Fighting potential irrelevance

Disclaimer: My employer, Essential Research, has worked with several of the UK network providers in the past, and hopes to do so again in future. All opinions expressed in this blog post – and this blog in general – are my own.

The first to market isn’t always the ultimate category “winner”. There were cars before Ford and social networks before Facebook, to give just two examples. Incumbents may hold the greatest influence, but through innovations and developments of products and services their position is rarely fully secure. Eventually a change of business strategy will be required.

I’m wondering if this is what the mobile phone networks are about to undergo.

For the past decade or two, the networks have had the power in the mobile market. They controlled the distribution – through both spectrum and their walled garden approach to content and services. Hence the huge bidding war when the UK government auctioned off spectrum for 3G a decade ago.

But this looks to be changing, as penetration of internet-enabled handsets that access the world wide web – both on a 3G network and on Wifi – shift the focus. While the debate over open access (symbolised by Google) and closed access (symbolised by Apple) continues, it appears that the shift in focus is to the detriment of the networks but the benefits of the operating system, and thus the handset.

This article – on the news that O2 and Orange are joining an open platform for applications – says that ‘The mobile phone networks fear that at the moment they are in danger of becoming little more than “dumb pipes in the air”‘

I’m sure they have methods to standardise the services across different screen sizes, resolutions, handsets and operating systems but it will be interesting to see whether it can compete with the OS based offerings of Apple, BlackBerry, Google and Nokia.

Do this mean mobile networks will go the way of ISPs? Viable businesses, but not wielding the level of power that AOL et al were hoping to achieve.

It is possible, but not inevitable. The main issue for networks is that when they work, they are invisible. We only notice when they fail, and most people will only contact network customer care when they want to complain (sales calls/contract renewals excepted). No matter how good (or otherwise) this service is, it is still ultimately dealing with negative issues.

A handset and operating system should also “just work”, but its visibility means we can also be delighted – whether through eye-catching menus or a satisfying tactility to the buttons or touch screen.

This visibility also means the handset is more closely associated with the service. Networks are still defined by the coverage and quality of voice communication above all else.

The networks risk becoming a utility, where price and quality are the only defining features.

The need to diversify is apparent, but I don’t think this should be in applications.

Aside from the handset/OS competition, there is a huge question-mark over the long-term viability of the applications market. Should HTML5 launch and grow, the balance of power may once again shift – this time from the operating system to the software or service provider. To the consumer, the delivery mechanism is largely irrelevant – they just want the best possible service in the most convenient format.

I’m also sceptical about exclusive content deals. Orange have successfully done this in France, but it raised anti-competitive issues and, ultimately, I think audience scale will mean openness will win out (I also think this is true with handsets trying to get content exclusivity).

Instead, I think partnerships – across a range of industries – are the answer. Mobile networks already have a significant presence in certain areas – such as O2 with live music and Orange with film – and these can be extended. There are also plenty of opportunities to provide complementary services – O2 moving into finance seems like a logical step, for instance.

Like gambling, one of the hardest things in business (so I’ve been told) is knowing when to call it quits. The era of networks dominating the monetisation of content and internet-based services looks like it is drawing to close. Yet there are many potential new revenue streams to develop. Whether picking the right strategy requires the luck of the gambler or not, time will tell.

sk

Image credit: Me

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IAB Mobile Forum

Last Wednesday I attended the IAB‘s mobile forum (presentations are uploaded here).

It was an illuminating afternoon, though mainly in terms of what I didn’t take away. Mobile is still nascent as a media platform, and the industry understanding of it is still at a fairly basic (in my opinion) level.

Most information on how people use mobile seems to be on potential behaviour rather than actual (though there were exceptions).   As such, the emphasis of the event was very much on inspiration rather than effectiveness or impact. In part because of the fragmented nature of mobile (different handsets, networks, operating systems, functionality etc), it is difficult to emerge with overarching advice on using mobile.

However, it is clear that it is a medium ripe for innovation. Nearly all of the speakers had case studies as illustrations on how mobile can be used in new and interesting ways. These include:

• Fitness First cold-texting people with information on their local gym (once people had responded with their postcode)
• Comic Relief raising £7.8m through people messaging in to pledge donations that would be added to their monthly bill
• The ringtone from the Cadbury’s “eyebrows” advert was downloaded over 250,000 times in less than a month
• Pizza Hut’s pizza-building application where you can shake to remove toppings, click to order it (including regional discounts) and play a game while you wait for it to arrive
• Ikea augmented reality tool to superimpose furniture into your living room
• An Ocado shopping app that requires a four digit pin rather than a username/password each time you want to purchase.

Despite not coming away stunned, there were some useful pieces of information that I picked up at the event.

• Chris Boddice from O2 made the comparison of a mobile phone to a personal assistant or life manager – it can do everything from diary management to your shopping via being an alarm clock
• Alex Kozloff from Orange made the point that in addition to being relevant and innovative, mobile marketing also needs to reassure. Trust is much more of an issue on your mobile (it has people’s lives on it, yet there is no anti-virus or anti-phishing software) and so consumers need to be reassured that your site/brand is trusted and that they aren’t going to be surreptitiously charged for anything. For people who pay for their data, zero-rating can be used whereby the advertiser foots the data charges to visit that site.
• Justyn Lucas from yodel warned of advertisers getting blinded by technology, and that the role of mobile should be established before deciding on how to proceed. In fairness, integrated marketing is hardly a new piece of information, but it is worth re-iterating
• Jonathan Abrahams from Admob revealed that they are now seeing more traffic from Andriod than they are from Windows Mobile. This reinforces the asymmetry of mobile use in that while iPhones and Google phones still have relatively small penetration, they are driving the use of the mobile internet
• The IAB’s Jon Mew said that the user experience should be paramount when browsing – from their first ad effectiveness study (for KitKat), they noted that respondents were much more likely to remember the ad if they had enjoyed browsing the site. Furthermore, regular users of the site were more likely to notice the ads (this was contrary to my assumption that the novelty of mobile ads would cause stand-out, but this effect is no different to other media platforms)
• Tim Hussain from BSkyB had some great tips on apps – which he argued should provide a richer more creative experience for your customer. He also alluded to the asymmetry of action – in 6 weeks more people were using the Sky EPG on the iphone than on the 300 other handsets it is available on AND the pc combined. He pointed out that the iPhone has a massive advantage in that, from our iPods, we are familiar with iTunes and the iTunes store and so the comprehension barrier has already been overcome.

Tim’s six tips for apps were

1. Understand the target audience
2. Ensure the app is different to a mobile website
3. Make it a destination, not a driver
4. It should either save time or kill time (I liked this point, even if it does overlook the other uses of an app, such as inspiration)
5. The idea should be aligned with the brand
6. The app should be integrated to the wider campaign

Additional statistics I picked up from the event were:

• Gartner predict that by 2012, 70% of all phones will be smartphones
• There is an average of 37 apps per iPhone in the UK
• Orange research suggests that 87% of mobile media users (“anything that a message can be delivered through” – so including SMS) use it at home
• 95% of us don’t switch our phones off
• Yahoo! is bigger than Google in mobile search (though I think this will change as iPhone/Google phones etc take share away from the network portals)

Although I didn’t pick up as much new information or knowledge as I was anticipating, it was an event worth attending. I’d particularly recommend Tim’s presentation on apps  – it can be downloaded here.

As the industry develops and matures, it is inevitable that our understanding of consumer behaviour and marketing effectiveness will improve – from my various discussions with people in the space there is definitely a market opportunity to fulfill some of these needs. I’m confident that the study I’m about to embark upon will contribute to this.

sk

Image credit: http://www.flickr.com/photos/kamshots/