Views on the new media market

Hero device plus browser strategy against mobile fragmentation

My friend David Wood posts a thoughtful piece on the challenges of mobile application fragmentation.

He outlines the challenge faced by many companies who want to deliver mobile applications - the the two warring camps are

• Focus on one iconic device platform
• Prioritise web based delivery

Each strategy has their place - but some applications need the combination of the two - application features integrated with the device, and broad reach.

What sort of strategy can be used to meet these challenges?

One example is a hero device plus browser strategy.

Development efforts are split between both applications, and web based delivery. There is however a difference in features between the two.

Hero devices are the iconic devices that are used by, or desired by the key market. The effort on the applications here is to create a dedicated experience for those devices that provides a superb experience, that will turn those lead customers into evangelists for your product.

The remainder of the market is delivered a more limited feature set in a browser based experience.

Why does this work?

Hero devices are the iconic devices that people desire - where your customers don't have the device, they desire the device - and seeing the improved experience from your application compared to their current device helps them justify why that desire is rational and reasonable.

Key to this is understanding that hero devices are not necessarily the devices that people have today. They are the devices that they want - so while your user base may be browsers today, if they desire an iPhone, then investing in an iPhone specific application benefits your existing browser users, in spite of the fact it's only a small proportion of the user base.

To quote Wayne Gretzky:

Skate to where the puck is going to be, not to where it has been

And one more thing

So Apple launched a new category yesterday. It's the web pad. Sorry, I mean the Tablet PC, no, no, I mean the MID, err, the eBook. Well something like that anyway.

What consumer want has the iPad converted into a need?

Apple have a track record in bringing products to market in an existing area, and executing better than the incumbents in creating high end, premium, high margin products. They have achieved this with desktops, laptops, portable music players and phones. As Steve Jobs presented the iPad is targetted at the space currently occupied by netbooks, and previously occupied by an array of products, none of which have demonstrated huge success.

What has made netbooks a success in this category? Price. Netbooks offer the promise of laptop functionality at a much lower price point - making them an acceptable additional device. The iPad is close here - the entry level device at $499 is close enough to netbook prices at around $300 to cause people to look - though the gap is still significant enough to dissuade many people.

The same is true for eReaders - Amazon's Kindle is $269 - so it's possible to get a netbook and a kindle for the same price as an iPad. Will consumers view the style and functionality of the iPad as worth the premium?

iPad has some very elegant software in it - it seems to do what it's aiming at very well - what is the likely impact?

Winners

• iPhone software developers. With the marketing hype and hope around iPad skilled iPhone software developers will find themselves even more in demand
• Digital media companies - particularly those with a clear content monetization strategy built off a solid web presence
• HTML5 + CSS developers - Safari in the iPhone OS is significantly ahead of most browsers in what it can do
• RIM - business people with money, and wanting a portable "iPhone like" experience can now keep their Blackberry (with all the advantages of power consumption and corporate email) and buy themselves a personal iPad - less pressure to get iPhones in corporates.
• Amazon - the rush to get eBooks will help Amazon's retailing - you can after all read your Kindle books on the iPad, using the Amazon Kindle iPhone application, I'm willing to bet Amazon can be a better book retailer than Apple - if they no longer have to produce and sell hardware even better - they make money on the content.

Losers

• Adobe. No Flash on the iPhone makes Adobe's core proposition to web developers weaker. Anyone who want's to reliably deliver video to the iPhone + iPod Touch + iPad economy needs an HTML5 solution as well as Flash.
• Intel - Apple's delivery of a superb ARM based browsing solution hurts Intel in the growing low power market. Expect to see more smartbook type notebooks based upon an ARM core with much better battery life than intel based devices
• Microsoft - the emergence of a new "application economy" around iPhone OS hurts Microsoft's long term position in being able to leverage Windows as the platform of trust for application developers

Let's see 1 year from now where these players end up.

What smartphone do people want?

At the leading edge of technology it's easy to get distracted by the "latest and greatest" release from technology companies - and forget that beyond the early adopters there are a set of people who view technology as a tool that they can use to get on with their lives.

Live Talkback is running a poll on what smartphones are most desirable right now - you can Vote here - it's interesting to see what people prefer - current results are

You can see realtime results too.

What is interesting here is that Nokia are the clear market leaders - with two devices (based on two different operating system platforms), with Symbian being the clear favourite - with 32% of people looking to get a Nokia N97. Combined with the N900 this suggests a 44% smartphone market share for Nokia. The second most desirable handset is Apple's iPhone. This is interesting, as the Apple iPhone is notable as being one of the least fragmented platforms in the industry - so most attractive to developers (while Apple are good at avoiding fragmentation created by OS versions with their OS upgrade strategy there is fragmentation between iPod Touch and iPhone - and it will be interesting to see what impact a next version of the iPhone has on the fragmentation)

Google are clearly doing well with their promotion of the Nexus One, though with new phone model releases typically announced at Mobile World Congress in Barcelona it will be interesting to see how perceptions change by March.

Sport - and the mobile media opportunity

As I look outside this friday I notice that most of the snow that has been disrupting the UK is melting nicely, which means the disruption that has caused problems for UK sporting fixtures over the past week will be over and normal service will resume.  In the UK over 3 million men (not quite as many women I'm afraid) attend live football matches every month.  We know that sport is an incredibly valuable, and popular form of entertainment - the fact that the UK TV rights generate £1.7bn of revenue for the Premier league over the 3 year licensing deals is compelling evidence of this.

With high season ticket prices and a majority male fan base we'd expect that UK Football clubs would have some of the most advanced, and intelligent mobile media offerings available.   Surprisingly this is not the case.  If we look at the highest profile teams we see that they have only recently released mobile applications, and their mobile media offerings in the past have been limited to the syndication of goal alerts through mobile phone operators and terrible quality mobile video clips of goals - where it has typically been impossible to actually see where the ball is.

One of the challenges for a football club is to understand the new reality of rich, connected devices at every seat in a ground.  There is a huge opportunity to capture the attention of the fans who are at the ground for 90 minutes - and are interested in richer ways of enjoying the game - after all if they were after close up pictures of the game they would be the supporters who remain at home and watch the live coverage on the TV.

With the latest mobile phones it's possible to connect these mass engaged audiences in new, and novel ways, and to enhance the experience for supporters.   Was that a foul?  Why not poll the supporters while waiting for the video replay?  Man of the match?  Run a live poll throughout the match to let supporters share what they think.   Disagree with the referee - let supporters watch replays from all the different camera angles on demand.   

This level of increased engagement and attention creates opportunities for sponsors and advertisers - the richer the engagement of the fans, the more opportunities there are to communicate with them.

The world cup in South Africa this year is the opportunity for innovative brands and advertisers to experiment with new ways of engaging sports fans - whether at the live game, or watching live over broadcast streams - if you are interested in this come along to the mFootball event next week - I'll be there discussing opportunities for new media in football and other sporting events.

Mobile advertising - where is the money?

Mobile advertising is a hot space right now. Google are in the process of buying AdMob with a valuation of $750m - for AdMob revenue are in the $50m-$100m range - so at the mid point that's around 10x earnings. A great exit for the founders of AdMob. At the same time Apple is buying Quattro Wireless for around $275m, for a company with between $20m and $30m revenue.

These numbers make for very impressive VC returns, and are a credit to all those involved in AdMob and Quattro Wireless, and clearly indicate a belief within Apple and Google that mobile advertising is going to be a big revenue source in the future.

So we should be able to easily find examples of mobile advertising that work well for companies and brands - after all there must be many.

Sat in London, where there is a major media market, many advertising agencies, and we have great mobile networks and great consumer adoption of high end mobile phones you'd expect that I'd be able to point to many examples of success. Luckily I can think of one example - Flirtomatic a mobile flirting site. Now Flirtomatic may not be a major brand that you have heard of - but they are successful in driving traffic to their mobile site, and converting customers into paying users of the service.

What about other major brands? ITV, Sky, Tesco, Nescafe, Vodafone, Nokia? Remarkable by the absence of success stories there. Yet this is in a market where we are growing to over 50% of consumers will be buying smartphone devices this year.

So what's wrong? Simple experiments demonstrate the problem. Even within a contained ecosystem (the iPhone) advertising does not prove a very cost effective way of driving traffic. Estimates based on my experience are that the cost per download of a free application is around £6 ($9) per download, and the cost per download for a paid application is around £11 ($16). Business models in mobile that have consumers paying upward of £10 per application are hard to come by - and compare poorly with the web where cost per click is sub $1.

So how are AdMob and Quattro Wireless going to turn their initial customers who are generating today's revenues into repeat customers who scale to $billions in revenues for them? The evidence so far is that what they won't achieve that.

It's instructive to look at the internet advertising market - $5.4bn for the first half of 2009. The IAB produce a report on internet advertising let's look at the split of the different types of advertising

Then we should consider, from the same report that the top 50 companies account for 89% of all internet advertising spend. So without those big brands seeing the return on investment from mobile advertising it is going to remain a small fraction of the overall advertising market - hardly enough to justify the investment that Google and Apple are making.

So - how can mobile advertising improve? The clue is in the above pie chart. Context is king. Mobile phones are all about convenience - that's why you use your mobile to call someone when you have a landline on your desk. It's why you check your email on your mobile phone when your laptop is a few steps away from you. So anyone seeking to have a successful advertisment on mobile needs to understand the context of how the device is being used.

Most business plans that include context and mobile tend to include the phrase "Location based services" in their plan - and sure, for a minority of cases mobile phones are uniquely used in places where location is important - mobile applications like FourSquare and Flook take advantage of this feature. More poorly served is the majority case where the mobile phone is in one of two locations - home and work. Yet people still pick it up and use it there. Smart solutions like Live Talkback can be used both when outside (for on location events) or at home (for broadcast events)

The really smart solutions for advertising will start to understand much more of the context around individuals - and will pick the right time to engage users with advertising - maybe mobile has something to learn from TV advertising here - will your mobile phone have an ad break?

Predictions for 2010

As it's December I get to blog some predictions, that I'll either ignore (as I've been proven completely wrong) - or use to tell everyone "I told you so" later on in the year.

So what do I think is going to be interesting in the new media market in 2010?

New application stores, and re-launches of application stores will continue to happen during 2010. As new application stores launch they will increasingly have problems getting quality application inventory as the cost of maintaining multiple application store listings deters developers. Some innovative companies will start to offer solutions to this problem with "meta aggregators" that manage applications listings in multiple application stores (Symbian Horizon is an example of this), however they will struggle to add long term value to developers, and so will have a limited lifetime. So my predictions are:

Big application stores will get bigger

Watch for a relaunch of Nokia's Ovi Store together with more operator partnerships to start to drive significant volume

Apple's App Store will continue to set the standard, and drive volumes.

Blackberry applications will see a resurgence as Blackberry devices grow fast in the consumer market, and RIM's increased developer focus.

Successful iPhone Application developers port to other platforms

Successful application developers from Apple's Application store will start to port to other platforms as they search for cheap routes to grow new revenues. The platforms that will benefit most from this will be Android and Blackberry, as these both have great mindshare in the USA. In Europe I expect Blackberry to grow strongly, and start challenging Nokia, Samsung and Sony Ericsson.

Audiences integrate mobile as part of their media consumption for major events (Election, World Cup)

In the UK we have two pending major national events that will have mobile integrated as part of the audience experience - in May we expect a General Election, and in June there is the FIFA World Cup. In both cases audiences will be integrating mobile as part of the overall media experience - there will be a small number of very smart media companies and advertisers who will have successful campaigns that have mobile elements as a part of this. (If you are a smart media company or advertiser and would like to find out how - contact us at Live Talkback to find out what we are doing)

Android loses it's shine with developers, Blackberry is a surprise hit

As new Android devices come out from multiple manufacturers and the platform fragments with different screen sizes, experiences and features on different devices it will lose it's appeal with developers. Those developers who switch their Java platform development to Blackberry will be surprised by the success, as Blackberry grows fast in the consumer market outside it's traditional enterprise strength. RIM will delight developers with new offerings, and consumers a new OS platform that integrates a great WebKit offering from the team at Torch Mobile. Manufacturer controlled mobile platforms that use open source components will be the new theme in mobile platforms.

BBC Canvas project will launch devices and a new generation of internet + broadcast experiences will appear

The BBC Canvas project will receive final approval, and will launch the first generation of devices that consumers will rapidly adopt as they enable BBC's iPlayer free, on demand IPTV service to reach TV screens. There will be some bold experiments with interactivity around TV and broadcast - but the majority of usage will be on demand TV services. Free, interactive TV services will challenge the growth of premium rate phone call TV shows like X-Factor and I'm A Celebrity, but will not have any significant revenue impact for ITV in 2010.

That's it for my predictions for this year - let's see how things turn out as 2010 progresses.

Google and Nokia competing with free

There has been lots of chatter about Google's gift of the Nexus One to it's staff. This is normal practice for smart companies in the mobile space - what better way to get feedback on early, experimental products and services than have your own staff use the early releases.

There has been much chatter about whether Google will go the next step and make the Nexus One available directly to the public. There is already an established mobile brand that has taken this step - Nokia. Unfortunately for Nokia it seems like consumers don't have that much demand for directly purchasing phones - Nokia's flagship stores are being closed.

The challenge for both Google and Nokia here is that they are both in the business of selling a product that consumers consider to be free - in Google's case search and applications are offered free to the consumer and subsidised by advertising revenues, in Nokia's case phones are offered free to the consumer and subsidised by network operator subscriptions.

As the music and media industries have seen there is often a big change in the demand for products when the move from free to paid. Evidence from some music services suggest that the fall in demand once you ask consumers to pay for something may be as much as 80%.

So Nokia and Google face the same challenge - how do they offer something that consumers currently get for free in a way that makes consumers prepared to pay for it?

One distraction in mobile is the word mobile - while most actual use of phones is in two locations - home and work. So creating compelling services that consumers will pay for has to offer some benefits in those two locations.

The mobile phone has succeeded at this in the past - some examples

Voice calls - consumers are used to having access to alternative forms of voice calling at both home and work - yet the convenience of integrated address books in mobile phones have succeeded in capturing more and more voice call revenue from landlines.

Text messaging - the ubiquity of SMS based text messaging captured huge new markets even when large numbers of people also had email and PC's with far better keyboards for text entry.

For me there is a new example National Rail Enquiries even though there are multiple ways I can get hold of this information - either phone, or websites, I choose to use the iPhone application, even when at my desk. The simplicity and focus of the application helps me get what I want done straight away.

The challenge for Google and Nokia engineers is thus to answer this question What services would you choose to use from your mobile phone while you are sat in front of your PC? The winners will be able to show examples of more phone usage - not just mobile, but every minute of the day.

Teens and mobile - some observations

At Live Talkback we had the opportunity to pitch to a panel of teenagers yesterday - and the insights were great. The panel was organised by the fabulous Julia Shalet, and is something I recommend that any product company does - the feedback was honest, blunt and a great insight into the minds of a generation who will be shaping the future.

The panel started with introductions from the teenagers - who had each prepared photo montages of what was important to them. The panel came from a mixture of backgrounds - two from a private school in North London, two from a South London Comprehensive, and two from an Inner City Comprehensive in Hackney.

I was struck by the similarities, and the intelligence of all on the panel - they all were able to thoughtfully articulate issues and concerns with all the product pitches.

I was struck by how deep the understanding that the panel had around how to leverage networks and online activities - and the dangers. Quotes (which are my paraphrase, any errors or misattributions are entirely mine) which stuck in my mind are "I take care not to post photos that could be embarassing to Facebook - I don't want them to appear in the school magazine". The teens were all fully aware of the issues around privacy in networks, and able to manage them - though I'm confident that they could all have shared mistakes (who couldn't?).

They all also had multiple "social networks" with different levels of trust. Instant Messaging, particularly Windows Live IM were in use by all of them, and SMS was hardly mentioned - indeed sharing a phone number was seen as something rare - it's a private thing, where teens were happy to share Windows Live IM identities on a more casual basis. Facebook usage was similarly restricted to close circles of friends.

For the many companies, mobile operators included, who offer a proposition of "unified communications" - this is rather a wake up call - teens want to maintain different identities for different people - so tempting them with a "simpler" unified identity is unlikely to be desirable. It seems people can manage the fact they have different circles of contacts.

Mobile phone use was very limited - two teens expressed "A phone is for making calls" - while two wanted slim, touch screen phones.

A common pattern of usage seemed to be limited phone usage, but much more use of the web on the PC (facebook and Windows Live IM stood out here). I'm curious as to how this usage will evolve over the next 5 years of their lives - as the environment that they work in changes, moving from a school environment with time for personal PC usage after school, to a work environment that has PC usage available during the day - but personal usage may become more restricted to mobile phones.

If there are any 23 year olds reading this blog then please comment with how your usage of PC and mobile have changed in the last 5 years.

What was the result of the panel discussion? At Live Talkback we have work to do to create a proposition that shows real benefit to teens - fortunately the suggestions the teen panel made are all areas that we are working on, so I'll continue to engage with our customers and find out how they want us to develop our offer.

I recommend anyone creating products to try a similar exercise - the feedback is refreshingly honest and productive.

Mobile application - sure, how do I get it?

Mobile applications and application stores are all the rage in mobile chattering classes at the moment, but it's worthwhile stepping back and looking at mobile through the eyes of a pragmatic, mass market consumer.

Sure, they have a mobile phone indeed surveys show that if forced to pick only one of TV, Computer or mobile phone 58% would pick the mobile phone.

So there should be a great market for mobile application producers, shouldn't there?

If you talk to mobile application developers there is one word that you'll hear again and again - fragmentation. The wide variety of different platforms, operating systems, programming runtimes, screen sizes, keyboard layouts and phone features, stores, certification programs and other differences make it expensive to produce even the simplest application on mobile. There are ways around these fragmentation problems, provided that developers are prepared to spend some time and money on solutions, so it's possible to overcome the problems.

Which leaves one problem remaining - how do you tell consumers about your mobile application, and what happens when they hear about it?

If we take a group of just 10 people in the UK market, discussing the latest and greatest mobile application we'll find:

Two of them have iPhones, two have Blackberries, four have Nokia smartphones, one has a Windows Mobile phone and one has an Android phone. Pretty tech savvy lot - especially as the other half of the room have non smart phones.

They are swapping stories about the latest application that they have discovered, and recommending it to their friends - great viral marketing. The problem is - how do they each get the application? Is it listed in the application stores on the devices? Which store? How about they search for it? Will Google find it? How does it then link to the application?

Even for an application that is available on all the platforms the chances that these consumers will quickly succeed in finding the application is small - there is no clear way to get applications for mobile phones that doesn't first require answering questions like "what phone model? what operator?"

This problem repeats itself when you look at any form of mass consumer advertising or marketing - the probability that you'll successfully convert customers for a mobile application is very low.

So what is likely to be the best way of marketing a mobile application?

How about marketing a mobile web site? If you can educate people to go to a mobile site first - then the application provider can provide the logic to navigate to the appropriate application store for a device. Thus, marketing your mobile application becomes a question of how would you market your website - mobile, or desktop.

Friction in mobile application provision

Firmly believe that "applications" will win on mobile devices - an application that can take up the full screen of a device, and has an instant response to starting the application is more convenient for a mobile phone - and a browser can't provide this as easily as an application can.

However browser based solutions provide far fewer points of friction to a developer who wants to make functionality available on a handset.

Developers frequently complain about fragmentation being a cause of problems in delivering mobile applications. This is a natural view, as developers spend most of their time dealing with issues caused by different platforms, languages and other technical features of phones. Yet fragmentation is only one form of friction for mobile application developers. Other forms of friction in getting an application out are:

• Multiple application stores - to reach a consumer in the UK it's likely you will have to support 10s of different application stores, and keep versions up to date across all of these stores
• Marketing differences between different stores - there is no consistency between the image formats or screen sizes required for screen shots for the same application on different stores - so even with one app there will be multiple versions of marketing assets required
• Approval times for different app stores vary
• Digital signature processes differ for different application stores, so application authors need to maintain multiple identities to support this
• Testing and QA processes differ for different stores, so application authors need to manage multiple different QA processes

All of these elements get in the way of an application developer getting their solution to market on time, and on budget, and being able to spend money on creating new features, rather than managing the distribution of the application.

Hardly surprising that the people who are making money in mobile applications are the large aggregators who can generate economies of scale by managing these solutions for multiple applications with multiple application stores.

The economics of a mobile web application are quite different however. While fragmentation in the mobile web space is just as bad - or arguably even worse than in the mobile application space there are fewer points of friction.

• A single web URL can be made to work for all mobile phones. Try m.facebook.com
• Consumers expect either direct marketing, or search engine marketing for web sites - on mobile as well as on desktops
• Few external approvals are required to launch a web application - there may be some if operator specific APIs are integrated with (for example for online mobile payments)

The result - it's quicker and easier to reach mobile devices from a web solution than with mobile applications. Apple's App store managed to significantly reduce the points of friction for an application developer bringing their app to market - and saw huge success as a result compared to previous application stores. The challenge for other application stores is - do they bring similar reductions in friction.