CES 2011 is nearly upon us and the conference will unveil to the public innovations that will shape the year. So, as press day hits its stride it's evident that there are a few key themes in mobile media we can expect throughout the conference and 2011. One key phrase to sum up the events thus far; thinner, faster (both device and network), and bigger (Which is not a contradiction with the first adjective). 1. 4G. One of the buzzwords that will be discussed throughout the show and has been said more times today than zealots at a Steve Jobs keynote say ooh and aah. 4G is clearly the future and for a multimedia loving public the ability to stream and download content more quickly will impact their device usage. 2. Thin. Depending on when a handset manufacturer announced their newest flagship handset today they were briefly the "thinnest smartphone on the planet." Peruse a few press releases and this key phrase will unabashedly appear at the top. 3. Fast. The 1.2GHz Qualcomm SnapDragon processor (and its competitors) and dual core variants will begin making their way into handsets this year. For content consumption this will inevitably mean richer applications, more immersive games, and of course HD video consumption/recording/editing. 4. Cross Platform. Whether it be a TV, a tablet, or a car cross platform services are quickly becoming the rage. As OpenFeint discussed at the AT&T developer conference this morning the ability to compete with friends across platform is the future. Also at the AT&T event discussions were had about developing apps for U-Verse that work on various tablets and phones. For users hoping to better immerse themselves in their content, apps, and games this cross platform functionality will change how they view the ecosystem of products they buy and allow for the creation of very compelling apps unlike anything we've seen so far. 5. Bigger. Screen sizes are growing ever larger (Samsung has a 4.5" device coming) and compatibility with third party accessories such as PC docks and HDTVs will turn phones into a hub for media consumption unlike ever before. For users uninterested in consuming content on a 3.5" screen the new options will make media consumption much more compelling and should impact the growth of digital content distribution as well. This is just the beginning of course and if you're interested in hearing more you can follow Strategy Analytics analysts by tracking the hastag #SACES on Twitter or view our intermittent live stream from CES at .

On 1st December 2010 US ad network Millennial Media officially announced its expansion into Europe, entering into a fairly crowded mobile ad network space, which also includes Google (which acquired AdMob in 2010), Apple, Smaato, Yahoo, Microsoft, 4th Screen Advertising, Unanimis, Yoc, Sofialys, and DaDa among others. Strategy Analytics was invited to its launch presentation to hear more about its plans and ambitions. Globally, the Millennial Media mobile ad network is currently delivering 16 billion page impressions monthly, with Europe generating 2 billion (just 12.5%) of that. With Ofcom today indicating that 26%, 21% and 18% of cellular users in Italy, Spain and the UK respectively owns a smartphone, there is clearly still potential for growth in Europe, as more mobile phone owners substitute feature phones and expensive pay as you use data tariffs with smartphones tied to generous data plans. Indeed, Strategy Analytics also believes there is growth opportunity in Europe, and predicts strong growth in mobile display advertising with advertiser expenditure rising ten fold $600 million in 2010 to $6 billion 2015, as more users drive mobile web page impressions. So where does Millennial Media believe it will fit in to the existing mobile advertising market place? Well, it’s aiming to find the middle ground between premium ad networks like 4th Screen Advertising, and Orange owned Unanimis, which aim to maximise inventory return for premium publishers to get high CPMs, and blind ad networks aimed at filling large volumes of unsold inventory where its all about low CPMs and volumes (see figure above). Millennial Media does not intend to compete with the higher value mobile marketing campaigns from Blyk, Hipcricket or mobile operators like O2 Media. Personally, I’m a bit sceptical this gap really exists. So ultimately I do expect Millennial to fall into the blind ad network bucket over time. On the other hand in these tough economic times brand advertisers are increasingly looking for metrics to prove advertising ROI, in which case Millennial Media will be well positioned to grow. Either way, validating Millennial Media’s claim is something we hope to do as we continue to conduct more research into this area. Nitesh Patel

At CTIA in San Francisco last week, away from the fanfare around LTE rollouts and the next dozen tablet devices (ok, I exaggerate a little), Sprint had an announcement which will have significantly higher impact on mobile broadband adoption and revenues: Sprint ID. 

Sprint ID promises to up the ante on personalization and ease current feature phone users into the smart phone ranks.

Sprint ID offers instant personalization along key themes/packs where the operator has done the heavy lifting of identifying and group related applications of interest to different persona from wallpaper to ringtones to apps. While the one click marketing line is not quite matched by reality given pesky little things like accepting terms and conditions etc, Sprint ID is a significant breakthrough in my opinion as:

• it broadens the market appeal of Smart phones to current feature phones users with a simple to understand offer in a range of device price points including the critical $49 and $99 levels.
• it tackles one of the biggest weakness of all app stores: discoverability of content and simple personalization.

Three handsets were featured at launch of Sprint ID: Sanyo Zio™, Samsung Transform™, LG Optimus S™. These three devices cover key price points in the Sprint portfolio and provide customers with a range of form factors, industrial design and brand to meet their tastes. Interesting to note that both LG and Sanyo retain the right to put their own packs on their handsets as well. This is a big win for LG as its Optimus S™ will be available for under $50 with contract giving the vendor a much needed boost in the smartphone space. Samsung meanwhile continues to shine at Sprint occupying the lucrative $149 spot with its Transform™. All three devices of course require a Sprint Everything Data plan.

However, for me the more significant impact is that operators and oems are finally realizing that customers don’t buy phones or services or apps… what they really want are positive experiences

… be that socially connected, sports, education, health and fitness, fashion etc. This is something that our User Experience team has been evangelizing for the last 7+ years. Whether its 80k apps on Android or 250k on Apple store or 10K on RIM, one common experience has been exasperation at the huge waste of time, energy and emotions in finding ANYTHING!!! Which happens first, eyes glazing over or fingers cramping with so much scrolling? Either way the net result is often a disappointing experience which the early smart phone coolaid drinkers have learned to live with.

Newbies to the smart phone arena, will certainly have less tolerance and spend less time to personalize their device and enable applications. Sprint ID is well tailored to the next wave who are taking tentative steps into the smart phone space

 

David Kerr

dkerr@strategyanalytics.com

Rumors abound that Qualcomm has cancelled its direct to consumer Flo TV service. Before delving in to the implications of such a decision it is important to note that as of now Qualcomm’s white label service it sells to carrier partners is still intact even if it is next on the chopping block.

Qualcomm’s decision to kill its never commercially viable direct to consumer Flo TV should come as no surprise. Many of the challenges were discussed in a report published in December 2009. The service suffered a number of hurdles to adoption:

1. The cost of FLO TV dedicated hardware
2. The cost of FLO TV service
3. The linear nature of the FLO TV service

The challenge in winning consumers was not unexpected but there are important lessons that carriers can take from Qualcomm’s inability to drive market demand for mobile broadcast TV services if they in fact plan to continue offering mobile broadcast services and most of these challenges are the same as Qualcomm faced in their direct to consumer play.

1. The cost of mobile TV enabled phones. Of the 4 AT&T phones that offer mobile TV service (mostly featurephones with touchscreens) only one is free while the others range in price from $49.99 - $149.99. Compare this to the 20+ free phones available to consumers and the reasons users may opt against mobile TV enabled phones are clear. As smartphones continue to gain momentum in established markets feature phones are attractive to a more communication/cost-centric audience. Therefore an increase in hardware cost to the carrier must translate to an increased cost to the end user. Therefore the increased cost of hardware featuring mobile TV makes the devices less attractive.
2. The cost of the service. Despite carriers testing various models – such as giving away broadcast channels for free or offering free service for a few months – the price of the service remains too high for the value it offers. If in fact the type of user opting for a feature phone is not multimedia inclined even then even a nominal fee – in this case $10 which is more than nominal – could be enough to scare away potential subscribers.
3. The demand for linear TV services. This will always be an issue for Flo services and in the increasingly on-demand world full of alternative video options paid mobile linear services simply don’t make sense for users.

In countries – such as South Korea – where most phones have mobile broadcast chipsets combined with free robust services adoption can even be deemed modest successes and the revenue for content owners in such a scenario remains unclear. But it does so only because it is free. Just because Qualcomm is retreating from the direct to consumer space doesn’t necessarily mean its white label service will also be a failure. One potential albeit unlikely side effect carrier should be wary of is that Qualcomm’s content partners – recognizing the limited opportunity the market offers combined with the limited success of these services could abandon mobile TV limited the amount of content available.

This only underscores the challenges that carriers in developed regions are facing. In an era where the carrier is becoming increasingly marginalized for phone services they must decide where to invest and right now that investment in both development, marketing should be behind their own branded app stores.

Qualcomm on the other hand should decide what other services the FLO spectrum can be used for. One opportunity regularly touted was aftermarket accessories for smartphones that could receive Flo broadcasts – but that too would have inevitably failed so now Qualcomm must go back to the drawing board. After spending a reported billion dollars on FLO technology and spectrum it may be worth Qualcomm considering licensing the spectrum for some other use..

September 23, 2010

While there has understandably been a lot of attention given to consumer apps post iPhone and the plethora of application stores that have emerged, business mobility and enterprise mobility offer huge potential from horizontal to vertical applications and from smartphones to iPads and tablets to superphones.

In both NA and W. Europe, business customers account for under 30% of users but are the dominant streams of both revenue and profits for operators. On the device side, premium priced models from RIM, Nokia, and Microsoft Mobile licensees as well as the iPhone have long been key drivers of profits in a market where low single digit margins are the norm.  The explosion of smartphone choices has led to the battle ground moving beyond the corner office, to other executive and now increasingly the midlevel manager.

With a new range of devices competing for space in the corporate market, the issue of corporate versus individual liable has become an increasing priority for IT decision makers. Add on the complexity of managing an expanding list of OS (Android, iPhone, Windows Mobile, Symbian, Palm, MeeGo, Bada from Samsung) and the growing importance of mobile portable devices with access behind the firewall and one can already feel a corporate migraine forming…. And that’s before we even discuss device management, mobility policy, device retirement etc. etc.

I am looking forward to CTIA Fall (San Francisco October 5-7) and in particular to the Enterprise Mobility Boot Camp moderated by Philippe Winthrop of the Enterprise Mobility Foundation. The boot camp spread over two days will address many of the issue listed above with our own Andy Brown featured in an analyst roundtable on October 6^th.  I look forward to meeting you there. Don’t hesitate to contact Philippe for passes to this the deep dive enterprise mobility event.

David Kerr

David Kerr
Snr. VP - Global Wireless Practice
Tel: +1 617 614 0720
Mob: +1 262 271 8974

Amazon has announced that over the past 12 months purchases made from mobile devices generated US$1 billion in sales, representing almost 3.5% of its total net sales during that period. $1 billion is clearly a large amount of money and 3.5% not an insignificant share. Furthermore, Jeff Bezos indicated that smartphones have had a strong role in driving mobile commerce to date, which is not surprising given the larger screen size and better resolution provides an improved product browsing experience over standard phones:- "The leading mobile commerce device today is the smartphone, but we're excited by the potential of the new category of wireless tablet computers. Over time, tablet computers could become a meaningful additional driver for our business." Unfortunately, there was little further information relating to the type of products being purchased via mobile, e.g. whether or not it includes the sale of ebooks, or the % mix between digital content (e.g. MP3) versus physical goods? However, this announcement, combined with the increasing volume of web traffic generated by mobile phones, and the fact that that the global smartphone installed base is set to expand from 458 million in 2010 to 1.1 billion by 2015, has a clear implication for web retailers that are seeing increasing mobile traffic to their sites: Integrate mobile to your digital sales process, because a growing share of consumers are using their phones to buy stuff! Perhaps not surprisingly, Amazon has been ahead of the curve with respect to mobile commerce for sometime. It currently offers dedicated smartphone applications for the major smartphone platforms (Android, Blackberry, iPhone, and iPod Touch) in the US. The absence of support for Symbian is clearly a consequence of Symbian’s low penetration in the US. Amazon has also designed mobile optimised sites for smartphones and in June 2009 Amazon’s subsidiary A9.com acquired Snaptell, a company focused on image recognition and visual search technology which allows users to take photos of products and find pricing information, rather like Google’s Goggles (still Beta) and ScanBuy. Linking the image capture capability on camera phones with off-board product recognition, price comparisons and product reviews can help to convert the handset into a powerful commerce device in my opinion. Perhaps most importantly though, Amazon allows users to register their payment details to their account and to make purchases using a single click, through its 1-Click ordering system, which eliminates the inconvenience of manually entering payment details. For many web retailers adapting for mobile is not likely to be a priority yet – few will have forgotten the dotcom bubble bursting. However, I believe this announcement by Amazon provides an indication of the potential size of the missed opportunity if they do fail to address evolving consumer behaviour. Nitesh Patel

 

 

 

The inevitable movement to tiered pricing which started with Verizon Wireless acknowledging its plans to do so for LTE and has been accelerated with the much anticipated data plan announcement by AT&T this week.  So, what next?

• Will we see significant priced based competition for mobile data among the top US operators?
• Will we see significant movement in share of adds for AT&T as iPhone wannabees are tempted by a plan of only $15?
• What impact will lower data plans for smartphones have on AT&T’s Quick Messaging Devices and Verizon Wireless equivalent?
• How long before we see family data plans and shared usage across multiple devices?

The move by AT&T is a smart play to extend the smartphone momentum as the low hanging fruit of Apple aficionados, multimedia techies and style seekers willing to pay top dollar has been significantly penetrated.

There is no doubt that the iPhone remains the coolest device on the marketplace and the end to end user experience remains easily the best in class. So, reducing the TCO to attract the next 20% of customers to a paid data plans while educating customers about data usage levels and managing the traffic risk is very smart business in my opinion.

The lower price points will help AT&T maintain its current leading share of smartphone users and may be attractive to casual social networkers

• Although the 50 photos allowance is not exactly generous! For casual messenger, and social network status checking and moderate email the new DataPlus plan is quite attractive overall and will likely attract a portion of customers who would otherwise opt for a Quick Messaging Device from AT&T or a competitive offering from Verizon Wireless.

I do expect to see some modest price competition among the big operators

• with T-Mobile most likely to drive prices lower given their need for scale and to protect their predominantly youth centric customer base. but also expect an increasingly strong Verizon Wireless handset line up to compete strongly.

The impact on Quick Messaging Devices is in my opinion likely to be modest

• as a traditional qwerty remains overwhelmingly the input of choice for heavy messengers in the US although there is definitely room for lowering the $10 mandatory data plan on featurephones

Family data plans and data plans which allow access across multiple devices are in the pipeline

• but will probably not make an appearance until 2012+ as part of LTE offerings.

From a device vendor perspective, the move to lower priced iPhone plans is likely to put further pressure on vendors like LG who have yet to make a credible offer in this space as well as RIM who will find more competition in the consumer space.

The lower pricing on data plans will be music to the ears of ambitious new entrants like Huawei, ZTE who plan to bring mass market priced devices to the US & Europe. The lower TCO of smartphones as a result of downward pressure on service prices boost their addressable market.

The industry has long talked about operators evolving into smart pipes by exposing a variety of network based assets for developers to use in their services and applications. The pressure on carriers to do so is certainly mounting. Smartphone sales are blazing and the market for mobile phone applications and browsing is going gangbusters, yet other than revenue from selling data operators are not seeing a lot of the action, particularly as app sale growth is happening through OEM stores rather than carrier portals. Take Telecom Italia just as one example:

• For the first three months of 2009 it reported a 27% drop in content revenue over the same period the previous year from €343m to €250m. This compares to 13% growth in browsing revenue from €469m to €530m.

Therefore increasingly, operators are considering how they can enter the value-chain of applications and services delivered over the top of their networks by exposing network capabilities such as their charging platforms, user location, presence, and user profile information to developers via APIs. There certainly seems to be demand for it if the Mobile Entertainment Forum’s Smart Enablers web seminars have been anything to go by. During these presentations the BBC and Yellow Pages, among other content providers, clearly stated that they hope in future to be able to access carrier information such as network latency for video streaming and user location data.

The stumbling block remains how operators commercialize these assets in a way to make it worth their while, while not employing a model that discourages the developer community. Alcatel-Lucent (ALU), a company that usually sells equipment, has come up with what it believes is a solution. Its Open API service, which will be discussed in more detail in an up coming Insight titled, Commercial Model A Stumbling Block To Alcatel-Lucent's Open API Service, proposes a revenue share model to compensate operators for sharing network based data with developers.

ALU proposes developers take between 60%-75% of application revenue, operators between 7%-10%, 3% to ALU to cover costs and the remainder to any third-party API providers such as advertising networks.

ALU claims to have already signed up some operators to Open API, but my initial thought is that at 7%-10% carrier revenue share represents a significant discount on the 30-70% operators currently receive from billing. Although I believe this type of revenue sharing agreement and API aggregation model is the way forward, the big questions are whether operators see it that way, and importantly, whether or not they are prepared to lower their lucrative 30-70% revenue share?

Nitesh Patel

Forecasting can be a tricky business. Every so often, a truly paradigm shifting event occurs that requires a wholesale re-think of how emerging markets will develop. Such is the case with Facebook Zero – a stripped down version (no pictures, videos, etc.) of the social network offered to non-data subscribers in emerging markets for free at 0.facebook.com.

It has been reported, and our newly updated draft social networking forecast (to be published in July) confirms that about half of all page views on the mobile web are social networking related. Facebook Zero should tip the balance further in favor of social networking in emerging markets.

The impact of the 50 carrier, globally supported Facebook Zero will be huge for users, carriers, and competitors.

1. Locking users in. Using its size, Facebook has been able to negotiate deals with carriers that other social networks or start-ups will not be able to rival. As individuals, their friends, and their families sign up for the free service the network effect will take hold and position Facebook as the de facto social network.

2. Reach. According to Strategy Analytics’ Global Smartphone Sales Forecast by Country: Asia Pacific & Emerging Markets and the Worldwide Cellular User Forecasts, 2010-2015, the number of mobile users in India in 2009 was 389.9m with just under 6 million smartphone owners or 1.5% of the mobile population using a smartphone. While not all these non-smartphones millions more users will have access to Facebook now than in the past expanding Facebook’s reach exponentially. And India is just one of the dozens of countries being deployed to (see chart below for the rest).

3. Advertising. A key revenue driver will be advertising. Facebook will have a sticky user that relies exclusively on its service to share personal information and location data which is necessary for targeted advertising to hundreds of millions of users in emerging markets. However, if carriers are not sharing in the revenue opportunity they risk missing out on the more than $7b in browsing revenue associated with social networking in 2010, according to the Global Mobile Social Networking Forecast 2006-2013.

4. Data Upgrades. While many users in emerging regions may not be prepared to sign up for data services yet, enticing users by showing what the mobile web offers with a stripped down version of Facebook could be a sufficient appetizer to winning their business in the future.

5. Boxes out competitors. The very hot mobile social networking space, which we have analyzed Here, Here, and Here will be owned by Facebook in emerging markets if Facebook can effectively roll out its geo-location it has touted. Facebook has just went from the 800lb gorilla in mature markets to the 2 ton gorilla

The service is also important for Facebook which has recently been banned in Pakistan and faces competition from feature phone staple – text messaging which serves as a crude social network in some emerging regions. What this means for partners – be it carriers, content owners, advertising networks, or others – is that Facebook is the partner companies will need to work with to immediately reach into emerging markets.