VisionMobile Research Mobile Megatrends 2010 · Mobile Megatrends 2010 Evolution of revenue models...

Copyright VisionMobile 2007-2010

Knowledge. Passion. Innovation.

VisionMobile Research

Mobile Megatrends 2010www.visionmobile.com/megatrends

knowledge. passion. innovation

updated: 4 May 2010

http://www.visionmobile.com/megatrends

http://www.visionmobile.com/megatrends


Mobile Megatrends 2010

Andreas Constantinou, Ph.D.Research Director,

VisionMobile

follow me on twitter: @andreascon

Knowledge. Passion. Innovation.

Licensed under Creative Commons Attribution 3.0 Unported License (http://www.creativecommons.org/licenses/by/3.0)You are free to Share or Remix any part of this work as long as you attribute this work to VisionMobile (www.visionmobile.com).

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Distiling market noise into market sense

Analysis + Mapping + Strategy

Market mapsvisual maps of who's who in the mobile industry

Active Idle ScreenWho will own the screen?

Mobile Operating Systems: The New Generation

GPLv2 vs GPLv3White Paper Mobile Megatrends

Business Intelligencecompetitive analysis, commissioned research, company due diligence

Strategy definitionstrategy design, ecosystem positioning, product definition

Mobile Industry Atlas1,100+ companies, 70 sectors (Jan 2010 update)

100 million clubtracking successful businesses in mobile

Top-100 analyst blogwww.visionmobile.com/blog2,800+ subscribers90% mobile industry insiders

Thought leadershipwe coined industry terms like on-device portals, active idle screens, customised design manufacturers and introduced new strategy tools:

mobile industry evolution centres of

gravity

http://www.visionmobile.com/blog

http://www.visionmobile.com/blog


Trusted by industry brands

Clients

selected VisionMobile clients


Vertical propositionsa one-way street or a quick detour?

Web platformsfuture paradigm for building phones or fad?

Open is the new closedhow companies are using open source to further their own agendas

OEM monetisationproducts, services or distribution?

Operator futures bit-pipes or supermarkets? new smart pipe strategies at the junction of brands+consumers

Mobile Megatrends 2010

Evolution of revenue modelsHow revenue models are changing in the mobile industry

App Storesthe long-tail future of app stores andthe untapped retailing opportunity

Recommendationsreaching into every corner of the mobile services world


Vertical propositions:a one-way street or a quick detour?

1

Copyright VisionMobile 2007-2010based on: Charles Fine: Clockspeed and Clayton Christensen: Skate to Where The Money Will Be

Horizontal industry structure Vertical industry structure

integrated componentsproprietary interfaceshigh barriers to entryall or nothing

modular componentsstandardised interfaceslow barriers to entrymix and match

The Double HelixIndustries move between horizontal and vertical structures

Maturing product marketswhich focus in flexibility, customisation

Emerging product marketswhich focus in performance, functionality



1980sthe mobile industry

was born here

1999first MVNOs

appear

2003IT operations

outsourced

2005basestation sharing

2004end of walled

gardens

2009open to social networks

open network APIs

2008service

delivery opens up to s/w

developers

2011operators as

micropaymentproviders

2010outsourced sub-brands

1990-8standardisation of radio

and SIM interfaces

Evolution of the network businessfrom vertical to horizontal

2015?convergence of

operator fixed + mobile products




was born here

1999first ODMs

appear

2003outsourced

operating systems

2007open source

browsers and operating systems

2007-8Nokia Ovi

service shopping spree

2005manufacturing for 1 in 3

phones outsourced

2002Club Nokia

2009OEM app stores

OEM sync services

2002first MNO customised devices

2008-9RIM, Apple:service+device propositions

Evolution of the handset OEM businessfrom vertical to horizontal and back


and SIM interfaces

2010Apple:best-in-class ‘experience’ productsfrom chipsets toad networks

Product leapApple, RIM

2010Windows Phone


Network operators: 50 years/cycle

slow-movingrigid

Handset OEMs: 25 years/cycleagilefragile

Clock-speeds differHandset OEMs move 2x as fast as network operators


Horizontal player structure Vertical player structure

tier-1 operators

tier-2/3 operators

handset OEMs

chipsetOEMS

Vertical propositions: where are we today?players are at different stages towards verticalisation or horizontalisation


was born here

1999first MVNOs

and ODMsappear

2005MNO basestation sharing

2004decline of walled gardens

2009MNOs open to social networks

open network APIs

2008MNO service

delivery opens up to s/w

developers


and SIM interfaces

2007open source

OEM browsers and operating systems

2005manufacturing

for 1 in 3 phones outsourced


Services

Service delivery

Service distribution

Device design

UI design

Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing

softwaredevelopers

servicesvendors

advertisers

Centres of Gravity are being formed

by integrating all value layers under one roofand creating thriving ecosystems around them


ComponentsApple Nokia RIM HTC Google Qualcomm Mediatek

Services

Service delivery


Device design

UI design

Core apps

App environment

Operating system

Hardware platform

Chipset IP

Manufacturing

denotes where player started

Centres of Gravitymoving to capture value across the stack


Takeaways- Operators/carriers are moving at half the clockspeed of handset OEMs

- T1 OEMs are approaching fully-formed verticals, led by Apple

- Chipset vendors are the a-la-carte assemblers (DELLs) of mobile

- Both players are creating gravity centers and developer ecosystems

- Sounds like the PC business?

Open questions- Where will Apple make money in 5 years?(applications, services or hardware?)

- Does vertical integration imply greater profits?(Clayton Christensen: biggest profits are at the points of proprietary integration)


The evolution of revenue modelsHow revenue models are changing in the mobile industry

2


post-sales

value created at point of sale and during in-life use

pre-load

value created before the handset is shipped

cloudvalue created in the cloud

devicevalue created on the device

Introducing Value Quadrants

the whereof value creation

the whenof value creation


post-sales

value created at point of sale and during in-life use

pre-load

value created before the handset is shipped

Distinct value in each quadrant

- software IP & services- hardware IP- integration services- industrial design

- content dev. tools- service design tools- developer tools- OEM production tools

- voice & msg services- VAS and SDPs- advertising- content & app stores

- service distribution- inventory leasing- on-device analytics- device management

Value

Value Value

Value

.. distinct value areas

clo

ud

de

vic

e


post-sales pre-load

clo

ud

..and distinct revenue models

- software IP & services- hardware IP- integration services- industrial design


- voice & msg services- VAS and SDPs- advertising- content & app stores

- service distribution- inventory leasing- on-device analytics- device management

Value

Value Value

Value

Revenue models Revenue models

- per activation/install- per week- per unit/user segment- per update

Revenue models

- per unit- per platform- per model- per site

Revenue models

- per usage- per active user- CPA/CPC/CPM- revenue share

- per developer seat- per module- per site

.. with distinct revenue models

de

vic

e


post-sales pre-load

clo

ud

The evolution of revenue models

- software IP & services- hardware IP- systemware- industrial design


- VAS and SDPs- advertising- content & app stores- network capabilities

- service distribution- inventory leasing- on-device analytics- service management

Value

Value Value

Value

Revenue models Revenue models

- per activation- per update- per inventory/day- per user segment

Revenue models

- per unit- per platform- per model/design- per site

Revenue models

- per user, CPC/CPM- revenue share- per segment/reach- per follower

- per developer seat- per module- per site

de

vic

e

from horizontal royalties to vertical productisation

long term evolution:from services to distribution

upstream monetisation(two-sided platform)

from hardware to services revenues

from pre-load royalties to post-sales activation

untapped value in modular design tools


Takeaways- pre-load value moving from software IP to systemware & productisation

- services value: from downstream to upstream; and from services to

distribution

- post-sales value: inventory leasing, analytics, service distribution and

service management

Key questions- what % of device value will be in software vs systemware in 2015?(software = platform royalties, systemware = productised software+hardware)

- what % of MNO revenues will come from upstream/downstream in 2015?(downstream=end-users, upstream = media publishers, app developers, advertisers)


App Stores: the long-tail futurewhy App Stores will take retailing where it’s never been before

3


Top-5 App StoresNo one has been able to copy Apple’s recipe. Is it that hard?

App Store comparative analysis (end- 2009). Source: VisionMobile


The App Store recipeThe App Store recipe needs end-to-end control of all 5 ingredients:

Each ingredient is mastered by different players in the value chain,

and requires different technical know-how and commercial relationships.

... no wonder Apple is the most successful cook!

mobile software firms

mobile operators & payments brokers

handset OEMs platform vendors brands and retailers(mastered by)


The 2-year future of App StoresTo predict the future you need to know your history

everyone wants to get their hands on

developers

rev share best-practices become standardised

operators seizetheir addressable

market

sophisticated in-life app management

app retailing takes on a life of its own


Key predictions for App Stores (2010-2012)

1. Abundance: 100+ App Stores will exist in 2012;Every single tier-1 OEM and MNO is launching their own App Store - enabled by white label App Store

solutions from Amdocs, Cellmania, Comverse, Ericsson, Everypoint, GetJar, Handango, Handmark,

Ideaworks Labs, Javaground, Mobango, Ondeego, OnMobile, PocketGear, Qualcomm, SlideME and Sun.

2. Diversity: App Stores will cater to diverse segments; OEM, MNO or platform-centric stores, lifestyle-centric stores (e.g. sports or clothes brands), specialist

content (e.g. adult or enterprise), region-centric stores (e.g. Seattle apps)

3. Co-existence: several App Stores will co-exist within a handset Case in point: LG and Samsung phones which shipped in 4Q09 in Korea came with four (!) app stores co-existing

within the same handset; one from the OEM, one from the platform provider (Windows Mobile) and two from the South Korean operator SK Telecom.

4. Low barriers: App Malls will enable low-cost shops-in-shop setupsSDP vendors will offer the infrastructure, catalogue and recommendations technology allowing wannabe

app retailers to be setup at very low cost, with proven revenue models (setup fee + rent + sales commission)


Key predictions for App Stores (2010-2012)

5. Retailing will triumph

- app retailing has been a bottleneck up to 2009Case in point: the Apple App Store top-25 is the main channel by which apps have been able to grab user

attention. This has resulted in price erosion, as app developers drop prices to bubble up to the top-25.

- flurry of startups to capitalise on untapped retailing opportunityApppopular, Appolicious, Appsfire, Chomp, Chorus, Flurry, I use this, Mplayit, Yappler using voting,

automated recommendations, in-app promotions and other techniques to capitalise on retailing opportunity.

- app stores will take retailing where it’s never been beforeApp Malls (shops-in-shop), friend endorsements, inventory micro-targeting, gift/beg options, second-hand

app reselling and other features will spring up, taking retailing to new levels of sophistication.

- retailing will grab a large chunk of revenues, as in the FMCG businessIn the book business, retailers get between 25% (online stores) to 55% (bookstore chains) of the retail price.

Mobile app developers will take 70% of revenues, but will spend another 20% or more in app promotions.

http://www.apppopular.com/

http://www.apppopular.com/

http://www.appolicious.com/

http://www.appolicious.com/

http://appsfire.com/

http://appsfire.com/

http://chompapps.com/

http://chompapps.com/

http://www.chorusapps.com/chorus-site/index.php

http://www.chorusapps.com/chorus-site/index.php

http://www.flurry.com/

http://www.flurry.com/

http://iphone.iusethis.com/

http://iphone.iusethis.com/

http://mplayit.com/

http://mplayit.com/

http://www.yappler.com/

http://www.yappler.com/


Takeaways- The App Store recipe requires diverse ingredients sourced from

across the value chain materialising an App Store needs multiple partnerships

- App Stores will follow the FMCG route; abundance, diversity, co-

existence and low barriers to entry.

- Retailing is the most untapped and biggest opportunity in App Stores

- App Stores will take retailing to new levels of sophistication

Open questions- How many apps will operator stores attract in 2012?(1,000s, 10,000s, 100,000s? So far operator app stores number around 1,000 apps each)

- Who will be the mega-retailers of the mobile apps world in 2012?(e.g. Ericsson, Nokia, Vodafone, Handango, ESPN?)


Web platformsand why the future of software development is still elusive

4


Web platforms: future of mobile development?

Many signs pointing to web development as a one-way street for mobile:

- from WAP to full HTML 4.0 on mobile browsers and Flash

- from web on high-end phones to the web on every phone (Opera Mini)

- from HTML apps to on-device widgets for delivering services

- from widgets to Palm’s WebOS where every app is web-based

- open source WebKit becoming a de facto standard (170M shipments as of June 2009)

But..

- web platforms address the needs of 3rd party devs, not handset OEMs

- the landscape is much more complex, as we shall see..


Which platform?Many platform choices for application developers and handset OEMs


For what player? Differences between 3rd parties and 2nd parties

- 10,000s of developers- selling software to end consumers - familiar with common languages and tools

Developer profile

Application profile

- 100,000s of applications, few variants- downloadable to the device post-sales- games, entertainment, utilities, e-books, ..- accessed through (often deep) menus

- 300-400 software houses- licensing to OEMs or MNOs- with access to proprietary toolchains

- 1000s of applications, many variants- often embedded to the device pre-load- middleware, apps or client-server solutions- or integration and customisation services

any software developer without a commercial relationship to handset OEMs

software developers and service providers supplying directly to handset OEMs

Definition

2nd parties3rd parties


platforms for 3rd parties vs(any developer)

- designed for building apps- aimed at any application developer- using modern platforms and low cost SDKs- intended for downloadable apps

The platform chasm

platforms for 2nd parties(OEMs, MNOs, and partners)

- designed for building phones- aimed at an inner circle of OEM trustees- using legacy C/C++ platforms and toolchains- intended for core (embedded) apps

3rd party developers want to:

Develop + Deploy + Monetise

2nd party handset OEMs want to:

Build + Differentiate + Customise


Simplify developmentIntegrate w/ deviceIntegrate w/ cloudReduce time to market

Distribute appUpdate app

SellPromote

Platform needs differ greatly

Fast chipset portAccelerate perf.Reuse expertiseMax. battery life

Few regional cores10s of MNO variantsFast variant creation

Social core appsDifferentiate w/ UIFast core app developm.Win MNO business3rd party ecosystem

3rd party developers want to:

Develop + Deploy + Monetise

2nd party handset OEMs want to:

Build + Differentiate + Customise


Simplify developmentIntegrate w/ deviceIntegrate w/ cloudReduce time to market

Distribute appUpdate app

SellPromote

How do cater to these needs?

Fast chipset portAccelerate perf.Reuse expertiseMax. battery life

Few regional cores10s of MNO variantsFast variant creation

Social core appsDifferentiate w/ UIFast core app developm.Win MNO business3rd party ecosystem


Takeaways- The needs of 2nd parties and 3rd parties are worlds apart

- Web platforms level obstacles for 3rd party development

- But.. they do very little in addressing handset OEM needs

- Android addresses OEM phone development and differentiation

- But.. no platform yet addresses OEM customisation needs

- No platform yet to replace legacy RTOSes

Open questions- Which platform will have disappeared by 2015? (S60, Qt, BREW, LiMo, Windows, Java or Flash? choose only one)

- What percentage of phones will run legacy RTOSes in 5 years?(from 85% today to ??% in 5 years)


Open is the new closedhow companies are using open source to further own agendas

5


What is open source?

- A tactical product move, not a strategy

- a middle ground between build and buy

Advantages:

- Shares cost and risk of developing software building blocks

- Speeds up innovation via third party contributions

Disadvantages:

- Lack of education and best-practices in mobile OSS

- Does not change how much you spend, but where you spend it

What is open source? quick refresher


Licenses vs Governance modelsin mobile, licenses converge but governance models diverge

governance model (simplified)

trust community managed community members only single company

weak copyleft(LGPL, MPL, EPL,..)

strong copyleft(GPL)

permissive (APL, BSD, MIT, ...)

Linux kernel

GTK+

license type

Funambol

Qt

dual license(commercial + copyleft)

platform

Proprietarycommunity license

Android

GTK+Foundation

Foundation

WebKit

OKL4Rhomobile

Chrome

sim

ilar

licen

sedi

ffer

ent g

over

nanc

e


Control points can detract the freedoms open source is meant to bestowControl points in open source

Open source freedoms Control points

Users should be free to run the software

- Incomplete software: Sponsor can retain key building blocks as closed source, meaning that users will not be able to create fully functional derivatives

Software source code can be accessed freely and easily

- Private codelines: Sponsor can use private codelines which are feature-wise very advanced compared to the public codeline, meaning that anyone using the public codeline is losing features or bug fixes.

Software can be modified freely

- Ownership of contributors: Sponsor can control all contributions into the main codeline (the tip of the tree), meaning users need to maintain a parallel patched codeline which can easily diverge and become very costly to merge back.

- Gravity of contributions: sponsor can dedicate the largest body of engineers to the project (compared to any single other participant), meaning any other contributions will be ‘drowned’ by sponsor-led contributions

No discrimination against any person or group of persons

- Private visibility: Sponsor can make the product roadmap or strategy available only to members of a paid-for or invite-only club.

- Timezone-limited forums: Sponsor can setup rules to operate the project forums (e.g. IRC channel) only during working hours, meaning it disadvantages users in other continents (e.g. US vs Europe vs Asia timezones).

No discrimination against fields of endeavour

- Trademarks: Sponsor can secure Trademarks on the project name, meaning that any users wishing to create derivatives named after the project will need a separate agreement with the sponsor.

- Distribution of bolt-ons: Sponsor can create a developer community for software bolt-ons so as to own the distribution gateway for these bolt-ons onto derivatives of the software.


How mobile industry uses control points within open source projects:

-Symbian Foundation: open source capitalism99% of reviewers still work for Nokia. No long tail contributions and complex contribution process

Long term Nokia has most influence over roadmap due to gravity of contributions

OPEX costs of circa $5M per OEM seat; expensive CAPEX for members and unsustainable

- Android: “you can have any colour as long as it’s black”Invite-only membership. Google-owned private codeline which is 6-8 months ahead of public SDK.

All code reviewers work for Google. Google owns Android Market distribution channel (closed source).

Google has a trademark on Android so that you cannot call it an Android phone unless it passes CTS.

CTS is very demanding certification process involving API tests, performance tests and hardware reqs.

-LiMo Foundation: OEM community source$20K entry-level membership needed to access source code. SDKs to be launched publicly in 1H10

A community of OEMs driven by operator requirements

Zero external community contributions since 2007; process established in 2009

Examples of closed governance


Recommendations everywhereraising the bar for mobile services

6


Recommendations: an underhyped market

- Behind-the-scenes adoption in mobileWhat started as ‘people who bought this also bought that’ has found its way into 10s of mobile operator

portals, not to mention 1,000s of mobile websites. None of this has received mainstream media coverage.

- Right technology at the right timeIn 2009-10, recommendations are the differentiator (the cherry on the cake) for App Stores. This has

prompted several mobile operators (including Vodafone, O2 Telefonica and T-Mobile) to issue RFIs/RFQs.

- Growing academic research Recommendations research is moving into its third phase of evolution. The Recommender Systems 09

conference gathered 50% more paper submissions than last year from 35 countries – making this a rare

case of synchronicity between commercial and academic worlds.

- Underhyped potential Recommendations technology is essential to help users navigate the terabytes of service content from a 2-

inch screen. Recommendations will find their way into every service, from App Stores to Customer Support


Reaching every niche of mobile servicesvery wide scope of applications

- Mobile Portal Personalization adaptation of navigational elements, content listed, ads served

and personalised search results (e.g. Changing Worlds, Choice Stream, Media Unbound and Leiki)

- Content Discoverypure content discovery and recommendations across content types (e.g. Xiam, FAST)

- Subscriber segment targetinguser profiling and segmentation as part of an online marketing campaign (e.g. Coremetrics and Pontis)

- Influencer targetingprofiling and identification of influential subscribers (e.g. Xtract and Strands)

- Mobile advertising solutionsinventory targeting (e.g. Jumptap, Aggregate Knowledge, Velti/Ad Infuse, Medio and Wunderloop)

- Product/Content Personalization cross-channel product and content recommendations

optimised for retailers, web and media (e.g. ChoiceStream, Loomia, Aggregate Knowledge)

- Business analytics product/offer bundle recommendations based on user segmentation and real-

time behaviour analysis (e.g. Olista, Oracle, ThinkAnalytics and Coremetrics)


Wealth of technology supply

40+ recommendation solutions packaged in a variety of forms- From vertical pre-integration into a service (e.g. App Store) towards operators to horizontal engine with connections to multiple touch points (e.g. mobile, broadband, web, retail) towards media brands.

- Most of these vendors have come from the IT/web side, with few pure mobile-domain vendors

8 key vendors we researched: Xiam, Changing Worlds, Ericsson, Loomia, Pontis, July Systems, Olista and Choice Stream

For full analysis see visionmobile.com/in/recommendations


Outlook for recommendation solutions- Academic research moves in parallel to commercial adoptionAcademic research focusing on interfaces in/out of recommendation engine and context adaptation

Commercials focusing on live clickstream processing, content optimisation and market penetration

- Scope of recommendation technology in mobile is rapidly expandingRecommendations are being applied to App Stores in 2009-10 and moving to business analytics,

advanced CRM and product/service recommendations in 2010-12.

- Specialist vendors will endureRecommendations need to be highly tuned to channel & content during launch and continually during

the in-life phase. Moreover, vertical solutions won’t be readily extensible to multiple touchpoints.

- M&A of recommendation vendors to ensueThe incumbent VAS and SDP vendors will need to buy in (rather than build) technology, due to the

content- and context- specific know-how that recommendations require. We expect this will lead to

M&As thanks to the abundant technology startups out there.

(e.g. see Qualcomm + Xiam, Amdocs + Changing Worlds acquisitions in 2008)


Takeaways- Recommendations is one of the most underhyped mobile tech sectors

- Seeing rapid adoption in 2010-12 to add differentiation to every service

- 40+ vendors of recommendations solutions, mostly from web

- Multitude of academic and commercial optimisation issues to solve

- M&A of recommendation vendors to ensue

Open questions- Will consumers shun portals without personalisation features? (consumers will expect to see personalised recommendations in mobile portals as they do in Amazon)

- Can reco solutions measurably improve churn or service adoption?(lack of measurable benefits hampers adoption of recommendation solutions)


OEM monetisationproducts, services or distribution?

7


Value Description Value Boundaries 1990

Boundaries 2010

Value in 2015

Services e.g. voice, messaging, IM, Facebook, Zyb, 3rd party apps ..

70% of industry revenues

NaaS, mbilling

Service delivery e.g. voice, text, web, WAP, software, on-device integration70% of

industry revenues

widgets, OSGi

Service distribution which device and where on the device


service inventory

Device design industrial design, packaging design


cross-

optimise UI design design of the entire user interface


cross-

optimise

Core apps core apps (dialler, call logs, menus, idle screen, inbox)


cross-

optimise

Operating system software middleware and hardware interfaces15% of

industry revenues

optimisation

Hardware platform integrated hardware reference designs


scalability

Chipset IP for apps processors, radio processors, graphics, etc


performance

Manufacturing component sourcing and assembly


supply chain mngmt

OE

Ms

OE

Ms

MN

Os

MN

Os

The telecoms value stackand how value is shared across the stack from 1990 to 2015

chip

sets


Value MNO value OEM value Chipset value Boundaries

Services NaaS, mbilling

Service delivery widgets, OSGi

Service distribution service inventory service inventory

Device designcross-

optimise UI design

cross-

optimise Core apps

cross-

optimise

Operating system optimisation

Hardware platform scalability

Chipset IP performance

Manufacturing supply chain mngmt

Value areas and boundariesfor MNOs, OEMs and chipset manufacturers

(analysis omitted)

flat rate data

open gardens

OEM-dependent

standard

chipset-dependent

ARM

outsourced

(see next)(see MNO theme)

RF standards

OEM-dependent


OEM valuewhere OEMs can add and extract value (1/2)


- Distribution is a *unique* OEM asset

Distribution = which device and where on the device a service is deployed

(distribution is OEM-proprietary due to pre-load software boundaries)

- In commoditised industries (e.g. books), distribution is 25-55% of revenues

- OEM distribution across 1,000 million devices/year is unmatched

- Service distribution is like Google’s business: managing & selling inventory

(which is why Android moves distribution control from OEMs to Google)

Services

Service delivery


Device design

UI design

Core apps

App environment

Operating system

Hardware platform

Chipset IP

Manufacturing

Services

- The best services will be run by someone else

- No unique OEM value-add

(commoditising due to open gardens - including open on-device services)


OEM valuewhere OEMs can add and extract value (2/2)

Device design + UI design

- Device design is most exclusive OEM value-add (and most tightly-kept secret)

- yet today UI design is monolithic due to horizontal integration of core apps

Defendable long-term OEM value add is in:

- Device design which can be mass-customised (think deep fascias, aka Modu)

- Device design which matches UI design and target customer segment at PoS

- UI design which allows ‘personality change’ during in-life use

(downloadable personalities) enabling a new premium content market

Services

Service delivery


Device design

UI design

Core apps

App environment

Operating system

Hardware platform

Chipset IP

Manufacturing

Manufacturing

- Supply chain management is unique value add

- but only for Tier-0 OEMs (Nokia)

- and mega hardware vendors (Qualcomm, Mediatek, etc)


Takeaways- Commoditised service delivery opens up services to anyone

- Distribution (which device and where on the device) is unique value add

- Device design and matched UI design are unique value-adds,

especially if mass-customised across global reach and customer segments

Key questions- How will Nokia (tier-0) make money in 5 years?(hardware, services or distribution?)

- How far can mass-customised designs go in 5 years? (1,000, 1 million or 1 billion unique designs?)

- Is there a new market to be created from premium ‘UI personalities’ ?


Operator futures: bit-pipes or supermarkets?New smart pipe strategies at the junction of brands+consumers8


The operator business is breaking upFrom the supermarkets of the 1990’s, operators are breaking up:

- outsourcing marketing & retailing (see MVNOs)

- sharing basestations

- outsourcing core network expansion

- outsourcing value-added services to 3rd party SDPs

- reselling bandwidth to OEMs (see Kindle)

- billing relationship diluted through App Stores

Are operators destined to become bit-pipes?- not if they don’t choose to


Value layers in telecomsand boundaries between OEMs and MNOs

To add:

Radio spectrum

Network infrastructure - analytics, network APIs

Payment and authentication - mbilling

Voice/text/data - resell data via OEMs, etc

Value-added services - brand deliverables


How can you build a smart pipe strategy?Three sustainable areas where MNOs can add value:

Value MNO value OEM value Chipset value Boundaries

Services NaaS, mbilling

Service delivery widgets, OSGi

Service distribution service inventory service inventory

Device design

cross-optimise

UI design cross-optimise

Core apps

cross-optimise

Operating system optimisation

Hardware platform scalability

Chipset IP performance

Manufacturing supply chain mngmt

(analysis omitted)

flat rate data

open gardens

OEM-dependent

standard

chipset-dependent

ARM

outsourced

(see next)(see MNO theme)

RF standards

OEM-dependent


How can you build a smart pipe strategy?Seven pillars for a sustainable smart pipe strategy

Services

Service delivery


Device design

UI design

Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing

1. Focus services only on unique brand deliverables

2. Expose Network APIs as a Service, but monetise as a matchmaker

and marketing channel

3. Reach where VISA doesn’t, but at VISA-like commission rates

4. Explore customer & service Analytics

5. Control the in-the-hands experience via on-device service management

6. Create, broker and monetise idle-screen real-estate to 3rd parties

7. Let App Stores divide and conquer, but offer best-in-class billing and merchandising as a service to all App Stores


Focus where the brand value isDesigning a smart pipe strategy (1/7)

Services

1. Focus only on unique brand deliverables e.g. piece of mind, the brand that brings you other brands, in the palm of your hand, choice, traveler-friendly, always-in-touch, always-first-to-know

2. Use these unique brand deliverables to drive service strategy

e.g.

- Piece of mind: sync contacts/SMSs to network, replace lost phones within 24h

- Choice: offer shortcuts to favourite services (from Facebook to flowers) from the idle screen

- In the palm of your hand: offer local device access to a) core network services like voicemail, self-help, phone bill, phone use andb) widgetise the 100s of SMS/WAP-only services to boost adoption and provide consistency of service experience and management

Mobile PC STB

Services

Service delivery


Device design

UI design

Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing


Network as a ServiceDesigning a smart pipe strategy (2/7)

- Making $$ from network APIs is hard:

users will not pay more for a network-enabled app, there’s little unique to it

1. Monetise as a matchmaker

- deliver dynamic profiling info per subscriber segment

- leverage customer segments for promos (aka white label Blyk)

- outsource new brand creation and co-own derivate brands

2. Monetise as a marketing channel

- offer a marketing backchannel for app developers through app store

- offer recommendation services by tapping into users’ social graphs

3. Offer network APIs via on-device widget environment

for consistency of experience, device integration, in-life service maangement and inventory management

Services

Service delivery


Device design

UI design

Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing

Mobile PC STB


Reach where VISA doesn’tDesigning a smart pipe strategy (3/7)

1. offer micro-billing at VISA-like commission to mobile, PC, STB environments

a) via web-activated billing with MT SMS confirmation

b) NFC-activated billing with free NFC reader terminals

2. Extend billing beyond VISA capabilities

through recurring payments, in-app purchases, DoesUser HaveCredit()

Mobile PC STB

Services

Service delivery


Device design

UI design

Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing


Services

Service delivery


Device design

UI design

Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing

Customer & service analyticsDesigning a smart pipe strategy (4/7)

Customer & Service Analytics

Install network and device probes to develop new intelligence:

1. Understand customer behaviour and enable behavioural targeting

2. Monitor and fine tune service performance (A/B testing)

3. Identify influencers and improve lifetime value metrics

4. Understand device performance and leverage in OEM deals pre- and post-sales

5. Monetise by reselling analytics to OEMs, ISVs (i.e. become the Nielsen of mobile)

Mobile PC STB


Services

Service delivery


Device design

UI design

Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing

Service lifecycle managementDesigning a smart pipe strategy (5/7)

In-hands experience is more important the out-of-the-box experience.

Implement on-device service management to:

1. Reduce ‘runtime age’ for existing content

2. Multiply addressable market for new content and services

3. Monetise from 3rd party software management with ‘per install’ and ‘per activation’ revenue models

4. Multiply customer touchpoints and opportunities for customer conversations

Mobile PC STB


Services

Service delivery


Device design

UI design

Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing

Service retailingDesigning a smart pipe strategy (6/7)

Networks buy the most terminals in Europe/US and hence control distribution and retailing (‘which device and where on the device’)

1. Create new real-estate through the idle screen (aka home screen, desktop)

2. Broker real-estate to 3rd parties and own services using innovative revenue models (per-widget, per-time slot, per action)

3. Implication: focus on a single app to be provisioned on all terminals

- idle screen for real estate management with widget runtime

- idle screen can encompass address book and any other functionality

- leave all other apps to 3rd parties! (and monetise upstream through distribution deals)

Mobile PC STB


Services

Service delivery


Device design

UI design

Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing

App StoresDesigning a smart pipe strategy (7/7)

Networks add unique value in billing, distribution and network APIs

but NOT in developer support and on-device storefronts

(or any other aspect of app stores!)

Networks can only extract value where they add value. Consequently:

1. Let app stores fight amongst themselves and evolve

2. Monetise as a billing platform and on-device inventory platform

3. Authorise network API access only for apps within pre-approved app stores -> creates new control point in application distribution!

Mobile PC STB


Takeaways- MNO value is in matchmaking, micro-billing, analytics and service

distribution

Open questions- How will operators make money in 5 years? (access pipe, MVNO enabler, smart pipe, supermarket or closed garden?)

- How will operators position themselves in micro-billing?(premium payment gateway, VISA of mobile, or bank?)

- What % of MNO revenue will come from up vs downstream in 5 years?(10%, 40%, 80% ?)


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