Monthly Archives: March 2009

Going Off (Portal) in Vegas

lasvegassignNext week I will be attending my 25th CTIA conference. This year’s Vegas show will occur with the twin backdrops of the overall economic mess coupled with the positive trends in mobile application use.

On Thursday April 21, I will be on a panel discussing the Off-Portal business models. The irony is that although I have made a living for the past several years in the Off-Portal marketplace, I believe that this model is not relevant to the future. Let me explain.

For those who are not familiar with the lingo for this segment of the mobile business, let me define a few terms. (If you know all of this you should skip down)

Mobile Carrier Portal – This is the homepage on a handset of a carrier’s wireless Internet service. The carrier determines what services are promoted and placed on the portal. verizontodayh4webThis is also referred to as “on-deck” or “on-portal”

Off Portal – This is any service that is available to the subscribers of a carrier that is not linked to the carrier owned homepage and direct links. This service is usually promoted through use of a shortcode.

Shortcode- a five or six digit number that is used to provide information or other services via SMS

Premium Shortcode – A five or six digit number that is connected to a service that the subscriber will pay a one time or monthly payment.

The mobile value added service market has been divided for the past 5 years between “on-deck” providers and “off-portal” service. The services were predominately information and news services, coupled with fee based ringtone, wallpaper and games services. The advantage of being an on-deck provider was free promotion for your service by being within the captive (or semi-captive) carrier internet web service.

Alternatively, off-portal services were promoted with a mix of traditional web advertising and search engine optimization, coupled with television, radio and print. The off-portal application and content providers also promoted their services via premium shortcodes. To use an off-portal service the subscriber sends a message such as “join” to the code, goes through an opt-in process and gets subscribed to a service such as monthly ringtones. The billing of these services is provided by the carrier.

It seems that regardless of a company’s portal status, they had envy for the other model. On-deck providers wanted the “freedom” to promote their services and drive even greater traffic to their site, while off-portal services desired the free promotion model of the on-deck players.

ovistoreThis game is largely over. Just as the original AOL closed portal gave way to the general Internet, the protected closed gardens of the carriers are done. If their portals are “done”, then off-portal, as a concept is done.

The explosion of smart phones with powerful standard browsers, large screens, pointing devices and keyboards renders a pre-installed carrier bookmark almost valueless.

If you have a fee based service that is on a carrier’s portal, you will have to promote that service with investment that will eventually approach the advertising investment of the off-portal services. This trend is further accelerated by the 3rd party application store trend.

The application stores are filling the promotion void created by the reduction of prominence of the carrier portals.

So on Thursday I will sit on a panel to discuss the challenges and opportunities of the off-portal business model. This business model has made 100’s of millions of dollars for application and content providers and, of course, the carriers.

My opening comment will be that this model is in its end days.

My next article will be on what a carriers and application providers should do to manage this transition.

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Filed under android, Apple, economy, mobile, Mobile Application Stores, mobile commerce, mobile games, Open Network, Ringtones, shorcode, Smartphone, subscription servcies, syndication, Verizon, wireless

Open Letter to Madison Avenue

iphonev5800This past week the New York Times had an article about the convergence of contextual advertising and Smart phones. The potential for highly targeted advertising including the use of GPS is a trend I have been discussing in this blog for over a year.

 

The interesting angle in the NY Times piece , “Is this an invasion of privacy?”

Regardless of ones wishes, all consumers will continue to be bombarded with advertising, much of which is the Madison Avenue equivalent of carpet bombing. As with the military version, this is a technique whose time has come and gone.

For the purposes of this article I will focus on video advertising because like many consumers, I can not tell you the last Internet banner ad I paid any attention to or clicked on.

I watch most of my video entertainment on the Internet. I frequent the websites of the major networks, as well as Hulu and YouTube. All of these sites have various forms of advertisements.

Most of these (I would say 99.999%) have zero interest for me.

These are a wasted investment with no opportunity to drive a sale of anything.

Would I prefer to see ads that were actually targeted to my interests? Of course I would. I would prefer no advertisements at all, but that is not realistic.

For me this equation becomes very simple. If I want advertisements that I would care about, the advertisers must have knowledge specific to my interests through some mechanism. The advertisers can either try to derive my interests through various contextual techniques (location, click analysis, websites frequented, purchases made, etc) or they can simply ask me.

Both of these techniques run into privacy concerns. There are fear mongers claiming that “big brother” is watching us and will do some unmentioned evils with all of this data. The questions are: What is private? What should remain private? and What forms of personal information can be revealed for mutual benefit?

I believe that information that is your medical history , your financial status, your sexual orientation, your marital status, your status as a veteran and your religion should remain private unless you explicitly release it. Basic consumer desires are fair game in my opinion.

Any person in 2009, however, who has any expectation that their Internet use, whether on a PC or a Smartphone, cannot be monitored for commercial gain is living in a fantasy world. Perhaps it is for this reason that 10’s of millions of Facebook subscribers readily reveal the most intimate details about their lives. They are just not concerned about their privacy.

If you have an expectation of privacy then never use a credit card, or make a phone call, or shop in a store, or use the Internet, or send a text message, or stay at a hotel, or use an airline, or subscribe to anything. You cannot live in modern society without leaving a digital trail of breadcrumbs that can be used for commercial purposes.

Now back to my video entertainment.

sgt_starWhen I watch any of my favorite shows I am subjected to commercials on trucks, beer, video games, grape juice (as a cure for everything!), tax services, an assortment of female oriented products, German cars, U.S. Army recruitment, fast food, etc. All of this investment is wasted on me.

To make my video watching more enjoyable and to help save advertisers millions of dollars, I offer the following open letter to those who want to advertise to me in the future:

Dear Advertisers

I will never buy a truck,a German car or an SUV. I am not interested in woman’s deodorant, and the last Budweiser Beer I drank was in High School. (Yes Mom, I did drink beer in high school) I don’t smoke, so telling me to stop is a waste of your breathe. I already have a subscription to the New York Times, so ads that try to get me to subscribe are also a waste, I only need one copy of your newspaper per day.

I am past the age of recruitment for the U.S. Army, Navy, Marines and Air Force. My kids are not interested in the military. We do support you and suggest you save the money that you use to advertise to me and use it to pay your soldiers more.

To Taco Bell, McDonalds, Wendys, and Dominos, we get it. You are fast, unhealthy and fattening. Please save the advertisements on me and work on your quality instead.

I have no interest in household cleaning products. I don’t know which one is for what mess.

I do like action movies, ice hockey (particularly the New York Rangers),baseball (Yankees), football (Jets), politics, and technology. I like the latest electronic gadgets, high definition television, anything made by Apple, and Japanese cars that last 15 years.

For Verizon, I would gladly consider switching my cable and Internet provider to your Fios service, if and when you get the one HD channel that I really care about. If you paid attention to this open letter you would know that it is MSG. Any advertising to me that does not have the words “We now have MSG in HD” is a waste of money.

I also find that a mob of guys in glasses and Verizon uniforms following me around to be creepy.

I like good wine and hand crafted microbrews. I prefer the anti-oxidants of grapes in my Chianti, not Welchs grape juice.

If you want to sell me diamonds and gold jewerly, then only send these ads to me a month before my wife’s birthday. You’ll have to get that information from her. But then, it is in her interest to tell you, isn’t it?

Now you have it. It would have taken millions in investment dollars to build the algorithm to derive this same information about me. This is a win-win. I get ads that I would at least find entertaining and focused on my interests, and you get a chance that is greater than zero of influencing a purchase decision.

I expect that the next time I watch something on Hulu, or “The Office” on NBC.com that the ads will be focused on my interests.

Regards,

Steve Spencer

A good ad targeted to my interests

A good ad targeted to my interests

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Filed under advertising, Apple, Content, mobile, mobile advertising, smart phone, Smartphone, Social Media, subscription servcies, You Tube

Mobile Content : Case Study for Economic Recovery?

 

The deluge of economic doom and gloom in the news would make Chicken Little seem like a wide-eyed optimist.disney-chicken-little-sky-falling

Headlines scream at consumers with news like:

Auto Sales Plunge 45% to 27-Year Low

-Unemployment Rate hits 8.1%, Most Jobs lost in a short time period since they started keeping track in 1939

-Citicorp stock dips below $1

With all of this news you would expect that Eli Lilly, the manufacturer of the world’s leading anti-depression medication would be having huge profits. Their stock is down about 30% since the beginning of the year. I wonder if they hand out Prozac in their cafeteria?

In midst of all of these downward indicators, I saw several news stories in the last week about the forecast for Mobile Content Services.

The best the press could muster for a down beat story on the Mobile Content industry was “Under the worst case scenario, Mobile Content would grow by only 7% this year”. The worst case scenario for GM, GE, Chrysler, AIG, and the other former titans of American Industry is that they cease to exist, and for Mobile Content its only 7% growth. Wow!

Unfortunately the Mobile Content industry is not a trillion dollar industry and cannot impact the overall economy in a meaningful way. It can however serve to highlight what still works in our economic system.

When innovation is coupled with the right financial and human capital resources, true value is created for consumers, investors and employees. This has been the model for value creation in high tech for a generation.

During the worst economic carnage since the 1930’s, a new economic value chain has been created that is enabling unprecedented portfolios of mobile applications on a new generation of devices.

There are now over 15,000 Apple iPhone applications.

Twitter and Tweeting are accepted terms used on the nightly news.

Android (G1) is not science fiction and 10 year olds are carrying Blackberry’s.

I’ve been in the Mobile Content Industry for over a decade. The vibrancy of this new economic value creation system for mobile content is what we have been trying to achieve for a long time. Device technology, software, networks and courageous investors and management have finaly created the reality of what was once just a dream.

Despite the example of the mobile content industry, there are literally hundreds, if not thousands of successful value-creating entrepreneurs presently on the bench. These are the leaders who have started, managed and sold companies. In the process they created tens of thousands of jobs, made millions for their investors and providing valuable services for businesses and consumers. Of course not every business was successful, but enough were to make a well-managed portfolio a good return.

I have the honor to personally know many of these industry leaders. I find their forced bench sitting, due to a lack of investment capital, one of the most staggering aspects of our present economy. Our nation never needed their talent more than it does now.

The U.S. Economy is going through a fundamental re-structuring. We have lived beyond our means because we have not created enough products and services that are valued on a global scale. The economy for the goods and services of the last century will continue to shrink. In my view the financial debacles of junk mortgages and the Madoff Ponzi schemes are symptoms of the underlying problem with our economy. Money was created with schemes that were in the final analysis, valueless.

We need new innovation, new services, new products, and new industries. We need real value creation.

The mobile content industry is just one example of such a value creation industry.

So here’s a note to all of you investors out there who have run for the hills.

“If mobile content and applications can thrive in this environment, what do you think will happen when the general e conomy finally recovers?”

seedmoney1

 

For those with the capacity and the courage to invest in the right opportunities now, the rewards should be extraordinary.

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Filed under Apple, auto sales, bailout, blackberry, citicorp, iphone, mobile, Mobile Application Stores, unemployment

Cheers and Jeers for Mobile without Numbers

My article “The Future of Mobile – without numbers” created a large reaction.  I received a full inbox worth of cheers and jeers.  For those who cheered, I say “thanks.”

comedy-tragedy-maskFor those who jeered, I say, “Thank you very much!”  I have always believed that when people challenge your thinking and your logic, you have the opportunity to learn and make your own arguments better.  With this in mind, I have created a couple of broad categories of challenges from my critics.   (If you have not read the original article you should first check it out with this link)

 These areas are:

1-The sociological, technological and economic feasibility of my hypothesis that social networking and VoIP will fundamentally change the mobile industry

2-What should the Wireless Service Providers do to counter this threat?

Item 1:

To explain and expand on my logic more fully it is useful to look at some history.

What was the key invention that made the Internet a global phenomenon?

It was not TCP/IP, or browsers or even Google.

barilan_internet-thumbThe key invention was the Domain Name Server (DNS).  DNS translates a domain name to an IP addresses.   It is much easier to remember www.nytimes.com, instead of its IP address (170.149.173.130).  DNS servers are continuously updated around the globe as Internet services switch IP addresses; add new destinations or new web services are created.

DNS is also what makes email possible.

Prior to global DNS services the translation of a name to an IP address took place (if at all) in the equivalent of a local address book on your computer.  You would update this local file with new IP address/Web name pairs as you discovered them, with the obvious problem that your local address book did not automatically update to track changes.

 Does this sound familiar?        

For nearly 100 years telephone services have been in the local address book mode.  As a telephone subscriber, the implied requirement was for you to carry your own version of a local DNS in your pocket. Antique telephoneYour phone contacts would only update if you physically made a change to your address book.

The phone company would issue all subscribers a regional, printed, version of DNS on a yearly basis, the big phone book.

This fundamental use case did not change until the introduction of phones with imbedded contact lists.  With embedded contact lists you could scroll through a list and click to call.  This feature eliminated the need to dial or punch all the digits yourself, but was still limited to your personal updates.

Prior to the ability to look up and retrieve phone numbers for people and businesses on the Internet, the only global DNS equivalent for telephone service was “411”, information service.

The use case for smartphones is the start of a fundamental change.  With their larger screens and easy keyboard entry, you just type the name of the person you want to call and press send.  The connection with the phone number is further eroded.  The contact list still, however, must be maintained personally, just like our Grandparents did with their paper versions.

I can still remember the phone numbers from my friends in high school, but have to look up my kids’ numbers.  The reason is that I never use my kids’ numbers; I just type their name.

The ability to take your phone number with you when you change providers (landline or wireless) was a big boost to the manual updating of address books.  This was made necessary because of the lack of Global DNS in telephone service.

The emergence of large, ubiquitous social networks is the final missing puzzle piece that will finally alter this 100-year pattern and make phone calling similar to typing “nytimes”, instead of its IP number.  These social networks provide several key elements.

They are a collection of your friends, family members and business associates.  Your network(s) contain the majority of people you need, or want, to communicate with on a regular basis.

fhw1uoifmega5hwmediumSecondly, your networked friends should give you permission to view and have access to their actual phone numbers.  This access will give you the equivalent of global DNS for your contact list!  The updating of the phone numbers will no longer be your responsibility, but the responsibility of your friends.  This is the same scenario as a Webmaster updating their web services IP address for DNS.  Even if Voice over IP (VOIP) services do not emerge as a dominant mobile trend (I believe they will), then the social network aspects will be a major force unto themselves.

So, at least to this point the logic is that Social Networks = Global DNS.

The last aspect of social networks is that they can easily provide an “always connected” status.  This is the way instant messaging services (AOL, MSN, Yahoo, Skype) work today.  This always-connected feature creates a direct IP path between any two (or more) members.  If you have a direct IP path, you can easily create voice and video communications services.

The combination of social networks providing DNS-like service and IP connectivity is the core of the technological argument.  The fact that the Internet has trained a large segment of the world to access sites and services by name, instead of by IP number is my proof point that there should not be a sociological issue with my scenario.

The economics of this scenario are more difficult to predict.  I agree with those who said that the social networks and VOIP providers such as Skype would not run a global communications network without significant revenue and profit.  The issue to consider is:  Have the economics of providing a significant portion of this service forever altered in a significant manner?

VOIP service for home or business is significantly less expensive for the consumer than a direct-wired solution using 100-year-old twisted pair telephone technology.  The ease of provisioning and maintenance, and the lower cost of transmission and billing, has changed the economics of landline services.   It is less expensive to transmit and manage a very high bandwidth data path using Internet technologies, than to maintain individual transmission paths.  

Why not the same for mobile?

Item 2:  What should the Wireless Carriers do?

If I were the CEO of a major service provider I would execute the following strategy:

vzw_logo_1024Recognizing the importance of the trends that I discussed, the game that is now being played puts this mobile carrier at a structural disadvantage.  If you think you are going to lose at the game that is being played, you change the game.

The Carriers should obtain their own DNS service for their subscribers that updates continuously and allows for one click friend calling.  This service should be a collection of the key social networks.  

The Carriers should Interface/partner with Facebook, LinkedIn, etc and create a superset DNS of their subscribers’ contacts.  Then they should build the social networking application(s) directly on the phones to permit IM, voice, and video communications. The existing mobile numbers can be used as the equivalent IP addressing scheme.  The integration with the social networks will also permit contextual communications as the subscriber has access to their friends profile and status.

The strategy of partnering with the social networks for calling DNS functionality and contextual communications would create tremendous value. 

The marketing possibilities for a Wireless Carrier with this strategy are huge.

If this strategy was implemented by just one carrier (Verizon for example) then they could market to your friends list to switch and get In-Calling rates (free) when they call each other.  If 98% of your calls were within your social networking contacts, then it would make sense for that group to be on a single carrier.

The Carriers have tried viral marketing in the past with In-Calling and T-mobiles Fav-5 program.  What I am suggesting would be many orders of magnitude more impactful.  The first carrier that figures this out and executes will steal many of their competitor’s subscribers and really change the game.

The last issue for the Carrier strategy section is to counter the VOIP threat.

My strategy would be to embrace and profit from it.   There are two obvious moves to capitalize on mobile VOIP.  First, follow the strategy of the landline providers by creating your own VOIP mobile service that utilizes your connections into the social networks.  You can have a flat monthly fee for VOIP calls.

Secondly, you can also provide a “bring your own VOIP” service plan.  The Carrier would charge a lower monthly fixed fee that would reflect their lower costs in servicing these 3rd party subscribers.

theatre_and_the_internet

Over the past five years the bulk of new mobile service investment has been on mobile data applications. Mobile  voice services have not evolved beyond the basic voice call, callerID, voicemail stage.  This is the opportunity to merge the data application investments directly with the core voice service.

The real issue for the Wireless Carriers will be in the recognition of this threat and the real opportunity that this fundamental disruption in the market it creates for a first mover to capitalize on the changes and redefine how people communicate.

I hope I have addressed many of the Jeers that I got last week.  I welcome your comments on these expanded explanations and logic!

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