Mobile Megatrends 2010 (VisionMobile)

knowledge. passion. innovation

Knowledge. Passion. Innovation.

VisionMobile Research

Mobile Megatrends 2010
www.visionmobile.com/megatrends
updated: 4 May 2010
Copyright VisionMobile 2007-2010

Knowledge. Passion. Innovation.


Andreas Constantinou, Ph.D.
Research Director,
VisionMobile
follow me on twitter: @andreascon

Licensed under Creative Commons Attribution 3.0 Unported License (http://www.creativecommons.org/licenses/by/3.0)
You are free to Share or Remix any part of this work as long as you attribute this work to VisionMobile (www.visionmobile.com).


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Who will own the
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White Paper Mobile Industry Atlas Mobile Megatrends
1,100+ companies, 70
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Thought leadership
we coined industry terms like on-
device portals, active idle screens,
Mobile Operating customised design manufacturers
Systems: The New and introduced new strategy tools:
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2,800+ subscribers tracking successful evolution centres of
90% mobile industry insiders businesses in mobile gravity


Trusted by industry brands
Clients

selected
VisionMobile clients



Vertical propositions Web platforms OEM monetisation
a one-way street or a quick detour? future paradigm for building phones or fad? products, services or distribution?

Evolution of revenue models Open is the new closed Operator futures
How revenue models are changing in the how companies are using open bit-pipes or supermarkets?
mobile industry source to further their own agendas new smart pipe strategies at the
junction of brands+consumers

App Stores Recommendations
the long-tail future of app stores and reaching into every corner
the untapped retailing opportunity of the mobile services world

1 Vertical propositions:
a one-way street or a quick detour?


The Double Helix
Industries move between horizontal and vertical structures

Horizontal industry structure Vertical industry structure

modular components integrated components
standardised interfaces proprietary interfaces
low barriers to entry high barriers to entry
mix and match all or nothing

Maturing product markets Emerging product markets
which focus in flexibility, customisation which focus in performance, functionality

based on: Charles Fine: Clockspeed and Clayton Christensen: Skate to Where The Money Will Be Copyright VisionMobile 2007-2010

Evolution of the network business
from vertical to horizontal


2009 2004 2003
open to social networks end of walled IT operations
open network APIs gardens outsourced

2010
outsourced
sub-brands
2008 2005
2011 service basestation
operators as delivery opens sharing
micropayment up to s/w
providers developers
1980s
the mobile industry
was born here

2015? 1999 1990-8
convergence of first MVNOs standardisation of radio
operator fixed + appear and SIM interfaces
mobile products


Evolution of the handset OEM business
from vertical to horizontal and back


2003 2002
outsourced first MNO 2008-9 2010
operating systems customised devices Apple:
RIM, Apple:
best-in-class
service+device
‘experience’ products
propositions
from chipsets to
2005 ad networks
manufacturing for 1 in 3
phones outsourced

2007
open source
browsers and 1980s
operating systems the mobile industry
2009 was born here
Product leap
OEM app stores
Apple, RIM
OEM sync services

2002
Club Nokia 1999 1990-8
2010 first ODMs standardisation of radio
Windows appear and SIM interfaces
2007-8 Phone
Nokia Ovi
service shopping spree


Clock-speeds differ
Handset OEMs move 2x as fast as network operators

Network operators: Handset OEMs:
50 years/cycle 25 years/cycle
slow-moving agile
rigid fragile


Vertical propositions: where are we today?
players are at different stages towards verticalisation or horizontalisation

Horizontal player structure Vertical player structure

2004
2009 tier-2/3 decline of walled
MNOs open to social networks operators gardens
open network APIs

tier-1 2008 2005
MNO service MNO
operators delivery opens basestation
2005 up to s/w sharing
manufacturing developers
for 1 in 3 phones
outsourced 1980s
the mobile industry
2007 was born here
open source
OEM browsers and
operating systems

handset OEMs 1999 1990-8
first MVNOs standardisation of radio
and ODMs and SIM interfaces
chipset appear
OEMS


Centres of Gravity are being formed
by integrating all value layers under one roof
and creating thriving ecosystems around them

services
vendors

Services
software Service delivery
developers
Service distribution
Device design
UI design
Core apps
Operating system
Hardware platform
Chipset IP
Manufacturing

advertisers


Centres of Gravity
moving to capture value across the stack

Apple Nokia RIM HTC Google Qualcomm Mediatek
Components
Services

Service delivery


Device design

UI design

Core apps

App environment

Operating system

Hardware platform

Chipset IP

Manufacturing

denotes where player started


Takeaways
- Operators/carriers are moving at half the clockspeed of handset OEMs
- T1 OEMs are approaching fully-formed verticals, led by Apple
- Chipset vendors are the a-la-carte assemblers (DELLs) of mobile
- Both players are creating gravity centers and developer ecosystems
- Sounds like the PC business?

Open questions
- Where will Apple make money in 5 years?
(applications, services or hardware?)

- Does vertical integration imply greater profits?
(Clayton Christensen: biggest profits are at the points of proprietary integration)


2 The evolution of revenue models
How revenue models are changing in the mobile industry


Introducing Value Quadrants
cloud
value created
in the cloud

the when
pre-load of value creation post-sales

value created before the handset is shipped value created at point of sale
and during in-life use
the
where
of value creation

device
value created
on the device


Distinct value in each quadrant
Value Value

cloud
- content dev. tools - voice & msg services
- service design tools - VAS and SDPs
- developer tools - advertising
- OEM production tools - content & app stores
.. distinct
value areas

pre-load post-sales

value created before the handset is shipped value created at point of sale
and during in-life use

Value Value

- software IP & services - service distribution
- hardware IP - inventory leasing
- integration services - on-device analytics
- industrial design - device management
device


..and distinct revenue models
Value Revenue models Revenue models Value

cloud
- content dev. tools - per developer seat - per usage - voice & msg services
- service design tools - per module - per active user - VAS and SDPs
- developer tools - per site - CPA/CPC/CPM - advertising
- OEM production tools - revenue share - content & app stores
.. with distinct
revenue models

pre-load post-sales


- software IP & services - per unit - per activation/install - service distribution
- hardware IP - per platform - per week - inventory leasing
- integration services - per model - per unit/user segment - on-device analytics
- industrial design - per site - per update - device management
device


The evolution of revenue models

cloud
- content dev. tools - per developer seat - per user, CPC/CPM - VAS and SDPs
- service design tools - per module - revenue share - advertising
- developer tools - per site - per segment/reach - content & app stores
- OEM production tools - per follower - network capabilities

untapped value in
modular design tools
from hardware upstream monetisation
to services revenues (two-sided platform)

pre-load post-sales

from horizontal royalties from pre-load royalties to long term evolution:
to vertical productisation post-sales activation from services to distribution


- software IP & services - per unit - per activation - service distribution
- hardware IP - per platform - per update - inventory leasing
- systemware - per model/design - per inventory/day - on-device analytics
- industrial design - per site - per user segment - service management
device


Takeaways
- pre-load value moving from software IP to systemware & productisation
- services value: from downstream to upstream; and from services to
distribution
- post-sales value: inventory leasing, analytics, service distribution and
service management

Key questions
- what % of device value will be in software vs systemware in 2015?
(software = platform royalties, systemware = productised software+hardware)

- what % of MNO revenues will come from upstream/downstream in 2015?
(downstream=end-users, upstream = media publishers, app developers, advertisers)


3 App Stores: the long-tail future
why App Stores will take retailing where it’s never been before

Top-5 App Stores
No one has been able to copy Apple’s recipe. Is it that hard?

App Store comparative analysis (end- 2009). Source: VisionMobile

The App Store recipe
The App Store recipe needs end-to-end control of all 5 ingredients:

(mastered by) mobile software mobile operators & handset OEMs platform vendors brands and retailers
firms payments brokers

Each ingredient is mastered by different players in the value chain,
and requires different technical know-how and commercial relationships.
... no wonder Apple is the most successful cook!

The 2-year future of App Stores
To predict the future you need to know your history

everyone wants to rev share best-practices operators seize sophisticated in-life app retailing takes
get their hands on become standardised their addressable app management on a life of its own
developers market

Key predictions for App Stores (2010-2012)
1. Abundance: 100+ App Stores will exist in 2012;
Every single tier-1 OEM and MNO is launching their own App Store - enabled by white label App Store
solutions from Amdocs, Cellmania, Comverse, Ericsson, Everypoint, GetJar, Handango, Handmark,
Ideaworks Labs, Javaground, Mobango, Ondeego, OnMobile, PocketGear, Qualcomm, SlideME and Sun.

2. Diversity: App Stores will cater to diverse segments;
OEM, MNO or platform-centric stores, lifestyle-centric stores (e.g. sports or clothes brands), specialist
content (e.g. adult or enterprise), region-centric stores (e.g. Seattle apps)

3. Co-existence: several App Stores will co-exist within a handset
Case in point: LG and Samsung phones which shipped in 4Q09 in Korea came with four (!) app stores co-existing
within the same handset; one from the OEM, one from the platform provider (Windows Mobile) and two from the
South Korean operator SK Telecom.

4. Low barriers: App Malls will enable low-cost shops-in-shop setups
SDP vendors will offer the infrastructure, catalogue and recommendations technology allowing wannabe
app retailers to be setup at very low cost, with proven revenue models (setup fee + rent + sales commission)


Key predictions for App Stores (2010-2012)
5. Retailing will triumph
- app retailing has been a bottleneck up to 2009
Case in point: the Apple App Store top-25 is the main channel by which apps have been able to grab user
attention. This has resulted in price erosion, as app developers drop prices to bubble up to the top-25.

- flurry of startups to capitalise on untapped retailing opportunity
Apppopular, Appolicious, Appsfire, Chomp, Chorus, Flurry, I use this, Mplayit, Yappler using voting,
automated recommendations, in-app promotions and other techniques to capitalise on retailing opportunity.

- app stores will take retailing where it’s never been before
App Malls (shops-in-shop), friend endorsements, inventory micro-targeting, gift/beg options, second-hand
app reselling and other features will spring up, taking retailing to new levels of sophistication.

- retailing will grab a large chunk of revenues, as in the FMCG business
In the book business, retailers get between 25% (online stores) to 55% (bookstore chains) of the retail price.
Mobile app developers will take 70% of revenues, but will spend another 20% or more in app promotions.


Takeaways
- The App Store recipe requires diverse ingredients sourced from
across the value chain materialising an App Store needs multiple partnerships
- App Stores will follow the FMCG route; abundance, diversity, co-
existence and low barriers to entry.
- Retailing is the most untapped and biggest opportunity in App Stores
- App Stores will take retailing to new levels of sophistication

Open questions
- How many apps will operator stores attract in 2012?
(1,000s, 10,000s, 100,000s? So far operator app stores number around 1,000 apps each)

- Who will be the mega-retailers of the mobile apps world in 2012?
(e.g. Ericsson, Nokia, Vodafone, Handango, ESPN?)


4 Web platforms
and why the future of software development is still elusive


Web platforms: future of mobile development?
Many signs pointing to web development as a one-way street for mobile:
- from WAP to full HTML 4.0 on mobile browsers and Flash
- from web on high-end phones to the web on every phone (Opera Mini)
- from HTML apps to on-device widgets for delivering services
- from widgets to Palm’s WebOS where every app is web-based
- open source WebKit becoming a de facto standard (170M shipments as of June 2009)

But..
- web platforms address the needs of 3rd party devs, not handset OEMs
- the landscape is much more complex, as we shall see..


Which platform?
Many platform choices for application developers and handset OEMs


For what player?
Differences between 3rd parties and 2nd parties

3rd parties 2nd parties
Definition

any software developer without a software developers and service providers
commercial relationship to handset OEMs supplying directly to handset OEMs

Developer profile

- 10,000s of developers - 300-400 software houses
- selling software to end consumers - licensing to OEMs or MNOs
- familiar with common languages and tools - with access to proprietary toolchains

Application profile

- 100,000s of applications, few variants - 1000s of applications, many variants
- downloadable to the device post-sales - often embedded to the device pre-load
- games, entertainment, utilities, e-books, .. - middleware, apps or client-server solutions
- accessed through (often deep) menus - or integration and customisation services


The platform chasm

platforms for 3rd parties vs platforms for 2nd parties
(any developer) (OEMs, MNOs, and partners)

- designed for building apps - designed for building phones
- aimed at any application developer - aimed at an inner circle of OEM trustees
- using modern platforms and low cost SDKs - using legacy C/C++ platforms and toolchains
- intended for downloadable apps - intended for core (embedded) apps


Platform needs differ greatly

3rd party developers want to:
Develop + Deploy + Monetise
Simplify development Distribute app Sell
Integrate w/ device Update app Promote
Integrate w/ cloud
Reduce time to market

2nd party handset OEMs want to:
Build + Differentiate + Customise
Fast chipset port Social core apps Few regional cores
Accelerate perf. Differentiate w/ UI 10s of MNO variants
Reuse expertise Fast core app developm. Fast variant creation
Max. battery life Win MNO business
3rd party ecosystem


How do cater to these needs?

3rd party developers want to:
Develop + Deploy + Monetise
Simplify development Distribute app Sell
Integrate w/ device Update app Promote
Integrate w/ cloud
Reduce time to market

2nd party handset OEMs want to:
Build + Differentiate + Customise
Fast chipset port Social core apps Few regional cores
Accelerate perf. Differentiate w/ UI 10s of MNO variants
Reuse expertise Fast core app developm. Fast variant creation
Max. battery life Win MNO business
3rd party ecosystem


Takeaways
- The needs of 2nd parties and 3rd parties are worlds apart
- Web platforms level obstacles for 3rd party development
- But.. they do very little in addressing handset OEM needs
- Android addresses OEM phone development and differentiation
- But.. no platform yet addresses OEM customisation needs
- No platform yet to replace legacy RTOSes

Open questions
- Which platform will have disappeared by 2015?
(S60, Qt, BREW, LiMo, Windows, Java or Flash? choose only one)

- What percentage of phones will run legacy RTOSes in 5 years?
(from 85% today to ??% in 5 years)

5 Open is the new closed
how companies are using open source to further own agendas


What is open source? quick refresher

What is open source?
- A tactical product move, not a strategy
- a middle ground between build and buy

Advantages:
- Shares cost and risk of developing software building blocks
- Speeds up innovation via third party contributions

Disadvantages:
- Lack of education and best-practices in mobile OSS
- Does not change how much you spend, but where you spend it


Licenses vs Governance models
in mobile, licenses converge but governance models diverge
license type
Proprietary
community license

dual license
Funambol Rhomobile (commercial + copyleft)
OKL4

strong copyleft
(GPL)
Linux kernel

Foundation
weak copyleft
GTK+ (LGPL, MPL, EPL,..)
different governance

platform Foundation
GTK+ Qt
similar license

WebKit
permissive
(APL, BSD, MIT, ...)
Chrome Android

trust community managed community members only single company

governance model (simplified)

Control points in open source
Control points can detract the freedoms open source is meant to bestow

Open source freedoms Control points
Users should be free to run the - Incomplete software: Sponsor can retain key building blocks as closed source, meaning that users will not
software be able to create fully functional derivatives
Software source code can be - Private codelines: Sponsor can use private codelines which are feature-wise very advanced compared to the
accessed freely and easily public codeline, meaning that anyone using the public codeline is losing features or bug fixes.
Software can be modified - Ownership of contributors: Sponsor can control all contributions into the main codeline (the tip of the
freely tree), meaning users need to maintain a parallel patched codeline which can easily diverge and become very
costly to merge back.
- Gravity of contributions: sponsor can dedicate the largest body of engineers to the project (compared to any
single other participant), meaning any other contributions will be ‘drowned’ by sponsor-led contributions

No discrimination against any - Private visibility: Sponsor can make the product roadmap or strategy available only to members of a paid-for
person or group of persons or invite-only club.
- Timezone-limited forums: Sponsor can setup rules to operate the project forums (e.g. IRC channel) only
during working hours, meaning it disadvantages users in other continents (e.g. US vs Europe vs Asia timezones).

No discrimination against - Trademarks: Sponsor can secure Trademarks on the project name, meaning that any users wishing to create
fields of endeavour derivatives named after the project will need a separate agreement with the sponsor.
- Distribution of bolt-ons: Sponsor can create a developer community for software bolt-ons so as to own the
distribution gateway for these bolt-ons onto derivatives of the software.


Examples of closed governance
How mobile industry uses control points within open source projects:
-Symbian Foundation: open source capitalism
99% of reviewers still work for Nokia. No long tail contributions and complex contribution process
Long term Nokia has most influence over roadmap due to gravity of contributions
OPEX costs of circa $5M per OEM seat; expensive CAPEX for members and unsustainable

- Android: “you can have any colour as long as it’s black”
Invite-only membership. Google-owned private codeline which is 6-8 months ahead of public SDK.
All code reviewers work for Google. Google owns Android Market distribution channel (closed source).
Google has a trademark on Android so that you cannot call it an Android phone unless it passes CTS.
CTS is very demanding certification process involving API tests, performance tests and hardware reqs.

-LiMo Foundation: OEM community source
$20K entry-level membership needed to access source code. SDKs to be launched publicly in 1H10
A community of OEMs driven by operator requirements
Zero external community contributions since 2007; process established in 2009


6 Recommendations everywhere
raising the bar for mobile services


Recommendations: an underhyped market
- Behind-the-scenes adoption in mobile
What started as ‘people who bought this also bought that’ has found its way into 10s of mobile operator
portals, not to mention 1,000s of mobile websites. None of this has received mainstream media coverage.

- Right technology at the right time
In 2009-10, recommendations are the differentiator (the cherry on the cake) for App Stores. This has
prompted several mobile operators (including Vodafone, O2 Telefonica and T-Mobile) to issue RFIs/RFQs.

- Growing academic research
Recommendations research is moving into its third phase of evolution. The Recommender Systems 09
conference gathered 50% more paper submissions than last year from 35 countries – making this a rare
case of synchronicity between commercial and academic worlds.

- Underhyped potential
Recommendations technology is essential to help users navigate the terabytes of service content from a 2-
inch screen. Recommendations will find their way into every service, from App Stores to Customer Support


Reaching every niche of mobile services
very wide scope of applications

- Mobile Portal Personalization adaptation of navigational elements, content listed, ads served
and personalised search results (e.g. Changing Worlds, Choice Stream, Media Unbound and Leiki)
- Content Discovery
pure content discovery and recommendations across content types (e.g. Xiam, FAST)

- Subscriber segment targeting
user profiling and segmentation as part of an online marketing campaign (e.g. Coremetrics and Pontis)

- Influencer targeting
profiling and identification of influential subscribers (e.g. Xtract and Strands)
- Mobile advertising solutions
inventory targeting (e.g. Jumptap, Aggregate Knowledge, Velti/Ad Infuse, Medio and Wunderloop)
- Product/Content Personalization cross-channel product and content recommendations
optimised for retailers, web and media (e.g. ChoiceStream, Loomia, Aggregate Knowledge)
- Business analytics product/offer bundle recommendations based on user segmentation and real-
time behaviour analysis (e.g. Olista, Oracle, ThinkAnalytics and Coremetrics)


Wealth of technology supply
40+ recommendation solutions packaged in a variety of forms
- From vertical pre-integration into a service (e.g. App Store) towards operators to horizontal engine with
connections to multiple touch points (e.g. mobile, broadband, web, retail) towards media brands.
- Most of these vendors have come from the IT/web side, with few pure mobile-domain vendors

8 key vendors we researched: Xiam, Changing Worlds, Ericsson, Loomia,
Pontis, July Systems, Olista and Choice Stream

For full analysis see visionmobile.com/in/recommendations

Outlook for recommendation solutions
- Academic research moves in parallel to commercial adoption
Academic research focusing on interfaces in/out of recommendation engine and context adaptation
Commercials focusing on live clickstream processing, content optimisation and market penetration

- Scope of recommendation technology in mobile is rapidly expanding
Recommendations are being applied to App Stores in 2009-10 and moving to business analytics,
advanced CRM and product/service recommendations in 2010-12.

- Specialist vendors will endure
Recommendations need to be highly tuned to channel & content during launch and continually during
the in-life phase. Moreover, vertical solutions won’t be readily extensible to multiple touchpoints.

- M&A of recommendation vendors to ensue
The incumbent VAS and SDP vendors will need to buy in (rather than build) technology, due to the
content- and context- specific know-how that recommendations require. We expect this will lead to
M&As thanks to the abundant technology startups out there.
(e.g. see Qualcomm + Xiam, Amdocs + Changing Worlds acquisitions in 2008)


Takeaways
- Recommendations is one of the most underhyped mobile tech sectors
- Seeing rapid adoption in 2010-12 to add differentiation to every service
- 40+ vendors of recommendations solutions, mostly from web
- Multitude of academic and commercial optimisation issues to solve
- M&A of recommendation vendors to ensue

Open questions
- Will consumers shun portals without personalisation features?
(consumers will expect to see personalised recommendations in mobile portals as they do in Amazon)

- Can reco solutions measurably improve churn or service adoption?
(lack of measurable benefits hampers adoption of recommendation solutions)


7 OEM monetisation
products, services or distribution?


The telecoms value stack
and how value is shared across the stack from 1990 to 2015

Value Description Value Boundaries Boundaries Value
1990 2010 in 2015

Services e.g. voice, messaging, IM, Facebook, Zyb, 3rd party apps .. NaaS, mbilling

MNOs

MNOs
70% of
Service delivery e.g. voice, text, web, WAP, software, on-device integration industry widgets, OSGi
revenues
Service distribution which device and where on the device service inventory

Device design

OEMs
industrial design, packaging design

cross-
UI design design of the entire user interface
optimise

Core apps core apps (dialler, call logs, menus, idle screen, inbox)

OEMs
15% of
Operating system industry

chipsets
software middleware and hardware interfaces optimisation
revenues
Hardware platform integrated hardware reference designs scalability

Chipset IP for apps processors, radio processors, graphics, etc performance

Manufacturing component sourcing and assembly supply chain mngmt


Value areas and boundaries
for MNOs, OEMs and chipset manufacturers

Boundaries
Value MNO value OEM value Chipset value

Services NaaS, mbilling
flat rate data
Service delivery widgets, OSGi
open gardens
Service distribution service inventory service inventory
RF standards
Device design
cross- OEM-dependent
UI design
optimise OEM-dependent
Core apps
standard
Operating system optimisation
chipset-dependent
Hardware platform scalability
ARM
Chipset IP performance
outsourced
Manufacturing supply chain mngmt

(see MNO theme) (see next) (analysis omitted)


OEM value
where OEMs can add and extract value (1/2)

Services
- The best services will be run by someone else
- No unique OEM value-add
Services
Service delivery (commoditising due to open gardens - including open on-device services)
Device design
- Distribution is a *unique* OEM asset
UI design
Distribution = which device and where on the device a service is deployed
Core apps (distribution is OEM-proprietary due to pre-load software boundaries)
App environment
Operating system - In commoditised industries (e.g. books), distribution is 25-55% of revenues
- OEM distribution across 1,000 million devices/year is unmatched
Hardware platform
- Service distribution is like Google’s business: managing & selling inventory
Chipset IP
(which is why Android moves distribution control from OEMs to Google)
Manufacturing


OEM value
where OEMs can add and extract value (2/2)

Device design + UI design
Services - Device design is most exclusive OEM value-add (and most tightly-kept secret)
Service delivery - yet today UI design is monolithic due to horizontal integration of core apps
Device design Defendable long-term OEM value add is in:
- Device design which can be mass-customised (think deep fascias, aka Modu)
UI design
- Device design which matches UI design and target customer segment at PoS
Core apps
- UI design which allows ‘personality change’ during in-life use
App environment (downloadable personalities) enabling a new premium content market
Operating system
Hardware platform Manufacturing
Chipset IP - Supply chain management is unique value add
Manufacturing - but only for Tier-0 OEMs (Nokia)
- and mega hardware vendors (Qualcomm, Mediatek, etc)


Takeaways
- Commoditised service delivery opens up services to anyone
- Distribution (which device and where on the device) is unique value add
- Device design and matched UI design are unique value-adds,
especially if mass-customised across global reach and customer segments

Key questions
- How will Nokia (tier-0) make money in 5 years?
(hardware, services or distribution?)

- How far can mass-customised designs go in 5 years?
(1,000, 1 million or 1 billion unique designs?)

- Is there a new market to be created from premium ‘UI personalities’ ?


8
Operator futures: bit-pipes or supermarkets?
New smart pipe strategies at the junction of brands+consumers


The operator business is breaking up
From the supermarkets of the 1990’s, operators are breaking up:
- outsourcing marketing & retailing (see MVNOs)
- sharing basestations
- outsourcing core network expansion
- outsourcing value-added services to 3rd party SDPs
- reselling bandwidth to OEMs (see Kindle)
- billing relationship diluted through App Stores

Are operators destined to become bit-pipes?
- not if they don’t choose to


Value layers in telecoms
and boundaries between OEMs and MNOs

To add:
Radio spectrum
Network infrastructure - analytics, network APIs
Payment and authentication - mbilling
Voice/text/data - resell data via OEMs, etc
Value-added services - brand deliverables


How can you build a smart pipe strategy?
Three sustainable areas where MNOs can add value:

Boundaries
Value MNO value OEM value Chipset value

Services NaaS, mbilling
flat rate data
Service delivery widgets, OSGi
open gardens
Service distribution service inventory service inventory
RF standards
Device design
OEM-dependent
cross-
UI design
optimise OEM-dependent
Core apps
standard
Operating system optimisation
chipset-dependent
Hardware platform scalability
ARM
Chipset IP performance
outsourced
Manufacturing supply chain mngmt

(see MNO theme) (see next) (analysis omitted)


How can you build a smart pipe strategy?
Seven pillars for a sustainable smart pipe strategy

Services 1. Focus services only on unique brand deliverables

Service delivery 2. Expose Network APIs as a Service, but monetise as a matchmaker
and marketing channel
3. Reach where VISA doesn’t, but at VISA-like commission rates
Device design 4. Explore customer & service Analytics
UI design
5. Control the in-the-hands experience via on-device service management
Core apps
6. Create, broker and monetise idle-screen real-estate to 3rd parties
Operating system
7. Let App Stores divide and conquer, but offer best-in-class billing and
Hardware platform merchandising as a service to all App Stores
Chipset IP

Manufacturing


Focus where the brand value is
Designing a smart pipe strategy (1/7)

Mobile PC STB

Services Services
1. Focus only on unique brand deliverables
Service delivery e.g. piece of mind, the brand that brings you other brands, in the palm of your
hand, choice, traveler-friendly, always-in-touch, always-first-to-know
2. Use these unique brand deliverables to drive service strategy
Device design
e.g.
UI design - Piece of mind: sync contacts/SMSs to network, replace lost phones within 24h
Core apps - Choice: offer shortcuts to favourite services (from Facebook to flowers) from
the idle screen
Operating system
- In the palm of your hand: offer local device access to
Hardware platform a) core network services like voicemail, self-help, phone bill, phone use and
b) widgetise the 100s of SMS/WAP-only services to boost adoption and provide
Chipset IP consistency of service experience and management

Manufacturing


Network as a Service

Mobile PC STB

Services - Making $$ from network APIs is hard:
users will not pay more for a network-enabled app, there’s little unique to it
Service delivery

1. Monetise as a matchmaker
Device design - deliver dynamic profiling info per subscriber segment
UI design - leverage customer segments for promos (aka white label Blyk)
- outsource new brand creation and co-own derivate brands
Core apps

Operating system 2. Monetise as a marketing channel

Hardware platform - offer a marketing backchannel for app developers through app store
- offer recommendation services by tapping into users’ social graphs
Chipset IP

Manufacturing 3. Offer network APIs via on-device widget environment
for consistency of experience, device integration, in-life service maangement
and inventory management


Reach where VISA doesn’t

Mobile PC STB

Services 1. offer micro-billing at VISA-like commission to mobile, PC, STB environments
a) via web-activated billing with MT SMS confirmation
Service delivery
b) NFC-activated billing with free NFC reader terminals

Device design 2. Extend billing beyond VISA capabilities
through recurring payments, in-app purchases, DoesUser HaveCredit()
UI design

Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing


Customer & service analytics

Mobile PC STB

Services Customer & Service Analytics
Install network and device probes to develop new intelligence:
Service delivery
1. Understand customer behaviour and enable behavioural targeting
2. Monitor and fine tune service performance (A/B testing)
Device design 3. Identify influencers and improve lifetime value metrics
UI design 4. Understand device performance and leverage in OEM deals pre- and post-sales
5. Monetise by reselling analytics to OEMs, ISVs (i.e. become the Nielsen of mobile)
Core apps

Operating system

Hardware platform

Chipset IP

Manufacturing


Service lifecycle management

Mobile PC STB

Services In-hands experience is more important the out-of-the-box experience.

Service delivery
Implement on-device service management to:
1. Reduce ‘runtime age’ for existing content
Device design 2. Multiply addressable market for new content and services
UI design 3. Monetise from 3rd party software management with ‘per install’ and
‘per activation’ revenue models
Core apps 4. Multiply customer touchpoints and opportunities for customer
conversations
Operating system

Hardware platform

Chipset IP

Manufacturing


Service retailing

Mobile PC STB

Services Networks buy the most terminals in Europe/US and hence control
distribution and retailing (‘which device and where on the device’)
Service delivery

Service distribution 1. Create new real-estate through the idle screen (aka home screen, desktop)
Device design
2. Broker real-estate to 3rd parties and own services using innovative
UI design revenue models (per-widget, per-time slot, per action)
Core apps
3. Implication: focus on a single app to be provisioned on all terminals
Operating system
- idle screen for real estate management with widget runtime
Hardware platform - idle screen can encompass address book and any other functionality
Chipset IP - leave all other apps to 3rd parties! (and monetise upstream through
distribution deals)
Manufacturing


App Stores

Mobile PC STB

Services Networks add unique value in billing, distribution and network APIs
but NOT in developer support and on-device storefronts
Service delivery
(or any other aspect of app stores!)

Device design Networks can only extract value where they add value. Consequently:
UI design 1. Let app stores fight amongst themselves and evolve
2. Monetise as a billing platform and on-device inventory platform
Core apps
3. Authorise network API access only for apps within pre-approved app
Operating system stores -> creates new control point in application distribution!

Hardware platform

Chipset IP

Manufacturing


Takeaways
- MNO value is in matchmaking, micro-billing, analytics and service
distribution

Open questions
- How will operators make money in 5 years?
(access pipe, MVNO enabler, smart pipe, supermarket or closed garden?)

- How will operators position themselves in micro-billing?
(premium payment gateway, VISA of mobile, or bank?)

- What % of MNO revenue will come from up vs downstream in 5 years?
(10%, 40%, 80% ?)


Thanks for listening!

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Mobile Megatrends 2010 (VisionMobile)

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