Livewire

What is new with online video?

2008-10-14T06:28:45Z

I spend so much time discussing IPTV, I sometimes forget to spend some space blogging on online video. Essentially the truest form of IPTV, online video is a trend on the upswing which is validated by the latest report from ABI Research showing the number of households watching online video doubled from 32% in 2007 to 63% in 2008 (http://www.abiresearch.com/press/1247-Number+of+US+Online+Households+Watching+Broadband+Video+Doubled+In+One+Year).]]> I feel that there are a few forces at work here. First, we are seeing a significant amount of content being made available on the internet and it is being more actively promoted for consumption (e.g. HBO, ESPN, YouTube). Fears of cannibalization are being replaced by audience expansion. Second, long tail or niche content providers are using the internet to cost effectively reach their audience which is helping to drive the total amount of content available. In the past, distribution costs would be too great to utilize TV as a delivery mechanism. Third, online video enables even better advertising options by placing pre-roll or embedded ads on the player itself to truly target consumers. Short clips can use specific ads to match the content more effectively than showing ads in a channel timeslot. Finally, consumer behavior is changing as more people are getting on the internet to view content, it is not such a tweener activity anymore.

However, online video creates a number of issues as well. The first being an interesting conundrum where the bearer of the broadband traffic typically does not benefit from online video consumption. It simply creates a larger burden on the network and the content owners do not have to pay for this additional burden which is the basis for the net neutrality debate in the US (Telco 2.0 blog does a good job dissecting this analysis for the BBC iPlayer http://www.telco2.net/blog/2008/02/bbcs_iplayer_nukes_all_you_can.html). The second issue is discovery of relevant content. Most users will not spend hours scouring for content to watch, but will go directly to destination sites for a specific show or clip they may have missed (NBC’s use of Olympic coverage is a good example http://www.nbcolympics.com/). This is where new entrants such as Videosurf are entering the market to incorporate visual discovery to make searches more relevant than relying on metadata tags put in place by an administrator.

In summary, online video is definitely on the upswing. The key will be to continue to create additional value by the content providers which complements their broadcast offering. The real issue will be the eventual showdown over payment for the infrastructure this video is delivered over. Stay tuned. Any thoughts on this subject?

Selling Solutions in a Tight Economy

2008-10-09T16:23:55Z

As I mentioned in a previous blog entry, the current financial market conditions are pretty scary out there and I tried to review some areas of impact. In this entry, I want to cover some strategies for dealing this these problems and selling effectively in this market.

]]> First, let’s set some basic understanding. One of the outcomes of the financial crisis has been the freezing of the short term commercial paper market, this topic was raised by Randall Stephenson the CEO of ATT in a recent interview (http://money.cnn.com/2008/10/01/news/companies/att.ap/). Large companies use commercial paper or the short term credit market to manage cash flow at low interest rates, essentially as if you would use a credit card. It keeps operations moving and projects funded. Typically there are many buyers of this commercial paper since large corporations like ATT are able to cover the loan, however many of those potential buyers have disappeared in recent weeks which has dried up the commercial paper market. While large Telcos may be stable businesses, this creates a ripple effect in regards to upcoming investment decisions since funding could be more of an issue. Now take this on a global scale and you can see it affects in many geographies.

So what does this mean for vendors selling hardware, software or professional services into these companies? You have better figure out your value proposition and return on investment to ensure continuity or future sales. I feel there will be more investment scrutiny until the markets start to free up again. Additionally, vendors should be more focused on solutions with discrete outcomes that deliver measurable value instead of point products. End to end ownership of outcomes will be more important than a best of breed product that replies on integration to many other products to create value. Finally, risk sharing to ensure these outcomes (instead of simple low prices) will help win deals by more effectively matching cost to revenue or savings realized. One blog I have recently read focused more on quick revenue generators such as advertising, this may or may not work depending on your portfolio (http://www.xchangemag.com/blogs/telecom/blogdefault.aspx/a/economy-ravaged-invest-in-advertising-now.html/m/art).

At Infosys, we are continuing to evolve our model to provide new options to our customers in this time of market turmoil. In addition to providing high value, we are actively investing in new IP such as SaaS platforms to provide quick deployment capabilities, risk sharing models to further align ourselves with our customers and large, transformational propositions to take ownership of business outcomes instead of only point projects. We feel this will keep us ahead of the market and enable that trusted relationship with our customers. How is the market affecting you? I would like to hear your thoughts?

Video Interview at CTIA on Mobile Trends

2008-10-08T07:32:42Z

Impact of the Credit Crisis on the Mobile Industry

2008-09-30T16:22:34Z

Since the credit crisis is absolutely dominating news topic (with good reason!), I would feel remiss if I did not at least provide some coverage to this issue. While I will not go into the intricacies of a bailout package or credit default swaps, I will address the potential impact to the ecosystem around the mobile communications industry. Disclaimer- do not construe any of this as investment advice or financial guidance from Infosys.

]]> Service Providers: I expect a possible softening, but nothing beyond the effects to the larger economy on the whole. Due to the seemingly inelastic demand for mobile service due to it becoming extremely important in our daily lives, we could possibly see an acceleration of fixed mobile substitution if consumers start to cut back spending. This could simply be an acceleration of a current trend. While voice minutes and texts are important, I could foresee consumers scaling back on large data plans which could affect Content Providers (see below).

Handset Providers: The most obvious issue would be a potential delay in handset upgrades if consumers decide to hold off on new spending. The smartphone segment does seem pretty strong in the US and could be buoyed by downward price pressure from new entrants (G1 Android phone at T-Mobile http://www.t-mobileg1.com/g1-announcement.aspx) which would make that buying decision less painful for consumers. I would be more concerned about Handset Providers that have a large market share in financial services (e.g. RIM) since this segment will slow as well.

Credit Providers: This is obviously the area of highest impact and the lifeblood; let’s consider raising capital, private equity and venture capital. The ability to raise capital will be constrained since banks will be less able to easily release funds, equity (stocks) valuations are reduced due to the downturn of the market so you get less money from stock offerings, and the bond market would demand a higher premium (yield) due to overall risk which reduces the cash generated from the bond sale. Private Equity should remain a strong player as they should have large war chests, but their ability to support highly leveraged deals would be impacted. We already witnessed the unwinding of Alltel to Verizon after only a relatively brief holding, but there are new PE rumors in connection with Sprint’s iDEN Network (http://www.ft.com/cms/s/2/97010fa4-8c11-11dd-8a4c-0000779fd18c,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html). Venture Capital should be the least affected, with the possible exception of raising new money, and should continue to fund the smaller innovators at potentially more favorable terms (for Venture firms) than before.

Network Equipment Providers: This to me seems to be the area of highest risk since tightened credit could cause Mobile Service Providers to slow down their large capital investments for network upgrades. At this time, I don’t believe we are looking at the telecom meltdown of the early 2000’s, but I don’t feel too bullish about this group since they depend on large projects to generate revenues. This actually creates a trickledown effect to Content Providers who rely on those infrastructure upgrades to enable higher speed access by consumers for next generation services.

Content Providers: This is a pretty diverse “catch all” group, but should have some similar issues. The first consideration is a slowdown in consumer spending may negatively impact content purchases as discretionary spending dries up. This is a larger issue for providers that rely on subscription or pay per use models, but less of an impact for ad supported models that provide free content. Another issue could be a cut back on large data plans by consumers which would also negatively impact the ability to consume content (see above). Finally, they are also impacted by slower rollouts of new phones and new networks (see above). When this segment may still get capitalized, it could be under considerable pressure.

While this is not an exhaustive analysis of the entire industry, it should be enough to spark some thoughts or validate opinions you already have. I would be interested to know your thoughts on this matter.

Update: Since I posted this blog entry, Reuters reported analysts cutting mobile phone forecasts for 2009 due to longer replacement cycles (http://ca.reuters.com/article/technologyNews/idCATRE4969VW20081008?sp=true)

The Buzz from CTIA Wireless IT & Entertainment

2008-09-23T14:46:32Z

More specifically, the lack of buzz from CTIA Wireless IT & Entertainment show in San Francisco was the big story line. In my opinion, the most interesting vendor announcement to me was expansion of the Yahoo! Blueprint platform (http://mobile.yahoo.com/developers/roadmap) and OneConnect messaging integration to include aggregation of Facebook, MySpace, Bebo, Flickr and Friendster. Yahoo! has made considerable inroads in the mobile space, I am not sure if they are able to really monetize these offerings or if the real money is simply with mobile search where Google is leading quite handily in most western markets according to the last comScore research (http://www.comscore.com/press/release.asp?press=2469).

]]> The other interesting story line was the call for “open” networks. I feel this is a desirable endeavor, but mired in the debate of what “open” truly means. It is a multi-faceted issue which affects various parts of the value chain from core network elements to development environments. Additionally, the people receiving the customer support calls (e.g. mobile operators) typically like to control events to limit any potential issues which inherently restrict “open”. This debate is obvious from the comments of the keynote speakers as they provided their own definitions of “open” networks.

If you can’t get enough online video or are tired of reading my posts, you can view my interview at CTIA with Michelle Sklar from bnetTV where she asks about current industry trends (http://www.bnettv.com/player.php?id=1686&title=Infosys&actionLogin=fail).

Being the Portal for Mobile Social Networking

2008-09-23T14:15:40Z

It seems like a good idea has really catching on with the mobile operators lately. Last year we saw announcements regarding mobile access to social networking sites on their handsets (see Vodafone and MySpace http://www.vodafone.com/start/media_relations/news/group_press_releases/2007/myspace_launches_exclusive.html) and driving of upgraded data plans to support the accompanying activity (revenue was also initially generated with monthly subscriptions for access, but that quickly went away since there was not exclusivity for the carrier and competition drove the subscriptions to zero). This lead to the next round of innovation to partner on special initiatives like a web 2.0 music offering to increase the mobile operator premium (see Vodafone and MySpace part II http://www.vodafone.com/start/media_relations/news/group_press_releases/2007/vodafone_teams_up.html). Now mobile operators are moving even further beyond the “dumb pipe” and taking more control over the social networking interface. Verizon SocialLife and ATT My Communities have launched respectively to provide a starting aggregation portal to access information from a variety of social networking sites (sorry no Facebook as of this posting). The consumer can still directly go to their favorite social networking portals via a mobile browser or downloadable application, but would have to login to each separately.

]]> I have previously blogged about how Orange UK introducing their version of a similar service in July and how it took control of the customer back from the social networking portal while providing adverting and commerce opportunities for itself. While the mobile operator does not get the rich social graph data (more reading http://en.wikipedia.org/wiki/Social_graph) generated from the interactions with the social networking site (the portals only have a view of the data, but does not own the data). However, I feel this is still a step in the right direction to maintain brand importance in addition to controlling the customer experience.

Is this simply buying time for the mobile operators or can they stay in front of the social networking companies in the battle for consumer brand share? I would welcome your thoughts.

Mobile App Stores Are Suddenly Everywhere? -The Apple Influence

2008-09-16T04:22:29Z

Mobile Application Storefronts are very simple concept, but received such little fanfare until the new driver of the mobile industry, Apple (yes Apple, the non-traditional mobile competitor), released its App Store for the iPhone. This move essentially provided a marketplace for new innovative content or services developed by third parties to be purchased or used by iPhone owners. At first glance, this seems very similar to current developer programs provided by handset manufacturers like Forum Nokia, marketplaces for platform providers like Window Mobile Catalog, or storefronts for application aggregators such as Handango, so why the fuss since this is old news? In a nod to the existing incumbents, there is a wealth of information regarding mobile applications, content reviews and developer support. So why after the Apple App Store launched, followed by the Google Android Market announcement (promising immediate time to market for developers) did Microsoft need to announce a relaunch with Skymarket for Windows Mobile and then Symbian (read: Nokia) following suit with a another marketplace? Don’t we have enough, aren’t they already there? My guess is a significant amount of press coverage to go along with a $1M/day sales number over the first month of launch and recent announcement of 100M downloads has something to do with re-launches.

]]> What is Apple doing differently? They are not dreaming up new concepts, just executing by creating better experiences within their “walled garden” (note- this is counter to what most are pushing for with open networks or ecosystems). First, they laid the framework with the iPod/iTunes success which then led to the iPhone that promotes heavy internet or service usage due to the easy navigation and display. They then opened their iPhone SDK and marketplace to third party developers while tying the purchasing and product browsing back to familiar tools like iTunes in addition to the iPhone itself. You get a double win by enabling developers to create very advanced content and providing a next generation buying experience that also fully incorporates web 2.0 concepts such as rating and recommendation into a familiar tool with iTunes. In my opinion, it is a brilliant ecosystem that addresses the consumption and development of mobile services. The only issue here is that content sales will not go beyond the iPhone user base, but those concerns do not seem to be too great as iPhone sales continue to climb in the highly desirable smartphone segment (due to the higher average spend compared to feature phone owners). This is where the “iPhone Killers” and marketplace competitors who are following behind need to understand the fact that it is all about the customer experience created from all the elements in concert, not just a device or service in isolation. It is the sort of innovation the mobile market needs to push other incumbents to make things easier and more enjoyable for the consumer, which is something not always heard in relation to mobile services.

What do you think about the mobile application development and subsequent monetization opportunities? Does Apple have the right idea with a walled garden approach or will open platforms be the winner? I am sure the answer will start with “depends” since we will be concerned with the target customer segments. I am interested in your thoughts.

Social Networking Moving Along the Hype Cycle

2008-09-09T02:10:19Z

Social Networking seems to be tracing a normal hype cycle for popular innovations in the market. It is a scenario where a core group finds value in a concept, it progresses almost under the radar until it makes that mass market leap to “cross the chasm” (to use Geoffrey Moore’s famous concept*) into wide mass market adoption. By this time, venture capital would have been funding the early leaders, the media would breathlessly cover the subject, valuations would skyrocket, consolidation occur as traditional players try to buy into markets or provide their solutions, and then at some point we actually have to make some money doing it. We are obviously to the point where someone needs to make money doing “social networking”, but what are those next steps?

]]> Early on, the value of the network was proportional to the membership of the closed network making outreach somewhat difficult for new entrants or companies trying to reach their customers via this technology. OpenSocial and other similar initiatives seemed to change the dynamics slightly to open those networks which helped users who became burdened by managing so many siloed logins or buddy lists. However, as companies tried to reach out to their customers using these new developments in social networking, they found a market of fragmented technology providers, single vendor technology stacks that create “lock in” to vendors with custom solutions, or a separate option to be beholden to launching within a platform provider such as MySpace or Facebook. Obviously due to brand considerations (with some exceptions for teen brands), having your own social networking platform was a better from a control perspective, but created a significant amount of risk due to the high cost of integrating and managing all the disparate technologies involved in establishing a consolidated offering. Furthermore, commerce would need to be added to enable revenue opportunities which also increased integration cost and complexity.

For these reasons, I am most excited about Infosys’ current social commerce and marketplace offerings which encourage customer intimacy and co-creation activities while providing revenue streams for commerce and advertising. Our hosted model based on an open architecture reduces the risk of deployment by supporting flexible commercial models for our enterprise customers to let them pay as they grow. This transfer of capital expenses to operating expenses more closely matched to revenue recognition is a winning proposition in this current economic climate. The key is to not only provide the basic social networking functionality, but to enable a unified platform to provide 360° views of customer behavior within the platform. Our team has dedicated a significant amount of manpower to solving these complex issues to enable a quick launch and experimentation with social networking concepts. I may be biased, but this sounds better than risking the development cycles on doing a single custom build. I look forward to writing more on this in the future and am interested in your thoughts.

(*Moore’s chasm applies to new disruptive innovations to which I feel social networking applies)

Adding Advertising to the IPTV Business Model

2008-09-04T17:40:12Z

The problems of justifying the ROI for an IPTV deployment have been widely documented by many analysts and media outlets. Most generally, cost concerns about the associated network infrastructure, software platform uplift, customer premise equipment and content acquisition for an IPTV deployment seem to be the biggest issues. However, Telcos must provide IPTV services as a defensive hedge against triple play offerings of voice, broadband and video from competitors such as cable companies. This issue can be addressed by revenue streams beyond monthly subscriptions which include interactive services and advertising. The breadth of interactive services and deployment into a lean forward/back environment with TV remote navigation is a subject upon itself, so I will focus on the potential and complexity of providing advertising to the IPTV platform.

]]> The good news is that cable local advertising sales and insertion in North America is a fairly evolved model for which to copy. European based operators have additional regulatory considerations which creates some adjustment. Based on cable local ad sales in the US, the addressable market is approximately $19B* with Comcast taking a lead, partially due to their highly regarded AdTag and AdCopy platforms (this may change with the new Canoe Ventures pan-cable advertising proposition). IPTV offerings from Telcos could potentially expand the market by providing new interactive capabilities such telescoping (clicking through the ad to a landing page), better targeting and measurement which increases the ad avail value, and providing more channel sponsorship possibilities since IPTV does not have the current channel limitation concerns of cable.

The bad news is that establishing that advertising value chain from the Ad Agencies to the delivery at the set top box is still quite a task. Not only do advertising operations need to be established, but the supporting analytics, campaign management, ad insertion and measurement systems need to be deployed. Interestingly enough, the strength of IPTV, the ability to micro-segment customers and track distinct actions, creates issues with managing all the ad avail sales combinations and discrete ad serving. Tony Hart at Packet Vision, a good colleague of mine, whose company helps Telcos integrate into the advertising value chain feels that while the complexity of establishing this model is significant, goal alignment with the Telcos and Ad Agencies will help to solve this problem with the assistance of innovative technology vendors. While this is exciting activity, I feel the biggest value will be realized when a combined three screen offering is available across TV, mobile and web since the monetization potential of those ad avails would be significantly higher with unified campaign management and tracking. This is one of the reasons that owning the mobile channel will be so important. However both IPTV and the concept of three screen advertising are still evolving.

While the total potential for local advertising sales may change due to factors such as economic conditions and DVR (ad skipping) technology, the there is still significant opportunity to increase average revenue per user with advertising. This is why at Infosys; we are focusing on new developments such as micro-targeting, customer value analysis and segmentation in addition to proactively building out advertising value chain solutions to help our customer take advantage of this opportunity. What are your thoughts on the advertising potential for IPTV providers?

(*2007 estimate from SNL Kagan)

Content Delivery Networks (CDNs) for everyone

2008-08-29T20:27:59Z

I thought it was just me, but I was thinking that there seemed to have been an unusual number of announcements lately regarding Content Delivery Networks (CDNs). Luckily, Dan Rayburn of Frost & Sullivan (who has a good blog by the way http://blog.streamingmedia.com/the_business_of_online_vi/) confirmed those suspicions recently in some of his postings and reports. His number for new CDN investment over the last 18 months is near $400M, this is in addition to whatever investment has been made in current CDN providers’ infrastructure (e.g. big players like Akamai or Limelight Networks or telecoms like Level 3 or BT). If this seems eerily similar to the heady dot com days circa 2000, I feel you have guessed correctly. That last meltdown resulted in a fire sale of cheap fiber to beneficiaries such as Google and others who astutely picked up those assets. How will it turn out this time?

To answer that question we need to look at what is driving demand in this latest round. The need to distribute even more content to greater reaches of the network for sharing for sites like YouTube or social networking is part of the equation. The other side being for enterprises requiring data management or content owners (e.g. Viacom, Disney) needing reliable distribution. However, this just begs the question of at what point do we have enough bandwidth? You could look at Microsoft’s decision to spend $2B to further develop its own data center and network infrastructure to create competitive advantage and provide managed services to large enterprises as a proxy answer being “obviously not enough”. Well, closer inspection reveals that the new managed services or other value add on top of those large pipes is the real opportunity beyond bandwidth, basic management and reporting. For this reason, I really like what CDN providers such as BT have done with their BT Mosaic service which allows their customers to manage and distribute the content transported over BT’s network. It is those types of services which will create competitive advantage in the CDN marketplace. As for competitors that are simply “pipes” providers? I believe the next round of consolidation is on the way for those players in a commodity business. The revenues do not support “infrastructure only” models particularly when the experts of the network, the telecom providers, are quickly ramping up operations. What are your thoughts?

The promise of mobile advertising

2008-08-25T16:19:56Z

The ability to directly target hundreds of millions or even billions of pre-qualified potential customers with specific messaging is an advertiser’s dream. With the mobile phone being a highly individualized device that is typically not shared, this promise should be a quick reality by simply mining some existing data owned by the mobile operator. Eric Schmitt, the CEO of Google, has even recently said in an interview with CNBC that “over time we will make more money from mobile advertising” than with online ad serving. If we take the scenario further, the promise of location based technologies will create additional value by quickly serving up contextual advertising just in time as you pass by the shop that is trying to lure you inside. Analysts have put the value of serving those ad avails for the mobile advertising market in the range of billions to hundreds of billions of dollars. At a time when mobile operators are struggling to maintain margins, is seems that they are sitting on a goldmine, right? Well, not so much.

There are a number of factors to consider, the first being the assumption that good and accessible customer data exists for each mobile device. As you move out of the western and in particular the US market, the number of prepaid customer dramatically increases which means that reliable customer data to which to match to a psychographic [definition] profile for ad targeting may not exist. Additionally, if the data does exist, it is often stored in a myriad of different customer systems owned by the mobile operator which makes a common extraction scheme more difficult. Second, due to a diversity of mobile handset operating systems and device characteristics, the rendering of the ad to ensure a common look or branding experience is challenging. Mobile rendering technologies exist, but you will still have issues between viewing an ad on a smartphone with a large screen and a mass market feature phone. Nokia has taken some steps in the right direction to address these issues with their Nokia Advertising Alliance, but again you are limited to phones served by the Nokia Media Network. This complexity is also another reason Google is launching their Android platform. Third, it is highly unlikely that mobile operators will share customer data so the launch of any pan-operator ad campaign would be limited by the customer base of a single mobile operator and need to be repeated with other mobile operators in that region. Fourth, the assumption that people are breathlessly awaiting advertising as they move around town is a bit off base. Granted, opt-in profiles can be exploited; however, we have not seen a good model in which to do so. Partially for this reason, location based services have been long on promise and short on delivery for quite some time. We also have already seen the legal issues internet service providers have faced with the NebuAd deployments where users were served advertisements based on web surfing behavior without any opt-in, so having approval of the targeted customer is vital. I feel the best opportunity here would be location linked to mobile search e.g. show we restaurants in my vicinity when I search for restaurants. Last (certainly not the final complexity to this problem), would be the maturing of the mobile operator’s role in the advertising value chain. They are just starting to develop models to exploit this opportunity and will need to become more efficient in operation for ad agencies to appropriately be able to execute advertising campaigns.

So where does that leave us? We have issues with data access for appropriate ad targeting, ad rendering across mobile devices is complex, ad serving across multiple operator’s customer bases implies replicated effort, location based targeting may not be an advertising boon and the mobile operators are still developing their own models to even efficiently operate in the advertising value chain. My colleague Bryon Morrison, the president of Ipsh! whose company executes mobile campaigns on behalf of big brands, equates some of these growing pains to the early days of the internet where the promise existed, but it took a while for monetization mature. If we start there, ad serving on the mobile internet has good short term potential since it bypasses the issues of data access and device rendering, but provides relatively small screen space and weak usage penetration. Serving ad campaigns via SMS is currently the simplest and most effective manner due to ease of management across operators and devices in addition to relatively good click thru success. The most significant new wild card in some regions has been the use of image recognition via the integrated camera on the phone which has met with significant success by again creating significant click thru and taking the complexity out of rendering mobile websites via url input by automatically navigating the user to the ad landing page once the image is captured.

To sum it all up, I am not yet completely sold on the current ad market projections since I feel too many obstacles still exist. However, I do value mobile as an advertising channel and am encouraged by the efforts of those like Bryon at Ipsh! who continue to exploit this evolving market. Additionally, I am very bullish on image recognition as a game changing technology to completely change the way we interact with print or display advertising. What are your thoughts?

Is mobile finally ready to live up to expectations?

2008-08-12T15:34:47Z

It seems that we are constantly hearing about the promise of mobile data, applications or mobile internet. In fairness, there have been a number of factors conspiring against progress including handset capability, competing standards, user interface issues and even complexity in billing plans. However, there have been a few positive steps that will hopefully continue to push the market in the right direction.

First off, the announcement of Symbian going open source along with an alliance with Android to create a common open source platform should help coalesce the developer community in addition to removing operating system (OS) variety. Kudos to Nokia’s and Google’s foresight in regards to this issue. At the last Mobile World Congress in Barcelona, I heard the then CEO of Vodafone, Arun Sarin, call for mobile OS consolidation in the marketplace during his keynote. A fragmented marketplace does not benefit content owners who must incur increased development and testing expense to support the various OS configurations, which in turn does not benefit the mobile operator. To illustrate the point, I had a conversation with the European Mobile Head of a leading games publisher who mentioned that for each game title, his team supports a matrixed spreadsheet by phone type and by mobile operator to track development build or test certification. This consolidation will help all content owners or application developers spend more time making compelling experiences for the end customer.

The second big achievement for mobile is the rise of the handset which is interestingly being led by Apple. While this is in contradiction to open OS, the iPhone clearly demonstrates the value of device driven experiences to encourage consumption. It has been well documented that 95% iPhone users regularly surf the mobile internet which is multiple times higher penetration than other phone models. Additionally, the Apple App store has recorded 60 million users downloading applications in the first month of being launched. The point is not to further applaud Apple, but to highlight that mobile devices can be game changers and that the “iPhone killers” are already being launched by the competition which will bring a new wave of innovation into the market place. This will only help drive usage of mobile internet services.

The last trend has been the mobile operators providing more attractive mobile data plans to remove the complexity from the end user. Most consumers struggle to understand the number of bytes required for a download which leads to confusion or a surprise when the bills come due. In the US at least, the major operators have all announced new plan options from Sprint’s “Simply Everything” to similar options from ATT or Verizon that promote mobile data usage by enabling experimentation, and hopefully adoption as well, by the end user who would not be constrained by download limits.

Results announced by Chetan Sharma Consulting for the wireless mobile data market have been very positive. In the last quarter, data related average revenue per user grew $.50 to help offset declining voice revenues. That put Verizon and ATT at $2.6B and $2.5B in data services revenues respectively. The interesting caveat to those numbers is that non-messaging revenues accounted for 50-60% of those totals which implies a strong uptake of mobile content or internet services. Actions by the operators, platform providers and handset manufacturers seems to be finally in alignment which should only benefit the end customers and allow mobile services to reach its market potential. What are your thoughts?

Content is King…. for whom?

2008-08-05T15:22:04Z

Particularly in the IPTV space, many articles can be found regarding “content as king” with the implication that compelling content will drive viewership, assuming all other things equal such as quality of service, etc. A recent report from Analysys Mason regarding multi-play services (this was the Triple Play of phone, broadband and video/IPTV with mobile not included in the particular analysis) in the Western European market found a “lack of compelling TV content from telcos” and “difficulties in transferring telco brand attributes to the TV content market” as barriers to Telco TV penetration. I definitely agree with the assessment as Telecoms cannot have an inferior offering to current cable incumbents. The issue becomes, at what point does content remain a differentiator and at what price is that content still worth purchasing? There have been numerous US-based IPTV providers announcing expansions of VOD libraries or increased HD offerings just as European IPTV providers have announced rights to sports such as soccer. At some point, these triple play offerings start to look very similar to the end customer which essentially makes a premium offering of video commoditized. We have already seen downward price pressures on the bundles in certain US markets were competition exists with a cable incumbent and Telecom IPTV entrant. This further skews an already difficult business case for IPTV while hampering the ability to pay additional content premiums.

In my opinion, content is part of the “table stakes” offering. Creating compelling experiences that span multiple channels such as broadband, video and mobile will be a true differentiator. This is one of the reasons that we at Infosys have been investing in research projects for personal virtual libraries, products to easily port web content to video or mobile and enabling secure handoffs between network access modes. This involves getting closer to the connected home to enable easy transfer of content between those consumption mediums so current silos of content become transparent to the customer. It is taking the taking the talk of “anytime, anywhere” content and making it a simple reality or compelling experience for the end customer. One very good and simple example is the deployment of multi-room Digital Video Recorders. This is not cross-channel, but it is cross-location in the house and does not tie the user to a particular TV. It is a great experience for the customer. The winners in the Triple Play race will build more experiences like this to differentiate their offering while using content to establish market parity.

Digital Media Divide?

2008-07-29T14:29:48Z

I just finished reading a whitepaper regarding a digital media divide which was base around a struggle between content owners (e.g. HBO) and user generated content (UGC). The premise was the disruption created by UGC as being a threat to the content owners, essentially a competition for consumer timeshare and wallet. While I agree that there is a limit to the amount of content that can be consumed, I don’t see the divide of content owners vs UGC as the larger issue since I feel that consumers will always value good, original content. I believe the bigger issue is sharing and downward pressure on the price of mobile or web content. For example in the U.S., the price of a song is no more than Apple’s iTunes marketplace of $.99 due to their wide consumer base. Other services are moving closer to “all you can eat” with a subscription, such as Nokia’s Comes with Music, which is even less expensive. The price of digital content is further depressed via file sharing or sites that do not enforce copywrite. However, content owners can fight back and enable communities to form around their content which incorporates UGC to increase viewer loyalty and the value of their content. Potentially, concert and merchandise interest is increased for a musical artist or advertising premiums and ratings are increased for the broadcast or web/mobile viewing of a show such as Lost or Sopranos. In these instances, UGC can be harnessed to become an enabler, not a threat. It is a matter of changing business models to find all available revenue streams when the primary revenue stream is under pricing pressure.

Am I missing something in regards to this digital media divide? Maybe UGC hurts shows with very weak rating by providing another outlet for consumer attention? Are content owners simply as the mercy of the web 2.0? I would be interested in your opinions on the subject.

Social Networking remains hot, but how do we make money?

2008-07-23T18:01:43Z

Being seemingly impervious to the current financial climate of tight money, Venture Capital continues to pour into wireless social networking startups and while others are being snapped up in a new wave of consolidation. Recent funding announcements include money for the likes of Zannel for $10M, Pelago for $15M, Kyte for $21M and Jaxtr for $10M, just to a name a few. The largest consolidation announcements came from Vodafone acquiring ZYB for $50M and Nokia acquiring Plazes for an undisclosed sum. Is this an irrational trend? I think not. These startups are adding one more component to the social networking value chain while product companies, such as Nokia, are continuing to develop their own portfolio offering in hopes of cashing in on the vast potential value that social networking represents. For example, Nielsen Company just released numbers suggesting that social networking usage on mobile only just recently passed 1.6% penetration in the US and 1.7% penetration in Europe, a number that should only exponentially grow. Additionally there will be a continuing turf war with operators, platform providers and handset manufactures trying to win the consumer to claim value.

The big question then becomes, “what value is there to claim?” for all of this investment. On the web, the market is already littered with point solutions and promises of ad funded models that have not delivered to expectations. Sure, there is uplift from new data plans from the operator to support social networking, but subscription revenue remains elusive while data usage then starts to rapidly increase. To use an example from a fixed line ISP, Plusnet in the UK released numbers showing that YouTube was consuming 17% of peak hour usage on their network, yet YouTube is still not even a large money maker for Google. I feel it is a great user base that has not been converted into a “consumer base”.

The answer is the creation of end to end thematic social networking portals for the customer. The thematic portals provide not only interaction, but context for relevant commerce, potential subscription revenue for high value content and targeted advertising since the audience is self-qualified. In my opinion, this mix of revenue streams will hold the greatest chance for success. A uniform and consistent, multi-screen experience completes the offering by making it easy for the consumer to interact via the modality that suits them best. The offering cannot be just another community that provides little marginal value.

Thoughts?