Knowledge. Passion. Innovation. VisionMobile Research Mobile Megatrends 2009

Knowledge. Passion. Innovation. Mobile Megatrends 2009 Andreas Constantinou, Ph.D. Research Director, VisionMobile twitter: @andreascon Last updated: 2 June 2009 licensed under a Creative Commons Attribution 3.0 license.

Mobile Megatrends Eight Centres of Gravity: the New Rules of Mobile. Market Gravity: The Rise and Fall of Market Value. The Software Industry is Consolidating. Mapping Business Model Innovation: Value Quadrants. Open is the New Closed. The Mobile Application Store Phenomenon. NaaS: Network as a Service. Mobile Service Analytics: the Most Underhyped Opportunity.

VisionMobile Research Reports selected analyst reports On-Device Portals: The New Age of MDM Case Study: Five Defining Traits Beyond WAP Handset Motorola of Open Source (ARCchart) Customisation: (Ovum) (Informa) 2006-2011 (ARCchart) High-Capacity SIMs Mobile Operating Firmware OTA: GPLv2 vs GPLv3 (Informa) Systems: The New From Hype to White Paper Generation Market Reality (ARCchart) Mobile Software Activating the Idle Open Source in Mobile Management Screen: Uncharted Mobile: 2007-2012 Megatrends Report Territory (Informa) 2008 (Informa)

VisionMobile Market-How Maps Mobile Industry Atlas The 100 million club :a visual map of who's who in the mobile : the watchlist of software companies whose handset industry, showcasing 800+ leading products have been embedded on more than companies across 47 market sectors. 100 million cellular handsets

VisionMobile Advisory services selected clients

Knowledge. Passion. Innovation. Mobile Megatrends 2009

1 Eight Centres of Gravity: consolidation of power

1 Eight Centres of Gravity: consolidation of power The industry is moving again into a vertically integrated structure From the vertically integrated devices 20 years ago, to the horizontal enabler era of ODMs and OSes, and again into a vertical integration of hardware + software + services with Nokia, Google et al start

1 Eight Centres of Gravity: consolidation of power Google, LiMo, Nokia, Qualcomm, Apple, Microsoft, Adobe, Intel are building vertically integrated solutions and related ecosystems in effect: Centres of Gravity ecosystem players vertical solution

1 Eight Centres of Gravity: consolidation of power Starting from software or hardware, and building upwards .. ..the value wars are moving up the stack!

1 Eight Centres of Gravity: consolidation of power

1 Eight Centres of Gravity: consolidation of power Outlook: - RIM aggressively moving into forming a centre of gravity - LiMos future is uncertain: LiMo-compliance only applies to circa 1% of the software stack - How succesful will be Adobes transition of Flash Lite into Flash 10 through the Open Screen Project? - Can Sony Ericsson elevate Capuchin from a toolkit to a platform? - Will Nokia divorce its Internet and manufacturing personae? -Plus: networks are now moving into horizontal structure; via outsourced IT operations, outsourced customer operations (see MVNO) and outsourced sub-brands (see Blyk, Out There Media)

2 Market gravity: the rise and fall of market value

2 Market gravity: the rise and fall of market value Every market sector follows a downwards path; As if pulled by a gravity, it goes through 3 stages: novelty network as a service - Novelty: the point when a novel product spectrum scarcity is introduced, but demand is scarce. market formation -Differentiation: market is formed and voice ring-back differentiation products become a point of differentiation services tones - Utility: when the products in the market MVNOs have limited sale value, but have become essential commodities. ringtones location services Gravity accelerators/decelerators value sideloading For every market there are factors or events causing Latitude line Google iTunes` utility its gravity to accelerate or decelerate (e.g. see what Google Latitude has done for MNO location services)

2 Market gravity: the rise and fall of market value Device technologies Network services novelty network as a service mobile haptics spectrum service scarcity analytics market mobile formation application billing stores widgets voice ring-back access differentiation touch- services tones screens synchroni- MVNOs application sation iPhone environments Active Idle multimedia photo Screen Flash codecs ringtones sharing Lite Java location virtual services machines value sideloading browsers core on-device Latitude line Google iTunes` Dalvik portals utility operating systems WebKit Linux

3 The software industry is consolidating

3 The software industry is consolidating Operating systems for smartphones are now reduced to two choices: (smartphone OSes are strategically important to OEMs due to high margins of smartphones) 1. S60: now with low cost of ownership and UIQ, MOAP out of the way Pros: Backed by Nokia, SEMC, Samsung, LG, but not Motorola. Mature and operator compliant Cons: Nokias dominance of package ownership and lack of UI differentiation may alienate OEMs 2. Android: advanced architecture, but not catering to OEM needs Pros: Backed by HTC, SEMC, Samsung, LG, Huawei. Dell, Garmin, Fujitsu, China Mobile, Vodafone, O2. Pros: designed from the ground up for 3rd party developers; fastest in developing and debugging apps Cons: not designed for 2nd parties (OEM partners); variant creation is very resource intensive Cons: software is not pre-integrated with telephony stack and needs Google engineering resource; Our prediction: 5 Android devices will launch within 2009.

3 The software industry is consolidating ..while other smartphone OSes have been sidelined: Linux is no longer the panacea it was considered to be in 2006 - Androids flexibility and short time-to-market has pre-empted Linuxs openness - ALP, Azingo are still in development, with phones expected in early 2010. - LiMo has been a diversion for ALP, Azingo and Myriad (Purple Labs), diverting focus away from product development, into operator customisations and business development. - The discontinuation of Motorolas L-J and the decline in the Japan smartphone market has meant lower volumes from key Linux champions - Linux is now meaningful only as an OS-supporting base Windows Mobile has niched itself into a corner - OEMs use Windows Mobile for enterprise phones or tactical wins (e.g. HTC X1) - ODMs do not have the money or expertise to invest in consumer-oriented industrial designs - The first consumer-oriented version of the OS, Windows Mobile 7, has been delayed to 2010 RIMs Java platform and OSX growing strong but not licensable

3 The software industry is consolidating Mobile Linux landscape: from 10 vendors in 2007 to 5 in 2009 -Linux for mid-end: Myriad (ex Purple Labs) now including Openwave client business and the Sagem software business - Linux for smartphones: Azingo and Access Linux Platform two acquisitions later, ALP is suffering from permanent beta status - since PalmOS 6 in 2004 - Linux for MIDs: Moblin (now with OpenedHand) and Ubuntu Mobile Missing in action: MontaVista, A la Mobile, OpenMoko (no consumer devices). - Plus system integrators: WindRiver (now with Mizi know-how), Teleca, Movial But Linux market share is in decline Linux only 5.1% of the smartphone market in 3Q08, compared to 6% in 2006 (data: Canalys)

3 The software industry is consolidating Four application environments set to dominate: -WebKit: de facto standard for web content and service delivery to hit 100m shipments by 2H09 due to its integration with S40, S60, OSX and Android. Most OEMs are expected to adopt WebKit as compliant, customisable and low cost - Flash Lite: now at 50% share of devices sold, but migrating to Flash 10 + OSP Adobe suffered similar setbacks as Java; ubiquity, but fragmented runtime (to be addressed with Flash 10) - Qt: Nokias foundation for deploying Ovi services and its branded core apps on a single substrate across S40, S60, PC and other OEM handsets - Java ME slowly moving towards MIDP3 Java will stay around due to 80% penetration across sales base and established Java applications market. But OEMs will push more advanced Java VMs. source: Nokia

4 The Evolution of Revenue Models

4 Value Quadrants: mapping revenue model evolution Services value created in the cloud theWHEN of value creation pre-launch post-launch value created during value created design, development and in channel, at point of sale production and during in-life use the WHERE of value creation Device value created on the handset

4 Value Quadrants: mapping revenue model evolution Value Services Value value created Design and each quadrant services, apps and in the cloud development of delivers content delivery software, hardware distinct Value and services pre-launch post-launch value created during value created design, development and in channel, at point of sale production and during in-life use Value Value industrial design monitoring hardware activation embedded software Device configuration software & hardware IP management value created on the handset

4 Value Quadrants: mapping revenue model evolution Value Services Value value created application Design and services, apps and in the cloud developers development of content delivery software, hardware network and services operators service deliv. handset platforms OEMs ..delivered by distinct development advertisers content players tools vendors aggregators pre-launch post-launch value created during value created design, development and handset ODMs and handset in channel, at point of sale production OEMs EMSs OEMs and during in-life use industrial embedded service design houses s/w vendors analytics hardware SIM card Value vendors manufacturers Value industrial design monitoring hardware activation embedded software Device configuration software & hardware IP management value created on the handset

4 Value Quadrants: mapping revenue model evolution Value Revenue models Services Value Revenue models value created application Design and per developer seat services, apps and per active user, in the cloud developers development of per site content delivery per impression software, hardware per CPU .. and using per click network and services distinct per transaction operators revenue models subscription risk-sharing service deliv. handset platforms OEMs development advertisers content tools vendors aggregators pre-launch post-launch value created during value created design, development and handset ODMs and handset in channel, at point of sale production OEMs EMSs OEMs and during in-life use industrial embedded service design houses s/w vendors analytics hardware SIM card Value Revenue models vendors manufacturers Value Revenue models industrial design per unit monitoring per active user hardware per platform activation per unit embedded software per device model configuration per activation per year Device IPR management per app install value created on the handset

4 Value Quadrants: mapping revenue model evolution Revenue models Services Revenue models value created application per developer seat .. confirming per active user, in the cloud developers per site recent trends per impression per CPU per click network per transaction operators subscription risk-sharing service deliv. handset platforms OEMs development advertisers content tools vendors aggregators pre-launch post-launch value created during value created design, development and handset ODMs and handset in channel, at point of sale production OEMs EMSs OEMs and during in-life use industrial embedded service design houses s/w vendors analytics .. uncovering new players hardware SIM card Revenue models vendors manufacturers Revenue models per unit per active user per platform per unit per device model per activation per year Device .. and innovative per app install value created revenue models on the handset

4 Value Quadrants: mapping revenue model evolution Revenue models Services Revenue models value created per developer seat per active user, in the cloud per site per impression per CPU per click per transaction subscription risk-sharing pre-launch post-launch value created during value created design, development and in channel, at point of sale production .. and revealing and during in-life use software the evolution of monetisation value creation in mobile Revenue models Revenue models per unit per active user per platform per unit patents & IPR per device model per activation Device per app install value created on the handset

5 Open is the new closed

5 Open is the new closed Open source is moving from early adoption to maturity across all handset OEMs Multiple major mobile open source efforts: Android, Symbian/S60, LiMo, Qt, WebKit, Java ME, MIDP3, AOL OMP, Qt, GTK, Eclipse IDE,.. Key benefits: - Shares cost and risk of developing software building blocks - Speeds up innovation via third party contributions Key risks: - Lack of education and established best practices in mobile OSS

5 Open is the new closed understanding licenses vs governance models license type Proprietary community license dual license (commercial + copyleft) paid-for Funambol Rhomobile OKL4 phoneME strong copyleft (GPL) Linux kernel hobbyists weak copyleft GTK+ (LGPL, MPL, EPL, ..) platform Foundation Foundation WebKit Qt GTK+ Participating developers non-copyleft (APL, others) OMP Moto Android MIDP3 permissive (BSD, MIT, ..) opinion leaders moderator based members only single company governance model

5 Open is the new closed which licenses and governance models are commonly used? license type Proprietary community license dual license (commercial + copyleft) paid-for Funambol Rhomobile OKL4 phoneME strong copyleft (GPL) Linux kernel hobbyists similar license, varied governance weak copyleft GTK+ (LGPL, MPL, EPL, ..) platform Foundation Foundation WebKit Qt GTK+ Participating developers non-copyleft (APL, others) OMP Moto Android MIDP3 permissive (BSD, MIT, ..) opinion leaders moderator based members only single company governance model

5 Open is the new closed While: Licenses are standardised, converged and well understood 4 licenses used most often in mobile projects (LGPL, EPL, APL, BSD) Governance models are proprietary, diverging and poorly understood And while: - Licenses are about source control source code access, modification, contribution and distribution - Governance is about product control product modification, forking, roadmap, IPR, membership fees..

5 Open is the new closed How open is an open source project? Some questions to ask: - Is the source code publically available or to members only? -Are code check-ins publically accessible ? - Are the minutes from meetings publically availably? - Are there any fees or contractual commitments (NDAs, etc) required for members? -Who has access to check-in code? (and what is the process/medium for check-ins) - Who has the authority to release code and binaries (how is the release schedule determined)? -Who is entitled to branch source code ? -How is the roadmap formed ? What is the process and who has voting rights ? - Are IP rights (patents, copyrights, etc) of contributions maintained or automatically transferred? - Do contributors have to transfer patents contained in the contributions ? - Are there any safe harbour provisions for contributors to the source code ?

5 Open is the new closed Governance models allow OSS use while maintaining control: -LiMo Foundation: open by inheritance Open because its members handsets are built on top of the Linux kernel Zero community contributions in two years since foundation (hired community manager in 4Q08) Only 40% of R1 code is OSS, rest is proprietary -Symbian Foundation: open source capitalism Open to compete with Android, marginalise Windows Mobile and make UIQ/MOAP irrelevant Open so as to reduce barriers to innovation, while lowering costs and risk of software development Nokia will have most influence over roadmap due to gravity of contributions: open source capitalism - Android: as open as Google wants it to be Members can access code, but Google controls commits and product management Commercial agreements allow Google to bundle apps and services on Android handsets

6 The Mobile Application Store Craze

6 The Mobile Application Store Craze The industry has been trying to open the mobile apps market for many years 2002: open route to technology (SDKs) the plan: open OSes and Java will enable 3rd party applications and revenue The reality: complex APIs, high porting costs, poor tools, poor discoverability, poor provisioning The result; Symbian (10,000 apps), BREW (10,000 apps), Java ME (45,000 apps) 2008+: open route to market the plan: help developers deploy and make money, help users discover the reality: Apples app store the first to get the recipe right the result: 35,000 apps within 10 months, circa $500M revenues/year for Apple app store the impact: ALL major handset OEMs, OS vendors and operators want their own mobile app store.

6 The history of Mobile Application Stores Qualcomm introd mobile app stores (MAS), but Apple perfected the recipe. BREW Mobile Shop Apple App Store Android Market RIM App Center Palm Software Store Ovi Store 2002 2008 2009+ 2009+: mobile application stores everywhere! OEMs: Samsung Innovator, MTK App Stores, Symbian, Microsoft MarketPlace, Adobe AppZone Operators: Orange App Shop, Verizon Appzone, Sprint OnDemand, China Mobile, T-Mobile, .. White label: Handango, Mobango, GetJar, Everypoint, Ideaworks 3D, Tanla, Motricity, Cellmania, Handmark, Javaground, OnMobile, Comverse, Amdocs, Qualcomm Plaza, Bango App Seller

6 Ovi Store update - Applications: native (Symbian/S60) + Java + widgets + Flash Lite apps -Content: *premium only* ringtones, wallpapers, videos, and themes - Self publish process (needs taxpayer ID + copyright declaration). 50 EUR reg. fee - Billing will be via credit card AND premium SMS (8 countries initially) - Revenue share: developers will get 70% revenue share (varies with MNO billing). - Availability: 200 million handsets by end 2009 (downloadable, not embedded) -Migration: WidSets discontinued to become Ovi Store runtime on S40. - Advertising: Spotlight will allow ad placements (time or CPM-based) -Features: recommendations based on friend picks and location (key to breaking promotion barriers of Apples top-25 lists and avoiding app price decline)

6 The key success factors of the MAS recipe (1/2)

6 The key success factors of the MAS recipe (2/2)

6 The Mobile Application Store Phenomenon The Apple App Store has also disintermediated the mobile apps value chain. Developer Publisher Aggregator Operator End user Before: (20%) (20%) (20%) (40%) Developer Apple End user After: (70%) (30%) ..and is stirring a rethink of the mobile games business: The traditional mobile-game business model is not bearing much fruit. Console-game publishers Eidos, Vivendi and Sony and mobile content aggregator Player X have all closed their mobile- game-publishing operations; Glu, the third-largest mobile game publisher in terms of revenue has seen is share price collapse; and many companies have gone out of business, including publisher Telcogames and Jamba-owned developer Ojom. .. Fishlabs reports that it makes more money each day selling games at just 0.99 (US$1.30) each to iPhone users than it did in a month from all operator portals put together, where it sold them for the much higher price of 5 a game. Source: Informa Mobile Media magazine, February 2009.

6 The Mobile Application Store Phenomenon Outlook: - Successful MAS solutions will require all five key success factors - Supply of MAS ingredients is in abundance Marketplace and content catalogues (e.g. Cellmania, Handango, GetJar), billing (e.g. Tanla, Bango, Qpass), distribution and retailing (e.g. July Systems, Motricity, Jamba, Handmark), on-device storefronts (e.g. mPortal, SurfKitchen, Everypoint), provisioning (e.g. InnoPath, Red Bend, mFormation). - OEM-led mobile app stores will be most successful OEMs control provisioning, on-device discovery and have access to global distribution. Mobile app stores will be a key post-sales revenue source for OEMs. - Operators will struggle to build and will buy or white label Operators/carriers lack of control over MAS key success factors and have limited s/w know-how. They will end up buying in or licensing MAS solutions Our prediction is that the Joint Innovation Lab will be short-lived.

7 NaaS: The Network as a Service

7 Network as a Service Mobile networks have traditionally been closed and slow to innovate - internal-only product innovation has been extremely slow - limited to mass-market, reach-all-handset services - limited to a handful of 2nd parties, on a need-to basis only - very complex APIs (IMS, Parlay, proprietary SDPs) But operators/carriers are finally realising that there are major revenues to be made by becoming a service platform or a WebCo Network as a Service = reselling API access to 3rd party services Plus allows operators/carriers to empower a long-tail of applications that better cater to the long tail of consumer preferences more choice = more users, less churn.

7 Network as a Service Networks have a breadth of services and consumer intelligence to expose e.g. click-to-call, billing access, send SMS/MMS/email, get location, IVR services, get device capabilities, access to voicemail, user authentication, access to user profile/calendar/contacts/favourites/photos. Early NaaS providers: - Orange Partner: 28 APIs, 4,000 active users most APIs are alpha and only in France -Vodafone Betavine: 5 APIs, 13,000+ users, 200+ applications rev share on apps -BT Web21C SDK: 6 APIs, 9,000+ developers provided by Ribbit (now BT) - O2 Litmus: 3 APIs initial APIs are free, plan to charge for SMS/MMS APIs - More joining Telenor Playground, Sprint Mobility Framework, Deutsche Telecom Develop Portal Standardisation efforts - GSMA One API, Telefonica WIMS 2.0, Open Movilforum

7 Network as a Service NaaS services are late to market and slow to mature: - 3 years behind web companies (e.g. Amazon affiliates, Google AdSense) - 5 years behind alternatives (e.g. aggregators for SMS, billing, location) - High charges for API access (e.g. Orange 500 activation charge for Contact Everyone API). - Lack of intra-country and inter-country reach (APIs limited to subscribers reached by the operator within each country. There is also a lack of consistency across regional implementations). - Lack of carrier-grade reliability (e.g. complaints of downtime on BTs SMS API) - No direct route to market for developers (developer programs are often run by R&D teams or otherwise lack direct access to commercial deployment or bundling deals) - Limited operator experience in working with developers unlike web companies

7 Network as a Service Outlook: Next-gen SDPs and NEPs will run NaaS services on behalf of operators. Companies to watch: Aepona ($45M funding, major telco customers in US, Europe and blueprint for GSMA OneAPI) Ribbit (NaaS pioneer, Web 2.0/Internet background, acquired by BT) see also: www.slideshare.net/aubs/open-apis-a-telcos-perspective, www.gsmworld.com/accessentry

8 Service analytics: the most underhyped opportunity

8 Mobile service analytics Mobile is the most data rich industry; yet we are still in the dark ages - Difficult to assess devices, services and the user experience due to a scarcity of widely deployed measurement tools and the complexity of extracting intelligence - Yet the mobile has infinitely more information about us than the web more information (voice, text, location, presence, mood, movement,..), more implicit (easier to extract), more often available, more closely tracking our behaviour more valuable! - and the analytics applications are phenomenal customer profiling and targeting, customer segmentation and value analysis, campaign management, ad inventory management, user experience analysis, network planning, handset & service performance analysis, revenue assurance, .. - Did you say privacy? it will be traded off for new capabilities especially for social networking - see Facebook

8 Mobile service analytics Mobile service analytics is an under-the-radar market. Early suppliers: The value is across - gathering & storing metrics through device or network probes - aggregating across domains e.g. user segments, location, handset, services, etc -extracting intelligence information depending on the application ..and will enable many new revenue sources and revenue models

Thank you ! Further reading: Industry Atlas A visual whos who of the mobile industry www.visionmobile.com/maps Mobile Open Source: Training Course covering economics, licensing, governance models, communities, operating systems, standards, case studies and strategies. www.visionmobile.com/workshops