Volker on Mobile

It was today, 30 years ago, that NTT (now NTT DoCoMo) launched the world’s first commercial mobile cellular telecoms network in Tokyo with 88 base stations and, boy, did we come a long way since. Take fees for a start: there was a $2,000 sign-up fee and then a monthly fee of $300. On top of that, you would be charged $1 per minute voice. A handset weighed in at a cool 10kg (more than some budget airlines allow you as hand luggage these days; but then you would probably only fly First if you had one of those…). Nokia was still into wellies at the time, I think…

In its first 10 years, mobile phone subscribers “amassed” a rather meagre 4m subscribers. The second decade was significantly better: it grew to 740m! Fixed-line telephony took 120 years to break 1bn users, mobile was dramatically faster.

If you want to learn more, head over to the unfathomable insights of Tomi Ahonen who dedicated a post to the date (and every milestone since) that will take you a good half hour to read. Well worth it!

And now, lean back, and have a glass on the arguably biggest media revolution since the printing press (because, my dear “1st World” readers, most people from “other” parts of the world, would not have any access to digital media without mobile phones at all).

And for every stickler amongst you: Dr Martin Cooper placed the first “proper” mobile phone call on 3 April 1973 but the first proper mobile network was NTT’s to claim (and someone needs to update Wikipedia as to that. Tomi?).

All of it of course went even further back than that. See:

Image credit: http://openlearn.open.ac.uk/file.php/3317/T307_1_010i.jpg

Quick facts: I am an iPhone user. I wanted one, I am based in the UK. What to do? Switch to O2, which had the exclusivity for this. This post is not about bandwidth, 3G availability or anything like that – I have not (much) to complain about this actually. It is not about the iPhone either.

This post is about the simple mistakes network operators (plural; O2 is not alone here) make by not living up to their own messages. Listening to customers and identifying (and answering!) user needs.

Back story: I have an iPhone 3G on a £45/month plan, which gives you countless voice minutes and lots of SMS and unlimited data – in the UK that is. In short, I do not normally have to pay anything for (UK) calls and texts, hence the tariff. Now, if you dare travel with your iPhone, you’re in for nasty surprises. The only thing O2 UK has to offer is slices of 10 or 50MB of data for some hefty sum.

One of the most insulting things about this is this: I used to have a Blackberry on O2 and, you see, you can purchase an international roaming plan that gives you blanket data coverage on your device when abroad for – if I remember correctly – £25/month extra. Would I take this? Any day. Does this exist for iPhone tariffs? No.

O2 UK would be able to easily deduce that I am traveling regularly. Great opportunity to hook me into an even dearer deal, you might think (ad slogans include “We’re better, Connected” and “O2 can do”). But wrong you are. Whenever I travel with O2 abroad (and this is on an O2 network), this is what I get:

They actually send me at least 3-4 SMS with various warnings and alerts about how expensive and truly nasty it is to use my (O2-purchased) phone to its full potential and capacity whenever I dare leaving British soil. Connected? Can do? Not at all! Very inspiring. NOT!

Does it offer ANY solution to my apparent need? No. Does it try? No. What does this say about how important I am to them as a customer? A lot. And nothing good either.

It reveals a very “last century” way of looking at life: users are basically being perceived as revenue-generating units rather than someone the brand even attempts to communicate with. This is a very short-term view of the world, and one that is bound to fail quickly. Why? Because I am very likely to switch carriers (I have already unlocked my iPhone, which you can – incidentally – do here).

Now, O2, listen up: will I switch because there are so many other so much better offers out there? No. Will I do it because I fear the charges? No. I might end up paying the same as before. But that’s OK. I will do it because you, my dear carrier, showed me that you do not give a toss about me as your customer and you failed to deliver on your promise (“connected”, “can do”). I beg this will change about 2 weeks before my contract with you runs out: you will promise me everything under the sun to keep me but this is cheap, and I will not have it (as, I suspect, will apply to countless others).

Here’s the solution: Try and build some trust in your brand and your actions (Zappos anyone?). The reference to Zappos is not only a fashionable one (and, yes, I know it turns up in every man and his dog’s presentation these days; I used it myself a couple of weeks ago… But Zappos business is, get this, O2, to deliver happiness. You think that this is over the top? Think again: Tony Hsieh just sold his company for a very real-worldly price of $800 million to Amazon. His company is America’s biggest shoe retailer. Did I say shoes? Happiness!

Do you have to go that far? I would wish you would. But, dear O2, a little respect and care would already do it. Any of this? None I can see or hear, and your hotline will know I have tried! In modern “Tweetish”: #fail.

Listen and deliver. Then the rest will come. Until then, it’ll be Vodafone for me (who at least abolished roaming charges) or Orange (if they manage to learn from the above in time before my contract runs out).

Good bye!

First, Samsung announced it would drop Symbian from its smartphones in 2010 in favour of its new, home-brew bada OS. Then Nokia said it would drop Symbian (albeit not immediately) from its flagship N-series devices replacing it with Maemo, the OS that premiered on a Nokia device on the recently released geek dream, the N900.

It is said that there are

no current plans for Maemo devices in the [...] X-Series range or the popular [?] E-Series enterprise range

but the word “current” suggests that this might well change soon, too.

This would leave Symbian without its two largest OEM supporters. Will there still be a future for it?

Symbian of course boasts a still very impressive number of legacy devices, and it will therefore be here for a while. However, what does the long-term outlook look like? Android, LiMo, etc all “boast” a nimbler, more agile set-up, allowing for faster development and, arguably, better user experience. This is not necessarily Symbian’s fault (it carries with it its legacy around) but it makes it that much harder for it to reinvent itself.

I am not sure if there is place (and – timewise – the runway) to reinvent itself without the backing of big OEMs. I would be surprised if carriers would use it; they – even more than OEM – require adaptability and customization, which the newer platforms seem better suited to serve. Vodafone’s choice of LiMo for their first two Vodafone 360 devices is testament to that.

The ever-bright Tomi Ahonen suggested a comparison with DOS/Windows and MacOS: he compares Symbian to DOS, Maemo to Windows and iPhone to MacOS: MacOS led in UI and leads to this day. DOS outsold MacOS in spite of its dramatic inferiority because of the legacy instal base. Windows then overlaid DOS and rolled out on all the legacy devices with MacOS, as a result, always playing second fiddle despite its superiority.

The market place in mobile looks different though: DOS was nigh dominant (outside the mainframe and large enterprise side of things) whereas Symbian “only” covers about 5% of the current market. It is big but probably not big enough to bridge the DOS/Windows migration gap. With Android, Blackberry, Windows Mobile, LiMo, JavaFX (if that ever takes of properly), etc all on the map, too, the situation is very different to the DOS/Windows/MacOS world. Would Nokia be quicker in execution, I might still look at it differently but, unfortunately, it doesn’t seem to be that way.

So is it good bye, Symbian, then?

We live in a world where sharing has become an It-word. Contribution, engagement have all fast become pinnacles of every marketing expert’s arsenal.

And now O2, not always famous for the radical and new, has taken this concept, embraced it, turbo-charged it and took it to a whole new level. Enter: giffgaff (fashionable with no upper case). giffgaff is the world’s first people-powered MVNO (or “mobile service” as it calls itself), owned by O2 but apparently independently run. Here’s how it works (or supposed to work):

The network is a good (?) old-fashioned solid one, namely from O2. But that’s where it ends. Sales, marketing, customer service, brand development and the general business decisions will apparently all be made (or at least proposed or advised on) by giffgaff’s own users. I already found an entry in its forum calling for users calling for two rotating board-seats for users (though that will probably remain to be seen). giffgaff does have a gaffer (CEO in old-fashioned corporate speak) with a back-room (management team) overseeing the whole thing (and that team, according to early commentators who have met them, seem to be for real). The service appears to run on a SIM-only model and aims for “simple” tariffs that include voice, text and data (mobile web without restrictions).

The prices for the service should be significantly lower because there are no armies of marketers, sales professionals, account managers, customer service representatives, customer service managers, etc, etc – or at least much less of them. At the same time, the “sharing is caring” credo has shown its power and quality in many ways on the web so far (and with giffgaff people will apparently earn rebates if they contribute). And in particular on customer service it should be easy to beat virtually any carrier hands down, shouldn’t it?

So will it work? I think it would be wonderful if it would. I am not sure though if this experiment will be a massive success (maybe a small success is good enough anyway). And the reason for this is power law distribution: only very, very few people contribute significantly (Clay Shirky gives a wealth of examples) and most people contribute hardly anything (the question would then be if the rebates are enough to break that mould). Whilst this works well with something like Wikipedia, I am not sure if a user of giffgaff would be all too happy to wait however long it takes for a member of the community to answer his/her particular query, at least not if it concerns some core functionality. Such a user would arguably be disappointed and thus relatively quickly discouraged. Which would be the end of him/her as a user of the service. Which would be not so good.

I would be more than thrilled if they would pull it off. And I will clap and shout for them. It would really be a whole new level of sharing. Go on, guys!!!

I do not normally do this but when Mary Meeker, the iconic Morgan Stanley researcher, this is too good to let it slip (and too voluminous to blog in detail), so I am posting her presentation here. Mobile starts in earnest on slide 28 et seq. Enjoy!

If you want to download it, you can do this here.

A couple of weeks ago, I pondered Spotify’s impact on music business models and suggested that mobile may have a role to play in the monetization end of it (which is, unless you’re Twitter, an inherent part of a business model indeed). It didn’t take them long:

Today, the UK arm of 3 – always one of the more creative carriers - announced a handset (and not a bad one either) to be bundled with Spotify Premium (i.e. on the go and no ads): users will pay £99 up front, and then £35 a month for 24 months for a tariff including a Spotify Premium subscription covering both PC and mobile, 750 minutes voice calls, unlimited texts, data and Skype-to-Skype calls. Listen up: all bandwidth included. For a streaming service. Now we’re talking!

3 said that the Spotify Premium service was

worth £240

which suggests that they might want to stick to the £9.99 price point (which would surprise me). But then it is hard to tell which bit of such announcements is marketing and which actual price-setting for the sake of royalties and such like…

3 also said

that the deal with Spotify would extend to other products in the coming months, including 3’s mobile broadband service.

Again, I am curious about the price point: the way it is, it would be a nice marketing deal for Spotify but it could be said that not much was going for taking exactly that offer vs just signing up as it is already. A little discounted however (with the difference paid for by 3’s marketing department) might change the ball game altogether…

It’s all good though: I for one am truly intrigued by the prospect of having more than 6 million tracks (equating to, what?, 6 terabyte or so of music) on my phone!

And one little thing on the side: it is – again – an app and not the mobile web that they choose – in spite of bandwidth apparently not being an issue at all. It is thus another argument for the superiority (for the time being) of apps over mobile web when it comes to UI and input constraints.

Here’s a nice deal: smartphone content specialist Handmark integrates Amazon’s new mobile payments service into its mobile content stores. This includes, most notably, also the famed (and sometimes damned) 1-Click functionality whereby users can (just like on iTunes; Apple licenses the 1-Click patent) buy content with just one click. The store will then use whichever credit card they have previously entered. To mobile users, bruised and tired of multiple clicks and onerous navigation to purchase a single piece of content, this is a true piece of added value (and one that was often hailed on Apple’s benchmark app store).

From what I can see, Apple still leads in the fewest number of clicks but Amazon’s offering comes relatively close. Amazon’s service seems to offer a wider range of functions though: a user can pay, reserve, settle, run refunds, cancel, etc, etc, and, last but not least, a fairly established and recognized dispute resolution system, all through the Amazon API. Rather neat indeed! The transaction fees then are a dream for every mobile content provider: in the ranges customary for mobile content ($0.99-9.99), the fees range from 1.5%+$0.01 for Amazon Payments balance transfers to 5%+$0.05 for credit card payments. This, dear carriers, equates to a revenue share to the provider of 90-95%!

We will arguably see a whole range of app store providers taking this model up, in particular amongst those without a prior billing relationship. Carriers might be tempted to license the model, too, in order to facilitate the order flow (although I doubt that they will adapt the revenue shares, too): I would be surprised if Amazon could not adapt the back-end to integrate with a carrier’s billing module (although those commercial discussions would surely be interesting…).

It is a compelling case of transferring an existing brand with proven ease of use to the mobile web (where it will thrive first) and app stores the world over.

After the news broke that Orange will add the iPhone to its roster from just before Christmas, today we read that Vodafone UK will do the same, only a little later, some time in Q1/2010. Vodafone said that not having the iPhone was basically the reason for losing 200k customers in the last quarter alone. Vodafone had previously been shipping the device in 12 other territories.

With Orange and T-Mobile merging their UK operations, the new set-up which sees basically all large operators offering the device should make for some juicy deals. Analysts reckoned the contract tariff for to come down by £4-5 per month. Orange did not say anything specific but “indicated” that it would be cheaper than O2’s deals.

According to the article, Virgin Mobile (an MVNO that sails on the Vodafone network) is also “understood” to be desperate to secure the right to sell the phone. Happy days…

It seems to be music week this week: Apple running its somewhat anticlimactic “It’s only Rock’n'Roll” event today, lots of folks pondering Spotify Mobile and now this: the good folks at Forrester Research have released an interesting report entitled “Music Release Windows: The Product Innovation That The Music Business Can’t Do Without”. This is some statement.

The Old Model is Broken

Forrester was kind enough to let me have a glance at the report, so let me dive into its revelations and the underlying rationales, which starts off with looking at the broken model of the industry: in (latter part of) the 20th century, the music industry was mainly fueled by record sales (first vinyl, then CD). With the introduction of digital media and, in particular, ubiquitous broadband connectivity in many parts of the world, it shifted to digital downloads. Unfortunately, it mainly shifted for downloads that people did not pay for. iTunes has only taken a piece of the action. And iTunes’ ¢99 per song model has then contributed to people no longer buying whole albums but only the songs they like most, which somewhat squashes profitability.

Live events, etc used to be a support for record sales. They have recently become the biggest revenue generator for some recording artists (as well as for some labels, at least if they managed to conclude so-called 360-deals with artists) but they cannot alone make up for the shortfall. On top of all that, people like my 14-year-old son use a plethora of services (Spotify, Last.FM, YouTube and probably dozens more of which I do not know) to quench their thirst for music.

Change the Product, not the Business Model

The researchers suggest to re-think the product offering in order to engage the fan more holistically: leverage diverse assets through those maligned 360 deals: they might “feel” a bit tight around the hips but the opportunities are immense: labels and (capable) artist management can create a very rich offering of diverse content. This then ties in into step #2, which sees the industry moving away from (or rather beyond) the classic album model where an artists would release one album per year (or so) and sustain the buzz in promotion thereof (and in between) with concerts, interviews, singles and EPs. With digital distribution, there is no need for that (an album on CD might be maintained as one part of the mix however): one can produce a continual stream of creative products from the artist. This will help build sustainable and longer-term relationships with fans.

The final piece is – put simplistically – the introduction of release windows similar to what the film industry is doing for decades: releases are structured successively with higher product (read: better monetizable) tiers coming first. It is re-vamping a trusty old model though: you want it first and exclusive, you pay more.

The bottom line is – oh, the bliss of buzzwords – the 4 C’s, which are content, convenience, cost and community: The higher the cost, the greater the convenience and the better the choice of content. The authors basically plead a re-introduction of scarcity in order to re-build the perceived value. Convenience ranks above content in terms of the creation of value: and this is where mobile plays a role: it is always with the user, it is always on, it is readily accessible (at least the new generation of phones is). It is arguably why services like Spotify are believed to be a valid revenue stream for labels, at least on mobile…

Community is the Glue

Is community just thrown in for good measure? No, of course not. According to Forrester, “Community enhances social value.” It is the glue that will be the key differentiator from piracy (or so they hope): the thinking is that a sense of community will build some sort of moral cohesion (another C). Here though, Forrester tails off a little. It says:

“Social functionality should be deployed right across the hierarchy.”

Nothing wrong, you say? No, it is not. However, “deploying functionality” is way short of what is needed to build social value. What makes a community? Emphatic engagement with fans, not a set of tools that sits somewhere on the various sites and offerings being operated by some far-away call center. Whilst the principle is right, the suggested execution remains a little shallow. Forums & networks is all they have to offer. Hm. Everyone has them already, so will this work?

The principle does work, I believe, However, the execution is much, much more complex than the analysts reveal. Here, one can make or break this.

Release Windows

The analysts suggest that a release should be tiered by windows: start with a preview, then go into the mainstream for-pay channels (2-3 weeks delayed) and finally release to “free-to-air” (6 weeks delay). The premier window is suggested to being the one where incremental value can be unlocked: first releases, premium value-added content (and no DRM!), etc; users only get this if they pay. Elegant packaging and programming is crucial to convince people of the richness of this. Then they will not defect to P2P sites. CD releases remain in the mainstream window and then, finally after six long weeks, the Spotifys of this world will be able to get it through their ad-supported model, TDC Play, the Danish flat-rate all-you-can-eat model that generated more than 100m downloads in 15 months would be able to add it to their package, etc.

Mobile is in the premium tier (with very few others): Forrester believes that carriers’ and OEM’s efforts, investment and – last but certainly not least – billing relationships merit this. I would suggest that the eye-opener ringtone where one could charge huge premiums for monophonic (!) 20-second-loops would contribute to this conviction, too.

In the “modern world” with smartphones and flat rate data plans, a lot of it of course hinges on how such services tie in with a) the handset (app vs. mobile web), b) the provider(s), namely labels, artists, operators, handset manufacturers, other (mobile) distributors as well as iTunes, and c) the users, i.e. will they adopt it or will they defect to the (free) web side of things after all. The crackdown on piracy in many countries will have something of a disciplinary effect but the jury on this is probably still out.

Is that It?

There must be more in order to create compelling services and products. Otherwise, I cannot see people doing it in sufficient numbers. It could be seen online with Spotify where, anecdotally, only 17,000 in the UK have signed up to the premium service; I cannot believe that the premium music market should be limited to that. The analysts suggest the creation of

“truly 21st century products [...] blend[ing] interactivity, multimedia, multi-platform, convenience and social to create something totally new.”

That sounds awesome but how do you create it? The starting point needs to be the relationship between artist and fan. I have long held that this bond is more than actual musical tastes; it is a lifestyle decision, which is why fans crave to belong to “their” artists’ circles. As early as 2002, a “Britney Spears Mobile Fanclub” was successfully running, and that did not even involve her label! What it did involve though was access (or at least the promise thereof) to Britney (who was, at that time, arguably one of the biggest recording artists in the world). The service combined text (real-time backstage reports from Britney herself!), live concerts, editorial, merchandise, and special promotions to create a rich and comprehensive experience around the artist. And this at a time when a ringtones were just on the rise and premium SMS not widely available! The principle works! It does take however (and that’s a big IF) active involvement of a complex ecosystem of artists, management, labels, merchandise firms, media, etc.

The new generation of artists is of course significantly more tech-savvy (see e.g. upcoming singer Remi Nichole’s video blogs and tweets): one sees a much higher willingness to participate actively and – even more importantly – authenticly in engaging the fans (“audience” is probably an overcome term in this respect). This can work, and on mobile it can work as a revenue generator, too! But the core is the revised approach to the people (and this is not limited to the music industry): they are not sheep that want to be exploited; if you treat them that way, they bolt. Treat them honestly, fairly, transparently, and you have at least a fighting chance!

There have been rumours galore about Apple’s exclusive deals for its iPhone all over the place (see e.g. here for Verizon). New reports have now surfaced that appear to confirm that Apple is looking at this option for both the US and the UK (and, if this works, presumably also for other territories):

In the UK, T-Mobile confirmed it was in talks with Apple over stocking the iPhone 3G (the 3GS remaining exclusive to O2, which also has its hands on the Palm Pre) and Orange is “believed”, to be as well.

In the US, the Verizon discussion has been around for a while. A new report now suggests that losing the exclusivity would spell doom for AT&T: the report estimates that as much as 30% of AT&T’s customer are with the carrier solely because of the iPhone exclusivity. This sounds a little high to me: after all, the iPhone penetration in the US is much lower than that (it held just under 11% market share globally in Q1/2009). Are they saying that all the other users (those with the less fancy handsets) just stay on AT&T to share into the iPhone limelight? No, I thought not…

Apple is in any event in a beautiful position at the moment: so far, most of its competitors’ “iPhone killers”(Palm Pre, Blackberry Storm and innumerable devices from Samsung, LG and Nokia) have failed to challenge its numbers and, quite literally, all of the app stores set up by competitors showed meagre results compared to the – now – 1.5 bn (!) downloads in a little over a year from the Apple App Store. The good folks from Cupertino are therefore now in a pretty good position: they proved (a couple of times now) that they shift 1m+ devices – on the opening weekend! They bring a lot of sex appeal in which the carriers, not generally known for coolness, can bask. They cracked the content dilemma and produced a thriving developer community, which made people actually use their phones for all these things that have been promised for so long (iPhones are connected, most others can connect). In short: in carriers eyes, they are – aside from the horrible fact that Apple takes a healthy cut – a really good thing for networks that see themselves locked into cut-throat pricing wars over voice and SMS (bringing in, anecdotally, up to 50% of European carrier profits over the past 5 years) and craving for a way to increase user ARPU (app revenue on the iPhone is, apparently, $27 per device). Happy days…