Friday, October 26, 2007

Mobile phones will be mobile phones

Mobile phones are destined to be tiny and no matter what technology goes in them they will still remain small. Sounds pretty trivial, is. Though this fact seems very very obvious, most of the companies are missing it by a margin and investing in a future that will never dawn in reality.

Somehow, the perception of an ideal mobile phone is a device which will let a user do everything that she can do from a desktop. A phone which will enable her to send and receive e-mails, create documents and presentations, conduct research on products and services, use search engines to look for specific information, download music, pay bills, do online banking, as well as arrange, tag and upload photos. A hope that one day the storage capacity on a mobile phone will be as large as desktops and that day we will no longer require a desktop. If you just believed in what I portrayed, probably you also missed the point here.

Lets go back to our initial postulate. mobile phone is by definition a small device and it will always be. It's largest screen, no matter how large, still 7-8 times smaller than 14 inch laptop. It's keyboard (even touch sensitive which zooms in..think iPhone) will remain smaller by a similar ratio. Given all these physical limitations, why will a user use a mobile phone to do such tasks, which she has been doing on a PC in the past. Well, the reason is simple: 1. it's on the go. 2. Mobile phone does not need to be switched on and then be waited for five minutes before it can be used. Thus, there is a trade off: Do you want to dig out from your couch and walk away to your desktop or you want to put the cable remote down and pick up your phone. And the answer quite simply depends upon the total expected time that it will take to accomplish the task.

Based upon the standard of general laziness and comfort, being a small interface, a mobile phone remains user friendly as long as the user is involved in a passive activity. In other words, the user is not running the show. Examples of passive activities are: listening to music, watching video, playing a downloaded simple game, reading comic (illustrated) book. Active ones will be: using search engines to find the best deal on printer, buying stuff from an online store, reading a novel (imagine a thick novel...War and Peace!), writing a document, creating a presentation, trying to read the A4 sized pdf copy of detailed bill. Simply put, anything that requires a lot of typing or a lot of scrolling will take the pleasure away from doing things on the mobile phone, doing things on the go.

Thus, the future of mobile phones rather lies in developing applications, which involve user passively. Apart from what is listed above, cell phone can also provide location based services, which are instant information: local weather, live score of a game, maps, closing time and phone number of top 10 restaurants around that location, very limited banking: reminders for credit payment last date and total amount due, reminders for monthly bills last date and total amount due, mortgage payments, activities around local area which can be seen in calendar, online access to personal information such as user name and passwords for different online accounts, currency converters.

The differences between active and passive activities are subtle but huge. Though there will be a variance in acceptance and choice by geography and age group, general trends will remain the same. And above all, one of the important things which cannot be ignored is pricing. Most of the customers who opt for data services, are either corporate or have high monthly income. An average customer would rather do all such activities online at home than pay $20 to do things on the go. Also, in North America where most of people drive to work will have no time accessing data services because according to my opinion, that is the time when people want to do such things - going to their office in train which takes more than 20 minutes.

While the telecom industry is struggling to get the killer application (mobile TV, VoIP), which will promote the telecom world from 2.5G users to 3G users, it will be interesting to see the kind of applications that will be developed around it. For, until the prices drop and customers see a point in doing things on phone rather than online, 3G will remain to be a technology of future.

Thursday, October 25, 2007

Mobile Advertising - The Road Ahead

Mike Baker, CEO of Enpocket, in one of its articles talks about the three possible ways of mobile advertising - SMS, MMS and WAP (http for mobile phones). SMS, which has primarily been popular in Europe and Asia, has recently gained serious momentum in North America. In the last 2 years, total SMS messages sent has increased 4 times from 7 billion to 28 billion per month. Also, unlike MMS and WAP, almost all the phones support the capability to send and receive SMS, making it one of the primary vehicles for advertising.

The idea of advertising via SMS works on the simple push/pull method. Advertisement is pushed to the user and if the user is interested, user pulls the more information possibly making a purchase. MMS also uses the same method, but it delivers a rich media interactive ad to user and has a much stronger impact than SMS, having a much higher click through rate and purchase rate (sometimes as high as 20%). WAP, the third channel, provides richer colors and more interactive experience and further, avoids the need for opt-in or user initiated reply message. However, the click through rate and purchase rate is not significantly different than MMS.

Despite the method, daunting challenges remain the same in all channels: finding the right customer, impressive ads presentation (as the same layout will not look impressive on all phones, colored phones have different resolutions and display size), and deliver the right content which created the spark to view the advertisement in the first place. Mike argues that marketers can't just blast out the advertisements to users without opt-in. Regular media channels are used for promotion leading to user selection, typically asking to send a message to a short code (normally 4-5 digit number). Interested users send the message and advertisement is pushed to the user. If the user remains interested, he clicks through to reply to the message or reach the wap site of the brand- sometimes making a purchase, downloading promotional content, calling the toll free number, opting to participate in further ad campaigns or accessing the brand information at a later time through internet.

Mobile advertising companies like Enpocket are just one part of the whole picture. MMA, in one of its papers, presents the whole picture and calls it mobile marketing ecosystem. According to MMA, the ecosystem is comprised of four interconnecting spheres-Product & Services (brands, content owners and marketing agencies), Applications (discrete application providers and mobile ASPs), Connection (aggregators and wireless operators), and Media and Retail (media properties, “brick ‘n’ mortar” and virtual retail stores). Brands want to advertise, marketing agencies help brands create the ad campaign, applications are created to show these ads, telecom providers to send these ads to the subscribers. Retails are used to create awareness and promote using its traditional channels. The ecosystem coherently works to create the best experience for the end user.

Mobile advertising has clear advantages over all the other channels, the most obvious is that the user is accessible to it all the time, unlike internet, TV or print media and the user can respond to the advertisement instantly and does not need to preserve the spark. Also, since the phone screen is small, typically there is only one advertisement per page, getting the maximum attention of the user.

However, a close look at the case studies presented at Enpocket suggests that mobile advertising still delivers a very very specific goal, unlike other mediums of advertisements. With the limitation of 160 characters and no graphics (SMS), the content and relevance become the only motivating factor for a user to participate. In such a situation, unlike TV, print media or even internet, the advertisement cannot be just pushed to all the users.

But as we will see more people using enhanced handsets and data services, the face of mobile advertising will change and become more like traditional media. While mobile advertising will continue to serve a very specific purpose, the user selection process will become much more flexible and user's opt in will be highly derived by the sites and contents downloaded by the user. This will, to an extent, reduce the role of retail and media that it currently plays to popularize the mobile advertisements and help brands find the right users. But that day is still at least a couple of years away.

Monday, October 22, 2007

Introduction to Mobile Advertising

It's not that unrealistic a dream I guess - a dream to live in an advertisement free world. Where it somehow dawns upon us from time to time: what services we want and which products to use, but just for that we don't have to go through the undesired ritual of watching ads, which keep showing up one after the other ruthlessly irrespective of the emotional turmoil of the viewer who is flipping through other channels and is cautiously waiting for the show to be back again.

Yet, as the new communication channels and technology around us emerge, new ways are being discovered to push advertisements to consumers in the most disguised manner. Mobile phone is no exception. More than 33% people (more than 2 billion) on this earth are mobile subscribers and the percentage is growing by 15% every year. According to CTIA, 81% of total population in North America are mobile subscribers. No surprise then that a group called Mobile Marketing Association was formed in 2003 to leverage the marketing benefits of this new vehicle which seems to be carrying more and more opportunities and data everyday.

Mobile advertising is still a field in its early stage. It has total estimated mobile ad spending of $ 3 billion in 2007, but is expected to grow to $11.5 billion by 2011, almost four times in the next four years. And the reason behind is simple: as the mobile screens become larger, have better resolution and data speed (3G) improves, there can be a paradigm shift in mobile advertising: from text based ads to display based ads, better user experience because of higher resolution, larger ads because of bigger screens and relevant ads based upon the sites and data accessed by the subscriber.

Mobile advertising industry so far has been a complicated one to get through. Research (and personal experience) suggests that mobile phone is a very personal device. People like it to keep the phone on most of the time. People carry the mobile phone with them almost anywhere they go. Any communication on cell phones receives an immediate attention. Thus, if anything goes wrong with the advertising on mobile phone, telecom subscribers have more to loose than to gain, one of the primary reasons that kept the telecom operators away from advertising for the past few years. But Enpocket, a mobile advertising solutions company, which was recently acquired by Nokia, claims in its in the press articles that mobile advertising, if done correctly, has a much higher response rate (measured as CTR - Click Through Rate) of 2-6%, than that of internet advertising. The challenge, thus, to achieve this success is to understand - how to spark the interest, engage the customer and then, deliver the content and/or right mechanism to access further information right away.

Thursday, October 18, 2007

Nokia 3Q results soar - global market share reaches 39%

The strong third quarter results of Nokia portrays the continuous dominance of mobile phone maker giant on the world telecom market. The profit soared by 85% to €1.56 billion from €0.85 billion. The company believes that around a billion cell phones were sold in year 2007 and Nokia sold 39% of them, up 4% from last year. Nokia expects that the mobile device market volume will be approximately 1.1 billion units in 2007, up from the approximately 978 million units Nokia estimated for 2006, approximately 12% increase.

The company sold mobile phones to new users in developing markets such as Asia-Pacific, Middle-East, Africa and China, where millions of new customers are entering the market every month. The company registered the net sales increase of 3% to €6.1 Billion and the operating profit increase of 78% to €1.4 Billion. In developed markets such as North America and Europe, multimedia rich mobile phones dominate the sales. The net sales increased 23% to €2.6 billion while the operating profit grew 57% to €575 million. Nokia says that the growth was primarily driven by N series phones, especially the Nokia N70, Nokia N73 and Nokia N95.

The strong growth of Nokia underlines the strong marketing, operations and global strategy, all of which Nokia seems to have implemented perfectly in a competent market. In addition, there is no doubt that Nokia has a broad as well as tightly targeted product portfolio that remains the key differentiating factor compared to its competitors.

To win the emerging market, Nokia has worked hard to increase the profit margins by reducing the operating cost and introduced several new phones to keep the prices up, thus selling more profitable phones across its range. Nokia understands that in these markets, customers have limited buying power and the use of mobile phone increases their standard of living and brings them information more quickly than without a mobile phone. Additionally, poor infrastructure and limited access to fixed line phones further increases the need of a cell phone.

However, its profit in developed market has come from net sales growth of multimedia rich mobile phones and improved profit margin from solid product portfolio. The situation in the developed markets is different than that of emerging markets. In these markets, new technologies and network upgrades has created a market for the mobile phones which can support high speed data access. In North America, most mobile phones are accessible to users thorough the telecom operators who sell the mobile phones at subsidized rate bundled with their rate plans. Thus the subscribers have relatively small range of mobile phones to choose from. And on top of it, telecom providers urge to offer different mobile phones to the customer than their competitors.

While it will be extremely difficult for Nokia to increase its market share beyond 40%, in the strong market conditions with growing demand of around 12% mobile devices every year, maintaining the market share is a challenge and reward both, huge enough. Despite the falling prices of mobile phones every year, Nokia has not only managed to sustain the profit margin but also increase it. Further, Nokia has started to expand its breadth with the acquisition of enpocket, to enter the mobile advertising industry and launch of Ovi, to enter the internet mobile services industry.

Saturday, October 13, 2007

Nokia Ovi - A tough door to open

On August 29, 2007, Nokia unleashed its ambitious plan to offer mobile services under the umbrella of brand name Ovi. As the photograph of the presentation by Mr. CEO Olli-Pekka Kallasvuo, President and CEO of Nokia, says it all - Devices are simply not enough.

Under Ovi umbrella, Nokia plans to unroll a fleet of internet based services in the next coming months. Nokia has started with the basic and necessary services: photographs, maps, music and games. While Ovi aims to converge all services to a single platform; it also provides the flexibility to access those services from anywhere, a mobile device, PC or internet.

In the present world, the mobile services industry is not mature enough to fulfill the demands of subscribers. Telecom providers invested heavily to upgrade their networks to support higher bandwidth so that users can subscribe to such services, but the content and access to that content were not on par to persuade the subscribers to use these services. On an alternative path, mobile phones made it possible to access internet on their mobile devices and use all the services as they have been using from a desktop. New mobile phones, now come with full html browser, support this theory.

However, the launch of Ovi opens a new horizon for the mobile service industry by tightly coupling the mobile phone with the services offered to access the content. This will help Nokia to create applications, which will be easier to use and have better user experience. Very similar to what iPhone and iTunes are for each other, though on a much bigger scale. Nokia gives the telecom providers and end users a new offer - buy our phone and use our services to keep and access your content. And telecom providers keep doing what they are good at - managing networks.

Ovi also claims to provide consumers easy access their existing social network, communities and content along with acting as a gateway to Nokia services. The success of Ovi solely depends upon its ability to convince more subscribers to use its services and Nokia will expect less number of subscribers using services outside Ovi. Nokia will be counting on the quality of content, easy access, deployment, pricing and usability of such services to expect the user to switch to Ovi. However, the content providers on world wide web and competitors will not loose their customers to Nokia that easily. While it will be difficult for Nokia to convince an existing subscriber of such services to use Ovi, the penetration of such services are so low that there are plenty of new subscribers, who will be ready to opt for Ovi if they are offered with the relevant contents, lucrative pricing and easy access.

The launch of Ovi definitely puts Nokia ahead of its competitors Ericsson and Motorola. The telecom industry has a strong demand of such services, which so far, the market has been unsuccessful to deliver. In a recent press release on GSM World, a GSM global trade association, AT&T claimed to have more than 5 million 3G subscribers, which is still less than 10% of the overall mobile subscriber base.

The Ovi services will be launched in Europe first and subsequently they will make their move in America, as the trend has normally been. Few days ago, Nokia signed a deal with Telefonica, a Spanish telecom company, and the industry will carefully observe the first launch of Ovi and take notes of its success.

Nokia has definitely opened a new market of mobile services and soon its competitors will follow the same path. It will not be long before these services will be an value addition to the telecom providers and a reason for subscribers to choose a particular telecom provider.

Wednesday, October 10, 2007

AT&T's first step towards Mobile TV

Only a couple of days ago, I wrote about the much talked auction of 700 MHz spectrum. While everyone in the industry is waiting to see who is going to get those channels and how much are these going to cost, AT&T, surprising everyone (especially Verizon), closed a deal with Aloha Partners purchasing spectrum licenses in the 700 MHz frequency band for $2.5 Billion.

AT&T bought 12 MHz of spectrum covering 196 million people in 281 markets. The spectrum covers many major metropolitan areas, including 72 of the top 100 and all of the top 10 markets in the United States. $2.5 Billion seems to be a very reasonable price, given the heat that has gathered around the auction. Companies like Verizon, which will try hard to get a good share of this spectrum to strengthen their position in the market; and Google, which is determined to take its first step in the telecommunication industry with this auction, can push the price of these channels really high. The 700 MHz frequncy has total 9 channels for auction (also known as auction 73) and only 3 channels with 12 MHz frequency spectrum, all in the lower 700 MHz band. While FCC expects to generate no less than $12 Billion from auction 73, industry experts believe it to be worth $30 Billion.

Aloha Partners is the largest owner of 700 MHz spectrum in United States. Wireless analysts and industry experts agree that this spectrum is much better than other wireless frequencies, because it travels significantly farther and penetrates foliage and buildings significantly better, hence saving billions of dollars to build a network on these frequencies compared to other frequencies.

This purchase has put AT&T in a very strong strategic position, much ahead of its competitors. With the auctions still 3 months away from today, AT&T can get significant advantage in the market by launching early and ahead of everyone else. However, at the same time, it also puts AT&T under pressure to offer its products and services in stipulated time and maximize the benefits from the opportunities. Another potential risk associated with being the first is that the followers can learn quickly from the mistakes of AT&T and adjust their strategies in a short time, reduce risks and make better profits.

In the past years, Aloha Partners has been busy developing market trials to provide high-speed, wireless broadband Internet services and broadcast mobile TV and music service in several of its markets, and most probably, AT&T will be thinking on the similar lines to leverage the incredible capacity of this spectrum. While the commercial and mass deployment of these products and services are still far away, it will be very interesting to see the way this spectrum will change the face of the telecom industry and what percentage of ancient telephony is actually left in a mobile phone.

Tuesday, October 9, 2007

VoIP over iPhone!

That day is not far when subscribers will be able to make VoIP calls from iPhone. The real question not whether iPhone will ever come out with an idea to provide VoIP services but eventually when and how much will it cost? A business plan to launch the VoIP services for individuals and house holds, though seems to be blurred in a distant future, is now clearly visible on the horizon of the next product line of telecom industry. At this time, when the telecom providers seems to have built enough infrastructure to provide such services, timing is going to be one of the important factors to reap the benefits.

An article recently published on PC World, which somehow did not catch much of the media attention, reported that British VOIP provider Truphone showed conventioneers how to use the iPhone's built-in Wi-Fi capability to make calls over Truphone's VoIP network. Truphone representatives demonstrated how a call can be initiated from a handset and then routed to Truphone's server via Wi-Fi. Though the Thruphone's spokesperson Mr. Smith asserted that the event was only a demonstration and was not intended to be a commercial launch, he also took the liberty to state, "This program doesn't do anything that Steve Jobs says not to do. and Apple is fairly neutral on third-party applications and they won't deliberately try to break them."

While Truphone regarded the event as a mere demonstration, the telecom market just seems right to launch such services. Telecom providers have upgraded their network to 3G and they have been laying wires all across United States to provide services which require, along with content, high speed IP network and a remarkable quality of service. VoIP products and services, which only existed on the desktop applications because of bandwidth issues, are now ready be deployed on the mobile phones.

Mobile VoIP, an application of VoIP technology to mobile handsets, requires at minimum high speed IP communications and the most common technology so far is Voice over Wi-Fi. Mobile VoIP, which uses SIP and Jabber protocols, can also be used over any broadband IP-capable wireless network connection such as the various 3G standards and WiMAX. While iPhone is only capable of connecting to Wi-Fi, some new phones in the market already have the capability to connect to the Wi-Fi network and make calls. T-mobile has already three phones in its pocket with such features and is aggressively marketing these handsets.

Estimations are that VoIP Mobile industry will grow to $12 Billion by 2010 in Europe alone. According to a study conducted by Gartner Inc, which was published in an article on PC World, by 2008, VoIP-enabled systems will account for some 97% of all systems sold. While all of this is still to be seen; potential yet to be demonstrated and VoIP services yet to be unleashed, it should be no surprise that year 2008 will bring an unprecedented era of IP phones in the world of telecommunication market.

Monday, October 8, 2007

Challenges for IPTV in United States

According to a report pubished by DSL Forum, the number of people using IPTV (Internet Protocol TV) services has increased by 179% in the 12 months to June, 2007 worldwide. The number grew from 2.9 million to 8.2 million subscribers. Europe added over three million subscribers in the 12 months to 30 June 2007, making it the strongest market both in terms of growth (231 per cent in 12 months) and total subscriber numbers (1.5 million to 5 million), while in USA, the number grew from 0.4 million to 1 million subscribers.

Interestingly, the number of broadband subscribers increased by only 25% in the 12 months to June, 2007 worldwide. The number increased from 250 million to 313 million broadband users and North America continues to dominate global broadband market with 16% of world subscribers.

As the facts state, IPTV has been able to convert broadband subscribers to opt for IPTV services. The maximum of this growth was observed in top markets like France (2,550,000 customers) and Hong Kong (938,000 customers), which show that IPTV can be deployed rapidly to large numbers of subscribers, if the market conditions are right.

While in Europe, the market conditions may have helped IPTV to expand at a much higher rate, in North America the conditions do not seem so right, a recent study published by Garner Inc. suggests. According to the report, the United States Pay T.V. market is fairly saturated with 82 percent of all U.S. households reported having a pay-TV subscription in 2006 and the penetration is expected to increase to merely 84 percent by the end of 2011.

To add to those problems, the market is fairly dominated by the satellite and cable operators such as DIRECTV, Time Warner Cable and comcast. Many telecom providers are still laying cables to develop a network capable of delivering a new generation of IP based products and services. AT&T, which launched a project Uverse to provide such a solution, as of September, 2007 has surpassed 100,000 customers (10% of total IPTV users in United States) and its fiber-rich network passes approximately 5 million living units.

The study observed that as the availability of IPTV offerings from telecom providers increase competition in this market, understanding what consumers currently receive, and what they will want from their pay-TV provider, will be critical to gaining or protecting market share. Such crititcal and differentiating factors can be from the qualitative factors such as quality of service, to intaractive features and pricing.

The study observed that interactivity features with the pay-TV subscription have increased during the past year, rising from 9 percent penetration to 15 percent. Observing the patterns, cable providers are upgrading to digital transmission as well as including either the features and/or equipment as part of the service offering at no additional cost or for a nominal fee.

While it will be difficult for the telecom providers to beatthe offers presented by satellite TV, the bundling of service, interactive features and pricing could be the only differentiating pointers. As of now, ahead of the telecom providers lies a huge challenge to secure a strong market share and convert existing subscribers from cable and satellite to internet protocol based TV.

Sunday, October 7, 2007

700 MHz spectrum

With the auction of 700 MHz spectrum less than three months away, the competition is expected to be fierce than ever. The auction will start on January 24, 2008 and the money collected should reach to U.S. Treasury no later than end of June, 2008. The spectrum was previously used by Broadband Analog TV Broadcasters, but now the ownership will be transferred to government by end of 2009.

In a recent interview published on the CTIA Wireless Association website, CTIA's Vice President of Regulatory Affairs Christopher Guttman-McCabe strongly emphasized the importance of additional spectrum to meet the growing demand of wireless communication. Mr. Christopher said that the money collected from this auction, which should be no less than $12 Billion, will be significantly used to reduce the deficit and massive critical upgrade of public safety communications. This money will also be used to generate coupons for users of analog TV for analog to digital transition.

The 700 MHz spectrum has strong broadcast-attractive features, such as the ability to penetrate the walls and to cover a much larger area per dollar invested than other spectrum with higher frequencies. In addition to these benefits, the telecom industry has registered a consistent growth in number of subscribers and total revenue in the last couple of years and needs to address the growing demand. Just for the records, last year, US Wireless Industry (wireless handsets and services) generated $118 billion revenue, which expected to grow to $450 billion in the next 10 years.

Verizon, a strong contender for this spectrum has recently been accused by Google for behind the scene lobbying to change the open access rules, proposed by FCC. Open Access Rules will allow wireless customers to buy handsets or download software different from what's being offered by their specific carrier. Google, which plans to foot its steps in the telecommunication market with this bid, is supportive of open access rules.