Views on the new media market

Apple joins the rest of the mobile industry

This week Steve Jobs announced the 3G version of the iPhone. A very significant change has nothing to do with the technical features of the phone, but to look more deeply at the business model changes that have taken place in order to ship the iPhone outside of it's initial few launch markets of USA, UK, Germany, France.

Apple's initial business model was revolutionary for the mobile industry:

iPhone was sold without subsidy

iPhone was sold by only one operator per country

Apple got a revenue share on the monthly subscription

These were shocking to the european mobile industry that is used to phones being subsidsed down to free to the consumer by operators, having choices of phones across operators and independent retailers - the only one that wasn't all that shocking was the revenue share - independent retailers have had deals that provided ongoing revenue based on subscriber usage for some time, these typically included a need to manage the ongoing billing relationship - though many operators have been reducing these, preferring a direct billing relationship with their customers.

So what has changed?

3G iPhone is sold with subsidy

iPhone is sold by more than one operator in some countries

Apple are no longer getting a revenue share

In fact when we now compare the iPhone business model to the business models of the major mobile OEMs we see that there isn't any difference. They all do some "exclusive" models to individual operators

In some markets they sell to operators who subsidise the handsets (e.g. UK, France). In other markets they sell direct to consumers on multiple operators (e.g. Italy, Turkey)

So after just 9 months of revolutionising the mobile phone industry with new business models and technology Apple have reverted back to traditional business models in mobile.

It seems that to innovate within mobile in europe it's best to understand the european mobile industry and innovate within it's constraints. So what are the key elements of mobile businesses?

Phones are subsidised by operators but marketed and sold to consumers - thus there is a tension between cost reduction (from the operators) and feature additions (wanted by consumers)

Operators grow their revenue by bundling more "pre-paid" communications (voice, SMS, data)

So what is the best space for innovation?

The mass market will remain low cost - with much feature fragmentation Communications becomes cheaper over time - so innovate enabling people to communicate

Browser or application?

On the desktop the choice between a browser or application is hard - many things can be performed in either. Email clients exist both in on the desktop and in the browser. With RIA technology it's possible to extend the browser to do things that have traditionally been the exclusive domain of applications - who would have thought when Amazon first launched that a document like this could be produced in the browser?

Even so it can be hard to decide whether you should chose to use the browser or an application for a solution - platforms like AIR make it easier to use the development skills traditionally used for browser applications to develop applications - but they don't help you make the choice of what is the better platform to focus on.

So how does one decide whether to focus on the browser or an application? The choice can come down to what are the technical needs of the solution - so if an application needs to operate offline and access local resources then it's likely to be better as an application. If the solution needs to communicate with the network for the majority of it's functionality then it's probably better as a browser. The choice isn't black and white though - it's possible to imagine most connected solutions as applications and most local applications as RIAs.

What does this mean for mobile? Mobile has many similarities to the desktop experience, but also many differences - many mobile phones can run both applications and have advanced browsers. Yet on mobile there are far fewer commercially successful applications for the size of the market than the desktop, and also far fewer commercially successful mobile web sites. How come the promise of the PC market hasn't translated onto mobile?

It seems both applications and browsers on mobile devices face the same challenges - how to get people to start using richer experiences on their mobile handsets? To do this there is a challenge - we need to lower the barriers that get in the way of people sampling a new application or service - and also delight them when they get that service.

The browser is great for this - the growth of the web in the mass market on the desktop has demonstrated that providing consumers with a very simple “on ramp” - the URL, to get access to a new service can grow usage rapidly compared to the traditional barriers of application installation.

So to succeed with applications on mobile the starting point is to create great, accessable services in the browser - drive usage then enhance and delight consumers with applications.