There is no lack of headlines and stories that focus on that disparate group of organizations which we collectively refer to as the Mobile Internet ecosystem. End users, content providers, advertisers, developers, device vendors, mobile operators and of course, Internet companies in theory all working together to provide a sustainable and balanced environment in which all partners benefit. However, as with any ecosystem in nature where on the face of it each player works selfishly for its own survival, in fact we see that in order to persist, an ecosystem has to work for all, or it doesn’t work at all.
What’s not working in the mobile Internet ecosystem?
A few examples come quickly to mind: firstly, the application developer. App development is obviously a very new market, but it has been around for long enough now for some interesting studies to take place. These seem to point to a situation where, once you discount the wildcard apps (Angry Birds and the like), the vast majority of developers receive an astonishingly low ROI for their effort. In June of this year VisionMobile reported the results of a survey of mobile developers that indicates on average that developers make only US$1,000 per app. Furthermore, according to a May 2010 issue of Internet Retailer, the median return of the typical app is approximately US$700 per year per app. With a minimum investment of roughly US$15,000 to fully develop an app this suggests a developer breaks even in 20 years! This is one situation that cannot persist.
Another, more often discussed example is the OTT (over the top) players as they, deliberately or accidentally, dis-intermediate the mobile operators from both the content and the end user. As well as the usual Google/Facebook/Apple etc., there are an increasing number of brands in this space. Take for example MTV, a well known and justifiably highly valued brand. For a mobile operator to work with MTV they are required to pay a revenue share for all content sold. Sounds fair enough, but then they are also required to pay a brand licence fee simply for using the MTV brand (and presumably diminishing their own in the process). Starts to sound expensive, right? But in addition to even that, they are then required to pay MTV a “bounty fee” – effectively a kind of reversed finder’s fee for every customer who even signs up to MTV’s mobile service.
At this point the operator no longer owns the content, the brand, or, one could argue, the customer, since customers understandably start seeing content providers as their “service providers”. And so we see, for example in Europe, operators actively seeking EU legislation to protect them from OTT brands and players. An April 26, 2011 Financial Times article reported that leading European telecoms companies are collectively seeking European Commission backing to levy significant charges on Google and other online content providers. This does not have the feel of a sustainable ecosystem.
In fact, mobile operators owe the OTT players a huge debt. Starting with one company and one phone in 2007, it is the OTT players and not the operators who firstly educated users worldwide that there even is a thing called the “mobile internet”, and it works; and secondly, made clear to users that, unlike on your desktop, stuff on this mobile internet isn’t free. That we even have an ecosystem to talk about is a result of these players.
What needs to change?
For more than five years now many people have suggested that mobile operators have the potential to deliver a 360-degree view of users based on traffic and subscriber information mined in near real-time –this is an incredibly impactful role. The emergence of a tangible mobile internet ecosystem with diverse monetization models, and the increasingly real personal information economy (PIE) finally opens the way for operators to invest in subscriber analytics and profiling, and mechanisms for well targeted, contextually relevant promotions of content, apps, and advertisements.
Mobile applications are becoming dynamic and smarter every day. Increasingly these apps rely on user data such as location, time of day, user habits and demographics to better serve subscribers’ needs and to market new goods and services. At the same time, consumers are becoming increasingly used to personalized marketing offers, perceiving them rather than intrusive promotions, as valuable information in a hurly burly Internet world that is increasingly difficult to self-navigate Infonetics Research recently predicted the worldwide total subscriber data management market would grow to $789 million in 2013, up from $128 million in 2008. Clearly, operators need to look to do more with the subscriber and device data kept in their myriad network databases.
Why the time is right for change?
Today a dramatic fragmentation exists, not just among operating systems, but among the types of relevant user information available to application developers and the third party players who want to create and sell to consumers. To best serve subscribers, operators eventually need to find a way to safely share user information, within privacy guidelines, while also monetizing traffic and delivering an outstanding user experience. I believe this is where the industry is headed.
And it is still all there to play for. The market for mobile commerce is vast and growing daily. Apple and Google get the lion’s share of market attention for their respective platforms, app stores and downloads. Actually, both platforms only capture a fraction of the current subscribers worldwide. The upside potential of the addressable market of available content is much higher than has been captured thus far. Google and Apple’s addressable footprint currently stands at approximately 100 million users.
There are currently an estimated five billion mobile subscribers on the planet, not including new mobile electronics in cars and homes many of which will also have screens requiring apps and services. That number is expected to go in one direction only. (Mary Meeker, Morgan Stanley). There is definitely a bigger world out there and a vast opportunity, up for grabs.
Implemented correctly, what has to emerge is a balanced and sustainable mobile internet ecosystem with user data, enabling frictionless monetization and distribution, and which continues to grow, unfettered by the borders that exist today.
