Views on the new media market

AIRpad beat Apple at their own game?

Adobe have been doing an excellent job in co-ordinating media to focus demand for Flash on the iPad. There have been many arguments put forward - one of the most thoughtful pieces is by Jeremy Allaire on TechCrunch one call that I haven't seen is for Adobe to step forward and put their money where their mouth is. Why don't Adobe produce a competing tablet device?

Adobe has all the right partnerships in place - they have been working with ARM for over a year to accelerate flash on ARM cores. They are working with HTC to put Flash onto HTC devices, and have a relationship with Qualcomm accelerating Flash on Snapdragon devices. So building a device wouldn't be that hard. What about selling it? Adobe has great channel to the creative market - who are used to paying around $599 every 18 months for upgrades to Adobe's Creative Suite products. Their consumer products have an existing channel to market through PC and accessory stores - so what would an AIRpad consist of:

• Simple flat, multi-touch display - the power here is in the software platform
• OS - small, simple and light - there are multiple linux based offerings here, an obvious one to pick would be Chromium OS
• Browser - webkit based - Chrome is the obvious pick here
• Application runtime - AIR - which includes Webkit, and already has it's own application store with a rich set of applications
• eBooks - Adobe Digital Editions which already has deals in place with multiple book publishers

Such a product would provide a great showcase for creative agencies to demonstrate their talents to clients - and also provide a great reference design for other hardware manufacturers who want to beat Apple to license from Adobe and drive distribution of.

With Adobe's success in building products that lead to rich, digital content, taking the step into a digital content consumption platform, complete with hardware would be a great way for Adobe to demonstrate it's vision and commitment to it's creative customers - and enable them to have a rich, broad platform that lets them express their creativity in any way they want.

How about it Adobe? When can I get an AIRpad?

Adobe's innovation dilemma

With Apple's launch of the iPad the number of web devices Flash doesn't reach is set to increase. Will this impact the use of Flash by the creatives who are Adobe's core supporters - it's instructive to look at what Flash uniquely provides, and also how did Flash get to the position it is in today.

While many people associate Flash with animated banner adverts (while in fact plenty of animated banners are in fact animated GIF images), Flash didn't start out there - Flash's roots go back to 1996 with the first release "FutureSplash Animator"

There has always been demand from creatives for high quality, interactive experiences - back in 1995 Macromedia Director and the Shockwave format ruled the roost here, with CD ROMs being the key vehicle for delivering interactive digital content. With the rise of the internet the opportunity for Flash opened, and Macromedia (who acquired FutureSplash and re-released it as Flash) allowed an internal competition between Director and Flash, to drive innovation, and ultimately prioritised Flash over Director.

Flash wasn't always as ubiquitous as it is now however - a key point in driving the ubiquity of Flash was the 11 June 1998 deal between Macromedia and Netscape to bundle the Flash Player as part of the Netscape download package. At the height of the "browser wars" between Microsoft and Netscape this was a key deal in delivering a better experience to computer users - and put Macromedia on the path to be a defacto standard.

Merely being there wasn't enough however - Macromedia were able to continually innovate on the Flash Platform enabling people to get more out of their rich web experiences. If we look at the timeline of Flash with key features we see

• 1997 - Flash 3 release transparency and the object library allowing for richer functionality within Flash
• 1999 - Flash 5 improved ActionScript and provided streaming MP3 bringing sound to the web
• 2002 - Flash Player 6 added support for video on the web for the first time - enabling YouTube
• 2004 - Flash Player 7 added Object Oriented programming and rich vector effects
• 2006 - Flash Player 9 new virtual machine for ActionScript with much faster performance, and full screen video

Each release has also brought incremental improvements - such as the move to h.264 video support in 2007, however with any platform the introduction of major new features has slowed down - as the user base has expanded, and the growing number of existing customers ask for new incremental features, rather than spending time and effort on radical, risky innovations.

While there is an ever growing number of new features in Flash Player the adoption of the new features has slowed down - and from the October 2008 release of Flash Player 10, we are still waiting for the 10.1 release.

This comes at a time when creatives are encountering new platforms on mobile - whether iPhone native applications, Android or Blackberry Java applications, or beginning to think about what they could do with the iPad.

Adobe's dilemma is - do they continue to incrementally improve the core Flash Player and Creative Tools used by the large army of creatives that they deliver to - and defend their platform - or make a major bet on a new area - and strike some new "Netscape" type deals to deliver a new wave of creativity to developers?

What should Adobe be thinking about? We can take our lead from the features that are easily accessible in Mobile devices, yet still very hard to do on the web:

• Accelerated 3D - is ubiquitous in desktop PC's now, and is growing fast in mobile phones due to the popularity amongst consumers of iPhone style smartphone experiences
• Location - many smartphones are location aware - applications and services are being built to take advantage of this - many laptops would also benefit from being location aware for the same applications and services
• 3D Video - consumer electronics and the TV industry is betting on a future that includes 3D video, support for 3D video on the web could accelerate the uptake and demand

I await with interest to see if Adobe have an aggressive as well as defensive strategy to address the growing army of web browsers that do not include Flash.

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.

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.

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.

Symbian - the mass market smartphone platform

The Symbian show is on again this year - with the Symbian Foundation promoting it's new open source colours.

The show has been heavy on promoting ideas, features and collaboration with industry partners, but in the rush to embrace open source, seems to have lost some vision and focus.

While Symbian execs are quick to criticise Android and iPhone there seems to be less clarity of what Symbian's focus is. The keynote on Tuesday highlighted 466 new features as being a great thing for the next releases.

In the buzz around new ideas the key advantage that Symbian has - that comes from it's long track record in producing Smartphones.

If we compare the two "low cost" smartphone challengers we see

Both of these are touch screen devices, with application support and great Webkit based browsers. When we compare the typical price a consumer might pay for an unsubsidised version of these handsets we see the difference - the HTC Tattoo typically sells at around €200, while the 5800 typically sells at €150

Symbian has the ability to go lower down the price bracket with smartphone devices too - devices such as the 6730 that use QVGA displays, but still with rich web browsers have the functionality of €500 smartphone devices from 2007, but can now achieve prices close to €100

All this innovation being pushed down to the low cost end of the market creates a great opportunity for developers - Symbian, the first people to bring smartphones to the market, are also going to be the first people to bring smartphones to the mass market - the prepay market in western europe, and the mass markets in India, China, Russia and Brazil.

This open innovation, and mass scale with rich API's and functionality is the opportunity for Symbian, and for developers on Symbian's platform. It is a great pity that this message did not come across from the keynote at the Symbian show.