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 $1.3 Trillion in 2011 with mobile data representing 24% of the mix. Global Mobile Data revenues are expected to eclipse $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%.
We expect the total number of subscriptions to exceed 6 billion by the end of 2011. The first 1 billion took over 20 years and this last one is going to take only 15 months. The primary growth drivers are India and China which are cumulatively adding 75M new subs every quarter. Indian and China are also entangled in the race to the billion. At the end of Q2 2011, China was ahead by 50M but India is adding subscriptions at faster rate and is likely to eclipse China before Q2 2012. By then, both nations are expected to exceed 1 Billion in total subscriptions making up 31% of the global subscriptions.
In Q1 2011, US became the first major market to exceed the 50% mark in smartphone sales. The global figure stands at approximately 26%. Some operators expect 90% of their devices sales to be smartphones by the end of the year. 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 â€“ Brazil, India, Russia, Indonesia, Pakistan, Mexico while once dominant â€“ Korea, UK, Italy, Germany have dropped off or slipped in rankings.
The number of mobile operators with more than $1B in data revenues will increase to 47 in 2011. This number was only at 13 in 2005.
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. In 2011, it became the first major market to have more than 50% of its mobile revenue from data services. 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 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 $3.50 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.
Mobile Trends for 2011
1.Total Global Subscriptions to hit 6 Billion
â€“India and China racing to a billion a piece
2.Total Global Mobile Revenues to hit $1.3 Trillion, almost 2% of Global GDP
â€“Top 10 operators control 43% of the global mobile revenues
3.Total Global Mobile Data Revenues to eclipse $300 Billion
â€“Non-messaging data now owns 53% of the global mobile data revenues
4.Mobile Devices are now exceeding traditional computers in unit sales + revenue
â€“Majority of the device sales in the US are now smartphones. Device Replacement is shrinking
5.Mobile Broadband (4G) is being deployed at a faster rate than previous generations
â€“Over 1 Billion broadband connections by 2011
6.Global Mobile Apps revenue has shifted to off-deck
â€“The decline is directly proportional to the increase in smartphone penetration by region
7.All major markets are consolidating with the top 3 players at 85% of the market
â€“Regulators will have to be more prudent and proactive about managing competitiveness and growth
8.Mobile Data Traffic will be 95% of the global mobile traffic by 2015
â€“Many countries are facing spectrum exhaust in the next 5 years
9.Connected device segment is growing at the fastest pace
â€“Operators will have to quickly adapt their strategies to stay relevant in this segment
10.Several multi-billion dollar opportunity segments are emerging
â€“Mobile Advertising, Mobile Commerce, Mobile Wellness, Mobile Games, and Mobile Cloud Computing to name a few
11.Mobile Ecosystem has become very dynamic and unpredictable
â€“Apple, Google, Amazon, and Facebook have become the most important revenue generating mobile platforms
12. There will be more changes in the next 10 years than in the previous 100
â€“ The value chains will keep disrupting every 12-24 months by the new players and business models
13. Intellectual Property has become a key component of long-term product strategy
â€“ Top 20 control 1/3rd of the overall mobile patent pool
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 canâ€™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.
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. Nokiaâ€™s valuation has been cut into half while the newcomer HTC edged past the industry giant in a remarkable story of the year. Nokiaâ€™s release of N9 shows the engineering and creative design depth but a lot is riding on the first generation of Nokia Windows Phones. While the market hasnâ€™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. HPâ€™s acquisition of Palm is finally bringing some new products to the market but the lack of an effective ecosystem means lack of traction in 2011. Given that the computing is shifting to mobile devices, we can expect some of the weaker desktop/laptop players will exit the industry.
Tablets are primarily being used in the WiFi mode because the primary use case is indoors and WiFi gives a better (and cheaper) user experience. Once operators start to roll out user-friendly family data plans across multiple devices, we can expect the cellular activation go higher but will still be dominated by WiFi overall.
The number of connected devices per subscriber and per family will continue to increase over the course of this decade. As the cost structure and margin profile for these devices will be different, we are likely to measure performance of various operators using margin analysis for e.g. while the ARPU for connected devices is 5-10 times lower than the postpaid subscribers, the margins are typically higher due to lower costs of sales, marketing, support, and subsidy. As such the overall impact is dilutive ARPU but higher margins. So, instead of focusing on just the ARPU, the efficiency of operators will be measured in how well they maintain average margin per user (AMPU) and average margin per connection (AMPC).
Managing the data growth
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 wonâ€™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.
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 doesnâ€™t matter if the market is defined by â€œcontrolled regulationâ€ like in China, Korea, and Japan or if it is â€œopen marketâ€ 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 â€œtop 3â€ operator market. Indiaâ€™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 shouldnâ€™t have more than 50% of the market share and the number three player shouldnâ€™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 â€œcommunicationsâ€ and â€œcomputingâ€ as we know it.
Apps and Services
As expected, mobile commerce and payment discussions are dominating the ecosystem. There is clearly a lot of investment and marketing dollars being spent. However, the traditional payments networks are largely intact. The new opportunities are being built on top of the existing payment platforms with convenience (Square) and offers and advertising (Google Wallet, ISIS, Groupon). Beyond payments, mobile is getting ingrained into every vertical and every facet of our lives â€“ from healthcare to education, from energy to entertainment, from communication to socialization. And we are in the early innings of figuring out the business models, ecosystem leaders, user behavior, regulatory needs, and the overall impact on society.
It is very clear that the ecosystem dynamics can change very quickly, one just can’t take the competitive and friendly forces for granted. In the past, the silos and segments were clearly defined with little overlap. However, over the course of last couple of years, players have been migrating and surfing in segments across the board – from Apple to Visa, from P&G to AT&T, from Facebook to Time Warner, from Google to Best Buy, every company wants to capture the mindshare and piece of the consumerâ€™s pocketbook. The fine line between partners and competitors can get obliterated in a quarter. Apple is competing with Cisco, Comcast is going after AT&Tâ€™s business, Visa and Verizon want to be the payment channel of choice, Amazon is gunning for Microsoftâ€™s enterprise business. One product launch, one acquisition, can change the game in an instant. And this is only the beginning.
Mobile is fundamentally reshaping how we as consumers spend from housing and healthcare to entertainment and travel, from food and drinks to communication and transportation. Mobile not only influences purchase behavior but also post purchase opinions. When the share button is literally a second away, consumers are willingly sharing more information than ever before. Mobile is thus helping close the nirvana gap for brands and advertisers who seek to connect advertising to actual transactions. The long-term battle is however for owning the context of the users. Having the best knowledge about the user to help drive the transaction is the simply the most valuable currency of commerce.
Mobile Future Forward
We will be discussing the global mobile ecosystem â€“ the challenges and the opportunities at our annual mobile thought-leadership summit â€“ Mobile Future Forward – brought to you in partnership with our terrific partners â€“ Qualcomm, Millennial Media, Real Networks, AT&T Interactive, Synchronoss Technologies, OpenMarket, Ericsson, and Openwave. Hope to see you in Seattle on Sept 12th.
Some of the distinguished guests include:
Abhi Ingle, VP â€“ Advanced Mobility, AT&T Wireless; Amit Gupta, SVP and CTO, INQMobile; Bob Gessel, VP/Head of Technology and Network Strategy, Ericsson; Braxton Woodham, Head of Engineering, AVOS; Carlos Domingo, CEO, Telefonica; Charlie Herrin, SVP – Products and Technology, Comcast; Dale Nitschke, former President, Target; Danny Bowman, President – Connected Devices, Sprint Nextel; David Messenger, EVP, Head – Online/Mobile, American Express; Erik Moreno, SVP, Fox; Gibu Thomas, SVP – Online/Mobile, Walmart; Glenn Lurie, President, AT&T Wireless; Hank Skorny, Chief Strategy Officer, Real Networks; Janet Schijns, VP, Verizon Wireless; Jason McKenzie, President, HTC-Americas; Jay Emmet, GM, OpenMarket; Jeremiah Zinn, EVP, MTV; Jerry Batt, CIO, PulteGroup; John SanGiovanni, Cofounder, Zumobi; Ken Denman, CEO, Openwave; Ken Wirth, President, Alcatel Lucent Wireless; Kris Rinne, SVP – Networks, AT&T Wireless; Mark Rolston, Chief Creative Officer, Frog Design; Matt Oommen, President, Reliance Communications; Mikael Back, VP of Products and Portfolio Management, Ericsson; Mike Mulica, President, Synchronoss Technologies; Paul Palmieri, CEO, Millennial Media; Prof. Cliff Nass, Human Computer Interaction, Stanford University; Rob Glaser, Partner, Accel; Sanjiv Ahuja, CEO, LightSquared; Stephen Bye, CTO, Sprint; Steve Mollenkopf, EVP and Group President, Qualcomm; Subba Rao, former CEO, Tata DoCoMo; Suja Chandrasekaran, CIO, Timberland; Will Hsu, Chief Product Officer, AT&T Interactive
More information at http://www.mobilefutureforward.com
Your feedback is always welcome.
Thanks and have a great 2H 2011.
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 Aug 2011. The next Global Wireless Market update will be issued in Jan 2012.
Disclaimer: Some of the companies mentioned in this paper are our clients.
Mobile Future Forward 2010 Summit Summary September 20, 2010Posted by chetan in : 3G,4G,AORTA,BRIC,Carriers,Enterprise Mobility,European Wireless Market,Indian Wireless Market,Japan Wireless Market,Location Based Services,Mobile Advertising,Mobile Applications,Mobile Ecosystem,Mobile Event,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile Wallet,Networks,Partnership,Patents,Privacy,Smart Phones,Speaking Engagements,Student Paper Contest,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 1 comment so far
In proud partnership with
Amdocs, Millennial Media, Real Networks, ZTE, Clearwire, Ericsson, Openmarket, Bango, Intel, Openwave, Wavefront, and Department of Commerce
Earlier this month, Chetan Sharma Consulting hosted its first mobile thought leadership executive summit â€“ Mobile Future Forward. The sold-out event attracted leaders from the global mobile industry across the ecosystem to discuss and debate the future of mobile. This note summarizes the various discussions from the summit.
Some of the key themes discussed by the speakers and panelists were:
1. The Mobile Ecosystem is becoming more complex and competitive by the day
2. Broadband is exploding around the globe, Nationâ€™s competitiveness and prosperity is being defined by the quality and depth of Broadband
3. Mobile Device is becoming central to our existence
4. Understand the user, generational usage patterns, geographical differences and customs
5. Communication modes are evolving and morphing rapidly
6. Emerging Devices are taking the lion of share of growth in some western markets
7. Given the devices and networks, content, media, services are moving to the cloud
8. New experiences are being introduced that will impact monetization and interaction with computing and technology
9. World is becoming flatter by the day
10. Mobile as a platform is booming and several industry verticals are exploding
11. Context and Analytics are key currency for tomorrow
12. There is significant reallocation of revenues underway
13. The fight for developer mind share is getting intense
As technologists, we get too enamored with the technical details and specs but whatâ€™s most important is how can technologies be applied to make lives of every day consumers better. If a new solution or a service only benefits or thrills a few, it is destined to miss the mass market. No one understands the mass market better than Procter & Gamble, and no company in the world touches more consumers with more products than Procter & Gamble (with over 40-50 billion items per year). Technology plays a central role in how P&G thinks about engaging consumers. Last year, I had the privilege of spending some time with Steve David, our first keynote speaker. His understanding of the interplay between technology and consumer interaction and behavior is very deep and his enthusiasm for using technology to change the world infectious. Steve spent over 30 years at P&G , the final assignment as P&Gâ€™s CIO responsible for their Internet Strategy.
Steve laid out the case for Advocacy being the new measure of marketing. It has a lasting impact on the brand, the sales, and the relationship with the consumer. Companies who have a better understanding of the customer via sophisticated analytics and can quickly take the solutions and products that consumer want and need gain long-term competitive advantage. Insights from the market must be processed in real-time that can empower decision making at every level of the company. And mobile is central to this strategic shift. Mobile is being used to attack the counterfeit problem worldwide, in formulating personal recommendations as trust in brands erodes, in collecting analytics, and engaging interactions with products and services using NFC, etc. Steve ended with the old Chinese proverb, â€œWhen the wind changes direction, there are those who build walls and there are others who build wind mills.â€ What are you going to build?
Fred Devereux, President, AT&T West in his address on â€œThe Next Big Thingâ€ honed in on the emerging connected devices ecosystem and how AT&T is retooling itself to take advantage of the boom. The AT&T Emerging Devices organization is setup to behave and operate like a startup with hundreds of devices being approved in a short amount of time. The new generation of connected devices range from eReaders, PNDs, Telematics, Cameras, Camcorders, Picture Frames, Tablets, Tracking Devices, Gaming Devices, and Smart Meters. While the ARPU of these connection is low, the margins are high due to negligible overhead in operations, sales, and marketing. The importance of this category is evident from the research data we reported in our last quarterly report which indicated that there are more connected devices being added than postpaid net-adds and operators are starting to list them as separate line items in their financial statements. Fred also discussed AT&Tâ€™s plans to deploy LTE in 2011-.
Dr. Genevieve Bell, Fellow at Intel is one of the most fascinating anthropologists out there with an acute sense of technology evolution and how humans react and adapt to changes around them and how technology needs to adapt to humans and their needs in different habitats. She had some interesting stats from her research e.g. the household sizes vary significantly by countries â€“ India has only 5% of the households as single-person households while France and Germany have over one third households as single-person. Boomers will represent more than half of the population of China, Japan, and EU by 2012. These demographic shifts have significant impact on how technology is used and how media is consumed. The keynote was filled with priceless anecdotes and research items that informed and gave the technologists something to think about and that the technologists are not the proxy for rest of the population. Her book â€œTelling Techno-Cultural Talesâ€ is being published by MIT Press and is coming out next year. So, be on the lookout for that.
Mobile Advertising is in the news lately in the US. About 11 years ago, a young man named Takayuki Hoshuyama was making waves in the mobile advertising space. In 1999, he helped found D2Communications – a successful joint venture between the largest advertising firm in Japan – Dentsu and the largest and one of the most innovative operator on the planet – NTT DoCoMo. He was one of the original members of the Mobile Advertising Team for the i-mode service 11 years ago. In June, he was appointed CEO of D2C. Hoshuyama-san talked about the future of mobile advertising. Japanese mobile ad market is over $1B (though it represents only 1.7% of the overall ad spent) and with the advent of 4G/LTE the opportunities are enormous. Display outscores Search by 3:1 in ad revenues. Mobile is some embedded in Japanese culture that it is just assumed just like my good friend and coauthor Dr. Yasuhisa Nakamura, then CTO of NTT DoCoMo wrote back in 2002 in our book â€œthe wireless infrastructure will become indistinguishable from air i.e. omnipresentâ€
Hoshuyama-san also talked about the evolving role of the operators in the ecosystem with some of them focused on becoming the cloud service providers and broadcasters.
After the keynotes, we shifted to panel discussions. The first one dealt with the disruptive forces in the ecosystem with Mike Sievert, Chief Commercial Officer, Clearwire, Lixin Cheng, CEO, ZTE USA, and Subba Rao, CEO, Tata DoCoMo â€“ three leaders who are disrupting the status quo. All three agreed that the openness of Android will make it the most dominant OS in the coming years. Lixin talked about how the infrastructure business is becoming a software business with SDR design of technology standards and evolution. He also suggested that we as an ecosystem need to simplify the business models and the consumer purchasing process of bandwidth and connectivity before the connected device revolution takes significant hold. India is the fastest growing market but the ARPU levels are 1/10th of what they are in the US. Given that the market just spent over $100B on the 3G auction, the investment recovery model is unclear and the market is ripe for a big shakeout. Telenor, having lost over half a billion dollars is desperate to get out of the market. The pains of globalization are showing up in other regions as well. Mike mentioned the high average data consumption at Clearwire (currently at 7 GB/mo) â€“ clearly a precursor of whatâ€™s to come (our research shows the national average was 230 MB/mo as of Q2 2010). In terms of new technology areas, the panel was interested in products that help with spectrum efficiency, reducing the cost structure, and in improving the battery performance.
As part of the Mobile Future Forward Initiative, we had also worked on two other projects:
Â· The Mobile Future Forward Book that consisted of thought provoking essays on the future of mobile from the speakers of the summit and
Â· The global student paper contest that invited the papers form university students from the around the world
It required enormous collaboration with the folks around the globe in a very short amount of time. We are very proud of the outcome.
Mobile Future Forward Book
The second project related to a limited edition book by Chetan Sharma Consulting (published by Futuretext) exclusively for the event. Some of these summit speakers put their insights and ideas on paper that resulted in this book. We are very grateful to the authors (and their respective organizations) who carved out time from their busy schedules to pen some really insightful commentary on how they see the mobile industry evolve both holistically and in the various segments of the ecosystem. While the views are quite diverse and bring together perspectives from different angles, everyone agrees, 2010-2020 will be one heck of a time period for innovation.
The book has the following pieces:
1. The Next 10 Years – 15 Trends That Matter – Chetan Sharma
2. Sustainability in a Mobile World – Stephen David
3. Managing The Mobile Data Explosion – Wim Sweldens
4. Show Me The Money! – Brian Shepherd
5. Mobility Revolutionizing Every Product, Service, and Process – Russ McGuire
6. How Constant Connection Is Changing Our World – Ken Denman
7. 4G: The Next Big Thing – Mike Sievert
8. The Untapped Potential of Mobile Advertising and Marketing – Takayuki Hoshuyama
9. Mobile Operators are at the Center of Mobile Advertising – Krishna Vedati
10. Mobile Challenges – Three Imperatives in the Changing Game – Russ Shaw
11. Interacting With Everyday Things – Amir Mashkoori
12. In The End, Itâ€™ll All Go Through â€œBrowse and Buyâ€ – Anil Malhotra
13. The Future of Mobile: 5 Trends That Matter Most – Jay Emmet
14. Indiaâ€™s Mobile Future Forward – Subba Rao
15. Cellphone As The New Computing Platform – Sailesh Chutani
16. What 5 billion Phones Could Mean for Health Literacy – Jon Stross
17. Privacy: From Compliance To Competitive Advantage – Sarla Sharma
18. Managing Growth and Profits in the Yottabyte Era – Chetan Sharma
We will be giving out some copies of the book during our Annual Predictions Survey in Dec, so be on the lookout for that participation request.
Student Paper Contest
Despite, the summer recess, we received an a very positive response from students around the globe. The top six entries went through rigorous scrutiny of our judges:
1. Pankaj Kedia, Head of Mobile Ecosystems, Intel
2. Subba Rao, CEO, Tata DoCoMo
3. Len Barlik, VP, Sprint Nextel
4. Jeff Giard, Director, Clearwire
5. Paul Palmieri, CEO, Millennial Media
6. Matt Oommen, CTO, Sprint Nextel
7. Paul Struthers, Head of Regional Marketing, Amdocs
The top two students were Lun Huang and Smruthi Pariccha and they were invited to join us for the event and receive their prizes.
The final ranking was as follows:
1. UWB Based on Multi-Band MC-CDMA and Magnetic Near-Field â€“Lun Huang, Electrical and Computer Engineering, Illinois Institute of Technology, US
2. Ubiquitous Peer Proximity Awareness in Mobile Environments â€“Smruti Parichha, Dept of Computer Science and Engineering, University of California, Riverside, US
As a mobile strategist, I get to see some of the cool technologies before they hit the market. For the demo this year, we selected Microvisionâ€™s cool projection technology where you can interact with the projected screen in thin air by waving hands. Yes, you got it. You had to be there to see it. It was shown for the first time to the general public and we are thankful to Selvan Vishwanathan and Andrew Rosen, the two engineers (and their colleagues) behind this exciting emerging technology that will expand the horizons of mobile interactivity and media engagement.
The afternoon sessions started delving into specific topics and details that were touched upon at the high level during the morning sessions. Each of the panels had an absolutely stellar cast who are deeply engaged in defining the mobile ecosystem right now.
Network and Mobile Data Evolution 2010-2015
Wim Sweldens, President – Wireless Division, Alcatel-Lucent,
Neville Ray, Chief Network Officer, T-Mobile,
Bob Azzi, Senior Vice President, Sprint,
Matt Bross, CTO and Vice Chairman, Huawei
Sean Cai, Vice President – Advanced Wireless Technology, ZTE,
Ken Denman, CEO, Openwave (moderator)
There is a big debate about network evolution – how fast does LTE need to come to the market? Will LTE be enough to help with the data tsunami. The consensus was a resounding No but LTE brings in some key capabilities like an all-IP network that enables new capabilities for multimedia applications and services, lowers the per bit cost, and reduces latency for superior user experience. Of course, the RAN is only part of the story, the backhaul needs to get upgraded as well to handle the load. The panel also emphasized simplicity in services without making things burdensome for the consumer with new technology. The other area of concern is of course the spectrum. Will there be ever enough spectrum? The issue is more acute for some operators. Finally, the focus need not to be on the bandwidth or the latency, from a userâ€™s point of view, it is always about the services and things they can do with more bandwidth and lower latency.
Future of Content, Engagement, and Monetization
Louis Gump, Vice President – Mobile, CNN,
Omar Javaid, Vice President, Converged Media, Motorola (moderator),
Paul Palmieri, CEO, Millennial Media,
Rob Glaser, Chairman, Real Networks and Partner, Accel
Superphones and smartphones have changed the landscape for content, engagement and monetization. Superphones are most open and it is reflected in the results, more engagement and higher app usage. Apple/Android have also put US back in the leadership role when it comes to devices. CNN has seen high degree of non duplicated reach and reach is king when it comes to mobile advertising. The ad platforms are going into the next stage of evolution with more multimedia, better monetization opportunities, and higher value for the consumer. For content providers, ads canâ€™t be the only strategy to generate revenue, subscriptions and/or micro transactions need to be part of the equation as well.
The Balance of Privacy and Monetization from Consumer Data
Krishna Vedati, Senior Vice President, AT&T Interactive,
Chris Murphy, Head of Digital Strategy, adidas
Dr. Nitin Shah, CEO, Feeva,
John Giere, Senior Vice President, Openwave,
Jeremy Lockhorn, Vice President – Emerging Media, Razorfish (moderator)
It is a complex issue and our insightful panel talked through the intricacies and the balance of monetizing using consumer data while meeting userâ€™s expectations on privacy. One has to give something of value to the consumer before they trade up. Advertisers like adidas want to move from 1-2-many to 1-2-1 relationship with the consumer that increases the volume and quality of the transactions. The valuable variables to track are location, propensity to buy, past actions, traffic inputs, etc. Discovery and recommendations also become important part of the whole process. Of course, regulators are eager to jump in as well. It will be one of the key issues defining the industry landscape over the next 5 years.
mHealth – The Impact on Society and Global Health
Dr. Sailesh Chutani, CEO, Mobisante (moderator)
Jon Stross, General Manager and VP, Babycenter.com
Tim Wood, Director, Grameen Foundation
Greg Brandenberg, CEO, Columbia Basin Health Association
Dr. Suzanne Clough, Chief Medical Officer, Welldoc
mHealth is one of those areas which has been talked about for a long time and where mobile is starting to have a truly disruptive run at the industry. While the regulations and the dinosaur health care industry have been slow to adapt, there are a number of innovative companies like Welldoc, Babycenter.com, Mobisante, and others who are forcing rethink and change in the status quo. Gregâ€™s CBHA is forced to think differently and has looked to technology to solve their challenges. Serving in the rural areas of WA state, his team has been testing out new solutions such as cell phone based ultrasound system from Mobisante that is 1/10th the cost of what GE sells for. It is much more portable and flexible and works well with the field work force. Timâ€™s Grameen Foundation is similarly leading the charge in nations like Ghana where mobile has been used to solve real-life health issues. Jonâ€™s Babycenter has been expanding in other regions and increasing revenues at the same time. However, the test results and trials can still take inordinate amount of time (it was 3 years for one of the trials). The opportunity is immense but regulators, healthcare industry, pharma giants, and the rest are starting to come to grips with the role that mobile can play in transforming lives and P&Ls.
Mobile Cloud Computing – At the Tipping Point?
Hank Skorny, Senior Vice President – Media Cloud Computing, Real Networks
Brian Shepherd, President – Mobile Services and Marketing, Amdocs
Marianne Marck, Senior Vice President, BlueNile
Mike Wolf, Vice President – Research, GigaOM (moderator)
Erez Yarkoni, Chief Information Officer, T-Mobile
Cloud is changing IT and cloud is going to change mobile media. It helps take out some of the complexities of media consumption, management, and sharing for the consumers and provides a lower cost structures for the media companies. There are opportunities for operators to provide cloud based services at many levels – storage, media, billing, bandwidth, profile, analytics, network intelligence and so on and so forth. Some are easier to implement while others requires more investment and change in DNA. From a developerâ€™s perspective, cloud based services will be ideal to increase reach but we are not there yet as the capabilities of the browser are not comparable to the native environment on platforms like iOS and Android. Better user experience is essential and developers wonâ€™t compromise.
Evolution of Communication and Social Interaction
Mario Queiroz, Vice President – Product Management, Google
David Weiden, General Partner, Khosla Ventures
Robin Schofeld, Principal, Booz&Co (moderator)
Erick Tseng, Head of Mobile, Facebook
Pankaj Kedia, Head of Mobile Ecosystems, Intel
The panel delved into how the communication ecosystems might evolve. While there is discussion about open and closed (too much at times), it is about executing on a strategy that touches the most number of consumers. The closed gardens of Apple is quite dominating and so is the evolving Android ecosystem which is relatively open. At the end of the day, developers are looking to make a buck with the least amount of resources and reach the most of amount of users. Cloud based communications services are about to change the landscape in a big way. Google and Facebook both have had good successes and both suggested that we are just getting started and more innovation is going to come in the form of personalization and social interaction. Operators while ceding some of the communication territory can still have a viable broadband business. As far as social on mobile is concerned, we are still in the early days with lots of opportunities to enhance and engage.
Internet of Things – Emerging Ecosystems
Amir Mashkoori, CEO, Kovio
Danny Bowman, President – Integrated Solutions Group, Sprint
Mark Selby, Vice President – Industry Collaboration, Nokia
Chetan Sharma, President, Chetan Sharma Consulting (moderator)
Abhi Ingle, Vice President – Industry & Mobility Application Solutions, AT&T
Peter Koo, Vice President, Ericsson
The fact that there are more mobile phones than toothbrush brings home the point of the pervasiveness of mobile around the globe. The panel gave several examples of how â€œconnectednessâ€ is spreading across other electronic devices as well e.g. in Netherlands, 30K home care workers are equipped with NFC enabled devices which help interact with the patients (opens the door as well) without the need for paperwork, the records, helps with navigation. Overall result – happier workers, higher efficiency, and reduced carbon emission. The mobility for â€œconnected devicesâ€ will try to leverage all RF radios as needed – 3G, 4G, Bluetooth, WiFi, Zigby, etc. Digital signage is emerging as a new area for consumer interaction and information. Some of the industries are on the verge of significant change – e.g. insurance where car insurance rates are given based on driving habits learned via telemetry vs. the old actuary table based rating systems. NFC is also enabling a lot of commerce opportunities by bringing the online world together with the physical world. However, as the ecosystem evolves, we need to also worry about QoS, security, and reliability concerns that various vertical industries have. Of course, the net-neutrality debate impacts the evolution. There are several scenarios where prioritization of data traffic is essential in emergency situations (ambulance transmission, fire fighting, etc.).
At the Intersection of Gaming, Social, and Commerce
Tim Chang, Partner, NVP (moderator)
Prashant Fuloria, Director – Facebook Credits, Facebook
David Marcus, CEO, Zong
Andrew Lacy, Senior Vice President, Disney Games
Alex Tokman, CEO, Microvision
Micro transactions is the new currency that scales up to billions of dollars in gaming and social networking. Free drives interest and the core 2-5% drive the revenues. If you ask for payment up front, virality component fizzles and the longevity declines. iTunes has been the gold standard for payments, carrier billing is starting to shape up and it will benefit the developers. HTML5+ in theory makes sense and is nice enhancement but the app experience is compelling for users. Discovery continues to be the sore spot and the burning opportunity. Whichever platform and mode of operation helps developers make more money, thatâ€™s where the momentum will shift. Today it is the iPhone but rival models are starting to pop up.
Our heartfelt thanks to everyone who helped in making Mobile Future Forward successful especially the sponsors (Amdocs, Millennial Media, Real Networks, ZTE, Clearwire, Ericsson, OpenMarket, Bango, Intel, Openwave, Wavefront, and Department of Commerce), participants, the moderators, and the speakers. Thanks to Caroline Lewko and David Smith for taking good notes. Planning for Mobile Future Forward 2011 is underway. Until then, best wishes and good luck in your pursuits, and we hope to see you next year. Thank You.
Mobile Industry 1H 2010 Assessment July 8, 2010Posted by chetan in : 3G,4G,AORTA,BRIC,Carnival of Mobilists,Carriers,CTIA,Enterprise Mobility,European Wireless Market,Gaming,Indian Wireless Market,Japan Wireless Market,M&A,Mergers and Acquisitions,Microsoft Mobile,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Event,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile TV,MVNO,Partnership,Smart Phones,Speaking Engagements,Strategy,US Wireless Market,Usability,VoIP,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 2 comments
Mobile Industry 1H 2010 Assessment
As the mobile world approaches the 5 billion subscription landmark, it is time to do a half yearly assessment of 2010. We will have our official Q2 2010 analysis for the US market in Aug and the global analysis for 1H 2010 in Sept after all the numbers are in. In the meantime, it might be worthwhile to take a stock of the first 6 months, the ensuing trends and what they mean for the long-term.
Mobile Ecosystem has become much more complex
In case you didnâ€™t notice, the competitive landscape has changed significantly over the last 6-12 months. The fine line between partners and competitors can get obliterated in a quarter. Apple is competing with Cisco, Comcast is going after AT&Tâ€™s business, Visa and Verizon want to be the payment channel of choice, Amazon is gunning for Microsoftâ€™s enterprise business, Kodak is competing with Yahoo, so on and so forth. One product launch, one acquisition, can change the game in an instant. And this is only the beginning.
Network evolution: more capacity, more bandwidth, tremendous usage
We have covered this topic in detail in our paper – Managing growth and profits in the Yottabyte era. As we had predicted, the tiering of pricing plan has started in the US which is actually a good thing. It will force some discipline and technology innovation to solve the longer-term problem of network congestion. While AT&T got things in motion, market forces will take care of the right pricing and GB levels in the coming months. Data consumption on TeliaSonera and Clearwireâ€™s network is a good indicator of whatâ€™s to come with 3-4x the usage compared to its counterparts.
New sources of revenue: mobile advertising, commerce, and more
Regular readers know that we have been bullish on the mobile advertising space for a long time. Over the last 6 months or so, some of the pieces are coming together though significant amount of work remains. Sergio Zyman, former CMO of Coca Cola once said â€œThere is only one rule: advertising must sell.â€ And nothing will sell better than mobile. Period. While North America and Western Europe have been slow to wake up to the mobile commerce opportunities, in Japan, it is already a multi-billion dollar industry. Several trials are underway that are going to help open up the western market in the next 12 months for significant opportunities. In fact, the pie for the mobile services will keep on growing bigger but so will the number of players who want a piece of it. This will set up an interesting tug-of-war for the next couple of years
Itâ€™s the iPhone, dude!
Just when the competitors think they are all caught up with Apple, Steve Jobs and co. releases a new product that raises the bar further. Google, Samsung, HTC, LG, Motorola have done well in emulating Apple while Microsoft and Nokia have fallen behind. The embarrassing launch and demise of KIN is a example of how confused things are for some of the players. While both Microsoft and Nokia are capable for mounting good comebacks, it will take more than an org change and a sprinkle of holy water. Android will easily outsell iPhone just by the law of arithmetic but Appleâ€™s secret weapon is iTunes. With over 150M billing relationships, it has fostered a great apps ecosystem that others will find hard to replicate entirely. While some point to Appleâ€™s tiny marketshare, wall street looks at the fat margins – rewarding Apple by making it the most valuable technology company surpassing Microsoft in a major tech tremor. Google has run the mobile chess game with great acumen so far. Despite the Nexus experiment, the explosion of the superphone category has gone according to the plan. Overall, most of the western operators are selling smartphones at 50%+ levels each quarter.
Always On Real-Time Access
The always-connected vision of the late Mark Weiser is finally approaching some realization. Mobile is so perfectly suited for cloud computing. The younger generation is growing with the expectation that they can get access to any content from any device anywhere. The constraints and friction that doesnâ€™t allow them to do that is just not acceptable. As such, the mobile industry is scrambling to provide tools and technologies that help the digerati access content at will. All this has to be designed and developed against the current network, content, and device constraints and evolution paths. Whether it is access to music or movies for a 15 year old or availability of the entire corporate knowledgebase, information will need to be available at a touch of a button. Companies big and small are investing in the infrastructure and software tools to make this happen. We are likely to see some interesting launches in the next 12 months.
Battle for the analytical mind – data, context and intelligence drives everything
Many people donâ€™t realize that the battle for the consumer of 2015-2020 has already begun. The company that has the best understanding about the most consumers will have a pole position in the mobile ecosystem. Players like Google, Apple, Amazon, Mastercard, Microsoft, Facebook, Twitter, China Mobile, Disney, AT&T, Vodafone, Motorola, and others are amassing a lot of information on individuals. Besides Google and Apple, Facebook has quietly become one of the most important players in the mobile ecosystem with its phenomenal reach across many countries, tremendous stickiness of the app, and innovative onboarding process of the carriers. Of course, data is a double edged sword – it can provide enormous benefits to consumers in terms of intelligence, experience, and engagement and can also prove to be problematic when privacy and data breaches happen. In fact, that will be one of the tightest ropes many including the regulators will have to walk this decade – figuring out what they call in Swedish – logam – the right balance.
Apps vs. the Web
Recently, the ecosystem has been more enamored with the apps vs. the web debate than the early departure of Brazil and Argentina from the world cup. It is rather a silly debate. As we mentioned in our apps economy paper, both worlds will coexist for a long time. What matters for the developers is the â€œreachâ€ of a certain platform or technology and the â€œcostâ€ and â€œpotentialâ€ of that reach. For the user, the only thing that matters is whatâ€™s available on â€œtheirâ€ device. Obviously, the capabilities of the mobile browser will grow over time and it will make more sense to build certain category of applications for the web vs. on the native platforms but developers live and die in the present.
Internet of Things
Nokia took the leadership stance of announcing that all of their smartphones by the next year will have NFC. You can expect pretty much all major OEMs following the same trend which means that hundreds of millions of devices will be equipped with a chipset that will enable new experiences, applications and services. Though we still need to do a lot of work to complete the end-to-end ecosystem, we are getting close. Further, all major carriers have created separate units to address the M2M and emerging devices opportunity. iPad showed whatâ€™s possible – it fundamentally created a new leisure computing category. Also, iPad (and similar form factor devices) will find good usage in the enterprise as well. Pretty soon, it will be hard to imagine a computing device without the communication capability. Operators will have to release pricing plans to accommodate such an evolution.
Nurturing ecosystems – fight for the developer mindshare
It is good to be a developer in 2010. The success of many players goes through developersville. The love fest wonâ€™t last forever though, it will depend on how vibrant the various ecosystems become and how profitable individual developer shops are over the course of time. One thing Microsoft did very well with the windows empire was to create a web of partners and developers who were incented to use the tools and develop for the platform. In a more fragmented world of mobile, things are a bit complicated. Developers donâ€™t have time or the energy to go after the newest, shiniest toy, what matters in the end is the â€œcostâ€ to develop, â€œreach/distributionâ€ of the platform, and â€œpotentialâ€ of the reach. Players who donâ€™t consciously make an effort to make developers thrive in their ecosystem will see their developer efforts collapse like house of cards. While the media attention is squarely on iOS and Android, we are not heading down the duopoly path as the dynamics of the mobile ecosystem are significantly different from that of the PC. RIM, Nokia, Samsung and others will do well, the fight is over the relative rankings in the pecking order.
Shifts in the revenue sand dunes
By the end of 2010, the global ondeck revenues will be overtaken by the offdeck revenues. As the smartphone penetration grows, it is less likely that the user will purchase VAS from the operator. While the carrier gets a healthy access revenue of $15-40 or more/month, the VAS business is shrinking for many. Some operators are trying to extract some value but are likely to follow T-Mobileâ€™s path and give up on the smartphone appstore eventually. On the featurephones and probably low-tier smartphones, operator do have a role to play but perhaps some of it can be outsourced to other appstore providers so that they can focus on higher-margin services. We are going to see a readjusting of the appstores again in the next 12-24 months with the weaker ones whittling away from the landscape.
New experiences – display, interaction and commerce
The man-machine interaction took a significant leap with the introduction of the iPhone. Now the touch-interface is embedded in our evolutionary genes. There is significant work going into accomplishing more with less friction with the help of new interfaces and experiences that can like trying out a new outfit in front of a mirror – at home or in the store and with a flick of finger – choose the color, purchase it, and get it shipped. The amount of time it takes to â€œaccomplish any given taskâ€ is going to reduce dramatically. With the help of contextual sensors, extreme personalization, and brainiac software, we will take automation to a new level. This will lead to new experiences that will enable more commerce, social interaction and participation, and general awareness and intelligence about every day things. Examples like Kinect, Augmented Reality, Projection displays are just the start of the decade when the display and interaction paradigms will be fundamentally redefined.
Reallocation of revenues – winners and losers are decided in reallocation
If we take a look at the spending habits of the US consumers on â€œaccess and communication servicesâ€ which includes the spending on Telephone, Cable, Internet, and Cell phones, the total â€œaccessâ€ spending over the course of last decade has been consistently around 4% of the total personal income per capita. However, the share of each of the services has been changing steadily. Telephone used to have 65% share of the spending but is going to be below 30% by end of 2010. Others have been climbing at the expense of telephone revenues, especially the cellphones which since 2007 command the highest share. So, the overall spending has stayed constant while there has been significant reallocation of spending. Similarly, within cell phone services, data has gone from being less than 1% of the overall revenues to over 35% in 2010 and is going to be more than 50% of the overall revenue mix by early 2013. Mobile operators will need to figure out how to manage these reallocation undercurrents and maintain the overall life time value of the customer. It will come from re-architecting of the business and technology practices as well through the introduction of new services.
Mobile takes off in Verticals
Mobile has become a full-fledged computing platform and other industries are taking notice. There is significant work going on in the mHealth, mRetail, mCommerce, mEducation, mEnergy, and others to keep things busy for the next few years. There are some really innovative startups focused on making use of the computing power that the device affords and turn them into full-fledged medical instruments. Add the communication bit and you can see the revolution happening in front of your eyes. The impact on saving lives and quality of health care will be tremendous – worldwide. The regulators and the legacy players will need to keep up. As we mentioned before, the NFC wave is coming and if all goes well, it will change the retail experience. Stay tuned.
(Mobile) World is flat
There is a significant readjusting of players going on right now with some of the Asian players flexing their muscles for dominant share of the market. Competition is driving more M&A, the gravity of the mobile data world is slowly shifting from Japan and Korea to the US with Verizon overtaking the long time leader NTT DoCoMo in terms of quarterly mobile data revenues. Indiaâ€™s Bharti became the number 5 operator after completing the acquisition of Zain. On the device front, Samsung and LG have been ferocious in their pursuit of marketshare and have been rewarded well by their performance esp. in the North American market. HTC has undergone metamorphosis and has become a serious competitor. Many non-traditional brands like Dell, Garmin, HP, Cisco are also flexing their muscles in the space that has become the computing battleground. On the infrastructure front, ZTE and Huawei are going to make life difficult for some of the players. We can expect the big â€œM&Asâ€ to continue as the industry consolidates around the top 3 players in different markets and sectors. The local skirmishes will spill into the global arena. North American operators have been curiously silent on the global front. Being the most lucrative mobile market probably has something to do with it but we can expect some of the bigger players to go shopping in the coming days.
The much-awaited national broadband plan was finally unveiled earlier this year. The current FCC has done a good job of engaging the industry and informing the citizens, better than its predecessors. It is also taking a deeper interest in setting up guidelines for the industry. The Comcast ruling was a setback but FCC is moving ahead with its plans. It will be interesting to see the execution details and how things pan out over the course of this decade. Similarly, regulatory agencies in other nations are acutely aware of the role broadband plays in nations economy and competitiveness and what they need to do keep their country on track. The mad scramble for more spectrum is underway. FTC is also keeping a close eye on the mobile industry for privacy related violations. If someone has any doubts of how much regulators are likely to get involved in this matter should read through the settlement between the FTC and Twitter.
Scenario Analysis – more changes in the next 10 years than in the previous 100
Despite all the commotion, the excitement, and the turbulence in the ecosystem, the trajectory of the winners and losers is not set. Like the Chaos theory, a lot depends on how the dynamic elements of the mobile universe effect and react to changes. Players will do well to have strategies in place per scenario so they can adapt quickly and keep the mother ship in the right direction. We can expect more changes in the next 10 years than in the previous 100. The triggers for various scenarios will vary – regulatory, competitive, technology, business model, consumer adoption, economic – each of these can have an impact on how a trend becomes the fact of life.
To discuss all these trends and more, we are putting together a unique Mobile Future Forward Executive Summit and are fortunate to have the company of some of the sharpest minds in the industry, folks who both have the vision to shape the evolution and the authority to invest billions of dollars this decade to make things happen. Hope to see you in Seattle on Sept 8th.
First 25 readers to use the discount code FUTBOL get $200 off the regular price.
Abhi Ingle, VP, AT&T; Amir Mashkoori, CEO, Kovio; Anand Chandrasekhar, SVP & GM, Intel; Bob Azzi, SVP – Network, Sprint Nextel; Chamath Palihapitiya, VP – Growth, Mobile, Intl, Facebook; Christopher Dean, Chief Strategy Officer, Skype; Danny Bowman,President, Sprint Nextel; David Weiden, General Partner, Khosla Ventures; Dr. Boris Nikolic, Sr. Program Officer, Global Health & Discovery, Bill & Melinda Gates Foundation; Dr. Genevieve Bell, Intel Fellow & Director, User Experience, Intel; Dr. Greg Brandenberg,CEO, Columbia Basin Health Association; Dr. Sailesh Chutani, CEO, Mobisante; Dr. Suzanne Clough, Chief Medical Officer, WellDoc; Glenn Lurie, President, AT&T; Hank Skorny, SVP, Media Mobile Cloud Computing, Real Networks; Jack Kennedy, EVP, News Corp; Joe Sims, Lead Partner – Digital Convergence , Booz & Company; Jon Stross, VP & GM – Babycenter, Johnson & Johnson; Ken Denman, CEO, Openwave; Krishna Vedati, SVP & GM – Mobile, AT&T Interactive; Lirong Shi, President, ZTE; Louis Gump, VP Mobile, CNN; Mario Queiroz, VP – Product Management – Android, Google; Mark Selby, VP, Nokia; Matt Bross,CTO and Vice Chairman, Huawei; Michael Sievert, Chief Commercial Officer, Clearwire;Neville Ray, Chief Network Officer, T-Mobile ; Omar Javaid, CEO, BBDO; Paul Palmieri, Founder and CEO, Millennial Media; Rob Glaser, Chairman, Real Networks and Partner, Accel;Sean Cai, VP – Advanced Technology, ZTE; Stephen David, Former CIO, Proctor & Gamble;Subba Rao, CEO, TataDoCoMo; Takayuki Hoshuyama, CEO D2 Communications; Tony Lewis, VP, Verizon; Wim Sweldens, President, Alcatel-Lucent
Each panel discussion will involve luminaries/experts on specific topics, for e.g.
M2M/Internet of Things
Danny Bowman, President, Sprint
Amir Mashkoori, CEO, Kovio
Tony Lewis, VP, Verizon Wireless
Mark Selby, VP, Nokia
Evolution of Communication/ Engagement
Christopher Dean, Chief Strategy Officer, Skype
Chamath Palihapitiya, VP – Mobile, Facebook
Mario Queiroz, VP – Android, Google
David Weiden, General Partner, Khosla Ventures
The size of the panel will be small and the time duration long so we can delve deep into the issues and questions. For more details, please visit http://www.mobilefutureforward.com
Your feedback is always welcome.
Disclaimer: Some of the companies mentioned in this paper are our clients.
Announcing Mobile Future Forward Executive Summit June 14, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carnival of Mobilists,Carriers,CTIA,Devices,Enterprise Mobility,European Wireless Market,Federal,Gaming,General,India,Indian Wireless Market,Infrastructure,Intellectual Property,International Trade,IP,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Event,Mobile Future,Mobile Future Forward,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile TV,Mobile Usability,Mobile Users,Mobile Wallet,Music Player,MVNO,Networks,Partnership,Patent Strategies,Patent Strategy,Patents,Privacy,Speaking Engagements,Speech Recognition,Strategy,US Wireless Market,Usability,VoIP,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 1 comment so far
You have seen some hints of the project that we have been working on for sometime. We are proud to announce â€œMobile Future Forwardâ€ Executive summit to be held in Seattle on Sept 8th, 2010.
MFF is a gathering of some of the most brilliant minds in the mobile industry. The goal is to look at how mobile is likely to evolve over the course of this decade. We couldnâ€™t have done this without the tremendous support of our excellent sponsors who are paving the way in their respective segments.
The speaker list includes the whoâ€™s who of the mobile industry:
Glenn Lurie, President, AT&T
Subba Rao, CEO, TataDoCoMo,
Mike Sievert, Chief Commercial Officer, Clearwire
Louis Gump, VP Mobile, CNN,
Paul Palmieri, Founder and CEO, Millennial Media
Dr. Sailesh Chutani, CEO, Mobisante
Abhi Ingle, VP, AT&T Wireless
Ken Denman, CEO, Openwave
Amir Mashkoori, CEO, Kovio
Stephen David, Former CIO, Proctor & Gamble
Dr. Genevieve Bell, Intel Fellow, User Experience, Intel
Hank Skorny, SVP, Real Networks
Jon Stross, VP & GM – Babycenter, Johnson & Johnson
Dr. Suzanne Sysko, Chief Medical Officer, WellDoc
Dr. Boris Nikolic, Sr. Program Officer, Bill & Melinda Gates Foundation
Krishna Vedati, SVP & GM – Mobile, AT&T Interactive
Christopher Dean, Chief Strategy Officer, Skype
Russ McGuire, VP, Sprint Nextel
Jack Kennedy, EVP, News Corp
David Weiden, General Partner, Khosla Ventures
Anand Chandrasekhar, SVP and GM, Intel
Chamath Palihapitiya, VP Growth/Mobile, Facebook
Rob Glaser, Chairman, Real Networks
Wim Sweldens, President â€“ Wireless Division, Alcatel Lucent
Takayuki Hoshuyama, CEO, D2 Communications
Neville Ray, SVP, T-Mobile
Bob Azzi, SVPâ€”Networks, Sprint Nextel
Mario Queiroz, VPâ€”Android, Google
Matt Bross, Global CTO, Huawei
We will be covering the following topics in detail:
Internet of Things
Content, Media, and Entertainment
New sources of Revenue and Business Models
Evolution of Communication and Interaction
Mobile Cloud Computing
Globalization and Competition
Mobile as a platform
The economics and politics of consumer data and privacy
Nurturing Developer Ecosystems
Shifts in the Ecosystem
Mobile Health and Implications
Japanese Mobile Industry
Innovations at each level of the value chain
Mobile Social and Commerce
Managing network growth
You can read more about what you can expect at the executive summit in the following whitepaper.
I hope to see you there.
Mobile Future Forward
US Wireless Data Market Update – Q1 2010 May 16, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,CTIA,Devices,Enterprise Mobility,European Wireless Market,Federal,Gaming,General,India,Indian Wireless Market,Infrastructure,Intellectual Property,International Trade,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Messaging,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile TV,Mobile Usability,Mobile Wallet,Networks,Partnership,Patent Strategies,Patents,Privacy,Speaking Engagements,Unified Messaging,US Wireless Market,WiMax,Wireless Value Chain,Worldwide Wireless Market , 5 comments
US Wireless Data Market Update â€“ Q1 2010
The US wireless data market grew 5% Q/Q and 22% Y/Y to exceed $12.5B in mobile data service revenues in Q1 2010 – on track so far to our initial estimate of $54B for the year.
In a significant milestone that went largely unnoticed, Verizon Wireless edged past NTT DoCoMo – the decade old leader in mobile data revenues to become the biggest mobile data operator by data revenues. Helped by its 93M subscriber base and high ARPU, the Verizon juggernaut is steamrolling. Rest of the 3 top US operators also occupy leading positions amongst the top 10 global mobile data operators.
The US subscription penetration was approximately 94% at the end of Q1 2010. If we take out the demographics of 5 yrs and younger, the mobile penetration is now past 100%. While the traditional net-adds have been slowing, the â€œconnected deviceâ€ segment is picking up so much so that both AT&T and Verizon added more connected devices than postpaid subs in Q1 2010. Given the slow postpaid growth in, operators are fiercely competing in prepaid, enterprise, connected devices, and M2M segments.
Data traffic continued to increase across all networks. US has become ground zero for mobile broadband consumption and data traffic management evolution. While it lags Japan and Korea in 3G penetration by a distance, due to higher penetration of smartphones and datacards, the consumption is much higher than its Asian counterparts. Given that it is also becoming the largest deployment base for HSPA+, LTE and WiMAX, most of the cutting edge research in terms of data management and experimentation with policy, regulations, strategy, and business models is taking place in the networks of the US operators and keenly watched by players across the global ecosystem.
We are starting to see the inevitable changes in broadband pricing starting with T-Mobile and MetroPCS. Over the course of this year, we are likely to see newer pricing models that tie usage to pricing and add multiple devices to a single data bucket.
The fabled iPad landed in the market and it is a winner. Appleâ€™s latest gizmo has created a new user experience category of casual and couch computing that will foster growth in the connected device space. Kids of the now generation are growing with connected electronics that is fundamentally altering the behaviors and expectations of interaction, communication, consumption, and monetization.
Privacy brouhaha has been brewing for some time and the polity class is getting interested in stepping in. If people are really serious about tackling privacy, OEMs and carriers should build a physical/soft privacy button on the device with 3-5 levels (just like for the ringer volume) that allows users to open/close privacy across all applications and services with the touch of a button. All apps and services should adhere to the principle via APIs. The other mistake companies make about privacy is by treating everyone the same. Privacy is about the perception of control and transparency. If it is given back to the consumer, they are likely to engage more and have a more positive impact on revenue streams that are likely to flow.
In an another global milestone, Softbank became the first major operator to have more service revenues from data services than voice services. In Q1 2010, 55% of its service revenues were attributed to data services. (While Smart and Globe have been reporting 50%+ revenues from data services for a long time, the total revenues are not at scale with the leading global operators. Incidentally, for the first time in many years, the data revenue % slipped below 50% for the both operators in Q1). Based on current projections, US is likely to cross the 50% data revenue threshold in late 2012 or early 2013. NTT DoCoMo is next in line to cross the 50% mark this year.
All this has setup an absolutely fascinating period in the communication/computing industry. Convergence is everywhere and is leading to fundamental reset of the value chains and ecosystems. We are going to be discussing the ins and outs of how the industry is going to evolve in the next decade in our Sept 8th event â€“ Mobile Future Forward which is bringing leading industry thought-leaders, inventors, and doers to brainstorm, discuss, and debate whatâ€™s next. Hope you can join the discussion.
What to expect in the coming months?
The pace of product introduction is accelerating with each quarter. Devices of all shapes and sizes are coming into the market. Players are having to re-evaluate their businesses and long-term strategies. Several new impressive handsets got introduced during the course of 1H of 2010. iPad finally launched and even the next generation iPhone walked into a bar.
Microsoft announced its comeback with the W7 launch though the time it is taking to launch is making partners nervous. The change in UI was refreshing though the inability for the OEMs to differentiate is not winning friends. HP acquired Palm in attempt to become relevant again in the mobile device space. Some other players missed out in buying an attractive IP portfolio. It has been an action packed 2010 thus far and we can expect more of the same for the remainder of the year.
2010 has also been active on the regulatory front as the national broadband plan was unveiled in March (our thoughts on the plan). The Comcast ruling delivered a blow to the FCC and any directives or policies will hardly have any impact on the ecosystem in the short-term.
With the looming spectrum shortage, regulatory bodies can have a significant impact on the competitiveness of a nation. Many countries in South America have imposed unnecessary spectrum caps. Others are behind in sorting out their spectrum allocations. The industry and regulators need to work hand-in-hand to make progress beyond speeches and paperwork.
To start planning for 4G, 5G, and beyond, US should think about rolling a 50 year broadband plan. While more spectrum is always helpful, will we have all the spectrum we need in 2050? or do we need to invent new technologies and business models that use spectrum more wisely? This topic will keep the industry occupied for some time to come. (Former FCC Chairman, Kevin Martin headlined our Mobile Breakfast Series event in March and discussed the Spectrum Crises. Our June 10th event is bringing CEOs of some of the most innovative mobile startups to discuss the ecosystem)
2010 is also the year of network rollouts. T-Mobile has been rolling out HSPA+ at an impressive rate, Clearwire has been expanding the network so fast that it has become the biggest construction company in the US, Verizon is betting big on LTE and AT&T has been adding backhaul, upgrading to HSPA+ and planning for LTE all at once. Even the smaller carriers like MetroPCS are looking for competitive advantage with quicker LTE launch and beat others by carrying the first LTE smartphone. (We will be releasing the next edition of our â€œState of the â€œMobileâ€ Broadband Nationâ€ paper later this year)
As we had mentioned last year, the mobile data traffic kept on growing disproportional to the revenues. A series of solutions have come into the market from players big and small. We will be releasing the second edition of our in-depth research paper on data growth – "Managing Growth and Profits in the Yottabyte Era" later this month.
We will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q1 2010 US wireless data market is:
Service Revenues (Slides 7, 16)
- The US Wireless data service revenues grew 5% Q/Q to $12.5B in Q110. Compared to Q109, the mobile data service revenues grew 22%.
- Verizon and AT&T accounted for 60% of the increase in data revenues in Q4 2009.
- T-Mobileâ€™s 3G drive is starting to pay off. While the net-adds were still in the red, it experienced the highest % growth amongst its peers in mobile data service revenues for the quarter.
- In a significant milestone, Verizon Wireless edged past NTT DoCoMo, the mobile data revenue leader since the late nineties. By the end of the year, China Mobile and AT&T are also likely to cross their Japanese counterpart in quarterly mobile data service revenues.
- AT&T and Verizon now account for 69% of the market data services revenues and 62% of the subscription base.
ARPU (Slides 8-11)
- Overall ARPU decreased by $0.17. Average voice ARPU declined by $0.84 while the average data ARPU grew by $0.67 or 4.6% Q/Q.
- As expected, the average industry percentage contribution of data to overall ARPU crossed the 30% mark in Q110 and is likely to get past 35% by end of the year.
- Verizon led in (blended) data ARPU with $17.06 followed by AT&T and Sprint. In terms of % contribution, all the top three operators exceeded the 30% mark. T-Mobile ended the quarter with 23.70% of its revenue coming from data services.
Subscribers (Slides 12-14)
- In Q409, the net-adds had increased from past several quarters, however, in Q110, the net-adds declined again.
- The texting see-saw between US and Philippines continued in Q110. US average was around 615 messages/user/mo just behind Philippines.
- In a sign of the times, for the first time, AT&T and Verizon reported more net-adds from connected devices than postpaid subs.
- T-Mobile and Sprint improved their net-add declines from last quarter though it was primarily from the prepaid segment. T-Mobileâ€™s 21% and Sprintâ€™s 23% subscriber base is now prepaid. The national prepaid penetration is touching 20%.
Applications and Services
- Non-messaging services continues to grab 60-65% of the data revenues for the US carriers.
- There is a significant shift taking place in terms of app revenues. In 2010, there will be more revenues generated (globally) from off-deck than on-deck for the first time and while the on-deck revenues are in billions, the decline trend looks irreversible. In the US, this shift will occur next year. (We released our mobile apps economy research paper last quarter)
- The usage and data consumption trends are enabling carriers to accelerate their 3.5G/4G plans and develop long-term business and technical strategies.
- The news reports of resuscitation of the media industry by iPad were premature.
- Nokia sold 108M units in Q1 2010 including 21.5M smartphones. Samsung again had a solid quarter with over 64M devices sold increasing its market share to 22%. LG Electronics at 9%, Sony Ericsson at 3.6% rounded up the top 4. For the first time, Motorola didnâ€™t figure in the top 5 device makers. Android, Apple, and RIM made gains as well.
- The constant drumbeat of new devices continued with Droid, Nexus One, HD2, EVO, and iPad.
- The battle for â€œOpenâ€ is breaking out in the street with latest episode being Apple vs. Adobe. We tend to forget that open is a means to an end, not an end in of itself. We are experiencing a fascinating period of transition in the mobile industry and some of the biggest brands in computing and communications are right in the middle of it.
Data Traffic (Slide 15)
Â· As we noted in our last update, the data traffic is now significantly more than the voice traffic. The good news is that there are several solutions that available and are being invented that will help manage the data growth. The question is how fast will the operators deploy some of these solutions.
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 Aug 2010. The next Global Wireless Data Market update will be issued in Sept 2010.
Your feedback is always welcome.
Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.
Disclaimer: Some of the companies mentioned in this note are our clients.
Global Mobile Data Market Update 2009 March 31, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carnival of Mobilists,Carriers,CTIA,Devices,Enterprise Mobility,European Wireless Market,Federal,Gaming,General,India,Indian Wireless Market,Infrastructure,Intellectual Property,International Trade,IP,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile TV,Mobile Usability,Mobile Users,Mobile Wallet,Music Player,MVNO,Networks,Partnership,Patent Strategies,Patent Strategy,Patents,Privacy,Smart Phones,Speaking Engagements,Speech Recognition,Storage,Strategy,Unified Messaging,US Wireless Market,Usability,VoIP,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 4 comments
The Global Wireless Markets continued to grow rapidly especially in India and China where the carriers (combined) are adding almost 30M new subscriptions every month. Amongst the two, India is outpacing China 2:1. China touched 750M subscriptions while India crossed 525M by the end of 2009. With 4.6B subscriptions, the global subscriptions penetration was above 68%.
The global mobile data revenues reached $220B and mobile data now contributes 26% of the overall global mobile service revenues.
As expected, the overall global mobile revenues stayed pretty flat for the year at around $1.1 trillion as many regions were hit by the recession and the competition pushed the ARPU lower for many operators. While the countries like US, Japan, China, and India showed very little signs of pullback, most of Europe and the developing world experienced a decline in overall service revenues in 2009. All the major markets have their data contribution percentages above 10% now.
For some of the leading operators, data is now contributing almost 50% of the overall revenues. However, the increase in data ARPU is not completely offsetting the drop in voice ARPU for most operators. NTT DoCoMo continues to dominate the carrier ranking in terms of the mobile data service revenues, Verizon Wireless which became #2 replacing China Mobile and is slowly edging towards the #1 spot and is likely to overtake DoCoMo within the next few quarters.
Though 4G as a standard hasn’t been defined yet, the discussions around LTE and WiMAX deployments grew intense. Telia Sonera became the first operator to commercially launch LTE. At CTIA, Sprint/HTC became the first players to launch a WiMAX smartphone and MetroPCS/Samsung took the honors for the LTE smartphone.
2009 also marked the year when the global data traffic (monthly) exceeded the global voice traffic. In the US, the yearly mobile data traffic exceeded the voice traffic for the first time.
We are also entering the phase of global mega-mergers in telecom. Bharti Airtel of India just acquired Kuwait-based Zain Group to become the 5th largest telecom group in the world (at the end of 2009, it was #9). There are now 14 telecom groups with 100M or more subscriptions. While China Mobileâ€™s ARPU is 1/5th of its western counterparts, it operates its business at higher margin, around 51%. There are a number of global players mainly in Europe and Asia who have mastered the art of running lean operations and if they have good bank balance they are going to go shopping in the days ahead.
From the revenue perspective, the $50 billion revenue club is more exclusive with China Mobile, Vodafone, AT&T Mobility, and Verizon Wireless as its sole members.
As we sit at the cusp of the iPad era, there is a bigger transformation taking place and that is of the connected consumer electronic devices (CEDs). Few years from now, most popular CEDs will have connectivity. We are also approaching the start of phase where pricing of access will start to morph – we will see the introduction of family data plans (something we have been advocating for some time), ability to connect multiple devices to the same GB plan, more granular use plans (per session/day/week/mo/yr etc, roll-over GBs anyone?). As the number of connected devices/consumer increases, we will start worrying about Average Margin Per User (AMPU) or Average Margin Per Connection (AMPC) because ARPU wonâ€™t quite capture the dynamics of the industry.
Exciting times indeed.
Chetan Sharma Consulting conducted its semiannual study on the global mobile data industry. We studied wireless data trends in over 40 major countries – from developed and mature markets such as Japan, Korea, UK, and Italy to hyper growth markets such as China and India.
This note summarizes the findings from the research with added insights from our work in various global markets.
Impact of Global Recession
Telecom in general fared better than other industries. In some regions, it hardly caused a tremor. However, in most nations, the impact was felt by the operators. Amongst the 40 major operators we studied, SK Telecom, 3 Australia, KTF, T-Mobile Netherlands, Rogers, Softbank Japan, Singtel, Vodafone Italy, T-Mobile Germany, 3 Sweden, Telstra, China Unicom, and Vodafone Germany experienced increase in both the data ARPU and the overall ARPU during 2009. Some of increase was due to the fluctuation in international currencies e.g. Korea.
Looking at the data at a country level, most nations noted a decline in overall ARPU. Only Venezuela, Pakistan, Argentina, Bangladesh, Australia, and Poland showed positive increase in ARPU since 2008.
Rule of Three is kicking in most markets with smaller players having to consider the M&A option to remain viable. T-Mobile/Orange, Bharti/Zain tie-ups are just the start of that process. We are likely to see many international mergers in 2010 and beyond as power in the mobile ecosystem self-adjusts.
5 new players joined the 100M subscriptions club. The new members are: Bharti Airtel (India), MTN Group (South Africa), Orascom (Egypt), Etisalat (UAE), and MTS (Russia). The top 9 telecom groups in the world are: China Mobile, Vodafone, Telefonica, America Movil, Telenor, T-Mobile, China Unicom, TeliaSonera, and Orange.
- US extended its lead over Japan as the most valuable mobile data market in service revenue with US adding $44.56B vs. $32.5B for Japan in 2009. China with $20.3B was ranked number 3. US registered the highest growth amongst the top 3 with over 40% increase from EOY 2008 levels followed by Japan and China.
- The top 10 nations by service revenues are: US, China, Japan, France, Italy, UK, Germany, Brazil, Spain, and India.
- The top 10 nations by data service revenues are: US, Japan, China, UK, Italy, Germany, France, Australia, Spain, and Korea.
- NTT DoCoMo continues to dominate the wireless data revenues rankings with over $16B in data services revenue in 2009. Almost 46% of its overall revenue now comes from data services. DoCoMo also crossed the 95% 3G mark.
- NTT DoCoMo was followed by Verizon Wireless, China Mobile, AT&T, KDDI, Sprint Nextel, Softbank Mobile, T-Mobile USA, O2 UK, and China Unicom to round up the top 10 operators by wireless data service revenues.
- Each of the top 5 carriers exceeded $10B in yearly mobile data service revenues in 2009
- Data revenues for the top 10 operators now account for almost 43% of the global mobile data revenues.
- The biggest jump in data revenues was experienced by Verizon, Softbank, and AT&T. DoCoMo saw an 11% increase for the year.
- Most of the operators in the developed nations are contemplating future strategies to boost data revenues such that the decline in voice revenues is at least compensated for. There are very few operators who have experienced increase in overall ARPU.
- China reported approximately $20.3B in data revenues for 2009 and the percentage contribution from data services is around 32%, data ARPU is around $3.2. For India, data ARPU continues to stay below $0.50 as most of the new adds are voice only subscribers and there is continued price pressure in the market.
- China Mobile remains the most valuable telecom operator with over $195B in market cap. It is followed by Vodafone at around $122B. Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans.
- In 2009, SMSâ€™s vice like grip on data revenues continues to loosen a bit with many carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around 50-60%, and Western Europe around 20-40%.
NTT DoCoMo has been at the cutting edge of the mobile data evolution by creating new markets. They are exploring new technologies and social experiments ahead of almost anybody else in the market. Our long history with the Japanese and Korean markets has taught us that while the individual strategies in each market will differ, one should study the trends, technologies, and ecosystem dynamics in these markets to get a sense of whatâ€™s coming.
Â· From the revenue perspective, the $50 billion revenue club has limited membership with China Mobile, Vodafone, AT&T Mobility, and Verizon Wireless as its sole members.
- Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like DoCoMo, and Softbank are over 46%. KDDI, 3 Australia, 3 Italy, 3 UK, Vodafone UK, O2 UK, Telstra, and 3 Sweden exceeded 35% and many others are on the verge of crossing the 30% mark.
- NTT DoCoMo reported the highest data ARPU for the year while Rogers took away the honors for the highest overall ARPU. Other notable percentage increases in ARPU were from 3 Italy, SK Telecom, KTF, T-Mobile Germany, 3 Sweden, and T-Mobile Austria. The Japanese operators saw a decline in ARPU by 3%.
- The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers â€“ Smart Communications and Globe Telecom with over 53% (or $2) contribution coming from the data services.
- Softbank of Japan looks set to be the first major operator (outside of Philippines) with more revenues coming from data services than voice.
Mobile Data Traffic
- We have been calling attention to the tremendous increase in mobile data traffic for some time. The discussion has hit mainstream and many operators are scrambling to nail-down their short-term and long-term strategies to manage the data traffic growth in their networks. See our paper on the subject "Managing growth and profits in the Yottabyte era." The recommendations discussed in the paper are slowly being adopted by various vendors and operators worldwide.
- The global mobile data traffic exceeded an Exabyte for the first time in 2009. In fact, the data usage is growing so fast that this year, the two territories experiencing the most growth – North America and Western Europe are both going to exceed an Exabyte in mobile data traffic.
- 2009 also marked the year when the global data traffic (monthly) exceeded the global voice traffic.
- For many of the superphone heavy operators, devices like iPhone and Android account for more than 50% of their total data traffic.
- 2010 will mark the first year when the total number of mobile broadband connections will exceed the total number of fixed broadband connections.
For more mobile data traffic analysis, please stay tuned for the second edition of our Yottabyte research
- India continues to be the hottest market on the planet in terms of net-adds with (again) a world record-setting month in Jan 2010 with 19.9 million net adds. To give you a perspective, this is almost 1.5 times the number of subscribers US added in the whole year. It is like adding a Canadian wireless market every month. For the year 2009, India added 177 million subs vs. 106 million for China. Combined, one year of growth in these two market is equivalent to the size of the third largest market – the US, to date. Making money on the net-adds is a different proposition all together (more discussion on the international market in our global market update later this month)
- Thanks to the explosive growth in the emerging markets, the global mobile market went past 4.6B in 2009 and is likely to cross the 5B mark in 2010. The global mobile subscriptions now represent over 68% of human population on planet earth.
- China crossed the 700M subscription mark in July while India’s total went past 500 in Nov. In the meantime, US crossed the 90% subscriptions mark in 2009.
- In the last 10 years, the growth patterns in the mobile industry have completely reversed. In 1998, the developed world accounted for 76% of the subscriber base, in 2008; the percentages have flipped with developing world now accounting for 76% of the subscriber base and are likely to increase to 85% by 2018.
- The top 10 nations by subscriptions are: China, India, US, Russia, Brazil, Indonesia, Japan, Germany, Pakistan and Italy.
- China Mobile became the first operator (and likely to be the only one for a very long time) to cross the 500M mark. It remains the #1 carrier in terms of the total number of subscriptions followed by Vodafone. Telefonica, AmÃ©rica MÃ³vil, Telenor, T-Mobile, China Unicom, TeliaSonera, Orange, and Bharti Airtel round up the top 10 largest telecom groups in the world.
Â· The total number of app downloads in 2009 reached 7 billion resulting in approximately $4.1B in revenues 12% of which was from mobile advertising.
Â· The number of non-carrier appstores jumped to 38 from 8 in the previous year.
Â· While Asia had the highest percentage of the download share, North America had the highest share of the apps revenue accounting for over 50% of the total revenue.
Â· The paid ASP in 2009 was approximately $1.9 and the advertising revenue generated from the free applications was approximately $0.09/user/app/year
For a more detailed analysis of the mobile apps market, please see our paper â€œSizing the Global Mobile Apps Marketâ€
- Messaging still accounts for the lion-share of data service revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have gradually chipped away the share from messaging. Alternate devices with wholesale cellular agreements are also flooding the market. In Japan, Mobile Commerce is expected to do much better than Mobile Advertising. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain.
- Nokia dominated the year as usual but the revenue share is shrinking and so is the lucrative smartphone share. Apple, RIM, and Google are relentlessly attacking the top tier while Samsung, LG, and others giving a tough fight for the bottom tier. We see a new middle tier emerging that has the form factor of a featurephone and functionality of a smartphone. The smartphone category is getting further split into regular qwerty smartphones like Blackberry and the touch and full browser based superphones like the iPhone and Droid.
- The year was dominated by several blockbuster device launches like the iPhone 3GS.
- Next few years will be big for infrastructure providers as many countries both developed and developing get into upgrading their infrastructure.
- Willcom, the small Japanese carrier that started the flat-rate unlimited phenomenon filed for bankruptcy last month.
- In the US, the increase in messaging volume catapulted US as the number one texting nation by messages/user/month going past the long-time leader Philippines.
- Deployment of 3.5G technologies is in full swing. However, it is the discussion of 4G that is occupying the headlines, even though 4G hasn’t been fully defined yet and the current candidates for 4G are nowhere near the performance goals of 4G (150Mbps/50+Mbps). Many larger operators have laid out their plans for deploying LTE starting this year.
We are also seeing regulators playing an active role in making the markets competitive and attractive in the long-term.
Â· The velocity with which the smartphones are being introduced into the market esp. the western markets, one wonders if in five years, we will be using the moniker to describe devices and if the "dumbness" in the device market will be practically eliminated. Led by Apple’s Appstore success, significant investments are pouring into the appstore world. In parallel, the debate over apps vs. mobile web is intensifying. The implications of the transition will be significant on the ecosystem on many levels.
2010 will be a critical year on many fronts. As usual, 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 2010. The next Global Wireless Data Market update will be released in Sept 2010.
Your feedback is always welcome.
Disclaimer: Some of the companies mentioned in this note are our clients.
New Research: Sizing up the Global Mobile Apps Market March 17, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,CTIA,European Wireless Market,Gaming,Indian Wireless Market,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Microsoft Mobile,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile Usability,Partnership,Smart Phones,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 7 comments
Sizing up the Global Mobile Apps Market
Industry Study Commissioned by Getjar
Mobile applications (apps) have been around since the late nineties and the apps stores have been available for a quite some time as well. Operators have been offering content and applications on their appstores for most of the last decade. But it wasnâ€™t until the launch of Apple Appstore that the appsworld started to blossom in earnest. First, it fundamentally changed the revenue model in favor of the developers which has become the current defacto standard (70/30) in the mobile apps business. Second, it brought more developers into the ecosystem as it fostered the notion of focusing on just 1-2 platforms rather than the entire device ecosystem to be relevant. Third, the time-to-market equation changed for developers so that they can get the application from conception to market in a fraction of a time of what was possible in the past. Finally, the importance of a seamless end-to-end user experience to increase usage and monetization became a core principle in the mobile apps space.
While Apple has played a significant role in reenergizing the mobile apps space by bringing more consumers and developers into the ecosystem, there is significant activity outside the iPhone or smartphones space that is often not discussed. The purpose of this research study is to take a holistic look at the mobile apps space across all platforms and on a global basis to get a sense of the size of the mobile apps market and the direction it is headed.
The overall mobile apps downloads are expected to increase from over 7 billion in 2009 to almost 50 billion by 2012 growing at the rate of 92% CAGR. The revenue from mobile apps which includes both paid downloads and revenue from advertising and virtual goods is expected to increase from $4.1 billion in 2009 to $17.5 billion by 2012 at the rate of 62% CAGR. Though ondeck (operator managed) mobile apps sales exceeded those from offdeck in 2009, by 2012, offdeck is expected to hold the lion share of the mobile apps revenue.
The dynamics of the app market are quite different in emerging nations where to effectively monetize the significant app momentum (app downloads/active user and growth rates in some of these countries exceed those from the western markets, irrespective of the device type), creative strategies are needed to attract new consumers and different business models will be required to make the regional ecosystems viable.
Overall, by enhancing discovery, improving user experience, dropping price barriers, and increasing developer revenue share, the apps ecosystem can continue to prosper. The paper presents the results of the study in more detail as well discusses the future of mobile apps and how the app economy is likely to evolve.
My thanks to Getjar for supporting the research.
Disclaimer: Some of the companies mentioned in this note are our clients.
2010 Mobile Industry Predictions Survey January 3, 2010Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carnival of Mobilists,Carriers,CTIA,Devices,Enterprise Mobility,European Wireless Market,Federal,Gaming,General,India,Indian Wireless Market,Infrastructure,Intellectual Property,International Trade,IP,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile Traffic,Mobile TV,Mobile Usability,Mobile Users,Mobile Wallet,Music Player,MVNO,Networks,Partnership,Patent Strategies,Patent Strategy,Patents,Privacy,Smart Phones,Speaking Engagements,Speech Recognition,Storage,Strategy,Uncategorized,Unified Messaging,US Wireless Market,Usability,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 6 comments
2010 Mobile Industry Predictions Survey
First things first. From all of us at Chetan Sharma Consulting, we wish you and yours a very happy, healthy, and prosperous 2010. Thanks to all who participated in our 2010 Mobile Predictions Annual Survey. We have found it is the best way to think about the trends coming our way.
Before we dive into the survey results, letâ€™s do a quick wrap-up of the year that was. Well, since we just completed one heck of a mobile decade, letâ€™s do a quick jog down the memory lane.
The Last Decade: 2000-2009
Each new decade brings its own consumer and technology trends. During the 2000s mobile cemented its place in the global society fabric, the use of mobility became addictive and pervasive, to be without mobile seemed a curse and innovation blossomed and took user expectations to new heights.
From a pure statistical point of view, the global mobile subscription penetration grew from 12% in 2000 to approximately 68% in 2009 – phenomenal by any measure. The overall revenues grew over 400%, the data revenue grew 32,600% and the total subscriptions grew 563%. NTT DoCoMo paved the way with the i-mode launch in 1999 and they were the operator to emulate throughout the last decade, leading every single year in data revenues, in new application and service revenue sources, and in innovation and risk taking. They tried to export the success to other regions with little reward but DoCoMo clearly led the industry in taking mobile devices where they have never gone before.
China and India were late to the party but during the second half of the decade caught up with the western world and eventually surpassed all nations becoming number one and two nations by subscriptions respectively. In 2006, China Mobile became the most valuable operator passing Vodafone.
Mobile devices went significant transformation as well. From the early Bluetooth, camera, and music phones to the iPhones, the Storms, and the Androids, the industry was transformed by the introduction of Appleâ€™s iPhone in 2007. While Bluetooth, sleek designs, camera phone defined the first half of the decade, the second half was all about the applications and the mobile web. While Nokia dominated the entire decade in terms of the sales and profits, having missed the touch revolution, it leaves the decade a bit battered and a bit behind playing catch-up to the newcomers who profoundly disturbed the status quo.
Razr carried Motorola through 2006 when its global share peaked but was left to reinvent itself during the second half. It seems to have redeemed itself with the successful launch of Droid and upcoming Android devices. While many in the industry predicted RIMâ€™s demise, the company has only gotten stronger and is looking good for the 2010s. The emergence of Samsung and LG as strong players in the mobile ecosystem was also a big story of the decade with Samsung increasing its share by 380% and LG by 575% becoming the number 2 and 3 players respectively.
While Microsoftâ€™s Windows Mobile had an early start and the enterprise market share, it lost its way through several missteps and is on dialysis as we enter the new decade. One shouldnâ€™t count WM out though but there is a lot of work to be done before it can capture the imagination of the ecosystem which has been sequestered away by iPhone and Android.
While many new application areas were introduced during 2000s, none was able to displace SMS as the leading app category by usage and revenues. However, itâ€™s relative share has started to come down especially in North America and Western Europe.
As data usage grew, so did the data traffic bringing many data networks to their knees. We expect the data traffic consumption to only accelerate. Many people are underestimating the growth rates (as they did previously) and the strain the increase in consumption will put on the unprepared networks. Projector phones will take media consumption to a new level. Data management is going to be big business in the 2010s.
Overall, the mobile industry became a trillion dollar industry in 2008 and the data revenues are increasing in almost all regions. Voice is being commoditized at fast pace and that has put the traditional economics and ecosystem wealth distribution in topsy-turvy.
The US market also experienced tremendous growth with mobile data service revenues climbing 21,327% and becoming a mainstay in the mobile economy. In 2008 it crossed Japan as the most valuable mobile data market. US was late in adopting SMS but caught fire once American Idol started using it and even played a good role in the 2008 Presidential election in showcasing the power of mobile. Verizon started the decade being the number one operator and after trading places with Cingular and ATT grabbed the title back in 2009 (after the Alltel acquisition) to become the most dominant carrier in North America. Many smaller players competed by being innovative with Cincinnati Bell launching the fist UMA device, Sprint the first mobile eReader, and TMO launched the hotspot business which has now become an essential component of an operator strategy going forward.
Mobile is also replacing landline at a much faster pace than expected and within the first half of the new decade, we will have majority of the users using mobile vs. landline. Just like the last decade, this one starts with a new standard deployment of LTE that will keep operators and vendors busy throughout the decade. However, a lot of the developing markets will still be deploying 3G during the first half of the decade.
Infrastructure providers suffered the most in the decade bookended by the two recessions. Consolidation of giants (Alcatel Lucent, Nokia Siemens), bankruptcies of the famous (Nortel), and uprising of the upstarts (Huawei) pretty much defined the decade for the segment. Ericsson and Huawei enter the new decade from a strong position and looking to dominate the global markets.
The last decade was also marked by some prominent IP battles such as RIM vs. NTP, Qualcomm vs. Broadcom, Sony Ericsson vs. Samsung, Upaid vs. Satyam etc. (disclaimer: we worked on some of these cases and testified as an expert)
Here is our â€œsubjectiveâ€ list of movers and shakers of the last decade
Operator of the Decade
DCM led the way in almost all new category of apps and services. Its data service revenue was highest in each of the last 10 years
DCM will continue to lead along with KDDI and SKT. However, it might be the carriers with tremendous scale who will have the calling cards in the new decade. Watch for China Mobile, Vodafone/Verizon, Telefonica, Orange, Bharti, Unicom, Singtel
OEM of the Decade
Nokia dominated in sales and revenues in each of the 10 years and while the last couple of years took some shine off its glorious past, the company nevertheless came out ahead
RIM, Apple, Nokia, Samsung
Smartphone OEM of the Decade
Smartphones as we know them were introduced by RIM but Apple defined the category and the subsequent ecosystem
This space will be very competitive with Apple still the gold standard to beat
Infrastructure Provider of the Decade
Its prime rivals struggled to stay afloat while Ericsson grabbed most of the revenues from infrastructure contracts and is very well positioned for the next decade
Ericsson is joined by Huawei as the two top infrastructure provider with Huawei giving tough competition for LTE contracts. ZTE and other Chinese infrastructure providers will also replace some of the incumbents
Nation that led in mobile data
This is a no brainer. Japan led with Korea a close second. Finland, UK also impressed
US, China, and India are well positioned to make an impression but most likely during the second half. Japan will still be a major player
Device of the decade
iPhone followed by Razr
iPhone impressed with form and function while Razr with its global sales making it a top selling device of all times
The field might get more crowded as all OEMs focusing on the smartphone category. However, OEMs who also focus on the 90% of the market w/o smartphones might win the top prize
The year 2009
Apple continued to dominate the headlines for the third straight year – whether it was the launch of 3GS or the upcoming introduction of the fabled tablet. Google too kept the ecosystem active. It has executed on its mobile strategy with brilliant acumen though causing significant consternation amongst its partners who it needs to be successful. It has been often misunderstood by competitors, regulators, and partners. Often, they have focused on Googleâ€™s tactics vs. its strategy. Look for these two players to be very aggressive as they try to fight for the mantle and the mindshare.
While Nokia leads the OEM space by a good distance, its momentum in the smartphone space left a lot of question marks. Motorola made a credible comeback with Cliq and Droid. Samsung and LG continued to innovate and expanded on their share of shipments and revenues.
India outpaced China in net-adds and crossed 500M though it is still quite behind Chinaâ€™s 750M. The M&A and the consolidation process became active in Asia with several of the big regional operators looking to flex muscles in the international markets. After several delays, China started deploying 3G while India again fumbled and postponed its 3G auction.
US mobile data market continued its pace in 2009 with each of the four quarters exceeding $10B in data service revenues. The gap between the top two operators and the rest grew to be the biggest in the decade and the industry weathered the recession with ease. There was a clear shift towards prepaid especially for Sprint, T-Mobile, and the tier 2/3 operators.
2009 was also defined by significant activity on the application front. With Facebook eclipsing 100M subscribers and Appstore exceeding 2.5B downloads, sky is the limit.
The year also saw an unprecedented growth in mobile data consumption. As we had predicted, for some of the networks, the growth proved to be a double-edged sword. Many in the industry are banking on LTE to help relieve the pain but will be surprised that depending solely on the upgrade strategy will not be enough. Declaring spectrum as a looming crisis, FCC also started tinkering with the mobile industry and the broadband plan.
Japan exceeded 90% in 3G penetration while US subscriptions ventured into the 90% territory. Most of western Europe is way past 130%.
All in all, a terrific year considering that we went through one of the worst recessions in a generation. As we bid goodbye to the last decade, Nexus One and iTablet only serve to whet our appetite of whatâ€™s to come.
On a personal note, we started our consulting practice this last decade as we were coming out of the bubble recession and have been fortunate to work with some of the brightest brains and companies in the global ecosystem. We also had a chance to work on some key initiatives that impacted the ecosystem in profound ways. Many thanks to our clients, colleagues, friends, and readers. We will be involved with many new initiatives over the next decade and are looking forward to the conversations through the research notes, books, speeches, panels, whitepapers, blog posts, facebook and twitter feeds, and more.
Thanks and Happy New Year. May the upcoming decade leave you happier, healthier, and more successful than the previous one.
As we eluded to earlier, 2010 will be a pretty eventful year from several perspectives: business models, user experience and expectations, ecosystem posturing, disruption, and friction. How are things going to shape up? What will be hot and what will fade into oblivion? How will competition shape up the new sub-segments?
We put some of the questions to our colleagues in the industry. We were able to glean some valuable insights from their choices and comments. This survey is different from some of the others in the sense that it includes industry movers and shakers participation. Executives and insiders (n=150) from leading mobile companies across the value chain and around the world opined to help us see what 2010 might bring.
11 names were randomly drawn for 3 special prizes. The winners are:
Claire Boonstra, Cofounder, Layar- INQMobile 3G Chat device
Michael Libes, CTO, GroundTruth – Open Mobile Book
Henri Moissinac, Head of Mobile, Facebook – Open Mobile Book
Subba Rao, CEO, TataDoCoMo – Open Mobile Book
Saumil Gandhi, Product Manager, Microsoft – Open Mobile Book
Sarah Reedy, Senior Editor, Connected Planet – Open Mobile Book
Mike Vanderwoude, VP & GM, Cincinnati Bell Wireless – 2010 Mobile Almanac
Pinney Colton, VP, GfK – 2010 Mobile Almanac
Tim Chang, Principal, Norwest Ventures – 2010 Mobile Almanac
Laura Marriott, President – 2010 Mobile Almanac
Asha Vellaikal, Director, Orange – 2010 Mobile Almanac
Thanks to INQMobile and my friend Ajit Jaokar for contributing the prize gifts.
Despite conventional wisdom, what will not happen in 2010?
There were many. Sampling – Verizon iPhone, Microsoft Phone, Sprint will not be bought, Femtocells wonâ€™t gain traction, RCS will not happen, Google will not enter handset market directly, iPhone wonâ€™t lose steam, Android wonâ€™t bring coherence, NFC wonâ€™t take off, WiMAX wonâ€™t disappear, Nokia wonâ€™t bounce back, Palm wonâ€™t die, â€œYear of Mobileâ€ noise wonâ€™t subside, carriers wonâ€™t be delegated as dumb-pipes.
It is hard to cover the mobile industry in 20 questions. As pointed out by our panelists, there are a number of other issues and opportunities that will help shape our ecosystem – monetization of social networks, augmented reality, the fight for mobile advertising dollars, continued impact of globalization, security and privacy, NFC, IMS, VoIP, enterprise apps beyond email, battery improvements, new interaction modalities, health risks of RF radiation, Mobile 3.0, LTE, single purpose devices, 3G in India, Bada, app vs web, developer turmoil, featurephones, smart grids, M2M, Chrome, etc.
However, be rest assured, we will be tracking these and much more throughout the year and sharing them through various channels.
Thanks again to everyone who contributed. We will be calling on you again next year. We are clearly living in "interesting times" with never a dull moment in our dynamic industry. It has been a terrific year for us here at Chetan Sharma Consulting and we are looking forward to the next decade and seeing many of you along the way.
We hope you enjoyed gaining from the collective wisdom. Your feedback is always welcome.
Be well, Do Cool Work, Stay in touch.
With warm wishes,
Disclaimer: Some of the companies mentioned in this note are our clients.
Now onto the 2010 Mobile Industry Predictions Survey Results
The panel comprised of movers and shakers from around the world
What will be the biggest stories of 2010?
Jan seems to be the Google Phone vs. Apple Tablet matchup. Our panel though voted for the continued growth in mobile data as the top story.
Have we recovered from the recession? (Please select one)
Majority thought we are out of it though some might still feel the pinch
Who will be the most open player in the mobile ecosystem in 2010? (Please select one)
Google has done a great job at maintaining its image as THE open leader
Will Android handset sales exceed iPhoneâ€™s in 2010? (Please select one)
Despite Androids coming in droves, iPhone will still be the king of the hill
When will we see tiered pricing plans for smartphones in the US from tier 1 operators? (Please select one)
There are indications that this might happen sooner rather than later
What will happen to the mobile prepaid subscriber base in the US? (Please select one)
Prepaid made a strong comeback in 2009 and a good majority thought that the trend is likely to continue
By how much will the mobile advertising ad-spend increase in 2010? (Please select one)
Mobile Advertising was the only advertising segment with positive growth last year so it is no surprise that folks expect it to more than double this year
What will be the impact of the FCCâ€™s national broadband plan on the mobile industry in 2010? (Please select one)
Not much is expected from the various rulings that might come this year with most expecting the courts to have the final word.
Who will be the mobile comeback story of 2010?
Having bet its future on Android, Motorola was voted as the comeback kid of 2010
What will be the impact of Google Phone?
Itâ€™s pretty clear, Google and Apple are duking it out for the developer mindshare. Google wins in either case.
Which areas will feel the most impact from FCC?
Net neutrality is the area where they will have the most impact
Which solutions will gain the most traction for managing mobile data broadband consumption?
While only a holistic approach can provide complete relief, tiered mobile data pricing might have the most impact
When will the carrier-branded appstores lose steam? (Please select one)
Most expect carrier-branded appstores to be a thing of the past in 2010
What will help mobile cloud computing gain traction in 2010?
Mobile cloud computing is gaining steam and the reason is storage and media
What will be the most successful non-mobile-phone category in 2010? (Please select one)
Netbooks seem to be the strongest category followed by eReaders, Tablet, and M2M
What will be the breakthrough category in mobile in 2010? (Please select one)
Mobile Advertising and Mobile Payments share the top honors
By the end of 2010, which will have more subscribers? (Please select one)
LTE might have the momentum but WiMAX has the subscribers
How will Netbooks do through the operator channel? (Please select one)
No major impact from the operator channel
Which standards will gain traction?
No major impact from the standards
What mode of mobile payments will get any traction in North America and Western Europe in 2010?
The category will expand in different ways with more items being charged on the operator bill
US Mobile Data Market Update Q3 2009 November 9, 2009Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carnival of Mobilists,Carriers,CTIA,Devices,European Wireless Market,Indian Wireless Market,IP Strategy,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Messaging,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile TV,Mobile Usability,MVNO,Networks,Partnership,Speaking Engagements,Unified Messaging,US Wireless Market,Usability,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 5 comments
The US wireless data market grew 5% Q/Q and 27% Y/Y to exceed $11.3B in mobile data service revenues and thus exceeded $10B for the third straight quarter. As we mentioned in our Q1 2009 research note, given the strong growth in data revenues and overall service revenues, the worst is over for the US mobile industry. The US market touched 25% penetration of smartphones in Q3 2009, a new milestone.
While the flailing economy hit certain segments of the wireless ecosystem hard esp. the infrastructure and handset segments, consumers havenâ€™t really pulled back on the mobile data overall spending. Additionally, the CAPEX spending has stayed strong in 2009 given the activity around 3G/4G deployments and trials. As expected, there was an increase of prepaid subscribers which dropped the overall revenues for some of the carriers. The US subscription penetration was approximately 91.3% at the end of Q3 2009.
As we mentioned in our last three research notes that this time around, the fate of the US mobile industry is more closely tied to the overall economy compared to the previous recessions. As the consumer sentiment improved over the last two quarters along with better than expected Q1-3 2009 earnings from corporations, the mobile industry is back on track. While the structural flaws in various industry segments remain, the outlook for the Q4 2009 and 2010 remains bright and we are expecting the overall data revenues to now increase by over 30% compared to 2008 with a record-setting Q4.
Q3 2009 reported a 3.5% increase in GDP compared to the 1% decline in Q2 and 6.4% decline in Q1, thus marking the official (technical) end of the recession. The GDP is expected to change by 3.2% for 2009 and the service revenues are expected to account for 1.13% of the US economy by year-end. Note: For a detailed discussion of the US wireless industry in recessions, please see 2008 US Wireless Market Update.
So, what does this mean? Well, the markets can still be volatile, but overall the market seems to be feeling better about the economy than it was in February. The Conference Board Consumer Confidence Index though retreated from June is at a healthy 47.7.
What to expect in the coming months?
The high unemployment has slowed the growth in the data card segment but the smartphone consumers have more than picked up the slack. Also, as expected, there was a shift from postpaid to prepaid in some user segments. For example, for T-Mobile, prepaid accounts for almost 20% of their customer base compared to 17% from an year ago. The fight for the low-end customer is also having an impact on the traditional prepaid players and the price pressure is reducing their margins. It is quite likely that 50-60% of such consumers donâ€™t go back to postpaid thus permanently lowering the ARPU base for such customers and carriers who have experienced more postpaid to prepaid shift will have to make up for the lost revenues elsewhere.
In fact, the churning in the last few quarters has distanced the top two (AT&T and Verizon) and the next two (Sprint and T-Mobile) by the biggest gap in the history of the industry. By the end of 2009, this gap will rise to 36% compared to 28% at the end of 2008 and 21% in 2002.The "Rest" category has essentially diminished from the market dropping from a dominant 43% market share in 2002 to 12% in 2009.
The trend of the landline replacement by Mobile continued in Q3 2009, now reaching almost 25%. In the third quarter, messaging growth slowed down. The messaging volume was up only 4% and messaging revenues were up 3% QoQ. With its expanding 3G network, T-Mobile like its peers has started to benefit from smartphone penetration reaching to 6% of its subscriber base. Overall, The increased use of smartphones and datacards is putting a pressure on carrier networks and accelerating their strategies to deploy LTE/WiMAX. We estimate that by end of 2009, the US mobile data traffic is likely to exceed 400 petabytes, up 193% from 2008. To truly tackle the problem head-on, operators will need to adopt a multi-pronged strategy to manage their traffic more effectively. We discuss mobile data traffic in much more detail in our paper "Managing Growth and Profits in the Yottabyte Era." We will have more on this subject in the coming days (You can also read our RCR Wireless columns on the subject – Defining Mobile Broadband and Solutions for the Broadband World).
We will be keeping a very close eye on the micro- and macro-trends and reporting on the market on a regular basis in various private and public settings.
Against this backdrop, the analysis of the Q3 2009 US wireless data market is:
Service Revenues (Slides 11-12, 17, 19)
- The US Wireless data service revenues grew 5% Q/Q to $11.3B in Q209. Compared to Q308, the data service revenues grew 27%.
- Verizon and AT&T accounted for 80% of the increase in data revenues in Q3 2009.
- The US mobile data service revenues crossed $10B for the third straight quarter and stays ahead of Japan and China by a distance.
- AT&T experienced the most growth with over 6% increase Q/Q followed by Verizon and Sprint at 5%.
- Verizon’s data revenues exceeded $4B/quarter only inches behind the global leader of over 10 years NTT DoCoMo.
- AT&T and Verizon now account for 68% of the market data services revenues and 61.5% of the subscriber base.
- The average industry percentage contribution of data to overall ARPU is now 28%. US market is likely to touch the 30% mark in 2009 though it might not quite eclipse it.
- The top four US carriers are now a permanent fixture in the top 10 global operators by mobile data service revenues occupying #3, #4, #6, and #8 spot respectively. Apart from NTT DoCoMo and China Mobile, Verizon Wireless and AT&T are the only two other operators generating more than $3B in quarterly mobile data service revenues.
ARPU (Slides 13-15)
- Overall ARPU decreased by $0.14. Average voice ARPU declined by $0.57 while the average data ARPU grew by $0.43 or 3%.
- Verizon led in (blended) data ARPU with $15.59 followed by AT&T and Sprint. In terms of % contribution, Verizon exceeded 30% to become the first US operator to do so. It was followed closely by AT&T and Sprint respectively. T-Mobile also exceeded $10 in data ARPU for the first time.
- AT&T experienced something unique – an increase in voice ARPU (for the first time in 10 quarters). The voice ARPU increased $.03 in Q3 2009.
Subscribers (Slides 16-18)
- In Q309, the US market added approximately 2.7M new subscriptions down 1% from Q109.
- The number of data subscribers has been on the rise with Verizon leading the way. At the end of Q309, 67% of US subscribers were using some form of data services.
- The messaging volumes in the US market now average almost 568 messages/subscriber/month or at the frequency of almost a message/hour/sub thus reaching close to the messaging leader Philippines.
- In terms of net-adds, thanks to the boost from the iPhone, ATT again led in Q309 with 2M net-adds, edging its friendly rival Verizon which added 1.2M net subscriptions. Sprint lost 565K.
- T-Mobile lost customers for the first time in its history. It lost 77K customers in the quarter.
- The 3G penetration in the US stays at a healthy 43% in Q309. Verizon led the pack while T-Mobile is slowly expanding its 3G coverage. The growth in 3G and smartphones is helping offset some of the downward pressure on the data revenues and overall ARPU.
- The gap between the top two (AT&T and Verizon) and the next two (Sprint and T-Mobile) is at its maximum. By the end of 2009, this gap will rise to 36% compared to 28% at the end of 2008 and 21% in 2002.The "Rest" category has essentially diminished from the market dropping from a dominant 43% market share in 2002 to 12% in 2009.
Applications and Services
- Non-messaging services continue to grab 50-65% of the data revenues for the US carriers.
- The flat-rate pricing movement that was started by Willcom in Japan which moved to Europe became more prevalent in the US market with industry wide flat-rate pricing plans that included data. All the major carriers seem to be offering flat-fee access plans for most of the new smartphones being introduced in the market. Approximately 20% of the consumers have flat-rate data plans.
- There are probably 18-20 sub-segments within mobile data services and consolidation looms. While the valuations are still high for rapid consolidation, we think that due to recession pressure, the M&A scene is starting to heat up.
- The usage and data consumption trends are enabling carriers to accelerate their 4G plans and develop long-term business and technical strategies.
- Nokia sold 100M+ units in Q3 2009. Samsung again had a solid quarter with over 60M devices sold inching its market share to almost 21%. LG Electronics at 11%, Sony Ericsson at 4.9%, and Motorola at 4.7% rounded up the top 5.
- The third quarter was again dominated by blockbuster launches of smartphones. Androids have been invading the industry en-masse and 2010 looks to be a terrific year for consumers and competition.
- The growth in smartphone usage is also putting pressure on the networks which are not able to handle the load during peak times in certain cities thus forcing carriers to look for alternate strategies to satisfy the demand for broadband – usage billing, UMA, Femtocells, Hotspots, WiMAX, LTE, and others.
Policy and Regulations
Â· Q3 also marked the start of an intense FCC scrutiny of the wireless industry. In outlining the four key principles of a) looming crisis of spectrum shortage b) removal of red tape c) enforce net-neutrality and d) open Internet, things have already started to change in the US Wireless Industry. Google has played the game of Armadaian tactics with Kasparovian acumen. The impact of the codified principles (and the subsequent court battles) can have a significant impact on not only the US wireless industry but the global ecosystem as well.
- The appstores battle is intensifying with OEMs and carriers are announcing their plans and some of them are opening their wares to woo the developer community. In the midst of the appstores hoopla, Apple announced the passing of the 2 Billion download mark with increasing number of developers participating the ecosystem. The new functionality being released with 3.0 is taking the battle up a notch. The clear-cut business model of 30/70+ split is attractive to the long-tail of developers. While there is no dearth of applications, findability remains a challenge. Also, appstores are changing the monetization strategies for content and application developers.
- The App vs. Mobile Web debate is getting intense. The evolution is pretty clear – for the applications that don’t require significant UI resources, it will be better to develop in for the browser, for intensive games, the native platform will be ahead of the browser advances. The location API access on the iPhone browser is breakthrough to have developers start thinking about the webapps. But, what does it do to the control points and the revenue models?
Â· While there has been much consternation around the word "Open," one is hard pressed to find a consistent definition what it might actually mean. One could provide access to one API and declare themselves an open heretic while others could end up opening up their business more than needed and yet be accused of being closed. Clearly, the degree to openness is in the eye of the recipient. There is no black and white, just shades of grey and that’s where the battles will be won and lost. In the end, it is all about "access" to the market and the "freedom" to earn profits. Rest is noise.
Â· It is worth debating as to what can be mandated to be open, do the rules apply just to the operators and OEMs, or we should extend the courtesy to software platforms, search indices, aggregated user profiles, billing engines, etc.
Â· It is also becoming obvious that we need to redefine the device categories. Featurephones are no longer dumb terminals, many empower the users with smartphone functionality. Devices like iPhone, Droid, Pre no longer fit the smartphone stereotype, they need a separate category for themselves – appphones, ddhmvcs (data devices that happen to make voice calls), platformdevices, mobilecomputers, geniusdevices, agilechips, astuteconceirge, you get the point.
- Not surprisingly, Venture capital market experienced a continued decline in 2009, with companies announcing $1.5B in financings vs. $3B for the same time period. (Source: Rutberg)
- In a sign of convergence battles to come, T-Mobileâ€™s @Home and various Femto cell initiatives are taking hold. Cable operators are also aggressively seeking triple-play by providing the wireless component of the service.
- China crossed the 700M subscription mark in Q3. India crossed the 500M mark for telephone penetration (wireline + wireless) of which 472 are mobile subscriptions. In terms of net-adds, India has outpaced China for the last 16 months. The Indian market added almost 155M vs. 101M in China during the last four quarters. (more discussion on the international market in our global market update next year)
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 Feb 2009. The next Global Wireless Data Market update will be issued in Mar 2010.
Watch out for our end of the year survey and commentary on global wireless markets and trends for 2010.
Your feedback is always welcome.
Should you have any questions about navigating or understanding the economic and competitive icebergs, please feel free to drop us a line.
Disclaimer: Some of the companies mentioned in this note are our clients.
Global Wireless Data Market Update 2007 March 27, 2008Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,CTIA,Devices,European Wireless Market,India,Indian Wireless Market,Infrastructure,Intellectual Property,Japan Wireless Market,Location Based Services,M&A,Mergers and Acquisitions,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile TV,Mobile Usability,Mobile Users,MVNO,Networks,Partnership,Speaking Engagements,Speech Recognition,US Wireless Market,Wi-Fi,WiMax,Wireless Value Chain,Worldwide Wireless Market , 8 comments
Global Wireless Data Market Update 2007
As you read this End of Year (EOY) 2007 Global Wireless Data Market update this week, somewhere in India, a new subscription will catapult India over the US as the number 2 global wireless market. 2007 was a banner year for global wireless data market. The global service revenues for the year touched $700 billion, the data service revenues were more than $120 billion, China signed its 500 millionth subscription, and both India (in feb 08) and the US crossed the 250 million subscription mark. 2007 continued to enhance mobile data’s role in the operator ecosystem with approx 17% of the revenue is coming from data services.
For some leading operators, data is now contributing up to 35% of the revenues however increase in data ARPU is not completely offsetting the drop in voice ARPU. From the true and tested SMS messaging to new services such as Mobile TV, Enterprise apps, and others, different services helped in adding billions to the revenues generated for 2007. Japan and Korea remain the envy of the global markets and the countries to study and learn from w.r.t. new services and applications. The US market has been steadily making strong comeback and for the first time exceeded Japan in service revenue generated from mobile data.
Chetan Sharma Consulting conducted its semiannual study on the global mobile data industry. We studied wireless data trends in over 40 major countries – from developed and mature markets such as Japan, Korea, UK, and Italy to hyper growth markets such as China and India. This note summarizes the findings from the research.
- The worldwide markets continue to grow at an explosive pace reaching 3.3B subscriptions by Q407 up 20% from 2006 levels. Significant growth is coming from India and China with both countries registering close to 8-9M net adds per month. India recorded 8.8M net adds in Jan 08 while China added 9.4M in Feb 08. Overall, the world market is at almost 50% penetration.
- US surpassed Japan as the most valuable mobile data market in service revenue with US adding $24.5B vs. $23.2B for Japan in 2007 mobile data service revenues. China with $12.5B was ranked number 3. US registered the highest growth amongst the top 3 with over 55% increase from 2006 levels followed by China at 37% and Japan at 18%. These top 3 markets account for over 50% of the global data service revenues.
- NTT DoCoMo continues to dominate the wireless data service revenues rankings with over $12.13B in service data revenues for 2007 however Q/Q growth has dropped to single digits. DoCoMo crossed 80% in 3G penetration and is expected to touch 90% by end of the year.
- DoCoMo was followed by China Mobile, KDDI, Verizon Wireless, AT&T, Sprint Nextel, O2 UK, SK Telecom, Softbank, and China Unicom to round up the top 10 operators by wireless data service revenues. All the top 10 carriers exceeded $3B in data revenues for the year.
- Most of the major operators around the world have double digit percentage contribution to their overall ARPU from data services. Operators like KDDI, DoCoMo, 3 Italy, 3 UK, and O2 UK are topping 30%.
- Both India and China added a whopping 85 million new subscriptions (most of them prepaid). This week India edges past US to become the number 2 wireless market (by subscriptions) in the world. In last two years alone it added almost 150 million new subscriptions (in comparison China added 155 million and the US market added 44 million).
- Vodafone Italy reported the highest increase in data ARPU from 4Q06 with 76% growth. Other notable percentage increases in ARPU were from Rogers, AT&T, Verizon Wireless, Sprint, and T-Mobile Austria. The biggest drop in percentage terms were registered by the Indian operators with average data ARPU dropping to $0.70.
- In terms of absolute dollar amount, 3 UK leads the pack with $29 data ARPU (qualifying limit: 4 million subs). By comparison, the rest of the top 4 operators are below $22. In fact, 3 UK reported the highest ARPU recorded for the year at approximately $94 (in Q2). Other operators who reported overall ARPU above $60 were KDDI, NTT DoCoMo, Rogers, and 3 Sweden.
- The biggest jump in data revenues was experienced by Verizon Wireless with over 68% increase from 2006 followed by AT&T with 63% jump and O2 UK making 49% gain.
- In 2007, SMS’s vice like grip on data revenues continued to loosen a bit with many carriers seeing an increase in non-SMS data revenues. On an average, Japan and Korea have over 70-75% of their revenue coming from non-SMS data applications, US around 50-60%, and Western Europe around 20-40%.
- The top 10 operators increased their revenue by 32% during 2007 (from 2006) to reach almost $62 billion in data service revenues, thus accounting for almost half of the global data service revenues though they account for only 27% of the global subscription base.
- NTT DoCoMo’s position at the top of the wireless data world has been challenged recently by several carriers esp. by its archrival KDDI. Their data coordinates stand at ($21.5, 35%) and ($21, 34%) respectively (please see PowerPoint for reference). Since the takeover from Vodafone, Softbank has been making significant strides in the market by taking the highest share of the net-adds in last 9 months.
- The biggest percentage contribution by data ARPU has been consistently registered (since mid 2002) by two Philippines carriers – Smart Communications and Globe Telecom with almost 55% (or $4) contribution coming from data services.
- Even though China reported approximately $12.5B in data revenues for 2007 and the percentage contribution is over 23%, data ARPU is around $2.3. For India data ARPU dropped below $1 for all major carriers.
- China Mobile with 369M (as of Dec 07, the numbers increased to 384M by Feb 08) remains the #1 carrier in terms of total number of subscribers followed by Vodafone at 252M and China Unicom with 160M subscriptions. Telefonica, América Móvil, SingTel, Deutsche Telekom (T-Mobile), and Orange (France Telecom) are the next five largest telecom groups in the world. In terms of individual carriers in a given country, AT&T and Verizon Wireless occupy the #3 and #4 spot respectively ahead of NTT DoCoMo, which is at #5. The two Chinese carriers round up the top two positions and are likely to stay perched at their lookout vistas for many years to come. China Mobile also surpassed Vodafone in market cap which stands at $288B (vs. $164B for Vodafone). Telecom groups in mature markets are under enormous pressure to either come up with a global expansion strategy or accelerate their existing plans. Carriers in Japan and Korea are the most under duress.
- As far as 3G is concerned, GSA reported 293 WCDMA commercial launches worldwide with over 270M 3G users (66% of them are WCDMA users vs. EV-DO). Both Japan and Korea continue to expand their 3G base with both reporting over 75-80% penetration. 3G has picked-up steam in both western Europe and North America per our forecast in the 2005 cover story article “3G: Hitting the Mass Market” published in the Wireless World Magazine. Western Europe and US are approximately at 25% 3G penetration (Italy being the exception reaching 40%).
- China and India represent the biggest opportunities for Infrastructure providers. China has postponed its 3G decision for the umpteenth time and has been having technical and political problems to get something in place before the 2008 Olympics. India is going through its 3G spectrum policy but unlike China is likely to resolve the issues in short order. Some of the biggest infrastructure contracts will come from these two countries that are looking to expand coverage into rural areas. In India, regulators are considering inviting bids for the 3G spectrum from foreign entities as well.
- Carriers with nationwide 3G networks and good distribution of handsets are seeing uptick in data ARPU. The Japanese and Korean carriers along with operator 3, Verizon, Sprint Nextel are all seeing benefits of rolling out their 3G service. Deployment of 3.5G technologies such as HSDPA and EV-DO Rev A (and B) are also gaining momentum. Networks are getting deployed and market is being seeded with some of the early handsets. In terms of 4G, there is a strong momentum behind LTE, UMB in its current incarnation is practically dead, and proponents of WiMAX are pushing the technology as a 4G candidate, though it is starting to lose its time advantage.
- In terms of applications, messaging accounts for lion-share of data revenues. However, other services such as Mobile Music, Mobile TV and video streaming, Voice navigation, PNDs, Mobile Games, IMS, LBS, Mobile advertising, and others have captured industry’s imagination. Though not much talked about, enterprise applications are also being adopted widely esp. in North America as more workers become mobile and corporations seek efficiencies in their operations and supply-chain.
- 2007 also saw the demise of some high-profile MVNOs like Amp’D. Helio continues to struggle while the newer ones like Sonopia and Blyk are testing the treacherous waters with different business models. Asian market is also opening up for MVNOs.
- Nokia eclipsed 100M/quarter unit sale three times in 2007. It sold over 437M handsets in 2007, more than the next three handset manufacturers combined. Nokia’s global market share stood at 40.2%.
- While the talk of “Open Access” and “Open Platform” consumed much of North America, it barely registered a decibel elsewhere. Several significant events including 700 MHz Auction, Android, and Verizon’s “Open Network” initiative elevated the consternation in the ecosystem.
- Several operators reported Mobile Advertising as their key strategic focus for the coming quarters, esp. China Mobile and Vodafone. Sensing the opportunity to seek new sources of revenue stream, Nokia launched its ad service as well. 2007 saw tremendous M&A activity in both the online and mobile advertising space. In a matter of weeks, several billion dollar transactions took place highlighting the intensity in preparing for the next battleground. The estimated market for mobile advertising in 2007 was approximately $2.3B with messaging, search, and browsing accounting for over 84% of the revenues.
Your feedback is always welcome.
Disclosure: Some of the companies mentioned in this note are our clients.
CTIA Wireless IT and Entertainment 2007 Roundup October 28, 2007Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,CTIA,Devices,Enterprise Mobility,European Wireless Market,Infrastructure,Intellectual Property,Mergers and Acquisitions,Messaging,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile TV,Mobile Usability,MVNO,Partnership,Privacy,Smart Phones,Strategy,US Wireless Market,WiMax,Wireless Value Chain,Worldwide Wireless Market , 5 comments
The early morning full moon over the San Francisco bay was much more inspiring than any gizmos or gimmicks at the annual CTIA Wireless IT and Entertainment show. Maybe it is the conference fatigue setting in but the scaled back event failed to gather steam and one had to rely on alternate sources to get a sense of where things are headed in the next 6-12 months. This note summarizes the observations and commentary from the show.
First let’s do the numbers. CTIA released its mid-year data survey for the year. In summary, as of June 2007 – 243M subs, $67.9B in revenues (first 6 months), $10.5B in data revenues for the year accounting for 15.5% of the total service revenue, MOU exceeded 1 Trillion minutes, 1B TXT messages daily. These numbers were in line with the numbers we reported back in Aug.
Keynotes – The central theme that tied the three keynotes was “Be Open, Do Good Work, and Rest will take care of itself.” The keynotes from Steve Ballmer, Microsoft, Dustin Moskovitz, Facebook, and Atish Gude, Sprint Nextel emphasized the need to have an “open platform” for innovation, applications, and services. Haven’t we been down this lane before?
Steve started by taking a page out of our (upcoming) book, literally (page 243 to be exact) and describing a vision where mobile device becomes the remote control of your life for both workstyle and lifestyle. Too often we focus on separating out personal vs. professional but our lives are so intertwined that one minute you are setting up a doctor’s appointment and the next minute closing a sale. Companies that focus on managing the experience start to finish (waking to sleeping) independent of everything else will be the ones that dominate these turf wars. Microsoft’s big announcement was the release of device management server that includes mobile devices in addition to the desktop world (but it is limited to windows mobile devices only, Open?). Microsoft has been making impressive strides in occupying its place in the mobile ecosystem. Though windows mobile and battery life don’t go together, the fact that they are deployed with 160 operators in 55 countries, shipping 20M devices/year places them at a significant advantage in the coming days.
Facebook’s Moskovitz made the plea for openness of networks, devices, and applications to enable the social networking phenomenon on mobile. The fact that Microsoft and Facebook were doing the keynotes on the eve of strategic investment wasn’t a coincidence. Dustin brought out the elderly statesman Mike Lazaridis to announce the facebook app for Blackberry smartphones. The interesting thing was how the app was introduced – Facebook chose RIM and RIM chose T-Mobile for this app. Device manufacturers are surely getting bolder. Facebook extended its platform to mobile. Getting social networking apps on mobile is a no-brainer. In fact, the coming enhancements with Presence, IMS, Broadband, Profiling, Location, can make mobile social network a society of its own.
I thought the most forceful case for “openness” was delivered by Atish Gude, SVP of the XOHM (WiMAX) initiative at Sprint Nextel. In fact, it was exactly along the lines of our recommendations for the operators in our book. Atish talked about openness across network, devices, content, and applications to deliver a great “customer experience.” Operators focus on delivering the intelligent network by focusing on QoS, Network elements like Presence and Location, Security, and Consistency of throughput and performance and leave the innovation in applications and services on the ecosystem who know how best to exploit the medium. His definition of “device” expanded beyond the mobile phone into consumer electronics and appliances which is a smart way of looking at things. However, vision is one thing and execution is another. Will Sprint be able to deliver on this vision in a timely fashion amidst quarterly Wall Street pressure is going to define the industry more than any of the hoopla of 700MHz.
Enterprise MIA – One of the personalities was clearly missing from the show. Yes, there was an enterprise pavilion but nothing new and different surfaced. Microsoft’s late foray into the device management space was the only worthwhile news that emerged.
LBS – The LBS industry proudly presented its posterchilds TeleAtlas, Navteq, TeleNav, and others. Their imposing presence on the show floor and in some of the sessions was palpable. I have been working in or following this space since 1995 and it finally feels that there is going to be some activity in this space after years of posturing, delays, and hype. However, the true value of “location” can’t be unlocked unless it truly becomes “open” for the application and service developers. The delivery of coordinates for every request is not cheap so some form of business model or technical break through is needed to make the use pervasive. Some of the newer players displaying their wares were Telmap, locr, and earthcomber.
Mobile Advertising – It is great to see the progress over the last 12 months. The distribution, inventory, and ad networks are all improving and size of the campaigns are starting to reach six figures on average. Some of the working demos I saw were really compelling and some unique solutions are going to be introduced in the market in the next six months. Though the space is still nascent, some trends have started to emerge – companies who are focused on solving the problem end-to-end from strategy to execution to understanding the results are separating themselves from the plethora of technology providers in the space. There is tremendous amount of work that needs to be done in the metrics and auditing space in addition to the integration of silos.
WiMAX picks up steam On the heels of WiMAX being declared as part of the IMT-2000 family, WiMAX is slated to gather momentum though a lot still depends on carriers like Sprint to deploy nationwide networks and device manufacturers like Nokia, Motorola, and Samsung to bring cheap devices to the market. Nevertheless, Cisco’s acquisition of Navini, Beceem’s deal with NEC and others are signs of positive movement in this sector.
Mobile Video a dying market? Already? Only a couple of CTIAs ago, Mobile video took the event by storm only to find defending itself as a viable business in a short span of time. The video quality has improved significantly but the business models have not.
Entering the US market – US remains one of the most attractive market for mobile data but very few overseas firm succeed. One of the big European brands “Zed” is making an aggressive and impressive push into the US market and is expecting up to 30% (or $150M) of its revenues coming from the US market in the next 12 months. They have developed a good platform for interactive games that tie the experience across mobile and online really well. EA and the likes should take notice.
Open – not in my backyard The keynotes were in sharp contrast with some of the carrier panels. One of them seemed to be the replay of a session I attended in 2001 or was it 1997. Eerie.
Presence, IMS – The discussion around presence and IMS is intensifying. Demos are getting better and the coordination between carriers to standardize and interoperate is improving but we still have a long way to go.
Coolest gadget – NeuroSky filled the void of a gadget less show by showcasing its mind-over-matter technology. Using brainwaves which are detected by a sensor attached to your head, it allows the user to move, push, and float objects by just concentrating on them. Remember The Matrix. Now, if you throw in Philip’s amBX and Microvision’s PicoP, your cell phone becomes this gaming platform that takes the die-hards to the transcendental state of nirvana.
iPhone continues to dominate the talk – iPhone continues to set the tone of discussion in the industry. Since July, there has hardly been a mobile conference worth its salt that hasn’t had a session on “impact of iPhone.” There hasn’t been a mobile device like this one and it shows. Attendees proudly fiddled with their iPhones in public and were eager to discuss their experience and forecasts.
US vs. Europe – There was quite a bit of us vs. them discussion. CTIA’s Wireless Wave magazine started the discussion by its cover story article “The Continental Divide” (for which we were interviewed). It was soon covered by the likes of WSJ (Walt Mossberg – Free My Phone), GigaOM (How far behind is the US vs. Europe?), Steve Largent (Largent to Mossberg .. Wish you were here in San Francisco), and others. As I say in the article – the picture is more complicated .. and one needs to take a holistic view. This topic is crying for a detailed study.
MCommerce – Behind closed doors there is a lot of discussion on MCommerce and how to enable phone to become the wallet of choice (this will be music to the ears to my colleagues in Japan and Korea). Some new and interesting models are starting to appear. One is from Mobilians, a company that has had good success in South Korea and is now setting its sight on the US market. Their focus is to use the phone to enable payment of online and offline goods. In Korea, Mobilians is registering 7M transactions/ month and over $1B in goods sold/year with up to $250 items (which appear on the carrier bill). This is a totally untapped space for the carrier and is a threat to the credit card companies especially for the low cost items where the 2%+20-25c fee drives up the effective rate for the merchant. A tier-1 carrier is also looking to firm up its mCommerce strategy in the next few weeks. It should be noted that some of the smaller regional carriers who survive due to laser focus customer service are testing and rolling out innovative solutions ahead of their bigger peers. For e.g. CellularSouth launched picture application (with Ontela) and after their successful trials with NFC based payments is looking into launching WirelessWallet. Similarly, some others are in the process of getting some LBS, Mobile Search, and Mobile Advertising solutions in the next quarter or so.
· AOL Mobile re-launched its mobile suite of products. It has a good suite of assets and the company is starting to integrate and enhance the user experience.
· More M&A activities are expected in the mobile advertising space in the next 6-12 months as startups use every advantage to maximize the returns before the big boys catch-up.
· There was hardly any mention of the gPhone or the zPhone.
· Verizon and Sprint are boosting the holiday season lineups to counter the onslaught of iPhone with similar looking phones.
· Becker – a 60 year old company which launched the first ever car radio showed off its “Traffic Assist” unit which had a good user interface and free real-time traffic info for life.
· Talkster talked about its free global calls in exchange of listening to ads.
Your feedback is always welcome.
Korean IT Leaders Summit November 15, 2006Posted by chetan in : 3G,Devices,International Trade,Japan Wireless Market,Partnership,Speaking Engagements,US Wireless Market , add a comment
My love affair with Korea started last year when i was invited by the State Department to put together a Korean-US Trade Summit. I was honored to serve with several other dignitaries on the US advisory committee along with Co-chair Governor Gregoire. I had a chance to meet with several innovative companies at the event as well. Earlier this year, I was hired by the executive team at KTF, the number 2 carrier in Korea to do some strategy work. As a result, I spent sometime in Seoul and go to know more about the industry, the country, and the wonderful folks who are so digitally inclined that they rank #1 in ITU/UN’s Digital Opportunity Index (ahead of Japan and US which is #21). Their engagement with games is at a different spiritual level.
So, it was only fitting that my first sponsorship of an event was rolled out at the Korean IT Leaders Summit which was held in Seattle last week. Proudly displayed my company banner side-by-side with Microsoft. Several senior executives from the Korean companies like SK Telecom were present. It always amazes me that the gulf between the device quality between Korea/Japan and US. Though the gap is closing, we are still worlds apart. I have a top of the line EV-DO LG phone. Comparing it with some of the handsets i saw in delegates hand, there is no comparison. User experience is so much better on handsets in Korea/Japan that us consumers in the US are missing out. I will have more on the Korean market next year.
I will be finishing the year with a stop in Seoul later in December.
If you are looking to do business in Korea or Japan or vice-versa for a North American or European company, let me know.
US Wireless Data Market: 3Q06 update November 13, 2006Posted by chetan in : 3G,AORTA,ARPU,Carriers,Devices,Infrastructure,Japan Wireless Market,M&A,Mergers and Acquisitions,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Search,MVNO,Networks,Partnership,Smart Phones,Strategy,US Wireless Market,Worldwide Wireless Market , 2 comments
- US wireless data market continues to grow rapidly. As expected, for the first time, the top three US carriers (Verizon, Cingular, and Sprint Nextel) crossed $1B/quarter in data revenues. US is the only country with 3 carriers in the “$1B/quarter” data revenues group (7 carriers are in this group, only NTT DoCoMo is in the exclusive “over $2B/quarter” club). This takes the overall US wireless data service revenue tally to over $10.5B for the year (compared to $8.6B for entire 2005) and is expected to cross $15B in 2006.
- Verizon continues to dominate and has shown better performance than its rivals. It became the number one carrier in terms of service revenues and data revenues, and is heading steadfastly to claim the coveted “carrier with most subs” title by second half of 2007. Its data revenues for the year were approx. $3.1B followed by Cingular at $2.9B, Sprint Nextel at $2.8B, and T-Mobile US at $1.2B.
- Sprint retains its leadership position of highest wireless data ARPU in terms of absolute dollar amount at $7.75 but Verizon continues to lead in terms of % data ARPU at over 14%. Average data ARPU for the industry is now $6.8 or 13%.
- Overall ARPU (voice + data) increased slightly for the second straight quarter to $53.09 bucking the general trend of slow ARPU decline. Both Verizon and Cingular reported slight increase in voice ARPU. Average Overall ARPU was $53.09. Sprint led with $61 followed by T-Mobile at $51, Verizon at $50, and Cingular with $49.8.
- US 3G subscriber base continues to grow – primarily due to Verizon and Sprint Nextel’s aggressive push. With Cingular and T-Mobile joining the fray, the 3G growth is expected to accelerate with 2007 being the inflection year.
- In terms of EV-DO vs. WCDMA, EV-DO is quite ahead in both coverage and handset diversity. As of Sept 2006, there were 15 3G handsets available in the market (representing approximately 20% of the available handsets from big four), 14 EV-DO (10 from Verizon, 4 from Sprint Nextel) vs. 1 UMTS/HSDPA handset from Cingular.
- US added over 16M net subscribers from Jan-Sept 2006. This translates into 1.7M subs/month which is slightly lower than the 2005 average of over 2M/month. Given the fact that we have crossed 75% penetration, the declining rate is indicative of approaching saturation in the market.
- The top 4 US carrier account for 81% of the subscribers, 86% of the service revenues, and approximately 95% of the wireless data revenues.
- US Off-net revenues for the year are likely to exceed $750M.
- Data ARPU of CDMA/EV-DO carriers was 20% higher than GSM/WCDMA carriers.
- Several high-profile MVNOs were launched over the course last year and the overall results have been disappointing primarily due to poor execution, instant crowding effect, and competition from big 4. Mobile ESPN was first to bow out last quarter.
- US wireless carriers are steadily climbing in their wireless data performance as compared to their peers worldwide. Verizon, Cingular, and Sprint maintained their ranking # 4, 5, and 7 respectively, amongst the top 10 operators worldwide in terms of total wireless data revenue generated for the first nine months of 2006.
- T-Mobile US outperformed its parent TMO Germany for the first time by generating $434M in data revenues (compared to $425M by TMO Germany).
- In terms of total wireless data revenue for the first nine months of 2006, the #1 carrier worldwide is NTT DoCoMo which has maintained its position for a number of years. It has generated over $7.8B in wireless data revenues during the first nine months and will eclipse $10B mark for 2006.
- In terms of wireless investments, over $5.1B was invested in wireless related companies/startups from Jan-Sept 2006. Source: Rutberg. Mobile TV/Video, Mobile Personalization, Mobile Search and Advertising, Semiconductor, Carrier infrastructure, Device design and development are hot areas. M&A activity also picked up quite significantly.
- Worldwide Handset market share Q306: Nokia and Motorola dominated with 35.4% and 21.5% market share respectively. Samsung with 12.3% stands third. Source: Credit Suisse.
- Sprint’s cozing up with the cable guys has started the realignment for “quad-play” and “quintuple play” positioning in the market. Clearly, bundling enhances life value of the customer and lowers churn but do you do it through partnership or investment is the question on the table.
Sell Phones: What will make Mobile Advertising tick? October 19, 2006Posted by chetan in : 3G,4G,AORTA,ARPU,BRIC,Carriers,Devices,European Wireless Market,Indian Wireless Market,Infrastructure,Intellectual Property,Japan Wireless Market,Location Based Services,Mergers and Acquisitions,Messaging,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Search,Mobile TV,Mobile Usability,Mobile Wallet,MVNO,Partnership,Privacy,Smart Phones,Strategy,Unified Messaging,US Wireless Market,Usability,Wireless Value Chain,Worldwide Wireless Market , 2 comments
The full version of the paper is available now –
http://www.chetansharma.com/sellphones.htm (pdf download)
Mobile Marketing and Advertising is the new “it” in the industry. All the three recent industry shows (MES, MECCA, and CTIA) in LA last month were buzzing with the potential of mobile advertising. For carriers, who until now had not paid attention to this evolving sub-segment, have started to organize internally to be the clearinghouse and magnet for agencies and advertisers. The advertising agencies and big brands have started to throw MDF dollars at experimenting with this new medium called mobile. Analysts have started predicting billion dollar markets by 2010. The ecosystem has also started shifting and new alliances are being probed and tested for positioning. Is mobile marketing going to be another over-hyped industry segment or will it actually help generate revenue, drive exits for VC investments, enhance content value-proposition, and most importantly, deliver value to the consumers? This article discusses the elements that are critical for the long-term viability of the mobile advertising and marketing industry.
How big is the market?
To get a grip on the potential market in the US or Western Europe, we take a look at Japan as the harbinger of what’s to come in this space. According to Dentsu, mobile advertising revenues for 2006 will be approximately $373M or close to $3.8 per subscriber (for the year). By 2009, this number is likely to scale to over $6/sub/year (Figure 1). According to InfoPlant, almost 60% of the Japanese consumers use mobile coupons and discounts more than once a month. The US market is just starting to get organized and move from SMS marketing to mobile/local search marketing, interstitials, in-content ads, banner ads, etc. In 2006, US will do less than $1/sub (for the year) in mobile advertising revenues, bulk of which will be SMS marketing. Europe is also slowly waking up to the possibilities around mobile ads and has been experimenting with some clever business models such as Operator “3” subsidizing usage and phones in lieu of advertising on the phone. These models are also being offered in the microenvironments of downloadables, subscriptions, video streams, etc.
Figure 1. Mobile Advertising Revenue Growth in Japan
It is apparent that due to the availability of context, immediacy, and personalization, mobile has significant advantages over the other channels as an advertising medium.
The potential is clearly there but how long will it take to reach a critical mass? How many years before the industry cracks $1B? $10B? For reference, it took 2, 4, and 5 years for Broadcast, Internet, and Cable advertising respectively, to cross the $1B revenue mark; 5 years for Internet and Broadcast advertising to cross the $5B mark. None of them crossed $10B mark in their first 10 years of existence (Figure 2). Will mobile be any different? Instead of being a blip in the advertising revenue stream, when will the mobile segment start rivaling revenues generated from advertising on Internet, Radio, Newspaper, and TV? Can it? If yes, what does it take to get there? What technical, business, and legal issues need to be addressed before agencies have dedicated staff to tackle mobile advertising and real dollars instead of MDFs as part of the budgeting exercise? Finally, who will be the dominant players controlling the ecosystem five years from now?
Figure 2. Annual Ad revenue growth in broadcast, cable, internet in the first 11 years
First, let’s discuss the technology piece. As we have seen in Japan and Korea, higher processing power handsets and 3G pipes play a significant role in the adoption of rich advertising content. If an ad is non-intrusive, delivers value, and is relevant to the consumer; there will be a higher propensity of adoption vs. when after 45 seconds of “connecting to server” screen, an ad rears its ugly head to slam in the face of an already frustrated consumer. In the US, 3G is being adopted fairly aggressively and when Cingular picks up pace with its WCDMA/HSDPA deployment, growth is going to accelerate into 2007. By 2008, 3G penetration will reach over 25%. Adoption of Smartphones is also increasing (Figure 3). With Motorola’s Q and RIM’s Pearl, price point is getting near mass-market consumption levels. By next year, we will start seeing $100 smartphones. In the US, 25% of the converged devices sold during the first half of 2006 were 3G devices. This is up from just 3% in 2005. User interfaces are also getting better. UIOne, MYDAS, Flash, Screen 3, 1mm, and other proprietary solutions are extending the possibilities. In terms of options, there are different channels available – SMS, MMS, Search, Browser, Games, Video/TV, etc. each with its pros and cons and maturity level in the market (Figure 4 and 5).
Figure 3. Expected lifecycle of various key technologies in the US
Figure 4. Mobile advertising channels
Most of the effective mobile advertising and marketing will be search driven – whether it is based on declared intent from the user or passive impressions based on user’s context, history, and preferences. Google is an example of the former while Amazon is a brilliant case study of the latter. Local search and advertisements will be a significant part of the equation. As Mark Anderson, CEO of Strategic News Service recently quipped in his recent column “Searching for Transactions”, “Search isn’t about advertising, it’s about shopping, which is why the advertisers have to be there”. It is truer in the mobile environment. Astute advertisers realize the proximity and intimacy of the medium and already conjuring up clever ways to engage the consumer. Service providers with good “mobile” search engine technology will be at competitive advantage as they build a strategic framework to address the bigger opportunity.
Figure 5. Consumption of various services in key western nations
For mobile advertising to be successful, one needs “reach”, “purity”, and “analytics” (Figure 6). Reach is how many “real” customers do you have? Purity is the “quality” of information on the customers. Name and address just don’t cut it. Analytics is matching users interests – implicit and explicit, context, preferences, network and handset conditions to ads and promotions in real-time. Not just bucketing a user in a group and giving them a number but understanding the user in every way possible and customizing every single interaction, every single push, every single imprint, and every single promotion to the finest degree possible.
So, who has the reach? Clearly, carriers with millions of billing relationships currently have the tightest relationship with the end-customer in this ecosystem and has the most relevant transactions to build a good customer profile fingerprint. On the other end are the Internet brands like Yahoo, Google, and MSN with over half a billion unique visitors each. Other important players include giants like Amazon, EBay, Myspace, Youtube, Skype, AOL, and Paypal.
Figure 6. Mobile Advertising and Marketing Framework
The internet brands have good reach but limited purity. Purity is about good profile data. The customer profile information that Internet players have assimilated doesn’t really always translate well into a view of a customer’s interests and preferences. They can and will build a direct relationship with consumer but it will take time and has to overcome some technical and business hurdles.
Finally, one needs the analytical framework. The goal of the framework is to capture the behavior and interests of the user while they are browsing, shopping, interacting with a variety of applications and content, and even simply calling 1-800-Flowers. This knowledge mixed with the explicit profile helps enable build characteristics and traits of users on a mass scale. Once the segmentation and understanding of the user is fine-tuned, the gathered knowledge can be continuously applied to enhance the user experience while they are interacting with their mobile phone by targeted promotions and offers sent to the user, and mobile advertising can be enabled such that it adds value to the user experience.
In terms of platforms, there has been a lot of activity on building backends, but little progress on the front-end where it matters the most. What is absolutely needed is an easily accessible control framework for “permission advertising/marketing” so that the user can selectively or globally switch-on or off the types of ads/promotions they would like to entertain and when. We need a SIP/Presence like capability that works across all apps and services and is as universally accessible through open APIs. Mobile advertising is not just all visual either. It can interact with the customer while they are on hold or support free 411 or premium services or can be integrated with podcasts, essentially finding clever ways to provide ad/promotion content in exchange for something that provides value to the end-user. The context engine combines various inputs and uses location and other contextual information to package information before it is pulled or pushed to the consumer. This is true for all the application areas such as portals, storefronts, local search, mobile search, off-net access, and other applications.
The value chain
As the convergence continues, the mobile ecosystem keeps shifting. Currently, the mobile advertising chain consists of the following main segments (Figure 7):
Campaign Sponsors American Express, P&G, GE, Toyota, etc.
Marketing Agencies Ogilvy, Universal, Carat, Mindshare, etc.
Enablers ThirdScreenMedia, Admob, MobiTV, Enpocket, Rhythm NewMedia, Medio, ActionEngine, Screen Tonic, Google, Yahoo, Tellme, MSN, Infospace, etc.
Content Provider CNN, Disney, Yahoo, YouTube, ESPN, Mixxer, Intercasting, etc.
Aggregators mBlox, Infospace, WSC, etc.
Carriers Sprint Nextel, NTT DoCoMo, Vodafone, Telefonica, Verizon, Cingular, Virgin, amp’D, Clearwire, etc.
Consumers You and Me
For each of the participants, there are some inherent benefits, specifically,
For the carrier, it is an excellent way to build loyalty and “stickiness”. It is also a way to take the saturated levels of data users to another level by subsidizing premium content and even transport costs by advertising thus lowering the barrier-to-usage. However, the carriers need to balance the influx of users and data traffic with the potential for additional revenues. Spectrum is still limited and it needs to be used wisely in any strategic scenario.
For the user, relevant (opt-in) and targeted advertising and promotions deliver value. In all recent surveys, the number of users willing to pay for the Mobile TV service is a very small fraction of the number of users who want to use the service. With advertising, they can afford more and start enjoying the full capabilities of their handsets.
Figure 7. The emerging mobile advertising value chain
From an advertiser’s point of view, mobile provides unparalleled reach and a reliable and fairly accurate measurement tool. The ad/promotion system should have the capability to create promotions at national and local level (city, zip code, location) and everything in between. The system needs to support extensive querying and segmentation capability to design sophisticated campaigns for e.g.
· Give me users who are most likely to purchase a new ringtone from Usher.
· Give me users who are Pop aficionados, have coke as their favorite cola, wear Nike shoes, single, living in large metro areas on the east coast, income level above $120K, have ARM11 or higher devices, and have responded to at least 50% of ads in the past 2 months.
For evaluating the mobile medium, advertisers are using the same criterion as they have used for other channels, namely:
Reach – how big is the audience esp., unique and regular visitors?
Purity – how good is the user profile information?
Frequency – how often is the audience exposed to advertisements?
Performance – what’s the quantitative measurement criterion to determine effectiveness of the campaigns?
Advertising inventory – what’s the availability of ad slots on premium properties?
Advertising units – what’s the size and shape of advertising content?
Tools – what kind of tools are available to run the lifecycle of a campaign? How does mobile advertising fit into the larger advertising budgets and planning?
For content providers, both big and small, it offers an ability to go direct in addition to working with carriers on revenue-sharing arrangements. If a content-providers has traction and user profile data for a few million loyal subscribers, advertisers would love to talk to you. But, as we discussed earlier, it comes down to reach and purity of the subscriber base.
While the potential is immense, there are also significant risks and potential challenges that need to be tackled before the industry evolves into a vibrant advertising medium. The prominent amongst them are privacy and data security. Once you start mining user data, significant profile information can be developed. Then how that information is used and by whom becomes an issue, and a significant legal minefield. In addition, if the industry doesn’t want regulators to get involved, the security policies and procedures need to be in place to protect the data from theft or misuse. Next, the advertising ecosystem needs to be fostered so that everyone in the value chain benefits relative to their contribution.
Some people have compared the advertising ecosystem to lions (advertisers) and antelopes (consumers), where you need enough antelopes to attract the lions but not enough lions that you scare away the antelopes. As Omar indicates in his article, advertising needs to align the interests of different players in the value chain to keep plenty of antelopes around the watering hole. As we have seen time and time again, if the ecosystem is healthy, segment thrives otherwise it is relegated to slow growth or the interest dissipates altogether. There needs to be a good balance of power between advertisers, content providers, carriers, and consumers.
It is clear that mobile advertising and marketing has big potential if certain technical and business requirements are met and industry strives to take into account the user considerations that matter the most. But, which players will dominate and control the ecosystem. Without a doubt, carriers have the purest profile information available, but can they execute their strategies? Well, they have approximately 3-4 year window. Once 3G and Smartphone penetration curves collide and pass 20-30%, if the carriers haven’t built a good mousetrap (value proposition) by then, all bets are off. Different dominant players will start to emerge, as it will get easier for Internet and traditional brands to build direct relationships with a good proportion of the subscriber base. It is also possible that in some geographies carriers and brands will work closely to establish a tight service offering and equitable revenue split. Role of savvy brands like P&G who are generally ahead of the curve on most technology trends is going to be important. Brands and service providers who are able to integrate user experience across channels will benefit the most (Microsoft will be a strong player in cross-channel advertising). There is real value in understanding user behavior on the Internet and mobile and cross-leverage in a) building a solid profile fingerprint and b) using it to push content.
Then, there is the whole world of off-net advertising and marketing. Carriers are increasingly playing a lesser role in that segment. But the market is very fragmented amongst hundreds of content providers and mini-aggregators. They only have a piece of the (reach and purity) puzzle and hence the analytics they apply will be limited in scope. Could they collaborate to work to leverage each-others strength? Certainly. Can the user profile information be available as a web service (with user’s permission of course)? Sure. Can carriers start to offer that to trusted providers in exchange for revenue-share? Possibly. There is clearly enough room for experimentation in both technology and business models arena of this nascent industry segment. Finally, ads and promotions should be “super-distribution-friendly” (across carriers and devices) meaning — treat ads and promotions like content that can be passed around “easily.”
It is quite clear from the industry trends that mobile industry (especially in the US) is moving from an emerging state to a more interactive and immersive application and services environment. By 2011, advertising industry will be close to $600B. Can mobile start to increase its revenue share from its current levels of less than 0.2% to 2-5% by then? Since this medium can provide context, immediacy, and personalization, the answer is yes. However, there are technical, business, and legal hurdles to be crossed before the industry becomes a thriving institution.
Until then, stay tuned to our commentary on the shifts and turns in the ecosystem.
My thanks to Sunil Jain, Victor Melfi, Amar Patel, Anne Baker, Sarla Sharma, Shawn Conahan, and Subhadeep Chatterjee for their valuable assistance with the article.
 Market Development Funds (MDF) are typically allocated for new media activities.
 In a recent report, Informa estimated that the mobile advertising market is going to be worth $871m this year, and will jump to $11.35bn in 2011.
 Japan is the second largest advertising market in the world behind US. Japan is also the first country to exceed 50% 3G penetration earlier this year.
 Source: Dentsu, Chetan Sharma Consulting
 Source: Dentsu, Chetan Sharma Consulting
 Year 1: 1995 for Internet, 1980 for Cable, and 1945 for Broadcast TV (Source: IAB).
 Source: IAB Internet Advertising Revenue Report, 2005 Full Year Results, PriceWaterhouseCoopers
 Source: Chetan Sharma Consulting
 Source: Chetan Sharma Consulting, Q206
 Data Source: M:Metrics, Aug 2006
 While carriers have the most pertinent data on the users, it resides in disparate locations and very few have realized the long-term value of such an exercise.
 Source: Chetan Sharma Consulting
IBM and Telenor invent PASTA September 22, 2006Posted by chetan in : AORTA,Carriers,Enterprise Mobility,Middleware,Partnership,Strategy , add a comment
It is great to see some progress in this space. I have been talking about such a system for some time.
IBM and Telenor have developed new mobile communications technology for global business users that will allow mobile devices and networks to automatically learn about their users’ whereabouts and preferences as they commute, work and travel.
Code-named PASTA for “Presence Advanced Services for Telco Applications” and developed by the two companies as part of a joint research initiative, the technology provides infrastructure for deploying next-generation mobile presence services. “Presence” technology – used in applications such as instant messaging – makes it possible to locate and identify a computing or communications device wherever it might be, as soon as the user connects to the network. Privacy issues are addressed by allowing users to control when they are available.
“The PASTA infrastructure has the ability to “learn” about users’ preferences. As the network becomes “smart” about its users’ preferences, we believe we can reduce outgoing network load by up to 70 percent,” said Vova Soroka, IBM’s lead researcher on the project. “That is a huge benefit to a network operator, but PASTA can also be used to create new end-user applications – to enable new services in medicine, tourism, financial services, logistics and home care industries among others. Any business with a large mobile workforce will find potential uses.”
I am sure it won’t be perfect but definitely a step in the right direction.
Nokia and Microsoft collaborate on Mobile Search September 21, 2006Posted by chetan in : AORTA,Carriers,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Search,Mobile Usability,Partnership,US Wireless Market , add a comment
Nokia (NYSE: NOK) today announced that it has reached an agreement with Microsoft to integrate Live Search capabilities into its Mobile Search platform, thus enabling consumers access to Live Search directly from their Nokia Nseries multimedia computers and other compatible Nokia S60 devices. Live Search will provide advanced web search results in 14 languages to enable on-the-go access to the information and content consumers want most.
Microsoft will provide advanced search results for web search, as well as quick and easy access to information such as stock quotes, movie times, and common facts via Encarta Instant Answers*. The Mobile Search experience from Nokia allows users to find search results more quickly than by using the browser and finding the web page of an internet search provider, since in many cases search will be accessible directly from the menu screen.
“Adding the advanced searching capabilities of Microsoft’s Live Search to our Mobile Search platform provides our customers with unique and powerful new ways to search the internet on their multimedia computers and many other compatible Nokia mobile devices,” commented Ralph Eric Kunz, vice president, Multimedia Experiences. “The Mobile Search platform is dedicated towards creating a user experience that is easy to access and optimally integrated into other functions of the device. “
The Mobile Search application is expected to be available in select markets in the standard sales packs of the Nokia N80 Internet Edition, Nokia N73, Nokia N93, Nokia N70, Nokia N71, Nokia 6630, Nokia 6680, and Nokia 6681, it is also offered as a free download for select Nokia S60 devices from www.nokia.com/mobilesearch.
CTIA, MES, MECCA Fall 2006 Roundup September 18, 2006Posted by chetan in : 3G,4G,AORTA,ARPU,Carriers,CTIA,Devices,Enterprise Mobility,Federal,Gaming,General,Infrastructure,Intellectual Property,Location Based Services,M&A,Mergers and Acquisitions,Microsoft Mobile,Middleware,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile TV,Mobile Usability,MVNO,Networks,Partnership,Patents,Smart Phones,Speech Recognition,US Wireless Market,Wireless Value Chain,Worldwide Wireless Market , 2 comments
Los Angeles was the venue for the annual CTIA Wireless IT and Entertainment 2006. Pre-show events included Mobile Entertainment Summit (Chetan Sharma Consulting was a research partner) and MECCA. This note summarizes the observations and commentary from the above shows.
First let’s do the numbers. Just before CTIA, M:Metrics released some numbers from their most recent survey. Amongst the western nations, US has just over 5% 3G penetration with UK leading the way at 11.4%. Spain and France are at 8.9% and 7.9% respectively. In the US, Verizon is ahead with over 17% 3G subscriber penetration followed by Sprint at 6%. CTIA also released their survey numbers. 12.5 billion messages in the month of June 2006, up 71% from 7.3 billion messages in June 2005. There was 70% growth in service data revenues. You probably already knew most of the above after reading our research notes here and here, weeks and months ahead of the mainstream media.
MES and MECCA. The central theme from both the shows was community and advertising. The buzz shifted from “Mobile Search”, “Mobile TV”, and “IMS” during the last couple of shows to “Mobile Advertising”. The prospective lifecycle of product development goes like this – build community (whether it is around user generated content, games, artists, bands or other) and monetize the community by advertising. The permutation and combination of the business models are: free application and/or free content, subscription, earn credits for watching ads, more credits for feedback/surveys, etc. Companies who are able to build a large mobile community (at least 5-10M active users) and gather some specific demographic data become hot property of the moment. It is important to note that the mindset for an exit strategy for companies in the social media and user generated content space has changed a bit. Instead of getting acquired by software or computing companies like Google and Yahoo (yes, yes, they are media companies as well) to traditional Media companies like FOX and HBO. This was quite apparent in a number of discussions I had with the executives from new media content companies.
Enterprise focus, Finally!. I have been involved in the mobile enterprise space since 1999 and have been coming to the CTIA for a number of years. The fall show is supposedly about dual personalities of Entertainment and Enterprise. For the first time it felt that the Enterprise side was given its due respect and was on an equal footing to its sibling personality – the glamorous, the attention-seeking “Entertainment”. CTIA started the conference with an Enterprise panel discussion (of course after the surprise Governator keynote). Though the discussion was too high-level to provide any key insights, CIOs confirmed what is well known now that the spending on wireless-data related projects is going up significantly. A surprise revelation was that China’s growth in enterprise solution is among the highest in the world. It is all about productivity and ROI. Companies are also looking to outsource their IT operations related to wireless devices. Handset guys are coming out with Enterprise targeted devices though we are still in the very early stage development of the cycle. Throwing an email client on the device doesn’t make it an enterprise device. Email client is a given in all new handsets now. When will we start seeing embedded enterprise apps? Mobile web services clients and frameworks?
It’s an Ad, Ad, Ad, Ad world. Mobile advertising is clearly the buzz of the moment. Everyone wants to build an ad-supported model and also build their own ad network. Currently, most of the talk is around simple rotation of ads or tying ads to the category the user is interacting with. Not much attention on demographics, profiles, or context. That’s where the “big” impact and value will come into play. Currently, carriers sit on goldmine of user data that is begging to be leveraged for enhancing user experience. Unexpectedly, they sit on a big opportunity that will start to change the advertising industry over the course of the next 5 years. To see where things are going, we just need to look at trends in Japan and Korea. It was interesting that in almost all of the mobile advertising discussions, nobody talked about the elephant that was not in the room – Google, trendsetter in monetizing content. Also, missing were the agencies and their perspective. I have looked at this space quite a bit over the last two years and while agencies are excited about the prospect, they are not ready to jump yet. It will be quite entertaining to watch the new-generation media companies compete/collaborate with the carriers. For the next 3 years or so, carriers will still have an upper hand and if they execute it right, could dominate the space for a long time to come. People also talked about different types of ads – IVR, Voice, Interstitials, banner, in-game, before-and-after, etc. Of course, click-to-call or click-to-action are going to be an especially important ingredient of this game. Sprint Nextel and Enpocket announced their mobile advertising program. Amp’D also announced mobile advertising plans with Rhythm New Media. Bango launched its Ad initiative as well. Virgin mobile’s Ad program “Earn Airtime in Your Spare Time” is innovative. They are truly in tune with their subscribers.
FMC. Kyocera had some trial handsets that supported WiFi/VoWiFi. One could theoretically make VoIP calls and download content over WiFi but will carriers allow it and how long will they resist. Non-traditional carriers like the MVNOs and the cable operators are very interested in exploring bundling offers. Sprint also announced EV-DO Rev A data cards that provide data rates up to 400-600kpbs. Cingular announced that they will have a majority of the top 100 markets deployed with UMTS/HSDPA by year-end. However, the choice of handsets is still missing and as such adoption for Cingular is behind schedule.
4G. While, we are just starting with 3G (except Japan and Korea), seven of the wireless industry’s leading carriers have joined forces to “develop a common vision” for the future of mobile networks technology. Members of the Next Generation Mobile Networks initiative include China Mobile, KPN, NTT DoCoMo Inc., Orange, Sprint Nextel Corp., T-Mobile and Vodafone. The group said it has created a set of requirements “for a future wide area mobile broadband network designed to offer enhanced customer benefits by delivering competitive broadband performance alongside high levels of interoperability.” In plainer terms, the NGMN appears to be devising a roadmap for interoperable 4G networks. You can sense the arm-wrestling to come. 4G could end up having some serious IPR issues if all major patent-holders don’t participate. The 3GPP licensing regime has been a failure, industry needs to be proactive, dedicate resources to the problem and get is solved to the extent it can.
Telematics. The number of firms talking about telematics or navigation on the phone or devices for your car increased quite a bit. Navteq, TeleAtlas, TeleNav, Inrix, Pharos, Kore, Teydo, and many others displayed their wares. On the consumer side, navigation is getting embedded into Local search apps which are enhancing the user experience quite a bit. FindIt and Google Maps are two examples. There were enterprise focused solutions from Tierravision, LiveCargo and @Road.
WiMax. Spent sometime with Lars Johnsson, VP at Beceem Communications talking about the prospect of WiMax worldwide. Clearly, Intel and Clearwire’s announcement has reenergized the industry and taken some uncertainty out. Lars is extremely knowledgeable person on everything WiMax. He co-founded Flarion which got sold to Qualcomm last year. It looks like the benefits of 802.16e will render 802.16d useless in short order. “e” provides better link capacity, Forward Error Correction, power efficiencies, and optimization. The cost of building a WiMax modem is lower than the WCDMA counterpart. A number of cable and wireline players are looking for triple-play offerings. Beceem has strong partnerships with OEMs worldwide and is actively involved in several trials in Korea, Taiwan, Japan, India, and US. The biggest challenges are around interoperability (as always) and quick resolution of IPR issues. From an application perspectives, gaming companies are the ones watching it closely. Also, automobile media player vendors are interested in using WiMax for Broadcast video. Tropos believes that Mesh technology will continue to have relevance in a WiMax-enabled world as the practical ranges of base stations won’t exceed 5-10miles.
M&A. Some major M&A news at the show– Real acquiring WiderThan for $365M, Lucent acquiring Mobilitec for undisclosed amount, and FOX acquiring 51% stake in Jamba for $188M. This follows Sybase’s acquisition of Mobile365 last week for $400M. There are several factors at play. Clearly, some segments of the industry that have matured are facing price pressure and hence consolidation. Media companies are also realizing the potential and don’t want to miss out or get behind the curve so acquiring companies that have traction, not necessarily the best technology. Some of the valuations just don’t make sense but I guess some over-exuberance is to be expected at this time.
Handset launches. You might have missed the announcement; there was no Steve Jobs, no iPhone release. Pearl was probably the highlight of the show though plans had been leaked in the media sometime back. RIM has Razresque aspirations from the device. The big three didn’t have anything interesting. Nokia launched E62 (thankfully, taking a cue from Motorola, they are getting rid of their number scheme), however it is missing 3G and WiFi support of its European cousin E61. Kyocera had some interesting devices as discussed above. Sprint launched two EV-DO Rev A data cards from Pantech and Sierra Wireless. Cingular announced a $150 HTC Smartphone. Linux handsets are also on the rise. Obigo/Teleca had some nice tools/products for mobile Linux – Browser, IM, Media and Email client. The user experience was quite nice.
Mobile TV/video. At the last two shows, Mobile video and Mobile TV were all the rage. The solutions seem to have matured though uncertainty of its success remains (primarily around time-horizon to success). There are too many providers in the space offering solutions from individual codecs to end-to-end solutions, do-it-yourself toolkits (Nexage) to user-generated video solutions (ComVu, Juicecaster – ComVu’s one click mobile broadcast capability was pretty good) to niche demographics (Viva Vision is getting good traction in the Latino market). Various pieces of the mobile video puzzle have been commoditized, now, it is all about packaging. There were a number of Mediaflo handsets on display as well. The quality of Broadcast is really good. I saw some Broadcast TV services in Seoul earlier this year and the user experience is pretty good. My partner watched the entire South Korea soccer world cup game on his mobile device as he wasn’t near a TV. Once the market gets seeded with enough phones and service pricing settles to mass-market scale, we can expect good adoption rate for such services. Imagination Technologies out of UK showed some innovative SoC (System on Chip) solutions targeting Mobile Broadcast video. Some new names in the space are QuickPlay, Picsel (nice user experience), and Convisual. Expect some consolidation in this space over the next 12 months.
The ecosystem friction. The mobile data ecosystem tension is bubbling up. Carriers want control (some more than others) so that they can manage user experience and minimize customer support calls. Content companies want to bypass the carrier and go direct to the consumer. This was also evident in the Walt Mossberg’s grilling of the carriers as well as other conversations with participants in the value chain. Things are improving but not at the pace everyone would like it to be. Clearly, ecosystem only proliferates if it is allowed to make money. If certain sections of the chain get strangled, holes start to develop which pollutes the system.
User experience. Didn’t see much progress on the UX front. Saw a cool implementation from FAST for Optus in Australia where they used search technology to populate the Active Screen with user preferred content. Optus has been using this offering to entice users to 3G as it is not available on lower bandwidth network and is apparently having good success. Add context and some multimedia and it becomes very very compelling. It is one area that hasn’t been exploited that much yet. In the US Cingular’s MediaNet implementation uses the same concept but is more browser-based. In different sessions, carriers agonized over limited shelf space and mountain of content. That’s why man invented “mobile search”. The concept of “deck” is very limiting. Content needs to get exposed via search whether it is post-query or pre-populated dashboard based on context and preference.
Test equipment – Whether it is entertainment or enterprise, very little attention is given to testing and monitoring data applications and services. Keynote launched a really useful product offering (Mobile Device Perspective) that enables developers to test their app from distance on a live network and live devices and control it through manual steps or automation. Currently, such testing is done by flying a team of testers, test, and optimize. This offering can reduce the cost of such operations. I took a look at their R&D and test setup and found it quite compelling. TestQuest also showed a product along the same lines though it is more of a platform play than a service offering.
MVNOs. There is a realization that MVNO business is hard. The unrealistic expectations for customer growth are being recalibrated. It is still a viable business model but one has to give time and execute like a carrier. Virgin Mobile noted that it requires at least 2M subs before a nationwide MVNO (in the US) will cross the line from red to black.
IMS. Talked to Lucent and NMS about their pre-IMS solutions. NMS was displaying a technology around P2P mobile video sharing while talking (though the tasks happened in time-slice mode). Lucent had a solution “extensions” which converged PBX and Mobility. An example would be you dial a 4 digit extension on your mobile phone that connects you to the other party as if you dialed it from your desktop phone. BUT, networks aren’t there yet and devices will arrive a bit later. In the interim, companies are looking to stimulate the simulated IMS experience.
Funding news. Several funding news from the show, the one that caught my eye was $10m for Bubble Motion in VoiceSMS (funded by Sequoia Capital). It should be noted that there is prior art in this space and the likelihood that the company is infringing on somebody’s patents are high.
Coolest gadget. MyVu’s media viewer
Coolest booth. Infospace’s Tony Hawk show was probably the most exciting thing happening on the show floor. Watching the masters go swing-swong had the crowd go wild with ooohs and aaahs.
- Melodeo won a major podcasting deal with Cingular.
- Medio Systems announced the big Verizon deal (mobile search including use of voice as input).
- Hookmobile – Got a preview of the services coming out next week on all four operators. It is around Mobile Trading Community and using content to digitize trading cards, create some exclusivity and hence some viral effect. In future users can create their own trading cards for their social network. Carrier keeps 35% of the subscription fee. Hookmobile gets 27% and rest goes to the content guys. This could be good for the MMS infrastructure that is collecting dust right now. And yes, you guessed it right; there is an Ad model as well.
- New York City is going to use IPWireless technology to build a $500 million network for police, firefighters and other public-safety agencies
- Users of EV-DO data cards were much happy customers than free Wi-Fi users. Though things were better, under load, the free network comes to its knees fairly quickly.
- SpinVox had a simple but useful offering – converting voicemails to text messages. Use case – you are in a meeting, somebody leaves a voice message, can’t go out to listen, peek under the desk to see (the SMS) if it is important.
- SNAPin’s solution is designed to address Carrier’s customer calls. It wouldn’t be a stretch if carrier starts selling “the deck” to other companies especially in the airlines, insurance, and credit-card industry. You dial the number; phone captures it, goes into the system and brings you the answers to the questions you might be most interested in (in a data format).
Your comments are always welcome.
US Wireless Data Market – Mid Year Update 2006 August 13, 2006Posted by Chetan in : 3G,AORTA,ARPU,Carriers,Devices,Enterprise Mobility,European Wireless Market,Japan Wireless Market,Microsoft Mobile,Mobile Advertising,Mobile Applications,Mobile Content,Mobile Ecosystem,Mobile Entertainment,Mobile Gaming,Mobile Search,Mobile TV,Mobile Usability,MVNO,Networks,Partnership,Smart Phones,Speech Recognition,Strategy,US Wireless Market,WiMax,Worldwide Wireless Market , 2 comments
Download PPT – http://www.chetansharma.com/midyearupdate06.htm
- US wireless data market is growing at an impressive rate. Top 4 US carriers (Cingular, Verizon, Sprint Nextel, and T-Mobile) accounted for over $6.3B in wireless data revenues for the first half of 2006. Overall, wireless data service revenues exceeded $7B and the figures are likely to exceed $15B for the year 2006. This is almost a 75% jump from end-of-2005 number of $8.6B. The growth rate slowed down only slightly from 2004-2005 growth rate of 87%. SMS and data transport still drives bulk of data revenues but their percentage share is declining.
- Among the top 4 US carriers, Verizon has made the most impressive strides in the last 4 quarters, increasing their wireless data revenues by a whopping 114%. Next Sprint with 71%, T-Mobile with 65%, and Cingular with 54% also netted impressive gains.
- Verizon became the first US carrier to net over $1B in wireless data revenues in a quarter. Cingular was close second with $979M and Sprint with $935M are likely to cross the $1B mark next quarter.
- Sprint retains its leadership position of highest wireless data ARPU in terms of absolute dollar amount at $7.25 but lost its number one spot in the % data ARPU to Verizon which now leads the US carriers at almost 13%. Average data ARPU is now $6.3 or 12%.
- Overall ARPU (voice + data) increased slightly from Q106 but declined $0.27 from Q405. The general trend is towards slow decline. Data revenue is barely keeping up with the decline in voice ARPU. On an average voice ARPU has declined 8% from a year ago and data ARPU has increased 48%. Average Overall ARPU was $53.04. Sprint led with $62 followed by T-Mobile at $51, Verizon at $49.7, and Cingular with $48.4.
- If the current trends hold, Verizon Wireless is likely to surpass Cingular Wireless as number 1 US carrier by Q307.
- US had about 7M 3G subscribers by Q206, primarily from Verizon and Sprint Nextel. With Cingular joining the fray, the 3G growth is expected to accelerate with 2007 being the inflection year.
- US wireless subscriber penetration stands at approximately 74% and is likely to exceed 78% by the end of the year.
- Top 4 carriers added 12.7M subscribers from Jan-Jun 2006.
- The top 4 US carrier account for 79% of the subscribers, 86% of the service revenues, and approximately 95% of the wireless data revenues.
- US Off-net revenues for the year are likely to exceed $750M.
- Data ARPU of CDMA/EV-DO carriers was 20% higher than GSM/WCDMA carriers.
- Several high-profile MVNOs were also launched in the last few months and the overall results have been disappointing primarily due to poor execution, instant crowding effect, and competition from big 4.
- US wireless carriers are steadily climbing in their wireless data performance as compared to their peers worldwide. Verizon, Cingular, and Sprint ranked number 4, 5, and 6 respectively, amongst the top 10 operators worldwide in terms of total wireless data revenue generated for first half of 2006.
- The #1 carrier worldwide in terms of total wireless data revenue for the first six months of 2006 is NTT DoCoMo which has maintained its position for a number of years. It is now generating almost $900M/month from wireless data revenues.
- The top 10 carriers in terms of total wireless data revenues for 1H06 in order of rank are NTT DoCoMo, China Mobile, KDDI, Verizon Wireless, Cingular Wireless, Sprint Nextel, O2 UK, Vodafone Japan, SK Telecom, and China Unicom. (6 Asian, 3 US, 1 Europe. Who says US is behindJ). Vodafone Germany, TMO Germany, and TMO US are also closing in.
- All the top 10 carriers in the list exceeded $1B in data revenues for the first six months of 2006. China Mobile and China Unicom benefited from their huge subscriber base of 274M and 135M respectively while DoCoMo and KDDI did well because they are generating over $17 (or 28%) in wireless data ARPU.
- The top 10 carriers accounted for almost $24B in wireless data revenues for the first six months of 2006. The top 10 carriers account for approximately 700M (or approx 28%) subscribers worldwide.
- In terms of wireless investments, over $2.8B was invested in wireless related companies/startups from Jan-Jun 2006 (this figure jumped to $4.1B in July). Source: Rutberg. Mobile TV/Video, Mobile Personalization, Mobile Search and Advertising, Semiconductor, Carrier infrastructure, Device design and development are hot areas. M&A activity also picked up quite significantly.
- WiMax industry got a big boost with almost $1B investment in Clearwire and due to Sprint Nextel’s announcement of WiMax deployment. Sigh of relief for Intel and Samsung. Puts pressure on Qualcomm. Maybe Intel will renegotiate with Clearwire.
- Worldwide Handset market share: Nokia and Motorola dominated with 35% and 23% market share respectively. Samsung with 12% stands third. Source: iSuppli. Though Apple’s iPhone rumors have been clouding the market, it is Motorola which continues to lead in launching must-have handsets. Windows mobile is starting to make serious inroads in the handset market but performance issues and high price points deter mass market adoption.
Download PPT http://www.chetansharma.com/midyearupdate06.htm
Tech heavyweights team up on 3G July 27, 2006Posted by Chetan in : 3G,AORTA,Devices,Mobile Ecosystem,Networks,Partnership,Strategy,Worldwide Wireless Market , add a comment
A group of tech heavyweights have teamed up to develop hardware and software for third-generation cell phones.
NEC, Matsushita Electric Industrial and Texas Instruments announced Thursday that they have formed a joint venture, called Adcore-Tech, that aims to create “a competitive communications platform” for 3G handsets. The partnership also includes NEC unit NEC Electronics and Matsushita subsidiary Panasonic Mobile Communications.
It will be interesting to see if this stays afloat one year from now.
Microsoft’s massive media spend next year May 5, 2006Posted by Chetan in : AORTA,Infrastructure,Mobile Advertising,Mobile Entertainment,Partnership , add a comment
Microsoft's over $2B spend next year will start to have implications to the mobile world in 2008. Seattle Times has good coverage http://seattletimes.nwsource.com/html/businesstechnology/2002973119_microsoft05.html