A major question in the wireless data industry today seems to be: How do you make money?
The recent refrain from industry watchers is that wireless data is set to soon explode, both in the United States and worldwide-but exactly how that blast will occur is still up in the air. Hundreds of companies are positioning themselves along the mobile data value chain in hopes of scoring the best seat, but the current economic slowdown has yet to illuminate a particular spot on the chain as the most profitable, the so-called sweet spot.
Mobile data has to be lucrative, these companies argue. As an example they point to the East and the success of NTT DoCoMo’s i-mode service in Japan. Millions of i-mode customers open their wallets for wireless data every day, so why shouldn’t the same be true in the United States?
Obviously, the situation is different here. Most U.S. wireless data users already have access to a wired Internet connection, and the wireless Internet does not live up to the same expectations. In other countries, including Japan, personal computers are rare, making the mobile experience incomparable. Other differences, including the regulatory climate, standards issues and population density, widen the difference gap.
So are U.S. wireless data companies doomed to eke out revenues through small sales and low subscriber numbers? According to some recent studies, the answer is “no.”
“The opportunity exists for North American vendors and services providers not only to catch up to their global competitors, but even to turn the tables and claim leadership roles in wireless data,” wrote Warren Wilson, director of the wireless practice at Summit Strategies Inc., in a new report titled, “Can U.S. Wireless Firms Ride Business Applications to Global Leadership?”
The title of the report gives a clue as to the research firm’s thesis. According to Summit Strategies, the U.S. enterprise market represents a huge opportunity for wireless companies to profit and succeed, as long as they are able to make the right moves.
This is not a new idea; a variety of wireless data companies, such as GoAmerica Inc. and Aether Systems Inc., saw the potential in the enterprise market and began offering specifically tailored applications. In fact, the number of wireless data companies focused on the enterprise market likely far outweighs those targeted at the general consumer market. However, today’s business applications are just the beginning, Summit Strategies asserts, and likely will evolve into more flexible, easier and cheaper applications to gain significant numbers of customers.
Today’s wireless business applications fall into two general categories, according to the Summit Strategies’ report. They are either custom-built for specific businesses or are pre-packaged for all customers. The line has begun to blur between the two styles and this will likely continue, leading to more flexible designs. Aether’s new Fusion software layer is a prime example of this type of adaptable approach.
Also, today’s application deployment methods also fall into two categories: hosted or in-house. While there are blurry definitions here, too, Summit Strategies predicts that the lines will continue to cloud-leading to more flexible and ultimately more effective deployment techniques and business applications.
If wireless data companies continue their trend toward flexible, effective applications and deployment methods, they could cash in on a huge business market, Summit Strategies predicted. And one link of the mobile data chain likely would become an important one in the future: the mobile portal.
According to Frost & Sullivan’s new report, “U.S. Mobile Portal Markets,” the mobile portal industry reached a mere $203 million last year, but could expand into a staggering $11 billion business by 2005. In addition, according to a recent report from Allied Business Intelligence, the number of mobile portal users likely will jump from 136.9 million this year to more than 1 billion by 2006. And again, the focus of wireless portals should be on the business market.
“For the near term, the revenue is really on the enterprise side,” said Brent Iadarola, a research analyst for Frost & Sullivan’s mobile communications group and the author of the report.
According to the Frost & Sullivan report, there are three distinct mobile portal players: network operators, wired-to-wireless businesses and wireless Internet service providers. While each group has different strengths, Iadarola said network operators have a distinct advantage.
“We see the network operator portals best positioned going forward,” he said.
Network operators like AT&T Wireless Services Inc., Cingular Wireless and Nextel Communications Inc. already have an established name in the wireless industry, and if they continue to bolster their portal offerings, they will solidify their place in the business. Wireless carriers have an established customer base and need only to retain those customers.
According to the mobile portal report, mobile portals and the rest of the wireless data industry will have to work on pricing models. While advanced networks will help the cause, more creative pricing methods will have to be designed to take best advantage of subscriber needs.
“If they move swiftly, these vendors can establish leadership positions in key emerging markets for wireless business applications,” Summit Strategies’ Wilson wrote. “If they execute well, vendors could change the rules of competition in the global wireless industry.”
