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Issue 4

THINKING ABOUT MOBILE

Back to the future:

Why retailers are key to app stores’ success

Also in this issue... 13 Consumed with mobile ads 17 Data2: India 19 Company focus: MCN 23 Mobi Wan speaks 25 Walled garden on location

Europe embraces the dongle: mobile broadband takes off

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Nick Lane, Chief researcher/writer nick@d2mobile.co.uk Tel: (44) 1483 243 382 Mob: (44) 7976 057 052 Ed Barker , Research director/writer ed@d2mobile.co.uk Tel: (44) 1483 243 383 Mob: (44) 7939 492 656 Michael Carroll, Contributor info@mobilesquared.co.uk Tel: (44) 1483 243 383 How to find us: Crossweys, 28-30 High Street Guildford Surrey GU1 3EL UK ISSN no. 1759-6483 Published in the UK 8 times per year in pdf format No part of this publication may be copied, photocopied or duplicated without prior written permission from the publisher, D2 Mobile Ltd mobileSQUARED is a trading name of D2 Mobile Ltd. The mobileSQUARED team offers unique forecasting, analysis, research and insight on the mobile market, providing highly focused reports and bespoke intelligence. We tailor our approach to the requirements of each project and use our network of global network of contacts. Our extensive market knowledge stems from years covering the mobile industry meaning that we’re in a position to respond immediately to market developments. All rights reserved. Opinions expressed by individual contributors may not personally reflect the views of D2 Mobile Ltd. Whilst reasonable efforts have been made to ensure that the information and content of this publication was correct as at the date of first publication, neither D2 Mobile Ltd nor any person engaged or employed by D2 Mobile Ltd accepts any liability for any errors, omissions or other inaccuracies. Readers should independently verify any facts and figures as no liability can be accepted in this regard. Readers assume full responsibility and risk accordingly for their use of such information and content.

©2008-9 D2 Mobile Ltd.

Insight into mobile advertising research One of the key findings that mobileSQUARED’s research during 2009 has uncovered is the availability of funds for mobile advertising campaigns. The issue for the majority of the mobile industry, is that it has largely failed to access funds because of shorttermism. Admittedly, analyst forecasts have to date overhyped the market, but the industry has under-delivered. However, without the former, mobile advertising would not have had the opportunity it now has. Riding out the global recession will be the priority for a significant number of companies, though mass consolidation will be inevitable. Would these companies have been attracted to the sector if the forecasts were US$500 million by 2011? Nevertheless, this lackadaisical form of mobile advertising, relying on an Internetbased model with a success rate of less than 1% has demonstrated little or no consideration for the consumer. The focus has been on the click through, not the experience after. That is now changing and having a direct impact on the value chain. The previous incarnation of the mobile advertising value chain ended with the consumer. In what mobileSQUARED has defined as VC+1, the consumer now represents the central point of the chain as the model incorporates both mobile advertising and marketing. In the report (and this issue) we explore the concept of Brand Relationship Management (BRM), a notion of empowering the consumer. Actually a simple concept but one that requires a fundamental mindset shift from the mobile industry. Mobile is an industry constructed upon a closed and opaque environment, and a far cry from the transparency enjoyed by the advertising industry. The irony, is that it is the power of directly communicating with the consumer that is attracting the brands to an industry that fails to communicate. Pre-order your copy of the Mobile Advertising:Where has all the money gone? report before the end of June and save 10%! Prices start from an economic downturn friendly £650/US$1,030/€745 for a single user licence. The report contains case studies, insight, analysis, the revised value chain and revenue breakdowns, consumer research, national and global forecasts, based on extensive research from over 100 interviews with representatives from all walks of the mobile and advertising industries. This is one of – if not the – most comprehensive reports on mobile advertising. Email sales@ mobilesquared.co.uk and write “Mobad” in the subject field.

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app stores

Wal-Mart hold the key to success of app stores of consumers. While Apple’s App Store has set the bar The benefits for developers would be for how mobile applications should be sold, low device iPhone numbers relative even clearer, he says. “It would mean a developer can write one application and to larger competitors, such as Nokia sell it into the mass-market. It’s much and Samsung, mean a true mass-market more of a retail business model.” is still some way off. But for the mass Smaller developers would benefit market to truly embrace the mobile app from the app stores experience in store concept in a way never achieved product placement, which is good by operator portals, they must apply the lessons of real-world retail environments news for the emerging breed of socalled ‘garage’ developers individuals if they are to become universally who have turned their hand to mobile successful. applications either as a diversion from A major new study by mobileSQUARED, their every-day job, or a replacement. Mobile Apps Stores: Reaching The Garage developers have played a Masses, concludes that the raft of new large part in the success of the App stores being launched by operators and handset vendors will ensure that apps stores become a mass-market proposition within the next five years, but only if they follow models established by leading high-street retail chains. Tim Haysom, spokesman for the Open Mobile Terminal Platform (OMTP) group, believes anyone launching a mobile apps store should look to leading global supermarkets for their Fruit, veg and mobile applications business model. “You used to have butchers, bakers, and so on,” he Store – the shop that has almost said. “They sold one type of product to one type of person. That’s where we’re at single-handedly created the market for mobile applications stores. Applications with mobile applications.” created by garage developers for Apple Haysom points out those traditional include iSteam, a program that mimics a retailers have been superceded by large supermarkets, and tips those mobile apps steamed-up mirror that users can wipe off with appropriate squeaking noise, and stores that take a supermarket-style iBeer – a virtual pint of lager that users approach for success, noting that they can then ‘drink’. When they’re done, the would appeal to a broader cross-section

phone will issue the obligatory belching noise. mobileSQUARED’s research into iPhone users showed that the majority had downloaded new applications onto their device, even if they don’t regard themselves as particularly tech savvy. But that can also be attributed to the ease of use and simplicity of the user interface; an area that remains something of a moot point for the majority of handset manufacturers. However, the poll also showed that most users have only downloaded free content, and most of those applications tend to be fun items like iPity, which puts the voice of actor Mr T. onto the handset, and iFart, an application offering a variety of amusing windbreaking noises. A few have downloaded the mobile version of social networking site Facebook (also free on the Apps Store), and most were unaware there is a free MMS application that makes up for a lack of native MMS capability on the iPhone. Critics of the App Store highlight that it’s difficult to find more meaningful applications, like location-based services, on the iPhone. While many journalists and analysts are aware of applications including alarm clocks and pedometers, consumers seem oblivious or ... mobileSQUARED 3


app stores uninterested due to the costs involved. Despite the apparent difficulties, Apple says iPhone users had downloaded 1 billion applications from its store in the nine months since it launched to endApril 2009. The firm says its store is the biggest, with over 35,000 applications now available, and will look to build on that success with the launch of its latest iPhone operating system – OS3 – during the summer. The new OS will give developers access to over 1,000 new API’s and will provide developers with the opportunity of introducing subscription-based business models. The fact those API’s can be accessed and used by anyone with even the most basic Mac operating knowledge is a key element in Apple’s success to date, by opening the doors to those garage developers. Ovi Apple has clearly stolen a march on the mobile market, leaving the mobile industry’s big players to play catch up. Vodafone has announced plans to release the API’s for its own apps store, and Nokia launched its Ovi Store this month, using open APIs from Symbian. Perhaps typically of a handset vendor that doesn’t call itself a handset vendor, Nokia says Ovi will be more than just an applications store. “It will have a full range of content including applications, games, videos, podcasts, productivity tools, web, and location-based services,” a spokesman told mobileSQUARED.

Wal Mart is the world’s largest retailer

Nokia will have access to 50 million compatible handsets when Ovi launches, and expects the figure to hit 300 million in 2012. By utilising its ownership of Symbian, and the fledgling Symbian Foundation applications warehouse, the vendor will be able to offer thousands of applications via the store at launch, compared to Apple’s 35,000, and the 25,000 rival vendor RIM will offer via its apps store, which is due to launch imminently. The Finnish vendor expects productivity and location-based services to be the biggest sellers in Ovi, and plans to make it easy to discover those services by engaging the consumer through a feature named Social Location. “[It’s] the combination of your social connections and physical location that provides a unique benefit to Ovi services,” the spokesman explains. “Content providers, developers, and most of all consumers, can…create and discover the most relevant content.” It all sounds great, but it won’t all be available when the store launches. “There will be elements of the relevancy engine at launch,” the spokesman concedes, adding. “Ovi Store will be an evolving service, with different iterations being rolled out over the next several months.” Perhaps the biggest advantage Nokia has is its ability to offer Ovi on a wide range of handsets. The spokesman says it will be available on “a broad portfolio of devices, from the high-end

to the mainstream.” That would remove the need for consumers to invest in expensive smartphones, which to-date have been the main preserve of mobile applications downloads. Nevertheless, the majority of stores will initially be available on high-end or smartphones and filter down to midrange devices over the next five years. But should the app store concept remain a smartphone phenomenon, it would not be the end of the world to the garage developer community. Analysts are predicting smartphone numbers relative to total device sales will increase during that period. Informa Telecoms and Media predicts that the smartphone’s share of the global device market will grow from 19.6% in 2009, to 38.1% in 2013. Smartphones Much depends on your definition of a smartphone, but Tyler Lessard, manager of alliances and developer programs at RIM, says the number of feature phones – every day devices with limited computing power – are falling, relative to smartphones. “Smartphones are moving into so many parts of the market,” he notes. He expects devices with built-in WiFi connectivity, and GPS to be the most useful in promoting applications stores – allowing easier Web access and more targeted applications, respectively. RIM’s confidence is encouraging, considering it has successfully made ... the leap from a ‘must-have’

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app stores enterprise device maker into a ‘musthave’ consumer manufacturer. The firm revealed details of its Store Front at the recent CTIA conference in Las Vegas, and Lessard says it will benefit from existing close ties with developers. “Developers have always been able to write applications without licensing fees. We’ve got a strong developer community.” He believes that app stores will quickly mature, and that the imminent onslaught of a number of different stores will ultimately help the market, as competition will result in clearer segmentation of applications. However, that success can only be achieved if handset makers work closely with operators. “Storefront owners must provide support, and it’s key that operators have expert teams,” he says. Lessard was vague on the precise timing of the launch of Store Front, stating only that it is due to launch 2Q09. Whatever the exact date, RIM’s store will be accessible from over 20 million compatible devices, he says. Play Now Of the remaining top-five handset vendors, Sony Ericsson is planning to evolve its Play Now service into the Play Now Arena, while Samsung and LG Electronics have thrown their lot in with Google’s Android platform. Play Now Arena will build on Sony Ericsson’s success in the music and entertainment categories. The vendor’s experience in leveraging Sony’s huge library of entertainment content, and as one of the original founders of Symbian, could place it well in the mobile apps store battle. The majority of its phones still run the Symbian OS, but it’s hedged its bets with the Xperia X1, which runs Microsoft’s mobile OS, and also has an Android device in the pipeline. Sony Ericsson spokesman Mattius Holm points out that consumers have been able to download new applications to its devices for the past five years, with over 2 million downloads to-date.

Holm believes the new content store isn’t the death-knell for the firm’s existing music and imaging phones. “There are some markets where we haven’t even launched Walkman phones. Music on phones is still big news in India,” he said. Instead, it is the developed markets of Europe and North America where content stores will have the greatest impact. Those markets have the greatest penetration of smartphones and a more mature user base, he points out. “We’ve educated people, and made phones credible devices for music, gaming, and imaging.” While entertainment applications have certainly proven popular in more mature markets, it is unclear whether they will remain the most sought-after in the era of mobile app stores. Research by British newspaper The Sunday Times found that six of the top 10 paid-for downloads on the iPhone in 2008 were games, however a glance at the ‘for free’ list reveals much more diversity, with only two games in the top 10. Other applications on the free list include Google Earth, Facebook, and Shazam, a highly successful music discovery service that launched in 2002. Since its launch, 20 million customers have used Shazam to find 100 million music tracks. The service is available on 60 million devices globally, though the firm aims to grow that to 250 million handsets by end-2009. While the device numbers are impressive, Andrew Fisher, CEO at Shazam says data pricing has been a key element in the service’s success. “The big drivers for us were data download charges and the performance of data

downloads in the UK market,” he says. When the service launched, “it could cost up to £16 to download the track,” which understandably proved to be an “inhibitor” to usage. A deal with Vodafone that allowed consumers to download a song for £0.20 and a video for £0.30 helped overcome those inhibitions. The price point is much the same on a mobile phone as it is on the Internet accessed from a PC, he notes. Users can now pay a set monthly fee for Shazam. It charges US$4 per month to AT&T customers in the U.S.; Eur.3 for Vodafone Germany; and £2 in the UK. The firm decided to offer the service for free on the iPhone, to gain a first mover advantage. In return, Apple advertises the service in its US and UK TV commercials, and promotes Shazam heavily in its highstreet stores. Word of mouth Word of mouth is still a key means of user-discovery though. Fisher says Apple’s user reviews of applications are very important in helping Shazam reach new customers, with over 10,000 reviews posted to date. He ...

Ubiquitous iPhone pic: Apple set to face new challengers mobileSQUARED 5


app stores expects similar results on Android, which also offers a feedback option. However, Fisher says it will be important to take content services into more mainstream devices to ensure mass-market success for developers and applications stores. “We’re on a mission to become the preferred music service. The obvious partner is the storefronts.” Even if apps stores get the marketing mix right, not everyone is convinced such shops are the way to go. Danish consultancy Strand Consult believes the concept of apps stores is essentially flawed, because issues concerning who markets the individual products remain unanswered. “In an app store, the primary focus will be on the few services being marketed on the front page, and the path to success could be very long for most developers,” it notes. Instead the firm believes that the current premium value-added-services market – consisting mostly of games and Java applications – will grow rapidly in the coming years. The market is already worth US$32 billion, it says. “The big question is not whether there will be a market, or whether it will be huge, but rather who will dominate the market?” Despite Strand Consult’s reticence, there

is no denying the impact or success Apple’s App Store has had in terms of raising consumer awareness of mobile applications. In much the same way as Nintendo’s Wii gaming console has opened up that genre to a whole new market – even your ageing parents can play it Apple has opened the doors to downloadable apps to a new market. However, the perception among developers is that Apple’s supermarket is largely a closed shop. While it offers access to anyone who wants to download the API’s and SDKs, open platforms from Symbian, RIM, Microsoft and Google could prove more attractive by offering a clearer revenue stream for all players, and access to a far greater number of handsets and users. Openness Open platforms are a double-edged sword for developers. Although they open up more possibilities in terms of device numbers, such platforms also mean developers must port each application to each operating system. They might also have to tweak their application to suit individual device specifications, such as different screen sizes and resolutions.

It’s not quite in the original spirit of J2ME, which promised a “write once; run anywhere” solution, but few of the developers mobileSQUARED spoke to see it as a big problem. “That’s the situation we’re in at the moment,” says Julian Stocker, UK managing director at games firm Gameloft. “It’s kind of business as usual.” Stocker reasons that porting is a necessary evil for developers looking to get on in the world of app stores. He points out that Apple’s shop has proved highly profitable for Gameloft, stating that the firm holds the unofficial title as top dog in terms of game downloads on the iPhone. “We have 33 games in the store, and each one has got into the top 10,” he said. Anything that increases the visibility of app stores is a good thing, Stocker says, but adds that new stores must focus on their pricing and billing models to replicate Apple’s success. “One thing the iPhone does well is require you to have an iTunes account,” he points out, noting that iTunes users must register their credit card details as part of the sign-up process. info@mobilesquared.co.uk

The inside story of the UK mobile advertising market 15th June, London, www.amiando.com/mobaduk Use discount code 'm209' to get £100 off the ticket price

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mobile thinking about

app stores

In the event that Nokia’s Ovi can make an immediate impact on the 50 million devices the service can now be accessed by, and enjoy the levels of app consumption now experienced by Apple, then the number of apps downloaded from Ovi will be approaching 1 billion at the end of 3Q09. In the mobile world we incessantly hear that this is a volume game, and Nokia certainly has the volume. If the Finnish behemoth can now muster up a marketing campaign to educate its customers and raise Ovi’s awareness, then those staff that have survived the company’s recent mass cull, could even start dreaming of bonuses again. But of course, all of the above is based on a very big if. Before turning our attention to what could potentially become the leader of the chasing pack, let’s focus on the pioneer, Apple. And let’s be honest, everyone in the mobile industry is suffering from a fruit-like Tourette disorder, because no conversation, comment or presentation is possible without a direct or indirect mention of Apple, the iPhone or the App Store. As of end-1Q09 the number of iPhones stood at 17.23 million globally. The number of App Store-enabled devices (i.e. iPhone and the iPod iTouch) was 30 million. At 21:54 on April 23rd, 2009, those 30 million devices had downloaded 1 billion apps from the App Store. Applying figures released by Apple, mobileSQUARED has worked out that the average number of app downloads per user (iPhone and iTouch) per quarter increased from 6.15 in 3Q08 to 15.61 in 4Q08 and 16.67 by the end of 1Q09. Based on this quarter-on-quarter growth (4Q08 to 1Q09), a 6 million increase in devices triggered an average growth of 1.06 apps downloaded per user per quarter, or a 7% increase. But the first billion can now be consigned to history, and the focus is on the next billion. For instance, applying growth and consumer behaviour from the last two quarters reveals that the 2 billionth download will be achieved sometime during August 2009. And maintaining that consistent growth further out, 1 billion apps will be ... Source: mobileSQUARED mobileSQUARED 7


thinking about app stores downloaded during the first quarter of 2010. By 4Q10 it is conceivable that 1.5 billion apps will be downloaded. The issue facing Apple is how to capitalise on its success and avoid application saturation. Presently, the company says there are over 35,000 apps jostling for the consumers’ attention, but is already suffering from the 80-20 rule – 80% of consumers are experiencing 20% of the apps. Some within the industry believe that the rule could be stretched as far as 95-5. This could result in a serious number of disgruntled developers. Not surprisingly, the development of a premium App Store is now well beyond conceptualisation. But will that resolve the situation? Apple, unlike any other handset manufacturer (and operator), is the only company that could principally overcome this threat because of the user interface. No other manufacturer comes close. If an iPhone user is unwilling to scroll through 35,000 apps, what does that mean for the other manufacturers? Of course our friends from Espoo certainly believe that in Ovi, they have the solution with the mass market reach that the mobile industry has been summoning. If for example, they too can encourage app consumption rates at the same level presently enjoyed by Apple, then in 3Q09 alone, Ovi can expect to witness 924.5 million downloads. Ovi, like App Store before it, will also suffer from a slow start based on the consumer familiarisation process. However, Nokia’s scale will ultimately mean that Ovi will experience its 1 billionth download during 2Q10, the site will start to experience over 1 billion downloads per quarter from 3Q10, 12 months from launch – a feat it will take Apple approximately 16 months to achieve. But there are three obvious concerns that have arisen with the launch of Ovi. Firstly, the mobile industry has an ingrained history of approaching the consumer from a technological standpoint, placing potential revenue generation above consumer experience. Secondly, there is little evidence to suggest that Nokia will support Ovi’s launch with a sustained cross-media marketing campaign to promote its app store in the same manor applied by Apple with its operator partners and app developers around the world. And lastly, it’s not Apple.

Source: mobileSQUARED

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sector report | app stores

Get the lowdown on mobile app stores Pre-order from just £500: sales@mobilesquared.co.uk The mobileSQUARED mobile app stores report covers the key trends in the mobile industry’s hottest sector. 50 pages of insight into the state of the market, interviews with leading vendors and analysis of the drivers for success. The report includes market projections to 2013. Chapter 1: The Road to the App Store • The development of mobile data • The arrival of the portal • The failure of the portal • BREW ecosystem Chapter 2: Genesis: The Apple effect • What is the App Store? • Lessons learnt from mobile history • Usability • Discoverability • Business models – rev share / ad-funded • Developers Chapter 3: The App Store limitations • One device – good or bad Chapter 4: What the consumer wants • Consumer research into the UK market • The pent up consumer demand • Demand beyond the smartphone Chapter 5: Taking app stores to the mass market • Nokia, RIM, Sony Ericsson • Android • OMA • Mobile operators Chapter 5: Beyond the smartphone • Will smartphones become mass market? • Reaching mid-device market • Rise of the lower-cost chipset • Emergence of Series 40

Chapter 6: Escaping the fragmentation? • DeviceAnywhere • Opera • Surfkitchen • Gameloft • The role of the independent developer Chapter 7: Apps versus stores and warehouse • Symbian: The warehouse • Qualcomm: Plaza Retail Chapter 8: The future • Success stories • Market analysis • Market projections

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sector focus | dongles

How Europe came to embrace the dongle Operators have been dreaming of congested 3G networks since they put down the multi-million dollar investments to build them. For years they have been looking for killer applications that would fill their networks with data traffic and now it seems finally their dreams are coming true. Last year saw more than 1.5 million data dongles sold in the UK alone, with year-on-year growth rates for 2008 at more than 1,300%, according to market research company Gfk. In Sweden the operators have managed a penetration of more than 10% for the product that has been in the market for less than two years. The ability to use 3G networks to access the Internet on laptops has been around for a long while with data cards. But the simplicity of the dongle has made it appealing to the mass market and after the external USB modems were launched the market saw astronomical growth rates. In December 2007 almost half of Internet connections from laptops were through data cards, but a year later 99.6% of 3G Internet access on laptops are through dongles, according to Gfk’s data. “One important aspect is the form factor of USB modems,” Huub Appelboom, KPN’s product manager for mobile data services, told mobileSQUARED. “It appeals to people because everyone

knows the format. We see a similar acceleration in sales of dongles in the Netherlands; total sales have increased by a factor of six in one year. We see the hockey stick-like sales curve.” The plug-and-play element of the dongle is especially appealing to consumers, and allows the product to penetrate the market beyond technology savvy early-adopters and business users. Another contributor to the sudden surge in dongle sales was the fall in price of the hardware itself as well as the cost of data. “We launched dongles in 2007, but in the beginning we had a pretty high price on the subscriptions and assumed we could sell it for a high price,” Camilla Bülow, product manager at 3 Sweden, told mobileSQUARED. “They [dongles] only really took off when the price fell to SKR199 (US$24) per month.” In the UK the average price of a dongle package fell from £35 to £11 between 2007 and 2008. The fall in the price was also evident in the fact that although dongle volume growth was in four figures, the value of the market only grew by 370% in the UK during the same period. The timing of the product launch is also important, says Appleboom. “You have to create the momentum with other operator,” he says. “T-Mobile [Netherlands] wasn’t so active initially, but last year they all started selling actively and T-Mobile too started doing more promotions on it.”

The USB modems represent a completely new revenue stream for operators and over the past year many of them have seen a massive boost in their data ARPU. At the same time the product allows operators to sign up new customers, boosting their subscriber figures. Revenues Australian operator Telstra reported 0.59 million mobile broadband subscribers at the end of 2008, with each paying A$90 (US$45.7) per month on average. The operator says dongles have mainly contributed to massive increases in its mobile data revenues. “The growth of 43.5% in Internet revenues continues to be driven primarily by the performance of wireless broadband,” Telstra’s annual report for 2008 says. “Within mobile data, our nonSMS revenues contributed 52.1% of the total mobile data revenues in the year, driven by our unique wireless broadband proposition. Revenue from wireless broadband and low-value data pack users has been the main driver of revenue growth and increased 121.6% to A$565 million for the full year.” The average ARPU from dongle subscribers at KPN in Holland is around €30 (US$38.6) per month, Appleboom reveals, primarily because over half of KPN’s dongle customers are still business users. “It’s a nice additional revenue stream,” he says. “Most of the contract [for dongles] we sell are €20 per month. It’s lower than for voice in both business and consumer markets.” The value chain It’s not only the operators that

...

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sector focus | dongles are reaping the benefits from donglemania. Others in the value chain, including chip makers and dongle manufactures are also seeing a new revenue stream. One winner is Huawei, a Chinese infrastructure and hardware provider, which has managed to grab the biggest market share of the dongle manufacturers. The company manufactures dongles for most of the big operators including Vodafone and 3. Qualcomm, meanwhile has the chipset side of things pretty well covered. “The vast majority of dongles in the market have a Qualcomm chip,” says Ben Timmons, senior director of business development at Qualcomm CDMA Technologies. The company designs and develops software for the chips, while a third-party produces the chip. “We have a horizontal strategy; we sell the chip and the software to manufacturers,” he adds. Business models Although dongles sound like a revenue generator sent from heaven for operators, the data revenue doesn’t come for free. In much of Europe, operators’ business model for selling dongles is very similar to that of selling mobile phones, where the operator subsidises the hardware. The majority of operators bundle laptops into dongle packages and carry some of the cost of the laptop, believing the revenues from the dongle subscription will pay back the cost. “It’s the same model as with mobile phones; there is a subsidy,” Appleboom says. The value of the subsidy depends on the tariff. Sometimes the laptop manufacturer puts their money on the table when they want to push their product.” Most UK operators also subsidise laptops bundled with dongle offering, but 3 Sweden, meanwhile, has decided to take a different approach to selling dongles and only subsidises the modem

itself. “We subsidise the modem, but not the laptop,” says. Bülow. The laptop bundle is appealing to consumers and helps accelerate growth in the sale of dongles and data usage. “Growth is still picking up,” says Appleboom. “I don’t think we have seen the end of it yet. The Dutch market has a laptop penetration of 13%, so there is still a lot of space.” One issue for concern for many in the industry is whether operators are communicating realistic information about dongle speeds to their customers. In the UK,Vodafone and T-Mobile came under fire from the Advertising Standards Authority, T-Mobile for claiming fixed-line broadband was interchangeable with a dongle and Vodafone for misleading subscribers of actual data speeds achieved with dongles. Similar complaints have been witnessed all over Europe as operators are advertising maximum speeds, which are often very unrealistic and “can only be achieved if you are sitting on top of a base station,” as one analyst put it. There is a danger that giving customers unrealistic expectations and then disappointing them with reality could damage the nascent dongle market. “As an industry we need to be clear about what the technology can deliver in peak rates and what the user can expect,” Timmons says. “There are a lot of possible bottlenecks in the network. We need to make sure we look at the whole end to end: if we promise a peak speed the network needs to be up for it.” Speeds that users can realistically expect vary from market to market. Vodafone UK advertises maximum speeds of 7.2Mbps, 3 Sweden says the network is capable of reaching speeds of 21Mbps, but the dongles themselves have a maximum speed of 7.2Mbps. The exact speed customers will receive is impossible to predict, says Bülow. “The speed for customers varies very much,” she says. “It depends on where you are

and whether you have a lot of users in the same base station. On our home page we say you can get speeds from 0.5-6Mpbs.” Congestion The speed customers can get depends on how much traffic there is going through that particular cell. Some operators say they have already experienced problems with too much data traffic going through the networks. “In some areas we have had problems,” Bülow admits. “The need for capacity has increased and that’s something we are working on very much. We are monitoring the needs of different base stations, we keep track of them all the time. The increase in traffic is mainly due to dongles. Many of our customers are using it as the only Internet connection they have, which puts a totally different demand on the product.” The welcomed problem of network congestion is common in most of the mature mobile markets. Operators are constantly upgrading their networks to add speed and capacity, but the sudden increase in traffic brought by the dongle craze has forced operators to rethink their roll out schedules for improved networks. “Congestion, it’s a balancing act,” says Appleboom. “We are continuously upgrading our network, but traffic [from dongles] is more than what we expected. Traffic has mainly increased because of higher bandwidth and if you increase bandwidth [to accommodate the increased traffic] you get more traffic again.” As there is a trade-off between increasing speed and increasing bandwidth, and only so much can be done with existing network technologies, KPN is looking into next generation technologies. A migration to LTE/4G has been on the cards for a while already, but Appleboom admits the increased traffic from dongles could bring forward the ... roll out date. mobileSQUARED 11


sector focus | dongles “There is a viable business case, but LTE systems require considerable investment,” Appleboom says. Telstra already announced the move to HSPA+ network at the Mobile World Congress in Barcelona in February. The operator claims that the initial US$765 million investment in the network has doubled data revenue in 28 months. The new technology will allow the operator to move to 42Mbps in two years. “Within the technology standards there is enhancing capacity,” Timmons says. “The effective management of capacity remains an issue, but it’s also getting a lot of focus in technology development. Operators are increasingly focused on it but I don’t think they have had unmanageable problems yet.” Developing markets Western Europe and the US have embraced the dongle but there are massive regional variations, and not all mature markets are joining the dongle craze, Japan being a good example. “In Japan for example, you would expect to have high penetration of dongles, but laptop penetration is low compared to other markets,” Timmons says.” It’s not such a big thing in Japan, people are much more focused on their phones.” The lack of existing fixed-line infrastructure is making developing markets ideal for dongles. Countries such as Nigeria and South Africa, for example, have relatively high mobile Internet penetration and a high usage of

mobile Internet services such as mobile banking due to the lack of fixed-line access, especially in remote areas. “In developing markets, like South Africa, Nigeria and Latin America, operators are really the primary providers of broadband connection, because fixed infrastructure is not that developed,” Timmons says. “You get a lot more volume in those markets than you expect. Broadband on the move is really a big untapped market.” The way dongles are sold in developing markets is different to that in Western Europe as operators are less willing to carry the cost of the hardware. “I don’t think there is the kind of aggressive laptop subsidy like in Western Europe,” Timmons adds. Qualcomm is also looking at cheaper device options for dongles in the developing markets. The company recently unveiled Kayak, a low cost PC alternative, designed to be used with a dongle in markets. “We are making available to manufacturers,” Timmons says “We are planning trials for the product. There is the great opportunity in developing markets for mobile to be first point of access [to the Internet].” Although there is massive potential for growth in the developing markets, Timmons doesn’t think demand will surpass that of Western Europe. “Market for dongles in the UK and US has been such a huge success that it is hard to see developing markets over taking that,” he says.

However, countries like India and China could create massive demand for USB modems. “China has released its 3G license in January and Huawei is now the largest mobile broadband provider all over the world,” says a spokesperson for Huawei. “China will of course become an important market for our dongles as well as handsets.” Although the dongle remains new to the wireless product landscape, products enabling computers to wirelessly access the Internet are already emerging. Most major laptop OEMs have already launched or are planning to launch laptops with embedded SIM cards. Such a move could potentially drastically reduce the market for Huawei, for example. However, many believe that dongles will continue to co-exist with embedded laptops. “Because the market needs are segmented, USB dongles and embedded modules will coexist for a long time,” Huawei’s spokesperson says. “Actually, Huawei has launched many embedded modules and has partnered with the leading netbook vendors, such as ECS and ASUS.” Timmons also agrees that there will continue to be demand for dongles. “There is movement from USB to embedded and this is very critical,” he says.” All major note book manufacturers are supporting this. But there are some clear benefits from the external device, for example, you can move it from laptop to laptop.” ed@mobilesquared.co.uk

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consumed2

Majority of users want control of their data 39.4% of 25 to 34 year-olds, compared to a little over 20% of 55 years and above were OK. Acceptance of user profiling could potentially lead to consumers providing more information with the added Consumers want to be in control of incentive of heightened targeting leading their profiles according to the latest SQUARED to a greater response rate, and could research by mobile . While almost further assist existing recommendation one-third of respondents in the UK and preference engines. There were “OK” with is a broad consensus across companies creating When you use the Internet and mobile Internet, companies such as search engines and your mobile operator are creating a database to use the mobile industry that it user profiles to to deliver more targeted adverts to you: Are you... cannot ask it’s consumers any serve consumers questions in order to create an more targeted accurate user profile. Ironically, advertisements, mobile operators are quite almost 95% of contented to call customers on participants favoured rival networks with the latest controlling the promotions and ask a series of creation and control questions about the consumer of their own user and their usage behaviour to profile. SQUARED encourage churn. mobile Three of the best opt-in teamed up with permission-based mobile consumer research advertising providers to date partner Lightspeed are the UK’s Flirtomatic, Research to Turkcell (which generates survey a sample more mobile marketing – not of 1,000 nationally just advertising – revenue representative Source: mobileSQUARED across its seven territories mobile users across than the whole of Europe’s consumers. Of that figure, the UK, a series of questions associated leading mobile advertising market, the 19.6% of total respondents were with mobile advertising on a level of UK), and conduit to the UK youth media, aware this user profiling was underway, granularity yet to be truly explored Blyk. These companies are not afraid compared to 10.9% that were unaware. publicly by the mobile industry. to ask questions and can demonstrate Of the 69.5% of respondents that were It comes as no surprise that consumers some of the highest click-throughs and “not OK” with their information being prefer controlling their own information, response rates on mobile advertising. collated for targeted advertising, with but the fact that a little over 30% Despite consumers willing to provide 36.6% aware and 32.9% unaware. of consumers are comfortable with some information on themselves, it is Acceptance of user profiling companies using their data to target clear that they believe they should be throughout the respondents diminished advertising is a key measure in the the primary guardian of their user profile with age. Just under 50% of 18 to 24 development of the mobile advertising ... and its distribution. When asked year-olds were “OK” with this, as were medium. Thirty percent can be a sizeable

consumed2

market, especially when it can be applied to a national mobile market of 100 million subscribers, or even an operator’s customer base of 15 million. In fact 30.5% of respondents were “OK” with the concept that search engines and mobile operators were compiling a database for user profiling to be used to target adverts to the

mobileSQUARED 13


consumed2 whether consumers would “prefer to be in total control of the information that they provided and was used by search engine providers and mobile operators”, which could involve securely storing their user profile on their mobile phone and they could control the amount of information and when, where and to whom it was released at any given time, 94.8% of respondents agreed with that statement. There has been an evolution within the mobile industry beyond merely referring to customer relationship management (CRM) to vendor relationship management (VRM), but the reality is that the consumers require BRM – Brand Relationship Management. The ability to not only control what personal information is distributed when and where, but to whom will also play a large determinant in the acceptance and ultimately, success of mobile advertising from the consumers’ perspective. We acknowledge that certain brands will target campaigns by gender – Gillette for men and Venus for women. But males favouring Wilkinson sword over Gillette should be able to The value in mobile advertising is that it develops a one-to-one line of communication between a brand and consumer. It is also capable of enabling consumers to select which brands develop that direct communication with them. And that is BRM. If mobile advertising is truly about the personalised experience for the consumer, then the consumer should be in control of the process and functions every step of the way. And let’s not forget that almost 95% of consumers were in agreement with this viewpoint. Further insight can also be provided by asking the participants to categorise their perceived value of financial redemption in exchange for receiving mobile advertising. Naturally, this range of multiple answers included the obligatory “no to mobile advertising”, which attracted 66.3% of respondents.

Would you prefer to be in total control of the information that YOU provided and was used by these companies? For example, by storing this information about you securely on your mobile phone and controlling how much information was released and when at any given time using your mobile phone?

Which category would you fall into with regards to mobile advertising?

Although the participants were not made aware of the monthly financial reward available to them in exchange for receiving mobile advertising – which was always equal to £15 (US$22.99); 50 minutes of voice, £15 high street retail voucher, five items of mobile content or £15 cash, it was the £15 high street voucher that generated the most appeal (15%), followed by £15 cash (11.3%). Free minutes upon receipt of SMS/MMS campaigns, based on the Blyk model,

garnered 6.9% Source: mobileSQUARED of responses, whereas ad-funded content amassed only 0.5% of respondents. For all but the mobile content category, it was the 18 to 24 year-olds that were most receptive to various mobile advertising models. In this instance money does talk. The perceived value to the consumer of a £15 shopping voucher for a particular store is greater than 15 pounds in ... cash which would have no usage mobileSQUARED 14


consumed2 restrictions. Similarly, one conclusion that can be drawn is that voice has a higher perceived consumer value than mobile content, put another away, ad-funded communication would have a broader appeal than ad-funded content. Perhaps the most revealing response focuses on what has to be considered true mobile advertising. By asking consumers whether they would accept “an advert that was served to them on their mobile phone that was 100% relevant to them at that moment in time, based on their location and immediate requirements – such as offering an ad for a mobile voucher offering a discount for a meal at a nearby restaurant,” would they act? Just under one-quarter (24.7%) of respondents said that they would click on the ad to find out more information; 10.9% would consider clicking on the ad but do nothing; 24.6% would also consider the ad but not act because of the unknown associated data cost; and, 39.8% of respondents would ignore the ad altogether. The notion of a contextual, relevant, location-based ad with transparent value is something that resonates with consumers. It is of course the latter that truly resonates with the consumer – the value, the contextual, relevant and location-based elements are merely sideshows to the main event. But it is this sideshow, the ad itself, that will ultimately determine the consumer response rate. Of the respondents, 64.4% viewed an ad as simply that, an ad. A further 14.9% view an ad as good content. Interestingly, 20.7% consider a good ad to be a “useful nugget of information”. While this does not imply that the creative juices should be squeezed out of planned mobile advertising campaigns, it indicates that an informative approach to mobile advertising could potentially have higher response rates than an entertaining campaign. Naturally, this would be dependent on the target demographic. For instance, a greater

If an advert was served to you on your mobile phone that was 100% relevant to you at that moment in time, based on your location and requirements would you:

If an ad was delivered/viewed on your mobile phone which was entertaining, informative and relevant to you, would you regard that ad as:

percentage of males view ads as informative and entertaining than females. Similarly, almost 50% of 18 to 24 year-olds don’t believe an ad is just an ad. And just to demonstrate the level to which we can target our own survey results, although mobile users in the north and south of the UK view an ad as just an ad in equal measure (63.6% each), mobile users in the north are more

Source: mobileSQUARED likely to view a mobile ad as a useful nugget of information, whereas a greater percentage of mobile users in the south believe an ad to be entertaining than their northern brethren. nick@mobilesquared.co.uk

mobileSQUARED 15


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mobileSQUARED 16


data2 | India

India turns to mobile web despite delayed 3G Large numbers of Indian consumers with Internet-enabled handsets are now using their mobile as their primary point of access for surfing, search, messaging and email. Around 3-5% of mobile subscribers access mobile Internet services via WAP/GPRS, which equates to about 10 million active users. Despite the lack of 3G services in India, the total number of mobile Internet users is growing at 8-10% year-on-year, from a base of 70 million mobile Internetenabled handsets. Although few of these handsets are smartphones (and a tiny proportion Apple iPhones, which is disproportionately expensive), this is more than twice the number of fixedline Internet users in India. The effect of this growth in Internetenabled handsets - and the low wireline broadband penetration rate of around 14 million connections - has been to create a generation of Indians who see mobile and not the PC as their main access point for the Internet. This is underlined by data from mobile Internet browser firm Opera, who claim growth of 160% month-on-month in the mobile browser market. This trend is driven by a large group of under-25 year olds and students, which make up more than 40% of the Indian population, who connect while away from home. This group of users, on average, downloads 10 times the amount of data of a typical worldwide mobile consumer, equating to an average of 35Mb of data per month. Many of these consumers are accessing fixed-line websites via the mobile. According to Opera’s data, of the top 10 sites accessed on mobile devices in India, none are WAP-based and less than

50% of mobile Internet users ever visit the operator portal. By 2013 there will be more just under 200 million browser-enabled devices in the Indian market and of these handsets it is estimated that up to 70% will be 3G devices. While the majority of these consumers will be utilising embedded browser technology, third party browsers such as Opera Mini and Bolt are becoming increasingly popular. This trend is expected to continue throughout the 2009-2013 timeframe as the pace of growth in wireline Internet

Source: mobileSQUARED does not match that of the 3G world. However, one barrier to growth in the mobile Internet is cost. While some operators have introduced flat-rate subscriptions for mobile data, this is not yet a widespread strategy. Many Indian consumers - especially those on prepay subscriptions - face the ‘bill shock’ associated with per byte pricing, and a widespread lack of transparency in data tarrifs. ed@mobilesquared.co.uk

mobileSQUARED 17


country report | India

India revealed Pre-order from just £500 for a single user license: sales@mobilesquared.co.uk Can there be any market with more potential for growth than India? With 400 million subscribers and 3G launching this year, the market for mobile content is set to explode. mobileSQUARED presents an insightful look at one of the world’s fastest growing mobile markets. The 50 page India country report covers the most salient developments in the mobile content sector, focusing on trends, barriers and key metrics. The report, which includes market projections 2009 - 2013, is essential reading for anybody doing business in the Indian market.

Chapter 1: State of the market • Overview of Indian Telecoms • 3G in India • Mobile data market • Mobile content and entertainment • Mobile Internet • Mobile advertising and marketing • Barriers and challenges Chapter 2: Unprecedented growth, market forecasts 2009-2013 • Overview • Ringback Tones & Ringtones • Mobile games, Mobile TV and video • Wallpapers and graphics • Gaming and adult entertainment • Mobile Internet • Mobile advertising & marketing

Chapter 3: Breaking down barriers, case studies from the coalface • Reliance • Spin3 • IMImobile • Opera Software • Buzz City • MMA Chapter 4: Market trends • Key market trends • Falling ARPU • Rapid subscriber growth • Deployment of VAS • 3G • Off-portal content • App Stores Chapter 5: Barriers and opportunities • Barriers to growth • Operator strategy • Revenue models • Illiteracy and poverty • Handset market Chapter 6: Conclusions mobileSQUARED 18


company profile | MCN

A good ARPS these days is hard to find In a mobile industry long captivated by ARPU, there is always room for another acronym as the transition from voice driven to data and media driven revenues accelerates. ARPS, a term coined for Web search, is capturing the attention of operators thanks to the efforts of mobile search providers like MCN, the pioneer of mobile Federated Search. ARPS stands for Average Revenue Per Search and is the measure of search success. MCN’s whitelabel search solution in Japan is generating ARPS of ¥5 (US$0.05) versus less than ¥1 for rivals. Such data has gained MCN ‑ the US mobile search provider who moved its business headquarters to Japan in 2007 ‑ plaudits from operators around the world as they open their door to a new federated way of mobile content discovery. By the end of 2009, MCN expects to be in over 50 operators and portals and 15 countries as it looks to deliver its highly-lucrative mobile search monetization model globally. MCN believes operators are attracted to its federated search solution because of its ability to deliver higher ARPS with relevant search results that include revenue from banner ads, paid listings, and MCN’s allwords performancebased pay-per-click vertical paid search program designed primarily for mobile content providers in vertical channels such as games, music, imaging, video and

commerce. Unlike keyword biddingbased systems, participating content providers can take advantage of their meta data and MCN’s federated search solution to buy all of the keywords in a given category with one buy, thus reducing management overhead and keyword costs.

MCN allwords

Conversion MCN claims allwords converts costly search marketing into search merchandising, by concentrating a content provider’s marketing spend directly on the consumer at the moment of highest interest in a transaction. To date, operators in Scandinavia and the Baltic, as well as in Thailand and Turkey, have followed Japan’s lead and implemented allwords. “A typical click-through rate on a mobile banner ad is between 1-3% and our click-through rate (CTR) for allwords results in music is 40%, for games its 60% and for comics, which is

the fastest growing content category in Japan, we have a CTR of over 70%,” Stephen Burke, senior vice president at MCN, told mobileSQUARED. The company is not afraid of packing a punch when it comes to its own marketing, with a series of bold claims along the lines of “unmatched return on investment (ROI) for content partners”, such as an ROI of 250% or higher for music program downloads, 190% or higher for games and 150% for screensaver program downloads. MCN boasts conversion rates of 5% for both music and screensaver downloads, 4% on games subscriptions, and 3% on music subscriptions. Burke explains that when a user inputs an artist’s name, for example Beyonce, they are directed to a landing page powered by the company’s whitelabel search solution, MobileSearch.net where they are presented with a choice of music service types, such as full tracks, ringtones, wallpapers and games all relating to that particular artist. “Users can get a set of results grouped by most popular or best price, with thumbnails and other descriptors, from the content providers that have bought allwords and can serve relevant results,” added Burke. “We provide every participating content provider with the chance of having a result served by using algorithms on our system to sort, rank, and return the most relevant results either in ...

mobileSQUARED 19


company profile | MCN a single category, like music, or across multiple categories. Our goal is to deliver the user actionable results in a maximum of three clicks.”

behaviours as “secondary,” meaning that we know the user is there primarily for social connections. But we also know that if they are properly presented with content they will act,” said Burke. Generating significant mobile data revenues in Japan has not proved the quandary as it has in the global mobile content economy. Indeed, Japan has provided MCN with growing traffic and a mature ecosystem that boasts a mobile

Japan In Japan, where MCN distribution partners include NTT DoCoMo,Yahoo! Mobile, and a host of high traffic offportal mobile sites, MCN started out with one music channel with three content providers. Within 12 months, it was operating five channels covering games, comics, videos and shopping, from 75 content providers. In December, 2008 MCN expanded its distribution portfolio when it launched with MCN allwords Ameba Mobile, an offportal celebrity social network and gossip site generating more content market the rest of the world than 2 billion page views per month. can only dream of – at least for now. “The tipping point we saw in Japan The Japanese mobile advertising market when off-portal traffic eclipsed onalone is expected to top US$920 million portal was several years back,” Burke in 2009 – approximately two-thirds of said. “What we’re finding in Japan with the total global mobile advertising spend. off-portal sites, whether they are mobile But that figure is dwarfed by the mobile content specific, social nets, or more content market generating revenues general purpose portals, is that if content of US$3 billion and mobile commerce discovery is properly placed on the site, revenues of US$6 billion. once users understand it’s their site and But this mobile market success become comfortable with it, traffic will has been founded upon a level of explode and mobile content providers cooperation and deep understanding have a huge new channel for customer instigated by the mobile operators acquisition and the portals have a brand themselves. This operator collaboration new source of revenue.” has created a cross-operator framework One of the notable developments that maximises consumer reach. “It is an in Japanese usage, and something that interesting lesson from Japan which has is commonplace globally, is the rise not yet been replicated across Europe of social networking on mobile. This and US,” Burke said. “This has been changing consumer behaviour on mobile developed over a period of eight or so is placing increasing barriers between years, and not over a couple of months content providers and the consumer. because operators suddenly realise they Content discovery is not the primary have a quarterly number to reach. This behaviour of social networking which has helped Japan establish a working means content providers must find ecosystem founded on transparency smarter ways to engage with consumers. where all the participants have a chance “We classify these types of search to make money”

That said, aspects of the Japanese ecosystem have been replicated in one form or another, but without operators developing a unified marketplace, these steps are being carried out on a solitary basis. live! was Vodafone’s attempt to create an i-mode-like system, while O2 went a step further and implemented i-mode in the UK, though neither examples proved particularly successful primarily because the operators failed to get the revenue share model right and extracted disproportionate value, as indeed is the case in the majority of developed mobile markets. A value which MCN believes it can inject back into these marketplaces. “Most of these large operators are loose federations and are not centrally managed,” Burke added. Thailand In Thailand, the market is gearing up for 3G and MCN is seeing significant uptake in traffic. “In emerging markets like Thailand and the Philippines, the operators there are clearly studying how Japanese operators have created and managed the ecosystem,” he said. “They may not licence i-mode, but you can bet that they will adapt it, in terms of how they design their portals and their revenue shares.” Staying with Thailand, operator AIS has positioned information search by Google and mobile content search powered by MCN at the top of its WAP portal to provide the differentiation of information and content to the consumer. AIS is now adding content search boxes to every subpage on the portal. MCN says the global economic slowdown has had an impact on mobile banner advertising from non-mobile brands, but does not believe that it has translated into an impact on mobile data and search traffic. “We have ...

mobileSQUARED 20


company profile | MCN been growing steadily in traffic and revenue over the last 12-18 months,” Burke said. “We are seeing budgets for allwords increase and that means double digit growth month-over-month. We are also finding as allwords kicks in that the portal managers are becoming more active on how they place search higher up the home page and across more pages on the WAP portal. So it is becoming a virtuous cycle, more revenue equals more promotion.” Search engines In recent months MCN has added

the likes of Fox Mobile to its array of content providers based on claims that the company can double or triple Fox’s conversion rate, which is ultimately what content providers are looking for, based on a cost-per-acquisition significantly undercutting well TV and traditional banner and paid listings. Every content provider has a different cost-peracquisition model, such as free ringtones. For a big content provider, the majority of marketing spend will be on traditional media “We want allwords to fit into their search engine marketing campaign,” Burke said. “That means cost-per-search

with more relevant and better results. Unlike an index solution, the content provider can watch the user come and look at the item. Over a period of time the content provider can look at that behaviour and optimise that result, perhaps change wording and pricing or adding a thumbnail, and getting direct feedback on user behaviour. Because it’s real-time we can serve the freshest content without the latency.” nick@mobilesquared.co.uk

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mobileSQUARED 21


Consumed

Where everyone knows your name? The mobile industry knows its consumers. Of course it does: Every 4 billion of them. So the promise of delivering a personal, relevant and of course targeted 1-2-1 (brand-2consumer (B2C)) advertising campaign to a multiple audience of one, must have the whole of the advertising world, from the brands to the agencies, in something of a tizzy. But it gets better still. Mobile has the capability of segmenting its 4 billion consumers into 13,000 categories. Brilliant. Or is it? Who will have the time to process and apply this information as part of a mobile advertising campaign? Do we, as the mobile industry, genuinely know how the advertising industry requires the data to be segmented? And if we are yet to truly understand the agencies’ requirements for mobile advertising, by the same token, can we honestly say we understand the consumer. The answer is a resounding no. At IIR’s mobile advertising conference in Amsterdam this month (May 2009), T-Mobile said that it simply had “too much data” on its consumers for it to realistically sieve through and use for mobile advertising purposes. Elsewhere, at a mobile Internet conference in March, Alexander Franz, commercial development manager, Internet brands, 3 Austria, said that “we have lots of data but are currently not using that data, but there is no escaping that there is pressure on us to give free access to

our networks. But it doesn’t come for free.” That pressure for free stems from the Google model. To the consumer, Google equals free. But unlike the mobile industry to date, Google uses lots of data to make lots of money. And it capitalises on its users to do so. As always, mobileSQUARED is attempting to bridge the gulf between the consumer and mobile industry by taking to the streets of the UK and capturing Joe ‘mobile’ publics’ views on mobile advertising. The first point to highlight is that advertising is not as much of a dirty word as we are led to believe. Generally speaking, those consumers mobileSQUARED spoke to accepted that advertising featured in their daily lives. What’s more, virtually all of those quizzed said that they did not believe that their mobile provider had displayed any understanding of their tastes or preferences. However, these consumers were open to the notion of an “information exchange” over the concept of advertising – a brand serves some relevant information to the consumer, and in return, they receive a coupon or voucher for a store of their choice. It is the latter point, “their choice” that will be instrumental in ensuring the consumers are onside to mobile advertising. Regardless of whether the Blyk model is working – and there are numerous stories circulating throughout the mobile trade press on this subject – it has undoubtedly proven that people will

answer questions as part of the opt-in process. By answering the questions, consumers are effectively controlling not only the communication that they will have with brands, but with the brands themselves. As already highlighted in consumed2, mobile advertising for a consumer has to be built upon Brand Relationship Management. Interestingly, mobileSQUARED provided consultancy to a mobile advertising start-up and advised swapping the term “mobile advertising” with “m-commerce enabler” and positioning the process of mobile advertising as the conduit between the brand and the transaction. Consequently, this has opened numerous doors for the company. Clearly, some industry folk have attached something of a stigma to mobile advertising. Why would that be? Analyst forecasts for the global mobile advertising market have ranged from US$10 billion to US$25 billion by 2011, 2013 and so on. And let’s not forget the GSM Association at the 2008 Mobile World Congress releasing their now infamous US$250 billion forecast by 2020. While these forecasts are now coming under (and justifiably) increasing scrutiny – mobileSQUARED estimates that the global mobile advertising industry was worth US$1.3 billion in 2008, or, if you remove Japan, Korea and the US from the equation, a little over US$100 million – if the analyst community had projected mobile advertising

...

mobileSQUARED 22


consumed revenues of US$500 million in five years time, would we have had the flurry of activity we have experienced over the last three years? So there is clearly something attractive, almost mysterious about the pulling power of mobile advertising.We just are not that sure of what that is, how we will get there, and when. But when we do… One thing that is assured is that the journey cannot commence without its passengers, in this case the consumers. So what are their views? Everyone knows that survey responses can be easily led dependent on how the questions are phrased. So it will come as no surprise to read that 66.3% of respondents quizzed by our partner Lightspeed Research said “no thanks, not interested” in mobile advertising. But here is an interesting point.When our survey asked those same respondents whether they would react to an ad that “was served to their mobile that was 100% relevant to you at that moment in time, based on your location and requirements”, 24.7% would click on the ad to find out more, 10.9% would consider clicking on the ad but would not take any further action, and 24.6% would also consider clicking on the ad but do nothing because of concerns about data costs. Moreover, that only leaves only 39.8% that would ignore the ad altogether. In the space of one question, the 66.3% of respondents that had only just flatly refused to consider accepting mobile advertising, had dropped to about 40% when the notion of serving something useful to them based on relevance, location and value (ie answering the standard “what’s in it for me” consumer riposte). So this begs the question: should mobile advertisements, and in particular display-based ads, sacrifice some of the creativity in favour of a more practical and pragmatic approach to enlighten the consumer? As an industry, it might be worth avoiding the phrase “educate” with reference to consumers.They are educated (mostly), know how to operate a mobile phone and have the presence of mind to know to not accept advertising – who wouldn’t? If on the other hand, they were served an item of content or information that related directly to that user, accounted for their location and resulted in the user receiving something useful in exchange, the user would inevitably be more open to such a concept – who wouldn’t? Because here’s the thing; while software and data can create a user profile on a consumer, it is one-dimensional. If a user is walking down the street looking for a restaurant, will the software know whether the user has or has not booked a restaurant and therefore their tolerance and acceptance will vary on a night-by-night basis.Will the software be able to predict the consumer’s mood? If, for example, the user has just completed a call with an operator call centre, they are highly unlikely to be in the frame of mood to accept mobile advertising – unless it was to purchase a boxing game.Then that would be clever. So while the mobile advertising industry gets its act together – and it is, only a lot slower than previously conceived – the time should be used constructively to educate and inform the consumer on the merits of how mobile advertising, m-commerce enabler, or this information exchange, whatever you want to call it, can enhance their communication experience, lifestyle and finances. nick@mobilesquared.co.uk

Mobi Wan

Lord Voda, c-3po, O2-D2 and Orango Calrissian are engrossed in the world of mobile advertising at a time when the advertising industry is in a mess. From TV to the papers, the number of firms hawking their wares has dropped like a stone, and it’s creating a financial black hole for media companies. Just take a look at NewsCorp’s recent results profits down almost 97% on last year. Why? A lack of ad revenue. So, all herald the saviour of the advertising industry ... the mighty mobile. Or not, as the case may be. There is speculation that one of the pioneers of the mobile ad scene, Blyk, will end its consumer service: Fallen before it really got off the starting blocks let alone reaching the first hurdle. Blyk says it’s looking to form “partnerships” with operators ... whatever that means. It’s a real shame that Blyk could potentially become such a high-profile victim of the economic meltdown. The service was bold, fresh, different, and offered a potentially new business model for mobile. By cutting consumer spend but still providing a financial backbone for the operators (through ad revenue), it was a far more unique proposition than 3’s Skype service. The advent of free broadband in the fixed market shows that as communications services become commoditised brands need ideas like Blyk to provide new value to their businesses an ad-funded proposition that doesn’t offer a one-size-fits-all volley of marketing tosh, but a cleverly targeted service that knows what turns you on (and off). Throw in location, even mood sensors (don’t laugh, we’re only a decade away from body-heat and heart-rates being used to signal whether we’re grumpy, sleepy, dopey or any of the other seven dwarves) and the mobile ad industry will thrive. But the potential collapse of Blyk’s consumer arm serves as a wake-up call to the new advertising world. Digital may take the lion’s share of advertiser’s spend, but it’s on the same collision course of pain as its traditional media cousins if it doesn’t start to use all the tools in its arsenal to better effect. mobileSQUARED 23


shorts GSA updates figures Ninety four percent of the 390 commercial WCDMA networks have been upgraded to HSPA, according to the latest research released by the Global mobile Suppliers Association (GSA). As of May, 125 HSDPA networks have been launched in Europe. Almost 200 of the HSDPA networks over 3.6Mbps, compared to 105 networks providing throughput of 7.2Mbps or higher. Seventy two networks in 42 countries have launched HSUPA. Four networks are now commercially offering downlink speeds of 21Mbps (HSPA+). From the device perspective, 1,470 HSDPA devices have now been launched by 171 suppliers; 944 devices support 3.6Mbps or higher and 514 devices support 7.2Mbps peak or higher. Opera graces mob. Internet… Opera Mini users viewed an average of 371.8 mobile Internet pages during April 2009. The company said its 23.4 million users – an increase of 140% increase since April 2008 – had viewed almost 8.7 billion pages in the month. In the same timeframe, Opera Mini users generated more than 151 million MB of data for operators worldwide –an data usage increase of 295% compared to the same time last year. In the UK during April, Opera claims unique-user growth (on April 2008) of 48.1%, number of page views increased 113.6%, and the average page views per user was 217. Top five sites Google, Facebook,Yahoo, BBC and live. … & sees African explosion The top 12 countries using Opera Mini in Africa are South Africa, Nigeria, Egypt, Kenya, Libya, Zambia, Tanzania, Cote d’Ivoire, Mozambique, Namibia, Ghana and Gabon. Between April 2008 to April 2009, the top 12 countries unique Opera Mini users increased 169%, page views increased 422%, and total data transferred increased 348%.

MACH’s fraud warning MACH has warned that roaming fraud could cost mobile operators US$5 billion globally in 2009. The company claims many operators are yet to comply with roaming recommendations. MACH clears two out of every three roaming calls on GSM and CDMA networks and settles more than 60% of global interoperator wholesale invoice amounts. 3 nets visual voicemail Strong user feedback has encouraged 3 Hong Kong to launch Comverse’s Visual Voicemail service on the iPhone 3G. 3 users will be able to view information about each voicemail in a message inbox, such as sender, time of call and message length and then click and listen to any message. Urban Gillstrom, group president of Global Sales at Comverse, believes that this next-generation of voicemail holds phenomenal massmarket potential. “Operators welcome the boost in user satisfaction,” he said, “as well as the additional revenues generated through increased voicemail usage and premium service positioning.” Ads served with a buzz Amobee has launched an holistic advertising solution for Telefónica Spain over the mobile Internet inventory channel, as the advertising solutions provider delivers on the companies’ 2008 global alliance. Telefonica will sell ad-enabled inventory to agencies and advertisers who want to buy, deploy, and monitor campaigns across mobile channels, using the Amobee media system with Telefonica’s deployed infrastructure. According to research compiled

by INFOADEX 2009 the Spanish mobile advertising market is grew by over 60% in 2008 and is the fastest growing digital advertising channel. Gypsii roams onto App store Location aware mobile social networking Gypsii has launched an app on the iPhone, allowing users to create and share geotagged content in real-time with community members as well as other social media sites like Facebook and Twitter. Accumulate stays flexible Flexible pricing solutions provider for mobile retailers, Accumulate UK, has updated its Flexion solution and launched an On Game Portal (OGP) feature. Flexion provides flexibility to mobile content providers by allow variable pricing options, such as ‘trybefore-you-buy’, ‘rent for the day’ or ‘have-a-go for 25p’. The company claims its solution is removes the need for a one-price-fits-all model. The company says this is complemented by the OGP which it describes as a retail store delivered with every ‘wrapped’ application, and claims it’s making it easier to cross-promote products and to give customers the option to buy more. The company includes Buongiorno and Player X among its content partners.

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walled garden

How did LBS get so lost? One of the better conferences on mobile location based services (LBS) entered its 13th year this month and by the end of the two-day London event, the delegation agreed that, just possibly, 2009 could finally be the year of LBS. While nobody was quite sure what that meant, it says much that after all these years of touting location as the pot of gold at the end of the rainbow, the industry is still debating how to make money out of it. Those in the know have long believed in the economic viability of LBS. After all mobile and location go hand-in- (literal) hand.Yet, 14 years after the launch of the NAVSTAR Global Positioning System (GPS) constellation by the US military, not only are operators not making money from LBS but many have long since given up the ghost. Mobile operators’ reticence towards location stems in part because so many of them were burnt after spending millions of dollars deploying cell ID network infrastructure, without first assessing what services could be deployed off the back of their investment. LBS became the poster child for the failure of the technology-first-businessmodel-second trap that the mobile industry repeatedly falls into. Child finder services were widely marketed to worried parents but technology based on cell ID, which offers a locationfix to within about 500 metres, were never going to command a mass-market audience. Then in 2007 came Secure User Plane

Location (SUPL), which was ratified as a standard by the Open Mobile Alliance. This standardized GPS in the handset, and gave OEMs the confidence to integrate GPS chipsets into their devices. It was supposed to stimulate the industry. But aside from navigation vendors such as Navteq and Teleatlas, few in the industry have ever found a business model that actually works for both operators and developers. This has long been the problem for LBS. In the US e911 legislation has forced operators to offer some kind of location service – fixed to within 300 meters for network-based technology (cell ID) or 150 meters for handset-based services (GPS). As a result consumers have taken up a variety of applications, from simple mapping to friend finder, sports trackers and dating services. Many were based on the now defunct end-to-end BREW ecosystem – the original App Store. No such regulatory stimulus has existed in Europe until recently; the sector’s failure epitomised by the laughably delayed launch of the Galileo constellation, which has been beset by in-fighting over money. In the absence of Galileo or a European version of e911, the market has come to the inevitable conclusion that consumers just don’t want LBS outside of their in-car Personal Navigation Devices (PNDs). But the LBS sector has been given new hope by Apple. It’s not the first time that the Cupertino-based giant has come

to the rescue of the mobile content and services industry. It is estimated that of the 35,000 applications now residing in the App Store, around 1,000 have some location element to them. While some of these are typical mapping and navigation apps, most are not. Some of the most successful App Store services to date such as Urban Spoon, Loopt and Rummble include an element of location but really have little to do with maps at all. Apple will take location to another level altogether by including an altimeter and digital compass in iPhone 3.0, enabling the automatic geotagging of every photo, video and status update a user uploads. Isn’t this the answer for LBS ‑ location can only really work for the industry if it loses the obsession with navigation? Location does work – and can make money – when it is an omnipresent element of a fundamentally useful service, such as the aforementioned restaurant finder or social networks.Vodacom South Africa have taken the concept a step further and based their entire network around a revenue generating location-based service – The Grid. But perhaps the best move the industry could make is to lose the term LBS itself. See you at the first annual mobile applications (with a bit of location) conference 2010. By then the industry may have found itself a business model. ed@mobilesquared.co.uk

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Endless Possibilities It’s time to get integrated...

H

ere at Mobile Interactive Group (MIG) we are totally committed to the mobile entertainment market. For some years now, MIG businesses have loyally served a broad client base providing m-commerce, mobile messaging, mobile advertising and mobile marketing solutions and have developed a business that is totally dedicated to its customers. We care about our clients and listen to their requirements all the time, whilst ensuring our technology and solutions allow everyone to overcome the increasing challenges that face the mobile entertainment industry. With this in mind we are delighted to announce the launch of two new businesses. Firstly, the launch of Mobile Interactive Technology, the new m-commerce and technology business within MIG

that will be led by a new management team, dedicated to driving leadership in delivery of mobile billing, messaging and technology innovation. Over the coming weeks Mobile Interactive Technology will be revealing an array of new products and services for the mobile entertainment industry. Secondly, the launch of Kilrush, a next generation mobile publishing business within MIG, set to revolutionise the mobile internet over the coming months. We have invested heavily in time, resource and funding to bring Kilrush to market and believe it is the most sophisticated platform in the industry. Kilrush will allow both large and small businesses from multiple sectors that are serious about mobile entertainment, to develop a robust and future proofed experience to engage its target audience. As a result of continued growth, MIG

has become the holding company and has established a highly regarded and experienced management team to ensure each business delivers optimum service to our ever growing loyal customer base. All businesses and solutions are fully integrated so we can truly work with all customers across the value chain to deliver a focused mobile strategy, at a time when clarity is so critical to survival and growth. To all group customers, I would like to say a huge thank you and to let you know there is so much more to come this year. For those of you who don’t currently work with us maybe it’s time we met? There are literally endless possibilities... Barry Houlihan, CEO and Founder, Mobile Interactive Group

Integrated mobile and digital communications Mobile Interactive Group (MIG) is the fastest growing privately owned technology company in the UK, serving the mobile and digital interactive markets

> meet the group:

> what we do: • mobile advertising • mobile marketing • mobile billing

• mobile messaging • mobile technology & services • multi channel digital solutions

• mobile internet publishing • experiential design • application development

wantto tolearn learnmore? more? >> want text mobile to 60505 to view our mobile site a UK HQ, The Tower Building, 11 York Road, London, SE1 7NX t +44 (0) 870 235 4042

e sales@migcan.com

w www.migcan.com

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