate variables: 2.5bn downloads, 90% free, average price of $2.25 for paid).

The total off-portal premium messaging and transaction market in the US for 2009 was a bit over 1 billion. Throw in Amazon and 2009 was the year when direct distribution marketplaces surpassed both on deck and off deck carrier distribution models in mobile.

Bango says almost 30% don't bother tracking their mobile ad campaigns

As Opera buys AdMarvel, the mobile advertising space continues to see strange bets being made with questionable revenue assumptions behind them.

Here is a data point which highlights how difficult it is to assess the potential of mobile advertising:

Bango surveyed over 100 participants in a webinar run in late 2009, including brands, agencies and specialist mobile providers. Over 90% of these brands said they will increase their mobile advertising investment in 2010.

 

·         27% admit to not implementing any analytics in their mobile campaigns.

·         83% of brands do not use mobile specific analytic tools

·         Of those that do implement some form of campaign analytics, only 17% said they’d sourced a specialised mobile solution designed to measure mobile user behaviour accurately and consistently. 

iPod Touch Growth Signals Need for Prepaid Services--Google to Move 1st?

Flurry reported very strong growth of iPod Touch application download and usage over the Christmas time period. In writing about the dramatic increase of app downloads for iPods (as opposed to iPhones) Flurry concentrates on viewing the iPod as a "starter" product for iPhones.

Their main conclusion: "Total iPod Touch downloads (all generations) jumped by over 1000% on Christmas Day, indicating that in addition to new iPod Touch 3Gs coming into the market, iTunes gift card giving may have driven downloads to older generation iPod Touch devices."

This is seen as a strong indicator that iPod's introduce consumers to the Apple and iTunes ecosystem with a profitable product which upsells them to the iPhone.

If you're AT&T this should scare the hell out of you. Because this argument says that people prefer to gift prepaid devices which do not come with service agreements. It further shows that people enjoy giving and getting digital content if the transaction is easy, safe, and assured to work.

The door is wide open for a device manufacturer to put this together and offer an Android device with prepaid bundles which go toward content, air time, and data. And make the distinction of that invisible to consumers. 

Boost is halfway there. As an MVNO it gets largely ignored. But the message I see in the iPod story is not one of upsell. It is that consumers do not want to parse their spending from a single device across air time, data usage, and content. They want a simple, controllable bill. And prefer single item purchases over subscriptions (even if that means forgoing service benefits).

Mobile operators either need to radically rethink how they sell, service, and bill for smartphones or risk having their world turned upside down in a few short years.

As Flurry said, "It appears that an influx of new iPod Touch devices has flooded the market over Christmas, and that users of the handset, primarily pre-teen and teen audiences, are voracious downloaders". This market is begging to be served by a different model than the super expensive device subsidized by a carrier but locked into a pricey two-year commitment. 

Who will bring it to them? Google?

iSuppli Predicts WM Resurgence--What am I missing?

Analyst firm iSuppli has a new report out which is getting a fair amount of attention. It has WM at twice the current market share of most analysts and then predicts Windows Mobile rapidly gaining even more market share with the number of WM devices tripling over the next three years, leading to a #2 market share. Huh?

There are several things about this view I find puzzling:

• The chart shows total smartphones shipped in 2008 as being around 25 million. What? RIM alone ships over 8 million devices each quarter. They sold more than 25 million devices in 2008. What can this chart possibly mean? Most analysts call current shipments as being around 100M.
• Symbian is projected to hold 47.6% market share. Really? How will that happen? Apple disappears? Android craters? Coming the same quarter where Nokia launches its flagship smartphone on Maemo and only two days after Nokia publicly started walking away from S60 you have to be very bold or just crazy to make this call. Gartner has Symbian falling to 45% last quarter--never mind in one or two years. Other projections are similar. 
• What is the point of making projections into the future with ".6" and other specious indications of accuracy? What a joke! How about rounding or, if you want to actually be useful, showing a 10-90 range?

Here is a reality check from Gartner: "Microsoft's mobile operating system had 11 percent of the global smartphone market in Q3 2008. A year later, it had 7.9 percent of the market, while the iPhone's share had risen from 12.9 percent to 17.1 percent, and RIM's share had risen from 16 percent to 20.8 percent"

I'm not one one to sing Gartner's praises. But did iSuppli talk to any operators? None of the top four US carrier product teams are super excited about WM 7 and certainly none of them are talking about decreasing Android and other platform launches in favor of WM. It's very hard to understand what this report could possibly be based upon and how it squares with what I hear directly from carrier teams.

Did iSuppli talk to vendors? Microsoft itself has said that 85% of its devices come from HTC, which is now at least equally focused on Android. LG is indeed an important partner win but they are not solely focused on WM and also will not have significant share of the smartphone segment for some years.

This report is very contrary to what I read and what I experience. And I'm not the only one seeing the opposite: Wired: "How Microsoft Blew It". What am I missing?

Google buys AdMob, VOIP player; turning mobile ecosystem upside down

Google's purchase of AdMob is dominating headlines today: "The company said Nov. 9 that it agreed to acquire AdMob, a mobile display ad technology provider, for $750 million in stock. Google said the purchase would move the company forward in its efforts to develop more effective tools for creating, serving and analyzing emerging mobile ads formats."

Not generating much news is that Google also snapped up a VOIP player today. 

Google is very close to having an end-to-end “unified inbox” service which completely commoditizes carriers. The initial lure for service providers is a cut of shared ad revenue in return for services which otherwise are costly for them to implement and maintain (voicemail, sms, IM, voice-to-text across these mediums, mapping, location enabled messaging).

However within a year you will be able to port your current phone number to Google and manage your voice calls, email, IM, chat, mapping, calendaring, etc. from the web or an android device which uses no voice and nothing but a prepaid, flat rate data plan and sim card. Your inbox can port seamlessly across mobile and PC devices as the data is all could based.

The AdMob acquisition isn’t as impactful as Google offering mapping for free and thereby destroying the value of the only two players who had managed to provide mobile mapping, Navteq (Nokia purchased for $8bn) and Telenav (IPO just announced).

For all the change that Apple wrought in consumer behavior on mobile devices, Google is driving at least as much change from the technology systems side. Truly an amazing time to be in the industry. And perhaps the most dangerous time to be a carrier as the risks for once are equal to the opportunities.