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Mobile Industry Predictions - 2008 January 1, 2008

Posted by chetan in : AORTA, Carriers, Middleware, Security, M&A, 3G, Mobile Advertising, US Wireless Market, Mobile Content, Mobile Entertainment, Mergers and Acquisitions, Location based Services, MVNO, Indian Wireless market, BRIC, WiMax, Mobile Gaming, ARPU, Japan wireless market, Unified Messaging, Messaging, European wireless market, Mobile TV, Mobile Applications, Smart Phone, Worldwide Wireless Market, Mobile Usability, Mobile Ecosystem, Microsoft Mobile, Speech Recognition, Mobile Search, Wi-Fi, Wireless Value Chain, 4G, Privacy , 7 comments

I never think of future, it comes soon enough – Albert Einstein

First things first. Wish you a very happy and successful 2008.

Before we look at what’s to come, let’s do a quick wrap-up of the year that was.

2007 will clearly be remembered as “the year of iPhone.” While there were several other “events/trends of interest” through-out the year, nothing captured the imagination of the world like the iPhone. It was significant for another big reason – it had a profound impact on the business model and ecosystem dynamics. Q4 2007 was also significant for the deafening roar that resonated around “Openness”.

Steve Ballmer exclaimed mobile to be the next battleground while Eric Schmidt pondered why mobile phones are not free (subsidized by Google ads of course).

Google played its chess game effectively and though it is unlikely to play to win the 700 MHz auction or even if they do win would be able to do anything substantive in the short-term, they did, however, with Android and spectrum gambit, force some of the regulation-wary operators to take a stance on openness. Nokia is putting together a brilliant services strategy that looks to connect directly to the consumer. Competition and coopitition will have a different meaning going forward.

Things were looking positive for WiMAX until the end of the year when Clearwire was left standing on its own. It will look towards Google, Sprint, Motorola, and others to rescue its fate.

Mobile Advertising was hailed as a great savior of mobile content and mobile revenues in general. Blyk even launched an advertising-based MVNO. We made significant headway in energizing the sub segment but the tough problems of privacy, education, control, fragmentation, and user experience remain. LBS picked up steam and mobility started to get into the alternate consumer device universe.

In terms of actual dollars, mobile data market continued its steady growth with substantial shifts in revenue towards non-SMS data applications and services. Several operators are doing $2B/quarter+ in data revenues. Several subscription milestones throughout the year: 3B worldwide, 500M China, 250M US, 225M India. 3G continued to inch towards mass-market in western markets (20-25% penetration) while in Korea and Japan, it was getting hard to find people without 3G (70%+ penetration).

Among other events of significance: Cincinnati Bell and T-Mobile launched UMA devices, Motorola lost its Mojo, Amp’D and Disney Mobile shut down, MediaFLO launched, mCommerce initiatives took hold, China continued to delay 3G, WM got updated, Yahoo cemented some impressive operator deals as GYM got more active in mobile, UMPC fizzled, Mobile Web 2.0 got into the industry physce, LTE got embraced worldwide, M&A galored, IP scuffles continued, Muni projects went into coma, and DRM-adorned content became a thing of the past.

2008 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. This survey was a bit different in the sense that the movers and shakers (and folks from the companies discussed here) and industry insiders participated. We were able to glean some valuable insights from their choices and comments. Participants (n=196) were folks from across the mobile value chain and from around the world.

Many thanks to everyone who participated.

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(click for larger image)

Three names were drawn for a copy of our upcoming book “Mobile Advertising” (co-authored with Joe Herzog and Victor Melfi, John Wiley & Sons, 432 pages, Feb 2008).

The winners are:

  1. David Cushman, Director, Emap

  2. Larry Shapiro, VP, Disney, and

  3. Keith Kostuch, SVP, Alltel

Congrats and Thank you.

Now onto the survey analysis.

Figures above and below summarize the responses. We requested respondents to rate the probability of an event happening in 2008 on a scale 1 to 5. 1 being “Not a chance” to 5 being “100% probability” The figure above summarizes the overall probability of the event happening. The figure below provides the breakdown of responses.

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1. Will Google introduce a Google Branded Phone in 2008?

Will it? Won’t it? 44.5% gave it a 75% or higher chance of happening while 40% thought it ain’t happening. GPhone is a temptation Google will find hard to resist though a lot will depend on how various initiatives and partnerships shape-up on the ground. In any case, expect another major announcement in the next 2-3 months.

2. Will Google play to win in the 700MHz Spectrum Auction?

Google has played the spectrum chess game effectively. Almost 50% respondents gave it a 75% or higher chance of Google winning the bid. Though expectations are high, Google is unlikely to play to win. Services business is not their cup of tea, they could still fund the Clearwire-Sprint deal but that investment can be spent differently to get better end-results, i.e. mobile ad revenue.

3. Will Microsoft launch its own mobile phone?

Unless Google comes out with GPhone, Microsoft will stay content with its operator distribution strategy. 63% of respondents gave it less than a 25% chance of Microsoft releasing their own phone. If GPhone comes out and gets some traction, expect Microsoft to get its “fast follower” strategy into high gear.

4. Will Mobile Payments get traction in North America and Western Europe?

Only 9% thought it is a sure bet for 2008. True mobile commerce hasn’t really started in the western world. While there are significant movements, 2008 will just be a “lay the groundwork” year for mobile payments.

5. Will WiMAX regroup from its setbacks?

Only 35% gave it a 75% or higher chance (of WiMAX resurrecting itself esp. in the US in 2008). A lot depends on how Mr. Hesse deals with Sprint’s WiMAX business. Indications are there will be a deal with Clearwire to off-load the risks via some external investment (Google?).

6. Will Helio survive 2008?

Almost 70% respondents thought Helio won’t make it. Given the flameout of some of the prominent new-generation MVNOs, it is hard to see how Helio will see 2009. It will all come down to how persistent is SK Telecom. Earthlink doesn’t have the bank balance to keep funding this initiative.

7. Will Verizon truly open-up its garden for third-party visitations?

Only 5% thought it is a sure bet for 2008. Verizon’s open posturing was more to ward off any regulators and to improve its image. There is unlikely to be any meaningful progress on this front this year.

8. Will 2008 be the inflection year for Mobile Advertising?

42% gave Mobile Advertising a 75% or higher chance for rapid growth. Market will mature, more consolidation, some privacy gaffes but overall things are looking up for mobile advertising.

9. Will Femto-Cells gain any significant momentum in 2008?

It will be an introduction and experimentation year, so no significant traction is expected. Over 52% thought Femto-Cells will be just a buzz word in 2008.

10. Will Nokia be able to extract iPhone-style rev-share from carriers in 2008?

Less than 20% thought Nokia will be able to do an Apple when it comes to rev-share arrangements. For OEMs, going direct to the consumers was considered treachery to the sacrosanct relationship with the operators. Until Apple showed up with iPhone. Now, Nokia is putting its services strategy in motion and is building a direct relationship with the consumers worldwide and it has a good shot at pulling it off though it will be a long haul.

11. Will Palm survive 2008?

Only 8% gave it a 100% chance of surviving 08 as an independent entity. It will be difficult for Palm to stay in a status-quo mode. They desperately need a hit device that can give them some breathing room.  Given all the operational and strategic problems the company is having, a sale is likely.

12. Will iPhone truly open up?

Over 45% thought iPhone won’t open-up in any meaningful way. Apple has built-up one of the most profitable closed empires in the digital world. Are they about open things up? While the iPhone SDK is scheduled for early 08, don’t hold your breath on accessing the critical native APIs.

13. Will there be more unsubsidized devices introduced in the US market in 2008?

Almost 49% thought we are likely to see another unsubsidized device in the US market this year. Nokia is looking to go direct and some GSM handset manufacturers are likely to entertain the idea of testing the market with unsubsidized devices.

14. Will Mobile TV move the needle in 2008?

Almost 70% thought mobile TV won’t make much of a difference in 08.Though AT&T is slated to introduce MediaFLO to join Verizon in the Mobile TV services market, lack of devices and better pricing models will hinder wide adoption in 2008. However, downloadable video and VOD content will experience significant growth.

15. Will Android make a dent in handset shipments in 2008?

Only 15% gave it a more than 75% chance this year. It is going to take some time for Android plans to mature and materialize. Don’t see any material impact in 08.

Of course, 15 questions can’t cover the whole industry. As pointed out our respondents, there are a number of other issues and opportunities that will shape the ecosystem - Rise of Facebook as social networking OS for mobile (social networking as a whole starts to go mobile), LBS beyond navigation, Rev-share shuffles, Chinese OEM start to become prominent in the western world, China and India continue to dominate in net-adds, Mobile device security becomes a nightmare for corporate IT, Consumers wake up to mobile privacy snafus and risks, Will Android spread its tentacles beyond nicheosphere, 3G iPhone, Does China Olympics hold any surprises for the mobile industry? Launch of projection handsets, NFC handsets, IMS .. and much much more ..

All in all, consternation and debate will continue into 2008. We will analyze, dissect, and report as events unfold in the new year.

Look forward to the continuing dialogue and meeting with you in person.

Your feedback is always welcome.

Chetan Sharma

Stanford University Program - Future of Indian Mobile Value Added Services (MVAS) Market December 8, 2007

Posted by chetan in : AORTA, Carriers, Speaking Engagements, 3G, Mobile Advertising, US Wireless Market, Mobile Content, Mobile Entertainment, Mergers and Acquisitions, Indian Wireless market, India, BRIC, WiMax, Mobile Gaming, ARPU, Japan wireless market, Unified Messaging, Messaging, Mobile TV, Mobile Applications, Smart Phone, Worldwide Wireless Market, Mobile Usability, Mobile Ecosystem, Speech Recognition, Mobile Search, Wi-Fi, Wireless Value Chain, 4G , 15 comments

Stanford University Program - Future of Indian Mobile Value Added Services (MVAS) Market

Stanford University hosted a program focused on the Indian Wireless Market – Why Mobile?, Why India?, Why Now? Under the tutelage of Prof. Tom Kosnik of Stanford, Graduate Student Mohit Gundecha and BDA worked on a study looking at the Mobile Value Added Services (MVAS) market in India and presented their research at the event along with the release of their in-depth report on the subject. Prof. Kosnik started the evening by giving a presentation on his Global Leaders Entrepreneurs and Altruists Network (GLEAN) initiative. This was followed by a keynote from Jeffrey Belk, SVP Strategy and Market Development, Qualcomm (sponsor for the event) providing an overview of mobile growth in emerging and developing markets. The evening ended with a panel discussion on the opportunities and challenges of the MVAS space. This note summarizes the discussion from the event and our random musings on the market.

The panelists for the discussion were:

(above L to R)

Eric Allen, VP, FunMobility (Moderator)

Ashok Narsimhan, Chairman and CEO, July Systems,

Ojas Rege, VP, Global Mobile Products, Yahoo!,

Vin Dham, Executive Managing Director, NEA-IndoUS Ventures,

myself, and 

Niren Shah, Managing Director, Norwest Venture Partners,

It was an honor to be part of this discussion.

First, let’s do the numbers. As we have reported in our previous research notes, India’s growth has been going through the roof. We are likely to end up with over 80M net-add (subscriptions) for the year taking the overall tally to 232M. In the last 5 months, India has added more subs than China. By early April, Indian Market will cross US as the number 2 wireless market in the world. China remains untouchable with over 500M subs. Indian Government is targeting 500M subs by 2010. So, what does this all mean?

Couple of points on the numbers – Just like in other prepaid markets especially Europe, there is a lot of double counting of subs. Many of the unused SIMs are still being counted so the number of “actual” subscribers is less than the numbers that are generally discussed for the market. Secondly, the new subs that are being added are primarily voice subs and hence ARPU (esp. data ARPU is steadily going down for the market. Overall ARPU is approximately $8-9 with 8-9% from data services (where P2P SMS still dominates). Despite low ARPUs, operator margins remain good. The overall MVAS market is close to $1B. The revenue splits are approx 60% for the operators, 20% for the aggregator and rest for the developer and content owner.

Mobile Advertising Market in India – Having looked at the mobile advertising space in depth for our upcoming book, we found the Indian market one of the most active esp. in coming up with interesting business models both operator driven as well as new startups. One of the first in-application mobile advertising services was launched by Reliance, they have several other interesting programs in place that cater to the advertising industry. One of the mobile advertising campaigns that we discuss in the book generated over 21M impressions and won the Cannes award. Companies like mGinger have come up with simple pyramid viral scheme to use SMS mobile advertising. As Admob numbers indicate, the number of impressions are second only to the US market despite low penetration. Finally, operators in India are quite innovate when it comes to integrating the back-end for triple and quad-play unlike their western counterparts who have primarily focused on bill-integration vs. service and application integration.

So, who is actually making money? Clearly the most amount of money is in the infrastructure-related items. Infrastructure is something that is absolutely needed to expand and though the margins shrink quite a bit, it is somewhat made up in volumes. Unless you have unique Intellectual Property that creates barriers to entry, software and/or content companies haven’t had much luck (similar to the trends in China) as the local competition is stiff. Overseas companies who jump in without understanding the market lured by the growing numbers are destined to be surprised.

Cricket, Bollywood, and Education remain the top categories for MVAS apps. Panelists were bullish on new MVAS applications and services around UGC, LBS, high-end segmentation, and enterprise applications. Everyone agreed that the next couple of years are primarily for educating the market and subscription acquisition and it will take another 2-3 years for the MVAS to mature and take off. Unless you are in for the long haul, tread carefully. This market is not for the faint-hearted. IP issues can pose significant risks and challenges.

Jeff thought 3G rather than WiMAX will drive growth in the Indian Market, while Vin suggest Fixed WiMAX is going to be significant. I think the primary use of WiMAX will be to provide Internet connectivity to desktops and laptops and for backhaul of backend systems.

We kind of joked that Indian market might become the second largest market for iPhones within a few months given the pace of unlocked phone shipment to the region.

A question was asked how is working with operators in India different, if at all? Apart from a larger value chain share, things are quite similar. Indian operators do exhibit the desire to move fast and they can take an app to the market quite rapidly where some of their western brethren can keep trialing forever.

You can access the released report here.

You can watch the video from the panel discussion here (Part I, Part II, you can access other videos from the evening on the same page).

Prof. Kosnik and Mohit are launching a new program called “Mobile Momentum” to create an ongoing dialog between Silicon Valley companies and the vibrant mobile industry in Asia. I have signed on as the founding member of the advisory board and look forward to working with entrepreneurs and companies on both sides of the pacific to share thoughts, research, and best practices.

If you would like to receive my slides from the event, please let me know.

2008 promises to be even more exciting than 07. Happy Holidays.

Your feedback is always welcome.

Chetan Sharma

US Wireless Data Market Update - Q2 & 1H 2007 August 12, 2007

Posted by chetan in : AORTA, Carriers, Speaking Engagements, 3G, Mobile Advertising, US Wireless Market, Mobile Content, Mobile Entertainment, Indian Wireless market, BRIC, ARPU, Japan wireless market, Unified Messaging, Messaging, European wireless market, Mobile Applications, Worldwide Wireless Market, Mobile Ecosystem, Mobile Search, Wireless Value Chain, 4G , 6 comments

US Wireless Data Market Update - Q2 & 1H 2007

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Download PPT (1.1 MB)

http://www.chetansharma.com/usmarketupdateq207.htm

US wireless data market continued its impressive growth reaching $5.85B in service revenues for the quarter. Data and Voice ARPU increased 8% and 1% Quarter/Quarter (Q/Q) respectively. Given that majority of the data revenues now comes from non-messaging applications and services and the subscriber penetration for such services is just getting into the inflection zone, we remain bullish on the US wireless data market. The introduction of iPhone in Q2 marked a new era of UX-driven devices and applications.

Global update (more details in our worldwide wireless data market update coming out soon)

Your comments are always welcome.

Thanks

Chetan Sharma

Speak your message June 19, 2007

Posted by chetan in : US Wireless Market, Unified Messaging, Speech Recognition , add a comment

In the US, one state after another is banning not only talking while driving but also messaging while driving (the latter can of course be deadlier of the two). So, how can one keep chatting away. Enter TravellingWave. With some sophisticated voice-entry technology, it is like Tegic for your voice. Helps dictate your message quickly and accurately. How soon something like this will be in the phones? Hard to tell but speech is becoming a way to interact with applications already, it won’t be long before messaging is also included in the mix.

Disclaimer. I am advisor to the CEO of TravellingWave.

Whitepaper: Unified Mobile Data Platform - An Analytics based approach June 11, 2007

Posted by chetan in : AORTA, Strategy, Carriers, Middleware, 3G, Devices, Mobile Advertising, US Wireless Market, Mobile Content, Mobile Entertainment, Mergers and Acquisitions, International Trade, MVNO, Indian Wireless market, BRIC, Mobile Gaming, ARPU, Japan wireless market, Unified Messaging, Messaging, European wireless market, Mobile TV, Mobile Applications, Worldwide Wireless Market, Mobile Usability, Mobile Ecosystem, Microsoft Mobile, Mobile Search, Wireless Value Chain, 4G , add a comment

Whitepaper

Unified Mobile Data Platform An Analytics based approach

Sponsored by InfoSpace Mobile

Download PDF (30 pages, 1MB)

Executive Summary

2006 was a banner year for mobile data. Revenues from mobile data increased for all major carriers across all major regions around the world with data contributing 10-30% to overall revenues. In Q1 2007, US carriers recorded over $5B in data revenues with mobile data contributing to over 16% of the more than $32B in carrier service revenues. In fact, the Average Revenue Per User (ARPU) from data jumped 43% from last year. It has been a long journey though. Driven initially by SMS messaging, the market embraced ringtones, graphics, music, and gaming, each creating multi-billion dollar markets. As we look into the next five years, not only are new content applications such as broadcast video, idle screen, user-generated-content, community, and mobile search being introduced, but the functionality available with these applications, such as the sharing and tagging of data, is also increasing the demand on the mobile entertainment platform to be adaptive to the growing needs of the market. To stay competitive in this rapidly evolving and challenging market place, service providers must move from silo’d point solutions to integrated unified platforms to maximize their returns from the declining services and better prepare for the technical and business challenges in front of them. The vast potential of mobile data services in general and mobile search and advertising specifically can’t be realized without a retooling of the fundamental approach to deploying services, engaging partners, and serving users with the best possible analytics-driven contextual user experience. This paper outlines the evolution of data services, discusses the need for unified mobile data services approach, and lays out the basics and the merits of a services-oriented analytics-driven framework.

Table of Contents

Executive Summary                                                               2

Evolution of data services                                                      3

Integrated solution offering                                                   11

Mobile Search - providing impetus for integration                   15

Rise of the brands - What’s your Audience Strategy?               17

Analytics driven unified framework                                        21

Mobile Advertising                                                               26

Recommendations                                                               29

Conclusions                                                                         30

Your comments are always welcome.

Chetan Sharma

TiE-Seattle: Mobile Content Monetization - Challenges and Strategies June 1, 2007

Posted by chetan in : AORTA, Strategy, Carriers, 3G, Devices, Mobile Advertising, US Wireless Market, Mobile Content, Mobile Entertainment, Mobile Wallet, Mobile Gaming, ARPU, Japan wireless market, Unified Messaging, Messaging, Mobile Applications, Worldwide Wireless Market, Mobile Usability, Mobile Ecosystem, Mobile Search, Wireless Value Chain , 6 comments

TiE Seattle Chapter hosted its annual mobile event earlier today. Given that Seattle is the mecca for wireless, it was no surprise that it was a sold out event with standing room only. I had the privilege of coordinating the event with my friend Sandeep Sinha - Director, Motorola. The keynote was given by Cole Brodman, Chief Development Officer, T-Mobile USA, a charismatic leader in the industry who rarely speaks at industry events, so it was great to have him participate.

The panel discussion was on “Mobile Content Monetization - Challenges and Strategies” - clearly a hot topic where lot of industry attention is these days. The panel was moderated by Len Jordan, General Partner, Frazier Technology Ventures. The panelists included:

Brendan Benzing, VP of Products and Marketing, Infospace

Jai Jaisimha, VP Product Development, Medio Systems

Satoshi Nakajima, CEO, UIEvolution

Hank Skorny, Executive VP, Business Dev & Partnering, OZ Communications

First let’s discuss the keynote and then I will get into the panel discussion. Cole walked us through the history of data growth in T-Mobile (he has been with the company for 11 years) and made some observations about the industry and the potential challenges and industry opportunities. Salient points included -

Then the discussion moved to a panel discussion with distinguished experts pondering over issues and future of the industry. key discussion points were:

When there is a carrier on the panel, it will be dishonest for the moderator to not touch upon the “closed garden” issue, the elephant in the room that no one wants to talk about in front of the carrier but endlessly ponder behind the backs. Well, Len didn’t shy away and put it straight to the panel. Satoshi, a veteran in the industry was bold to address it head-on, telling it like it is — carrier model in the US is a closed model and that hurts the entrepreneurs and if you think you will be in the next company which gets sold to Google, forget it. Lead time are so long that you might not survive. Brendan said it takes patience and commitment to scalability and reliability before you can crack the nut.

Cole to his credit acknowledged the issue and said, yes, as carriers, we do make things hard for the entrepreneurs to work with us, we haven’t built enough tools to make things simpler. However, he said, carriers need to take few issues into consideration, the biggest one being customer support costs. If there is a minor issue, multiply that by 26M and it can quickly become a nightmare. Secondly, User experience needs to be solid. We as an industry haven’t done a good job, he thought, by pushing out some of the half-baked solutions. And, finally, the spectrum isn’t free like the Internet, even when broadband comes, it will be an issue. However, industry needs to set the bar for introduction of apps a bit lower to test out the market, so instead of releasing it to 26M, introduce it to a small subset, test and expand. T-Mobile is working on figuring this out.

When asked, what’s the driving factor for mobile content, everyone agreed (of course) the personal nature of the device, the asynchronous capability, and personalization capability is important. Satoshi mentioned his nirvana moment was when he saw the first version of a mobile fishing game in Japan, where users could set the location for fish and when the back-end server ‘caught’ the fish, an SMS alert was sent. It affirmed the “different nature of this medium”. Hank narrowed it down to communication, jewelry, and entertainment being the key elements for mobile. Jai said that presence and location are going to make a huge difference in mobile UX.

The challenge of discovery of content was mentioned. Brendan thought the opportunity for “mobile advertising” is huge but it will take good amount of time for the market to develop. The models for advertising based content monetization will start to happen. Jai also thought indirect monetization models will start to happen soon and also Long tail content monetization will be significant as it is an untapped territory right now.

Len asked, how things are different in Intl market? Brendan said, some of the differences are in how people consume media, and how mobile fulfills the need for media consumption demands and needs.

To the question of how we pay for all this, Satoshi pointed out two business models, one is people will pay for mobilizing their Internet experiences. He said, Myspace is free online but the mobile version is $3.99 but is the biggest selling app on AT&T (value is in immediacy) and second the standard comcast/cable model of flat fee for services like VCast irrespective of the apps and content you consume (with bundling of course).

Brendan thought that Personalization will always be a big market. Also, an untapped market is the commerce on the phone. Online, 30% of search revenue is based on checkout or from ecommerce players. Micropayments for commerce and content will be big.

Cole emphasized that things need to be made very simple like RIM did for email - intuitive and easy to use. He said, carriers should focus on horizontal things instead of focusing too much on vertical elements. To the question on alternate billing models, they are looking at Paypal and other means for billing.

Satoshi thought that offdeck market is another opportunity that hasn’t been fully exploited yet but the challenge is getting eyeballs.

Finally, there was a question around why US is so behind. Cole countered that there is a perception that US is behind but we are doing fairly well. I agree, if you look the numbers, 12-15% growth Q-over-Q over past 10+ quarters ain’t bad. That’s clearly a misconception in the market as highlighted in our Q107 update.

So, a variety of issues tackled, some fun discussion, good networking, and a very successful event. Thanks to all those who were able to make it. The Wireless SIG is doing another event in June, stay tuned.

Chetan Sharma Consulting was a proud sponsor of the event along with other great sponsors.

 Photo Credits: Shashi Shashidhar

American Idol and Mobile Marketing May 24, 2007

Posted by chetan in : Mobile Advertising, US Wireless Market, Mobile Content, Mobile Entertainment, Gaming, ARPU, Unified Messaging, Messaging, Mobile Applications, Worldwide Wireless Market, Mobile Ecosystem, Mobile Search, Wireless Value Chain , add a comment

American Idol was a game changer in the US as far as mobile marketing is concerned. Last night 74M text’d in.

The Mobile Entertainment Forum (MEF) today published a draft Code of Practice (Code) outlining best practices for Participation Television (P-TV) in the United States. P-TV services typically provide viewers the ability to interact with television shows – for example, where viewers are asked to text in votes or enter sweepstakes using their mobile phones. Often these shows integrate enhanced content with premium rate mobile services. P-TV is expected to experience continuing fast growth in coming months.

Had a chance ealier today to talk to Edward Boddington, MEF Americas Board member and Telescope, Inc. Founder. Boddington helped develop ‘Pop Idol’ in the UK, which became ‘American Idol’ in the U.S. (he handed the envelope to Ryan Seacrest last night on ‘American Idol’ announcing Jordin Sparks as the new American Idol). 

Some numbers from Ed. $300M P-TV in UK, 30% of it is mobile messaging. In the US, the numbers are in the range of $30-50M though accurate estimates are not available. The final version of the code will be available at www.m-e-f.org within 2-3 months. Thanks to Chris Pfaff for arranging the interview.

US Wireless Data Market Update Q1 2007 May 15, 2007

Posted by chetan in : AORTA, Strategy, Carriers, Middleware, Speaking Engagements, 3G, Mobile Advertising, US Wireless Market, Mobile Content, Indian Wireless market, BRIC, Mobile Gaming, ARPU, Japan wireless market, Unified Messaging, European wireless market, Mobile TV, Mobile Applications, Smart Phone, Worldwide Wireless Market, Mobile Usability, Mobile Ecosystem, Speech Recognition, Mobile Search, Wireless Value Chain, 4G , 3 comments

US Wireless Data Market Update - Q1 2007

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http://www.chetansharma.com/usmarketupdateq107.htm

US wireless data market continues to grow at a steady pace offsetting any decline in voice revenues. Growth in both enterprise and consumer segments resulted in a $5B quarter for the industry (by comparison, in 2004, the total data revenues for the year were $4.6B). Given that approximately 60% of the revenues are from non-SMS applications and the subscriber penetration of data services is still low, we remain bullish on the US data market. However, as the subscriber penetration crossed 80% this month, the subscriber growth continues to slow down from its highs in 2005.

Your comments are always welcome.

Chetan Sharma

Mobile Advertising Panel Roundup April 19, 2007

Posted by chetan in : AORTA, Strategy, Carriers, Speaking Engagements, Mobile Advertising, US Wireless Market, Mobile Content, Mobile Entertainment, Indian Wireless market, ARPU, Unified Messaging, Mobile TV, Mobile Applications, Smart Phone, Worldwide Wireless Market, Mobile Usability, Mobile Ecosystem, Microsoft Mobile, Speech Recognition, Mobile Search, Wireless Value Chain, CTIA , 7 comments

Yesterday, I had the distinct honor to present and moderate a PAN-IIT event on “Mobile Advertising - Technical Challenges and Business Opportunities” at Google’s Kirkland offices.

I will get into the panel discussion in a minute. First, would like to join everyone in paying our sincerest condolences and prayers to the families of Prof. G.V.Loganathan and rest of the folks who were lost in the tragic Virginia-Tech incident. Prof. Loganathan was a fellow IIT alum and colleague and friend of many in the community.

Mobile Advertising Panel Discussion

Our illustrious panel included:

(Bios here)

Decades of experience in Mobile, Internet, and Advertising.

I started the discussion by giving a broad overview of the mobile advertising industry and some of the things that we should be thinking about. In random order, they are:

Mobile Advertising means different things to different people: Depending on a company’s focus, mobile advertising means different things to different companies. There are over a dozen different channels or strategies at our disposal in this framework, for instance -

No one provider offers capabilities across a majority of them, you could argue that there is no need but from an advertiser’s perspective, the situation demands aggregation and simplicity.

Forecasts: I put up a graphic that included the US mobile advertising forecasts from several leading analysts and asked the audience to guess the timeframe for the same. The original figure is below -

(Source: eMarketer, 2001)

This is a reminder that a) it is hard to forecast when you are starting from zero and b) we should learn our lessons from history. 2006/7 forecasts stand at

(Source: eMarketer, 2006)

(Data Source: Informa, 2006)

 (Data Source: ABI Research, 2007)

It is not a question of whether these forecasts will prove to be accurate in 4-5 years time, but what will it take to make these forecasts real. Can we learn from the last time around and apply the lessons to this cycle?

Japanese Mobile Advertising market: Clearly, Japan has had more experience with Mobile Advertising than rest of the markets. In 2006, the average revenue/user/year stood at around $4. For US, this figure was less than $1.

Mobile Advertising value chains: As I mentioned above, mobile advertising means different things to different people and hence there are different value chains in place though they are merging rapidly.

Measurement: It is critical for the success of the industry to have measurement tools in place. I discussed Ogilvy’s Lenova campaign that generated 188% lift in brand awareness and 156% lift in product recall.

Mobile Advertising Framework: Finally, I presented my view of the technical advertising framework that is needed to make the experience work for the user

Panel Discussion

We had a packed house and a very engaged audience. We had influential engineers, VCs, biz dev, mobile enthusiasts in the mix. I asked the panelists to summarize their view of the Mobile Advertising space and what they saw as some of the challenges going in. (paraphrasing of their comments is mine)

Everyone was bullish on the segment, however they cautioned that it will take time, as the “reach” is not there yet. Jai mentioned the oft-quoted 15% penetration for browsing in the US as a limitation of “reach”. Kosar discussed Google’s initiatives in Japan where they are doing a lot of testing to hone in on the “user experience”. Victor talked about the challenges of “user interface” and that voice represents a good solution to cut through the archaic menu hierarchy to find things. He is not worried about the supply and demand but the brokerage in the middle. Brendan talked about the “ecosystem friction” wherein we have too many players for advertisers to deal with and an aggregated or simplified view is needed for the advertisers to jump in with both feet. Coming from the broadcast and Internet marketing background at TW/AOL, Brendan thought measurement authority like Nielsen is a must.

Kosar described the concept of “signals” that Google uses to discern “intent” and how mobile presents a great experimentation field to test some search techniques and algorithms that can also be applied to online search at a later date. The reason being low threshold for wrong results on mobile.

On the question of targeting, Brendan and Jai mentioned the use of demographic data available from the carrier to make search results (and advertising) better. Kosar said that Google’s focus is on tailoring experiences for device capabilities and cannot always rely on user preferences on mobile devices since they are not always available. They want to make sure an ad shows up where user expects it to show up. Google is concerned for both the user and the advertiser. Victor used to the run probably the biggest direct marketing research org in the world at Reader’s Digest and he thought that the targeting is actually much easier in mobile due “declared intent”.

There was some discussion on the meaning of mobile advertising and how promotions and marketing are part of the same mix. Jai said that recommendation is another form of advertising which appears non-intrusive and is actually useful for the consumers. Amazon gets a good chunk of their revenues from recommendation clicks. I myself find them quite useful and end up buying dozens of books this way every year.

Victor thought that the ”promotions” piece (tied to local search) is actually going to be a much more lucrative business than the banner ads or even media search related advertising.

Kosar reiterated Google’s philosophy - “focus on the best products and experiences, and monetization opportunities will emerge naturally both for users and advertisers”.

There was active participation from the audience as well.

Katie Thompson from Trilogy (a prominent VC firm in PNW) wondered about the ad saturation levels we might be reaching and how do we address that and if agencies are worried about that aspect.

Mohan Venkataramana, President of IITPNW chapter and a veteran in the industry saw history repeating itself w.r.t. advertisements and evolution of the mobile industry.

There was general agreement that industry needs to focus on user’s needs  rather than CPC and CPMs at this stage in the game. And that user privacy issues should stay at the forefront.

Another one lamented that first the carriers need to fix the voice quality, reduce data rate plans, and make things usable before consumers are going to tolerate ads.

Someone narrowed things down to two key aspects a) location and b) relevant targeting.

There were questions about the Japanese market and if it is different from the US and if that’s the reason advertising will take longer in the US. A lot of people misunderstand the Japanese (and Korean) market. I was advisor to the senior management team of NTT DoCoMo when they were active in the US and we used to laugh about the misconceptions and the myths that perpetuated in the US market. We dealt with this issue in quite a bit of detail in our previous book (co-authored with Dr. Nakamura, SVP, DoCoMo).

We could have gone on for the rest of the night but had to wrap things up. Mobile Advertising is a broad topic and it is hard to cover all aspects of it in 90 minutes, but touched on quite a number of items and honed in on a couple.

Thanks to our hosts Google for space and food, the panelists for an illuminating evening and spirited discussion, and the participants for making it a lively exchange.

Sell Phones: What will make Mobile Advertising tick? October 19, 2006

Posted by chetan in : AORTA, Infrastructure, Strategy, Carriers, Middleware, Security, 3G, Partnership, Devices, Mobile Advertising, US Wireless Market, Mobile Content, Mobile Entertainment, Mergers and Acquisitions, Mobile Wallet, Location based Services, Usability, MVNO, Indian Wireless market, BRIC, ARPU, Japan wireless market, Unified Messaging, Messaging, European wireless market, Mobile TV, Mobile Applications, Smart Phone, Worldwide Wireless Market, Mobile Usability, Mobile Ecosystem, Mobile Search, Wireless Value Chain, 4G, Privacy , 2 comments

The full version of the paper is available now -

http://www.chetansharma.com/sellphones.htm (pdf download)

 

Introduction

Mobile Marketing and Advertising is the new “it” in the industry. All the three recent industry shows (MES, MECCA, and CTIA)[1] 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[2] dollars at experimenting with this new medium called mobile. Analysts have started predicting billion dollar markets by 2010[3]. 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[4] 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[5] (Figure 1). According to InfoPlant, almost 60% of the Japanese consumers use mobile coupons and discounts more than once a month[6]. 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[7]

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[8] (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[9]

Technology Requirements

 

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%[10]. 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[11]

Figure 4. Mobile advertising channels[12]

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[13] 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[14]

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[15]. 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