Global Mobile Market Update 2012 (Annual Edition) April 30, 2012Posted by chetan in : 3G, 4G, AORTA, BRIC, European Wireless Market, Indian Wireless Market, Japan Wireless Market, Mobile Breakfast Series, Mobile Future Forward, Mobile Operators, Mobile Patents, Mobile Payments, Patent Strategy, US Wireless Market, VoIP, Wireless Value Chain, Worldwide Wireless Market , 7 comments
Global Mobile Market Update
State of the Global Mobile Union - 2012
- Total Global Mobile Revenues to hit $1.5 Trillion in 2012, over 2% of Global GDP
– Top 10 operators control 42% of the global data mobile revenues
- Mobile Services Revenue exceeded $1 Trillion for the first time in 2011
– The number of mobile operators with > $1 Billion in yearly data revenues will touch 50 in 2012
- Total Global Mobile Data Revenues went past $300 Billion in 2011
– Non-messaging data now owns 53% of the global mobile data revenues
- Mobile Operator Profits have more than doubled over the last 10 years.
– However, the wealth is not divided evenly. Asia’s share has tripled at the expense of Europe whose profit share has declined by 50%
- Total Global Subscriptions to exceed 7 Billion in early 2013
– China exceeds 1 Billion, India 950 Million. Subscriber growth is in Asia, Revenue growth is in Asia+North America
- China and India represent 27% of subscriptions but only 12% of the global service revenues
– US represents only 6% of the subscriptions but 21% of the global service revenues, 26% of the data revenues, and 27% of the global CAPEX
- Mobile Devices are now exceeding traditional computers in unit sales + revenue
– 70% of the device sales in the US are now smartphones. Device Replacement cycle is shrinking
- Samsung and Apple now account for 50% of the smartphone unit share and 90% of the profit share
– Difficult environment for other OEMs esp. when ZTE and Huawei are coming strong from the bottom. It will be difficult for pure play device OEMs to survive long-term
- Tablets (iPads) has created a new computing paradigm that is having a significant impact on commerce, content consumption, and developer investments
– Apple will continue to dominate the segment and iOS will be the leading OS for the segment. Amazon, ZTE, Huawei, to chip away at the sub-$200 tier.
- Mobile Broadband (4G) is being deployed at a faster rate than previous generations, first time data is leading the charge
– Over 1.5 Billion broadband connections by 2012
- Global Mobile Apps revenue has completely (and irreversibly) tilted to off-deck
– The decline is directly proportional to the increase in smartphone penetration by region
- All major markets are consolidating with the top 3 players at 85% of the market
– Regulators will have to be more prudent and proactive about managing competitiveness and growth
- Mobile data traffic 2x YOY in most markets. Mobile Data will be 95% of the global mobile traffic by 2015
– Many countries are facing spectrum exhaust in the next 2-3 years (in certain markets)
- Mobile Signaling takes up 2x the resources as Mobile Data Traffic
– Signaling traffic is growing faster than the data traffic on broadband networks
- Connected device segment is growing at the fastest pace in the western markets
– Operators will have to quickly adapt their strategies to stay relevant in this segment
- Several multi-billion dollar opportunity segments are emerging
– Mobile Advertising, Mobile Commerce, Mobile Wellness, Mobile Games, and Mobile Cloud Computing to name a few
- Mobile Ecosystem has become very dynamic and unpredictable
– The 5 Platform Amigos – Apple, Google, Amazon, Microsoft, and Facebook dominate though the first two have the real power
- Mobile Operator Revenue is under pressure from OTT Players
– OTT Share of the Global Mobile Revenues increased to 4%
- OTT players forcing operators to up their game
– Operators are partnering, launching their own OTT apps, increasing tariffs to manage the margins
- Intellectual Property has become a key component of long-term product strategy
– 21% of all patents granted in US are mobile related. Top 20 control 1/3rd of the overall mobile patent pool
- Mobile Patent Rankings: US – IBM, Microsoft, Nokia. Europe – Alcatel-Lucent, Nokia, Samsung. Overall – Nokia, Samsung, Alcatel-Lucent
– OEMs – Nokia, Samsung, Sony. Service Providers – AT&T, NTT DoCoMo, Sprint
- In 3-5 years, with few exceptions, if a company is not doing majority of its digital business on mobile, it is going to be irrelevant
– Majority (by a good margin) of the consumer interactions with brands will be on mobile
- Mobile has become the single most important digital channel for engaging consumers and it shows
– In the US, mobile revenues were > all Ecommerce And > Music, ISP, Hollywood, and Cable revenues combined
- We have entered the mobile 3.0 era where “data” is all that matters and it disrupts the value chains
– Data will drive majority of the network growth, Contextual data will drive majority of the VAS growth
- There will be more changes in the next 10 years than in the previous 100
– The value chains will keep disrupting every 12-18 months by the new players and business models. Several verticals are already getting redefined e.g. retail, health, education, etc.
The Big Picture
The global mobile industry is the most vibrant and fastest growing industry. We expect the total revenue in the industry to touch approximately $1.5 Trillion in 2012 with mobile data representing 28% of the mix. Mobile data services revenue stood at 33%. Global Mobile Data revenues eclipsed $300 Billion for the first time in 2011. It is also the first year in which non-messaging data revenues will make up the majority of the overall global data revenues at 53%.
By the end of 2011, the global subscriptions exceeded 6 Billion. The first 1 billion took over 20 years and this last one took only 15 months. The primary growth drivers are India and China which are cumulatively adding 75M new subs every quarter. China became the first country to eclipse the 1 billion mark in March 2012. India is likely to arrive at the milestone by early 2013.
Smartphones are driving tremendous growth around the globe. Amongst the major markets, US leads with 69% sales. The global figure stands at approximately 32%. Some operators expect 90-95% of their device sales to be smartphones in 2012. In terms of the actual smartphone penetration, we expect the US market to eclipse the 50% mark in 2012.
China leads in the number of subs but US dominates in both total and data revenue. A number of emerging nations are now in top 10 – Brazil, India, Russia, Indonesia, Pakistan, Mexico while once dominant – Korea, UK, Italy, Germany have dropped off or slipped in rankings.
Global Mobile Data Growth
Japan continues to be the leader in mobile data with NTT DoCoMo, KDDI, and Softbank Japan ahead of the pack in terms of mobile data revenue and data as a % of total ARPU. Country average is now at 60%.
Next, Australia and the US have made good inroads in the last two years. In fact, if we look at the overall data revenue, US is much further ahead than any other nation due to the size of the market.
While India has the highest subscriber growth rate in the world right now, the revenue generating opportunity remain down right anemic compared to other major markets with average dropping down to $2.50 in overall ARPU. Even with significant subscriber base, there is going to be a general lack of opportunity in the market for the next couple of years relative to other markets.
Devices – Changing Landscape
Apple has had the tablet space to itself. Thus far the response from the competitors has been tepid esp. on the pricing dimension. Apple has had such a mastery over the supply-chain and months ahead of the competition that by the time they figure out details, Apple already locks up the pricing advantage for the cycle. OEMs try to catch-up on the features but can’t do on the margins. OEMs can grow the pie by bringing products at a better price points that helps attract different demographics to the mix. Microsoft can make good inroads into the space with its Win8 tablet release in 2012 but it will be again in a catch-up mode as the iOS ecosystem will be even more robust by then. The cheaper Android tablets will do well in the market. As expected, tablets will pretty much eliminate the need for netbooks and are starting to eat into the desktop/laptop revenue.
Apple and Samsung are strong on the top. Huawei and ZTE are coming up strong from the bottom. The middle tier players will have a tough time going forward.
It will be difficult for pureplay device OEMs to survive long-term.
Nokia and RIM are under severe market scrutiny as investors and developers leave in droves. Lack of product planning and execution has left their market share in disarray. Nokia’s valuation has been cut into half. Nokia’s release of N9 shows the engineering and creative design depth but a lot is riding on the first generation of Nokia Windows Phones (Lumia). While the market hasn’t shown much appetite for Windows phone thus far, a good family of devices might be able to slow the loss trajectory and position the combined team for the up-for-grabs 3rd spot in the ecosystem. Given that the computing is shifting to mobile devices, we can expect some of the weaker desktop/laptop players will exit the industry.
Majority of the tablet use is in the WiFi mode because the primary use case is indoors and WiFi gives a better (and cheaper) user experience. However, of the users who use cellular, the churn is low. Once operators start to roll out user-friendly family data plans across multiple devices, we can expect the cellular activation go higher (e.g. Rogers, Vodafone Spain) but will still be dominated by WiFi overall.
Mobile VAS and OTT – The Big Picture
• The traditional operator revenue streams of
– Voice – declining and under threat from VoIP
– Messaging – flattening/declining and under threat from IP messaging
– Access – rising but margins are shrinking fast
– VAS – declining in proportion to the growth of smartphones
• Operators are fighting back with
– Voice – launching their own VoIP apps e.g. Bobsled from T-Mobile, partnering with VoIP players e.g. Skype integration, charging for VoIP apps e.g. TeliaSonera €6/month
– Messaging – launching their own IP messaging apps e.g. Huddle from AT&T, partnering with IP messaging players e.g. Whatsapp partnership
– Access – Tiering
– VAS – launch their own VAS apps and industry vertical apps and services
Managing Mobile Data Traffic and Profits
As a result of the data tsunami, there are two types of opportunities that are being created, one that take advantage of the data being generated in a way that enhances the user experience and provides value and the other in technologies that help manage the traffic data that will continue to grow exponentially.
To be able to stay ahead of the demand, significant planning needs to go in to deal with the bits and bytes that are already exploding. New technical and business solutions will be needed to manage the growth and profit from the services. Relying on only one solution won’t be an effective strategy to manage rising data demand. A holistic approach to managing data traffic is needed and our analysis shows that the cost structure can be reduced by more than half if a suite of solutions are deployed vs. a single dimensional approach and thus bringing the hockey stick curves of data cost more in line with the revenues and thus preserving the margins.
The decision making process within the operator organizations will need to be streamlined as well. Operators should also consider creating a senior post which focuses on both the cost side and the solution side so they can devise and institute a sustainable long-term policy and keep the margins healthy.
Mobile Intellectual Property
• The IP tussles are playing out as expected
• Players with strong IP portfolios will be able to command better negotiating positions, new revenue streams, competitive positioning over the long-term
• On average mobile companies file patents 1.7 times more in the US vs. Europe
• Mobile Patent Leaders in US: IBM, Microsoft, Nokia
• Mobile Patent Leaders in Europe: Alcatel-Lucent, Nokia, Samsung
• Mobile Patent Leaders in Infrastructure: Samsung, Alcatel-Lucent, Ericsson
• Mobile Patent Leaders in Devices: Nokia, Samsung, Sony
• Mobile Patent Leaders in Service Providers: AT&T, NTT DoCoMo, Sprint
• Top 20 control 1/3rd of the total mobile communications patent pool
Mobile Competitive Dynamics
The Rule of Three is evident in all major markets. While the percentage market share might vary, on an average, the top 3 control 93% of the market in an given nation. It doesn’t matter if the market is defined by “controlled regulation” like in China, Korea, and Japan or if it is “open market” driven in markets such as the US, UK, and India. Eventually, only top 3 operators control the majority of the market. There are niches that others occupy but they are largely irrelevant to the overall structure and functioning of the mobile market.
Markets such as US and India experienced similar competitive environment in their hyper-growth phase. For the US, this phase was in the nineties-mid-2000s while India has been experiencing the similar environment in the last 3-4 years. In both cases, at the start there are 5-6 players with no more than 25% market share but higher than 10% of the mix but gradually the market forces enable consolidation. Over a period of 18 years, US is settling into a “top 3” operator market. India’s brutal price wars are going to trigger the consolidation in the next 12-24 months and will eventually settle into a structure similar to other markets.
The competitive equilibrium point in the mobile industry seems to when the market shares of the top 3 are 46%:29%:18% respectively with the remaining 7% being allocated to the niche operators. To achieve some semblance of equilibrium in the market the top operator shouldn’t have more than 50% of the market share and the number three player shouldn’t have less than 20%. This helps create enough balance in the market to derive maximum value for the consumer.
Mobile operators will face some hard choices in developing and protecting the role they want to play in a given region and the ecosystem at-large. The strategy they choose will have a direct impact on the expected EBITDA margins, investment required over the long-haul, how investors view them, and on the competitive landscape of the country. Given, the fast pace of globalization, new rules and trends might emerge over the course of this decade that further define “communications” and “computing” as we know.
Key Industry Micro-Milestones
- Apple captures 70% of mobile device profits – defies gravity, obliterates competition
- Apple mobile appstore downloads exceed 25 Billion, 100 Million on Mac – can you spell domination
- Samsung ends Nokia’s 14 year reign as the device king – brutal execution
- Android 300M activations – Juggernaut
- Paypal does $7B in mobile transaction volume
- Square does $5B in commerce transaction volume
- Google > $5B in mobile revenues
- Microsoft revenues from Android > Windows Mobile
- Pandora’s 70% usage is on mobile, Twitter’s 60% of the usage is on mobile – heading towards a mobile-dominant world
- Facebook Instagram Acquisition $1B – Mobile only acquisition to beef up mobile strategy
- Angry Birds approaches a billion downloads
- ESPN does 3.1 billion minutes on mobile in 3/12 – Mobile is where the action is
- Skype traffic over 150 billion minutes – OTT pressure
- KPN messaging volumes decline 15% YOY – OTT pressure
- Mobile Security threats grow 7x in last two years, Android threats up 3000% – Mobile IS IT
- Cisco BYOD ratio – 70% (up 52% in 2011) - BYOD is creating new opportunities for vendors
- US data traffic over 130 quadrillion bytes/month in 2011 – Data traffic 2X YOY, welcome to the yottabyte era
- Fandango sells quarter of its ticket on mobile – commerce is happening
- Expedia does > $1B in mobile commerce – see above
- Microsoft Nokia Multi-Billion partnership – It takes two to tango
- Lightsquared fails – Keep your friends close, enemies closer
- Google Motorola $12.5B – IP becomes key to strategy
- Nortel Patent acquisition $4.5B – IP becomes key to strategy
- AT&T/T-Mobile Failure – DOJ/FCC put down the gavel
- 40% of Kenya’s GDP comes from mobile money – impact of mobile is pervasive
- Millennial Media IPO at $2B – first public market validation of the mobile advertising space
- HP gives up on Palm – Competition forces Corporate Schizophrenia
What to expect in 2H 2012
• More Tiering, faster pace of change of plans. More options, family data plans
• Cost reduction is as important as revenue generation. More players will align their value-chains and cost structures
• Facebook IPO is probably going to be the single biggest event in the technology industry in the next few months.
• Radios will start connecting the digital world with the physical world with significant disruption opportunity
• Mobile Payment Networks will remain intact for the near future as the ecosystem largely focuses on building value on top of the existing exchange platforms
• The intersection of Social, Location, Identity, and Gaming is creating new opportunities
• With connectivity becoming pervasive, mobile will fundamentally start to alter the legacy infrastructure – retail, health, education, energy, computing, travel, entertainment
• Significant tablet adoption in the enterprise directly impacting the traditional computer manufacturers
• Both HTML5 and Apps will continue to grow, the relevancy to any given application will depend on the reach and economics requirements. HTML5 is not going to replace Apps.
• Mobile data growth will double again in 2012. Significant opportunities in managed and understanding of mobile data growth
• Regulators will need to evolve to keep up with the trend to keep their nation globally competitive
• More IP scuffles before licensing settlements
• Consolidation of weaker players, more global M&A
• Significant progress in emerging areas like mHealth, mPayments will come from the developing world while the western countries get mired in regulatory and legacy mess
• Several players face challenging times ahead and 2012 will be critical in their turn around sojourn.
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in May 2012. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.
Mobile Patents Landscape – An In-depth Quantitative Analysis April 17, 2012Posted by chetan in : 3G, 4G, AORTA, European Wireless Market, Infrastructure Providers, Intellectual Property, Mobile Advertising, Mobile Applications, Mobile OEMs, Mobile Operators, Mobile Patents, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment
In April 2012, in its report on Intellectual Property, the US Patent Office (USPTO) concluded that the entire US economy relies on some form of IP, because virtually every industry either produces or uses it. The foreword of the report said,
“Innovation protected by IP rights is key to creating new jobs and growing exports. Innovation has a positive pervasive effect on the entire economy, and its benefits flow both upstream and downstream to every sector of the U.S. economy. Intellectual property is not just the final product of workers and companies—every job in some way, produces, supplies, consumes or relies on innovation, creativity, and commercial distinctiveness. Protecting our ideas and IP promotes innovative, open, and competitive markets, and helps ensure that the U.S. private sector remains America’s innovation engine.”
Intellectual property has been an integral part of the economic engine of the western world for many decades if not centuries. Over the past two decades, nations and corporations have competed on the creation, funding, execution, and protection of the new ideas. Increasingly, the role of mobile devices, networks, and applications has become an important component of the growth story worldwide.
To say that the mobile devices have become the remote control of our lives would be an understatement. Mobile phones stay attached to us almost 24 hours a day. From waking us up in the morning to keeping us connected and entertained, from speeding up a commerce transaction to being a trusted advisor; mobile is fundamentally changed how we as consumers behave and how societies and cultures evolve over time. As a result, there has been a big influx of investment and innovation over the last decade. This surge of activity has also translated into increased number of patent filings in the two major jurisdictions of US and Europe. Even the developing countries like China and India have seen a significant increase in patent activity in the country. In fact, in terms of filings, China’s share of the global patent grants has increased from 0.8% in 1996 to 15% in 2010 placing it third behind Japan and the US and well ahead of Korea and Europe.
According to the US Patent Office (USPTO), in 2011, the number of applications reached over 535,000 growing by almost 54% from a decade ago. Similarly, the number of patents granted grew 35% to 224,505 by the end of 2011. The numbers of foreign filings are now in the majority for both the applications filed as well as the patents granted. In Europe, similar trends were observed where the EPO (European Patent Office) patent grants increased by 46%.
The number of mobile related patents that were granted by the USPTO and the EPO increased significantly over the course of last decade. The US market saw a 390% increase while the European market saw a 173% increase in mobile related patent grants.
Another interesting fact is that as of Q1 2012, over 21% of the patents granted by the USPTO now are mobile related. This grew from around 2% in 1991 and 5% in 2011. In Europe, roughly 9% of the patents granted are related to mobile.
Chetan Sharma Consulting analyzed almost 7 million patents granted by the USPTO and EPO over the last two decades to understand how mobile has become a key enabler for all technology companies. Furthermore, we looked at patent granted to the top 65 technology companies who are active in the mobile space to understand their relative strengths and weaknesses in the mobile patent landscape. In a first of its kind study, the paper presents and discusses these findings in more detail.
Your feedback is always welcome.
We will be keeping a close eye on the trends in the wireless data sector in our blog, twitter feeds, future research reports, and articles. The next US Wireless Data Market update will be released in May 2012. The next Global Wireless Data Market update will be issued in Apr 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.Mobile Breakfast Series, US Wireless Market, Worldwide Wireless Market , add a comment
Our first Mobile Breakfast Series event was in Seattle back in Sept of 2009. Since then, we have expanded the program to include a full day thought-leadership summit – Mobile Future Forward which is going to be on Sept 10th this year. I am very excited to announce that we are expanding the MBS series to Atlanta and the first edition is going to be on June 22nd. The topic of discussion is “Connected Devices and Connected Consumers.” If you are in Atlanta or nearby cities, hope you will join us. Also, please let your friends know about the event.
Atlanta, June 22nd 8:30-10:00 am
We have a terrific line-up of speakers.
The connected devices segment is the fastest growing category of the market and is also the most profitable due to higher margins. Consumer behavior is changing as they consume and interact with content across multiple devices. Connected devices are also impacting a rethink in virtually all key verticals – healthcare, housing, travel, entertainment, communication, energy, and others. It is also disrupting the traditional value chains and revenue models. Which segments are yielding the highest ROI? Does computing fundamentally change forever or are connected devices just a part of the PC hub? How does M2M fit into the world of smartphones and tablets? How are businesses and solution providers taking advantage of the growing connected universe? What’s most important for the consumer and what are their expectations on design, pricing, and connectivity? From connected cars to wireless pill bottles, our world is going to change forever. Meet the leaders who are shaping the growing connected devices ecosystem to get insights that will inform your strategy and decide your future revenue streams.
David Christopher, Chief Marketing Officer, AT&T Mobility and Consumer Markets
David Christopher, chief marketing officer of AT&T Mobility & Consumer Markets, leads product strategy, marketing and execution across AT&T’s extensive portfolio of wireless and consumer communications, entertainment products and services. Previously, David served as chief marketing officer for AT&T’s wireless business unit–where he led all marketing functions and drove the company’s strategy to introduce groundbreaking devices and applications. He also served as vice president of product management for AT&T’s wireless unit. David currently serves on the Ad Council’s board of directors and its executive committee.
Louis Gump, VP, CNN Mobile
Louis Gump is vice president of CNN Mobile, responsible for managing CNN’s mobile business globally. Recognized internationally as a seasoned leader in the mobile marketplace, Gump directs CNN’s mobile strategy and development to meet consumer needs and grow overall reach, usage and revenue. Before joining CNN, Gump worked at The Weather Channel, where he led their mobile business. Since 2003, Gump has served on the Board of Directors for the Mobile Marketing Association (MMA), where he is past global chairman as well as past global treasurer. Last year, he received the MMA’s first annual Lifetime Achievement Award for his leadership.
Biju Nair, EVP and Chief Strategy Officer, Synchronoss
Biju Nair has over 18 years’ experience as an entrepreneur and technology industry leader. In this role as CSO, Mr. Nair is responsible for leading the strategic vision of the connected devices and cloud computing for profitable growth of the company’s product portfolio. Prior to joining Synchronoss, Mr. Nair was the Chairman & CEO of Sapience Knowledge Systems, Inc., a venture backed wireless software company (acquired by Synchronoss Technologies in 2011). Previously, Mr. Nair held the position of Senior Vice President & GM of the Connectivity and Security Group at Smith Micro Software (NASDAQ: SMSI) and Corporate Vice President & GM and founder of Mobility Solutions Group at PCTEL, Inc. (NASDAQ:PCTI) which was acquired by Smith Micro in 2008).
Mobile Breakfast Series – How Mobile is Impacting Media, Commerce, and Consumer Behavior April 3, 2012Posted by chetan in : AORTA, Connected Devices, Mobile Breakfast Series, Mobile Commerce, Mobile Content, Mobile Ecosystem, Mobile Future Forward, Wireless Value Chain, Worldwide Wireless Market , add a comment
We entered our 4th year of running Mobile Breakfast Series and hosted 2012’s first Mobile Breakfast Series on March 28th. The topic of discussion was “How Mobile is Impacting Media, Commerce, and Consumer Behavior.”
First of all my thanks to our series partner: OpenMarket and Synchronoss Technologies. Both of them have been great partner to this series and I very much appreciate their support.
Before I get into the details of the panel discussion, a few announcements about the upcoming events. We are planning on hosting MBS events in Atlanta and London this summer and need your assistance in getting the word out. On June 22nd, we will be in Atlanta to host a fireside chat with David Christopher, CMO, AT&T Mobility. The following week, we will be in London and in partnership with O2 UK, we will have some great discussion about the future of the Operator/OTT tussle in the ecosystem.
Our fall summit – Mobile Future Forward is scheduled for Sept 10th later this year and we are making good progress in setting up the agenda and the topics of discussion, already have some terrific speakers lined up. The theme is to connected universe, monetizing opportunities. We will open up the registration late April, so, keep an eye for that.
We released our yearly update on the US market earlier this month and you might have noted that 40% of the service revenues are now coming from mobile data. In Japan, this figure is getting close to 60%.
If you look at the consumer IT spend – mobile now occupies 50% of that budget and it is increasing. More than 35% households in the US are mobile only. More than 90% of the devices sold last quarter in the US were smartphones. Mobile influences 30-50% of our commerce transactions. In 2009, ESPN noted that their mobile web traffic is exceeding desktop traffic, now most brands have noted that they are already there or within the next 12-18 months mobile will be the majority traffic owner.
The impact of mobile is even more profound in developing countries. The first billion mobile subs took 250 months, the last billion took only 15 months to 6 billion and we will reach 7 billion in 12 months. Mpesa, kenya’s mobile payment now drives 20% of the country’s GDP. In Bhutan, where I spent some last quarter, mobile is the only way to deliver health care to remote areas. Earlier this month, China surpassed a billion subscribers. The opportunities are literally endless. In 2002, I had the good fortune of writing a book with then CTO of NTT DoCoMo, Dr. Yasuhisa Nakamura and he used to say – mobile networks need become omnipresent like air – clearly he didn’t have to pay for roaming data charges. Mark Weiser, from XEROX PARC, one of my heroes, considered the godfather of pervasive computing who first articulated the concept of everywhere, anytime computing back in the eighties and early nineties would have been proud to see the progress we have made.
Mobile is disrupting many industries – two of the most prominent being media and commerce and it is all driven by how consumers perceive the value of mobility, how they interact with content and devices, and how their consumer behavior is shaped over time. To discuss all of that, we had a great panel.
Michael Bayle, Senior Vice President and General Manager, ESPN Mobile. Michael Bayle is Senior Vice President and General Manager of ESPN Mobile. A former Yahoo! and Microsoft executive, Bayle develops and manages all aspects of ESPN’s mobile strategy and execution, including content production, programming and publishing on every ESPN Mobile platform. He reports to John Kosner, Senior Vice President and General Manager of ESPN Digital and Print Media. Before ESPN, he did stints at Amobee, Yahoo, and Microsoft.
Len Jordan, Managing Director, Madrona. Len joined Madrona in January 2010 and is actively pursuing opportunities to lead new investments. He currently serves on the boards of Cedexis, MaxPoint Interactive, and Zapd on behalf of Madrona. Len has served on the boards of ten early-stage companies and on behalf of Frazier Technology Ventures currently serves on the boards of Control4, DSIQ, Medio, and Wetpaint. Prior to joining Frazier Technology Ventures as a General Partner in 2004 Len spent 16 years in the software industry. He most recently served as a senior vice president at RealNetworks.
Megan Tweed, VP, Media, Razorfish. Megan brings bleeding-edge media strategy and planning innovation to clients like Best Buy, Weight Watchers, and Nike. She is a leading agency and industry voice on the benefits of holistic, platform-agnostic planning and measurement across all viable platforms. Before Razorfish, Megan spent time at Carat and UniversalMcCann working on key global accounts.
Vik Pavate, VP of Business Development, Kovio. Vikram Pavate joined Kovio in 2002 with extensive experience in business development, product management and strategic planning. As vice president of business development, he is responsible for Kovio’s corporate strategy, business development, product management and marketing, OEM relationships and strategic joint development and technology alliances.
We touched upon a range of topics, players, issues, and opportunities. Below is the summary of the discussion:
- ESPN is one of the leading mobile properties – 20M mobile uniques, 9B alerts, active across all screens, 4th largest network. 55 different networks.
- Texting growth have declined but still very important for media and commerce.
- NFC is going to be more successful for other things besides payments. 30M NFC phones shipped in 2011, will more than triple in 2012.
- Many of the European operators like O2 investing heavily in NFC and related services.
- The four major players at the center of mobile commerce evolution are: Google, Apple, Amazon, and Paypal. Apple because they massive number of iTunes accounts, Amazon because of their scale and tenacity in doing things at low margins, Paypal is the most dominant mobile payments player in the market today, and Google because, they are the only major player doing something with NFC and learning.
- I might add Square and Starbucks to the mix. Both are doing some interesting stuff that has scale already.
- Financial institutions have wrestled away the 3% transaction share opportunity from the operators. The opportunities for the rest of the ecosystem are in going to be built on top of that payment platform like couponing, advertising, marketing, loyalty programs, etc.
- US retailers are some of the most inefficient in the world and we are in a for a big reset in the next 2-5 years.
- Tablets are a brand new category and eating away from the PC transactions. Expedia already seeing significant commerce traction on tablets.
- Tablets are becoming substitute for catalogue for many brands like Best Buy.
- 50% of the time, consumers have a second device while watching TV. Tablet usage occurs mostly in front of the TV so companies are looking to engage the users on both the platforms at the same time.
- Android devices are out shipping iOS 3:1 but revenue for developers is lacking. iOS is taking away 75% of the developer projects. HTML5 is also starting to have an impact.Android development is expensive due to fragmentation, roughly 2 to 3 times more.
- Windows, Microsoft, and Nokia likely to make a strong comeback. Nokia is weak in the US but very strong in over 40+ countries. Brands want reach, are likely to gravitate towards Nokia for fulfilling some of their goals. Everyone has
- 12% of the media spend is digital. Mobile takes a significant share of attention but only a tiny fraction of the advertising spend. Reasons – maturity, disconnect between impression and commerce, lack of quantifiable metrics. Millennial Media’s blockbuster IPO at almost $2B is however a good indicator for the segment as it became the first company in the space to be vetted by the public markets.
- There are huge opportunities in local advertising.
- Media consumption and commerce are shifting away from desktop to tablets and smartphones. will create new winners and losers.
- Mobile operators role is likely to be that of the enabler vs. the creator of new services.
- Mobile video consumption and advertising are on the upswing. However, the tiered data plans is starting to give a pause to the advertisers. There are ways operators and content owners/advertisers can work together in the interest of the consumer.
- The integration of social with mobile and location is creating new companies and opportunities.
Always, great to moderate a panel with terrific speakers. MBS audience is top-notch as well. Great questions and follow-up. That’s why it is so much fun putting these together. The next MBS event in Seattle will be on June 7th. Hope to see you there.
Until then, do good work and keep in touch.
Bonus: Some ESPN stats that will rattle your mind
ESPN Mobile enjoyed a record-setting month in March, with new highs for mobile web and app usage, as well as video content and alerts. ESPN mobile web and apps served an average minute audience of 103,000 in March, with an average of 5.1 million daily unique visitors (an increase of 22 percent over March 2011) and 3.1 billion total minutes for the month. ESPN apps in March had 3.6 million average daily uniques (up 125 percent over March 2011) and 1.5 billion minutes (up from 595 million in March 2011).
ESPN Mobile delivered 45 million video starts in March, including 24.6 million from mobile web and 19 million from the ESPN ScoreCenter handset and table apps, both record highs for a single month. In addition, ESPN delivered 1.5 billion alerts in March, also a record high for any month.
(Source: ESPN)AORTA, Frank Meehan, Mobile Devices, Strategy, US Wireless Market, Wireless Value Chain, Worldwide Wireless Market , add a comment
As regular readers and participants of our annual mobile thought-leadership summit – Mobile Future Forward, know that we publish a book that contains essays from thought-leaders on the future of mobile from around the world. For the 2011 edition, we had the good fortune of getting a contribution from Frank Meehan who was then the CEO of INQMobile.
Frank has been behind some of the initial disruptions in the mobile space such as tight integration of Skype when he was with 3 UK much before than it became fashionable to do so. Similarly, his team launched the first Facebook Phone, the first Twitter Phone and proved that a tight integration of the OTT apps makes all the difference. So, I was delighted for him to pen down a piece on “Buying a Mobile Device in 2014” for he has the insights, the experience and the sincerity to tell it as he sees it. I am excited to make this piece available to our readers.
Frank is now with venture capital firm Horizons Ventures (owned by Hong Kong business magnate Li Ka-shing, whose Hutchison Whampoa is the parent company of INQ), Frank continues to be actively involved in some of the most innovative companies that are disrupting the status quo of telecoms.
Thank You Frank.
Buying a Mobile Device in 2014 by Frank Meehan
From its inception the mobile handset has been an unusual consumer device. It became an extremely coveted product that nonetheless was always way behind the fixed world in terms of its capabilities. Hardware was often very design driven, with vendors playing around with cameras and form factor more than the technical capabilities of the handsets. But it was incredibly convenient and desired by all, so the mobile industry coasted along on a relatively closed model that worked for all concerned.
Of course, in 2007 Steve Jobs looked as this cosy situation between handset manufacturers and operators, which in effect did not deliver anything of earth shattering innovation to the customer, decided this status quo was ripe for disruption, and then proceeded to rip up and reshape the industry in a very effective and efficient manner.
So now in 2011, the landscape has altered dramatically, in a way that has left the big vendors of the 2000’s fighting to stay relevant. Over the next couple of years, the hardware "arms race" will accelerate to the point where only a few can really stand the pace at the top - with Apple and Samsung leading the way and everyone else back in second place. Businesses that were set up around specific mobile models and software suddenly have found that mobile really is becoming blended into fixed and that the traditional ways of differentiation are rapidly disappearing.
Mobile devices really are becoming just like "PC’s" in that the customer is becoming more savvy about hardware specifications, and less "brand loyal" with the exception of Apple. In fact looking forward 2-3 years, there will be little to differentiate mobile versus the traditional definition of fixed.
Everything essentially becomes a screen. Whether it is a desktop, laptop, tablet or handset.
These screens will be incredibly high powered. In 2012 we already have quad core chipsets coming. That is an incredible amount of computing power, yet the user interface on mobiles does not take advantage of it. Software is behind hardware now, except for 3D games, there is little on a handset that takes advantage of the processors.
So the focus now will be developing software to match this rapid processor jump. Already with Windows 8 we’re starting to see the first natural user interfaces that were first envisioned back in the film Minority. This is the start of the next big jump in a user experience, where the consumer naturally just shifts content around and will only get faster, more visually striking and more useful.
When asked to think about any future vision or experience, I try to articulate the answer in terms of how a customer will actually be driven to purchase that product at the point in time, which in this article is set at 2014.
The mobile device buying experience for a customer in 2014
A customer considering buying a mobile device, in 2014 will have an incredibly wide range of choices about where to buy and what to buy, with four main areas of choice:
1. The ecosystem. In 2014 there will still be 3 major OS ecosystems to buy into, which help connect all their devices, from home to car to work. Those will be from Google, Apple and Microsoft. Everything else will have too small a market share to be significant.
The ecosystems are not mutually exclusive, since the key companies have long developed cross platform versions of their products, and HTML5 has largely replaced vendor controlled application stores. But each customer will have the majority of their devices on a certain ecosystem. The mobile device market will be quite similar to the PC market today. Apple will command a premium; everyone else will fight over tight margins, which are likely supplemented with software and advertising revenues by the smart vendors. The customer will be quite aware of where their media is stored, which system delivers it best and how easy it is to use. In that respect, Apple will still be the clear leader.
2. The hardware. The customer buys primarily on specifications, just like they do with a PC, laptop or TV in 2011. By 2014 the average customer is very tech savvy at the tech inside, such as screen capabilities, processors, memory, etc. They have little loyalty, but if their current vendor has a new device which is great on price, spec and design than they will naturally like to stay with that vendor. However, if someone else has better technology at the right price, then they will switch.
Buying mobile devices in 2014 is like the PC or TV buying experience of today. By 2014, the high margins enjoyed by non Apple handset vendors will disappear as the tech spec wars drive customers to buy only the latest and best specifications, which commoditizes the devices . Since everyone else will be running either Android/Chrome or Windows, the device itself is just a spec, with some nice design being the main differentiation between devices of similar specification. Of course, there will always be one vendor who brings out a technical marvel, be that wraparound screens, flexible screen etc, but within 6-12 months everyone has caught up and it’s back on spec again. Just like the TV business.
Devices have become commoditized, and the inevitable point in the industry where a device is just more or less a screen has been reached. Whether it is TV, Laptop, tablet or handset, everything is about the screen, and due to their superior technology in this area, the leader in 2014 is likely Samsung. Naturally matched by Apple with it’s superior user experience, design and hardware.
Also, Apple and Samsung are the only two companies in 2014 who can bring out truly ground breaking technology fast enough, sexy enough and most importantly to the widest distribution. Together they control around 40-50% of all devices, with low cost vendors taking up most of the rest - similar to the TV market today. There are some expensive niche players, but the volume is via Samsung and Apple. However, disruptors are at play, more of that later.
Essentially handset vendors have found themselves having to be extremely efficient distribution machines with high hardware R&D costs. Devices last no more than 6 months before being replaced in retail, and customers differentiate very strongly between hardware and software brands.
The customer will be buying far more mobile devices online than they do today, driving overall cost of ownership down. As devices have become more commoditized, people buy devices online just like they buy laptops, TVs and tablets. Although they will go to a major outlet to see, use and browse the handset, their buying choices are much greater.
The new world has also thrown up big new mobile brands, which are built around a strong online presence, wrapping up software and hardware in low cost devices sold directly to consumers. These brands have a completely new connection with the consumer, who sees them as delivering considerable value, plus some will be able to stand out with great software as well. By 2014, the web has really revolutionized mobile retail as well.
4. Subscriptions and payments
By 2014, consolidation around operators in cable, fixed and mobile, means that the biggest just got bigger and are now dominating home, mobile and office access. Which has led to devices being less subsidized as operators look to bring cash flows forward. Also the key ecosystem players are spending considerable amounts to subsidize subscriptions and devices which have also improved operator cash flows. Operators in most countries have also decided that their considerable retail estates were not an efficient use of cash and have consolidated their shops, concentrating instead on internet sales, especially as devices have become much easier to sell online.
Operators have diverted cash into developing applications, services and online payment mechanisms which deliver greater margins combined with access subscriptions than previous times.
This means that consumers likely get a free hub from their operator which delivers access, services and media to multiple devices. But the devices themselves are mostly paid for by the subscriber, even handsets. Consumers also have multiple devices leading to less desire from operators to subsidize, instead their cash has been diverted to subsidizing the big media players such as Spotify, Netflix, YouTube, Xbox Live and Hulu to entice subscribers, which will make the device prices far more transparent to consumers.
In short, handheld devices may be technological marvels, but by 2014, they will also have become just like any other consumer device and the "mobile industry" has become part of a much broader device industry.