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Anywhere Network Phil Presentation Transcript

  • 1. Profiting from the Uncertain Business Models of the Anywhere Network www.yankeegroup.com March 2007 Executive Summary The media and communications industries By are in chaos. Traditional business models Philip Marshall, are being severely disrupted as new What Is the Anywhere Network? Ph.D., SMIEEE innovations emerge and take advantage The Anywhere Network is Senior Vice President, Enabling of the low market entry barriers created Yankee Group’s vision of a seamless Technologies Service Provider with Internet Protocol, MPEG and for and always-accessible intelligent internet browser technology. Anywhere infrastructure that provides a Philip Marshall, Ph.D., joined Network™ is a framework for navigating the connection for everyone to everything Yankee Group in 2000. He is senior vice president of Yankee Group's developing chaos and profitably delivering from anywhere. consumer research group. He manages services to the Anywhere Consumer™ and analysts focused on service providers' Anywhere Enterprise™. perspective to investigate market and service opportunities and trends for telecommunication systems. The Anywhere Network is Yankee Group’s vision of a seamless and always-accessible Before Yankee Group, Dr. Marshall worked intelligent infrastructure that provides in various engineering operations, • Is destroying traditional media-centric software design, research, due diligence a connection for everyone to everything from business models. and strategic planning roles in New anywhere. Internet connectivity moved this Zealand, Mexico, Indonesia and Thailand. • Will demand interoperability between control to companies such as eBay, Google Dr. Marshall also cofounded a software competing solutions for VoIP and and Yahoo! The framework also encompasses company specializing in the development of instant messaging that will drive the database applications and was an electrical community-led and user-centric solutions, which affords the users increased autonomy, obsolescence of proprietary solutions. engineer at BHP New Zealand Steel. service variety, flexibility and personalization. • Has enabled search-centric solutions Exhibit 1 (on the next page) illustrates the to firmly establish themselves in the Table of Contents variety of existing and emerging business early phase of the Anywhere Network Introduction 2 models that could be affected by the and garner significant success with Business Model Uncertainty Arises evolution of the Anywhere Network toward advertising revenue support. However, from Anywhere Network 3 it will see it become increasingly user-centric solutions. Monetizing the Anywhere Network 4 commoditized with the increased Business Model Division Over the Anywhere Network 5 In particular, the Anywhere Network: need for standardized search Carrier-Centric Solutions 5 • Will demand carriers implement solutions that capabilities throughout all facets of Commerce-Centric Solutions 6 increase the intrinsic value derived from the Anywhere Network. Traditional and New Media-Centric 7 distribution capabilities of their networks. • Will see the proliferation of community- Communications-Centric Solutions 8 centric solutions as the Anywhere • Will drive commerce-centric solutions to Community-Centric Solutions 9 support an increased demand for ad-hoc Consumer seeks greater specificity and Search-Centric Solutions 9 Connectivity-Centric Solutions 10 community and ultimately peer-to-peer control over the services delivered over Conclusions 11 transactions. the Anywhere Networks. The Executive Summary continues on next page. © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved. This Yankee Group Report is published for the sole use of Yankee Group clients. It may not be duplicated, reproduced or transmitted in whole or in part without the express permission of Yankee Group, 31 St. James Avenue, Boston, MA 021 For more information, contact Yankee Group: info@yankeegroup.com; phone: 617-956-5005. 16. All rights reserved. All opinions and estimates herein constitute our judgment as of this date and are subject to change without notice.
  • 2. March 2007 Media and communications industry Exhibit 1. Business Models Collide at the Intersection of Digital Media, Communications regulators face the challenges of the and Internet Communities Source: Yankee Group, 2007 market conditions created by the Anywhere Network. Policy makers are Traditional grappling with the migration of legacy Media-Centric network centric regulations, appropriate Operators Producers New Media- • Comcast • Columbia regimes to anticipate service evolution Centric • News • Viacom Carrier-Centric and appropriately manage the efficient Corporation • Disney • BitTorrent • MySpace • Cablevision • China • Verizon use of scarce resources such as radio • YouTube • Lime Wire Mobile Wireless • Apple • Sprint • Vodafone spectrum, and ensure that there is sufficient market competition to benefit Enterprise- Connectivity- the Anywhere Consumer. Centric Centric Community Driven • Microsoft • wibiki • Avaya • FON • Cisco • Ozone User-Centric Commerce- Communications- Centric Centric • Amazon.com • AIM • eBay • Skype • Vonage CE-Centric Search-Centric Community- • Quigo • Wikipedia • LGE Centric • Sling Media • Yahoo! • Ask.com • Sony • Plaxo • XING • craigslist • Google • LinkedIn • Facebook Introduction The media and communications industries This chaos will accelerate and become advantage of the low barrier to market entry appear to be in chaos. Traditional increasingly disruptive as players capitalize that is the hallmark of the transformation. communication service providers are fighting on pervasive and open technologies such market decline with convergence strategies— as Internet Protocol (IP), internet browser, What is going on here? Yankee Group calls attempting to fend off disintermediation from IT virtualization and media standards such this disruptive transformation the next global internet upstarts like Skype. Internet and media as MPEG. connectivity revolution as the world moves to players such as eBay, Google and News Corp the Anywhere Network. The Anywhere are making lofty investments in unprofitable Players across the value chain will be Network is Yankee Group’s vision of a companies such as Skype, MySpace and disrupted as new industry models emerge. seamless and always-accessible intelligent YouTube. Apple recently made a big splash Telecom service providers and software infrastructure that provides a connection for with its overpriced iPhone, and companies vendors such as Microsoft are struggling everyone to everything from anywhere. offering media and social networking because it destroys the traditional value of application seem to be capable of achieving the network and software lock-in techniques The Anywhere Network provides a guide for massive market scale overnight, albeit with they have vigorously pursued. Google and profitably delivering media, communications dubious standalone business models. Skype, beneficiaries of the early phases of and internet-based services in support of the the Anywhere Network, are under threat ever-increasing needs of the Anywhere from later entrants that take can also Consumer and the Anywhere Enterprise. Its 2 © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.
  • 3. March 2007 characteristics vary between markets and Business Model Uncertainty Arises from Anywhere Network market segments. For example, solutions that enable low-cost basic communications The Anywhere Network exposes existing During the Total control period, dominant services in the short to medium term are the business models to disruption in the telecom and media companies benefited priority in nascent emerging markets. This process of enabling new models to flourish. from closed networks and captive user contrasts with mature markets where basic As the Anywhere Network evolves, it communities, for whom they controlled the communications are well established and the continuously liberates the Anywhere delivery of services. The unleashing of an convergence of media and communications Consumer and Anywhere Enterprise from open internet and standardized browser is a more significant consideration for business models that aim to profit from technology allowed players like eBay, opportunities with the Anywhere Network. exercising control over the user experience. Google, Microsoft Skype and Yahoo! to offer Exhibit 2 shows that this liberation process Displaced control services such as online This Yankee Group Report focuses primarily progresses from total through displaced to auctions, internet search, infotainment and on the evolution of the Anywhere Network in community-driven and, ultimately, user- messaging services with vertically integrated mature markets and segments of emerging centric control. The Anywhere Network service delivery platforms. These solutions markets where the convergence of media environment encompasses the various displace the control from the network to the communications and internet services is business model phases that capitalize on the service delivery layer, using highly ripe. An analysis for economically emerging open internet environment. Only with a proprietary and vertically integrated service markets, which focuses on the delivery of deep understanding of the Anywhere delivery technology with sophisticated low-cost communications, will be the topic Network and its effect on the Anywhere portal-based user interfaces. of a future Yankee Group Report. Consumer and Anywhere Enterprise will players escape the calamity and profit from A hallmark of the Anywhere Network is the At the heart of the Anywhere Network are the phases of ecosystem maturation low barrier to market entry that enables the business models emerging as a result of key illustrated in Exhibit 2. proliferation of a seemingly infinite variety of technology and market innovations. This report develops a framework for navigating the emerging variety of the business models Exhibit 2. The Anywhere Network Evolution Drives a Business Model Revolution illustrated in Exhibit 1 (on previous page), Source: Yankee Group, 2007 with particular emphasis on their current and emerging characteristics. Legacy Closed Anywhere Network Environment Ecosystem Maturity Media and Open User- Communications Centric Driven Service Delivery Open Network Open Community- Networked User Driven Services Communities Open Network Controlled Service Networked User Communities Open Network Controlled Service Networked Controlled User Community Network/ Distribution Captive User Community Total Displaced Community User Control Control Driven Centric Apple Craigslist Amazon EC2 eBay Facebook Google Desktop Google MySpace Microsoft Wikipedia Yahoo! YouTube © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved. 3
  • 4. March 2007 services and applications. In the past, these As Anywhere Consumers become Monetizing the Anywhere services and applications were implemented increasingly sophisticated, they will seek Network using vertically integrated service-delivery greater autonomy and control over the silos. Vertical integration is necessary to manner in which media, services and The emergence of the Anywhere Network support nascent services and applications applications are delivered. This will drive the and the displacement of control from that standards-based architectures cannot need for services and application traditional media and communication support. However, these solutions present personalization of the user’s context and providers also shifts the monetization of challenges for the Anywhere Consumer. efficient management of the lifecycle of services and applications they offered. services and applications as needs change. Although traditional providers continue to The Anywhere Consumers are now locked This emerging User-centric category offers seek subscription funds, emerging business into the vertically integrated services. But as massive upside market opportunities. models that derive revenue from users become more demanding and seek a independent sources, such as advertising, wider variety of offerings, the providers’ Early implementations of user-centric have emerged and continue to evolve. challenge is to offer broad service delivery offerings such as Google Desktop and Players such as Google have mastered pay- applications that are suited to the mass Amazon Elastic Compute Cloud (EC2) per-click advertising, while others such as market. The recent “Peanut Butter provide early (and relatively rudimentary) Yahoo! have been more effective in branded Manifesto” article in the Wall Street Journal illustrations. Google’s Desktop application advertising. Major players hope the articulates the challenges Yahoo faces enables users to federate services and emerging Anywhere Network business supporting a wide variety of services with a applications in a single portal environment. models—and the associated convergence vertically integrated market strategy. Although there is some some between media, communications and the personalization, the structure of the services internet—will create revenue that will Community-driven solutions continue to be and applications are relatively static. offset subscriptions. supported on vertically integrated service Amazon EC2 offers virtualized grid delivery infrastructure, but the media and computing capabilities that offer flexible, Although Google and Yahoo! see the lion’s services delivered over this infrastructure are user-provisioned computing capabilities. share of their growing revenue coming from facilitated by like-minded communities, Others such as HP, IBM and Sun have offered advertising, upside opportunities for typically with the service being essentially similar solutions. However, these are not as advertising in other sectors of market are user generated. Early communities, such as versatile and tend to be targeted at large unclear. For example, the large MySpace and craigslist, LinkedIn, Plaxo, Facebook, enterprises. The intrinsic value providers YouTube communities seem to be prime MySpace and YouTube, focus on managing that offer community-led and user-centric targets for advertising but these communities local advertisements, contact details and solutions derive depends on the extent to filled with young members tend to be fickle user-generated media. The accelerated which they liberate the Anywhere with limited disposable income—not growth in these solutions shows the Consumers’ experience. necessarily ideal advertising targets. value that comes from federating services to As Anywhere Consumers become increasingly Because only 3% to 4% of total advertising like-minded sophisticated, they will seek greater autonomy expenditures globally are internet based, communities. Google and News Corp and control over the manner in which media, there appears to be significant upside potential. Communication providers hope recognize this value services and applications are delivered. they can capitalize on personalization and and, with acquisitions user behavioral characteristics to offer of YouTube and MySpace, respectively, are targeted advertising. But, to succeed, looking to complement their existing offerings targeted advertising strategies require vastly with community-driven solutions. increased sophistication, particularly in the case of premium advertising. 4 © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.
  • 5. March 2007 As disruptive business models continue to Business Model Division Over the Carrier-Centric Solutions emerge under the Anywhere Network Anywhere Network umbrella, business models for monetizing Carrier-centric solutions provided by major services will come and go. For example, As Exhibit 1 illustrates, there are a wide telecommunication providers that own and Apple currently derives the lion’s share of its variety of service offerings and associated operate massive facilities based network music business profitability from iPod business models emerging under in the infrastructure, such as China Mobile, Sprint, devices. Apple cannot sustain this model Anywhere Network. To understand the Verizon and Vodafone, garner the bulk of their indefinitely. Similarly Google was evolution of the Anywhere Network through present-day $2.7 trillion revenue from unprofitable before it launched its the various stages of development, we’ll traditional circuit switched telephony services. advertising-supported internet search investigate the existing and emerging model. In general the effective monetization business models associated with the Carrier-centric business models rely on closed of services, whether through direct networks and service delivery environments Anywhere Network. In addition, we’ll look at subscriptions, ad-supported or campaign- that exert significant control on subscribers their traditional and emerging control points type offerings, will depend primarily on the (i.e., the total control category in Exhibit 2). in the value chain, their prospect of survival scale, consistency and reliability of the The Anywhere Network will ultimately destroy as a category, and the various technology underlying service offerings. Important and market innovations that they mustthese business models. The internet has considerations when evaluating business already created an open environment to implement to capitalize on opportunities models include: allow the delivery of an abundance of with displaced control and self-service • Are there obvious direct and indirect internet-centric services, such as search and paradigms. We will discuss the enterprise- revenue streams that can be derived from e-commerce, over the telecommunication and consumer electronics-centric business the service? For telephony, cable and networks without carrier intervention models in subsequent Yankee Group reports. broadband services, for example, this or control. More could mean revenue sharing associated Carrier-centric business models rely on closed recently, peer-to-peer with e-commerce transactions or pay-per- networks and service delivery environments VoIP services, offered by click type advertising models. These companies such as Skype, revenue streams tend to be associated that exert significant control on subscribers. have enabled the delivery with specific transactions as opposed to The Anywhere Network will ultimately destroy of voice telephony less tangible brand-led initiatives. these business models. services over the internet • Is there a consistent service offering and at a fraction of the price carriers traditionally usage model that has intrinsic value and charged. can be monetized in its own right—or by a third party with a parallel revenue—or These innovate services achieve global reach value-generating capability, such as with relative ease and distribution over a sophisticated indexing and cataloging of variety of fixed and broadband networks. Until existing offerings? recently mobile networks had not enabled an • Are the multiple identities and profiles of open internet environment because of network the Anywhere Consumer managed in a performance and difficulties in delivering unique way? These might include a variety services to mobile devices. Higher bandwidth of trusted party security solutions and networks, data-enabled laptops, devices with techniques for service brokering. standardized operating systems, fixed mobile • To what extent can providers combine and media convergence initiatives, and the profitable services with others that lack emergence of access technologies such as 3G standalone business models to magnify and WiMAX, are enabling the mobilization of the internet. the aggregate intrinsic value of the service offered to the subscriber? © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved. 5
  • 6. March 2007 As the Anywhere Network evolves, carriers To profit from the displaced control, carriers creates. To achieve this, carriers are must establish business models, deploy must harness the existing and emerging essentially serving two masters. One master associated technologies and develop service capabilities in their service delivery, network requires that the traditional best-of-breed distribution strategies to capitalize on the and service distribution solutions. Carriers services are delivered efficiently and is business models that arise from displaced must either optimize their business models optimally addressed with vertically control. The business models might focus for wholesale network operations, or integrated service delivery solutions. The on offering wholesale and retail network alternatively create an efficient means for other requires the federation of a breadth of connectivity—relying on others to enable federating internet and other dedicated services, which requires horizontally services over the networks. Or they may play third-party (off-net) services and integrated service delivery solutions. a greater role in the service enabling applications while they drive cost down and process. Because most carriers resist the add advanced functionality to their notion of being bit-pipe providers, the offerings. In both cases, carriers must focus Commerce-Centric Solutions analysis emphasizes their active role as a on driving service offering beyond an service provider (or, more appropriately, a intermediate displaced control approach to Companies such as eBay and Amazon, which service enabler). a completely user-centric orientation. In provide online e-commerce portals for third doing so, carriers must capitalize on context parties to buy and sell merchandise, support The challenge for carriers is in profitably awareness, such as device and access commerce-centric solutions. These transitioning their business models, market network type, location and presence, media companies capitalize on the global reach of strategies, and capital and operational category and subscriber profile. the internet and extend the span of investments. They must pay more attention distribution they can manage and control. to areas where they can differentiate, such To succeed, carriers must carefully The persistent fragmentation in the e- as monitoring and managing service prioritize their technology investments to commerce market coupled with intense distribution, and complex and dynamic simultaneously deliver their traditional competition from specialized e-commerce business process management. Exhibit 3 services economically and capitalize on the and brick and mortar companies, and the illustrates that transition. opportunities the Anywhere Network continued need for managing logistics, provoke players such as Amazon and eBay to continue developing solutions that extend Exhibit 3. Anywhere Creates Opportunities for Openness in the Process of the variety of merchandise they offer, Destroying Closed Carrier Silos Source: Yankee Group, 2007 improve communication and business process capabilities, and lower overall Displaced Displaced Control Total Control Control and Beyond transaction friction. See Exhibit 4 (on the next page) for an illustration of the areas of Services and Services and Services and Applications Applications Applications strategic importance in the e-commerce value chain: Network IP SDP IMS • Third-party plug-ins facilitate integration Network IP with existing customers, managed Network e-commerce services, and enable new Dedicated Open Network Context-Aware, transaction orientated applications to be Network Distribution Open Distribution efficiently implemented in A2P, P2G and P2P environments. • Transaction management capabilities aimed at managing electronic transactions Services and Devices Services and Devices and Services and Devices and Applications Applications Appliances Applications Appliances over the Anywhere internet. Transaction Google Yahoo! management capabilities will evolve in AT&T Bell BT Amazon.com eBay To Be Determined lockstep with functionality created by third-party plug-ins. 6 © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.
  • 7. March 2007 • Integration between Anywhere The combination of ubiquitous communications, Traditional and New Media-Centric Network and bricks and mortar access-independent service delivery, low-cost includes logistical functions, such as the and diverse media aggregation and distribution Traditional media-centric businesses cover a delivery of merchandise, and must methods has spawned competitive media broad range, including: Dow Jones and incorporate both business process and sources. These range from community-based News Corp, which offer print and online communications capabilities (such as solutions such as MySpace, YouTube and information centric media; cable companies Skype and instant messaging), blogs to music-sharing sites such as such as Comcast; and media content particularly as transactions become LimeWire and media-sharing solutions such publishers and distributors such as increasingly ad hoc. as BitTorrent. Apple capitalized on the early Disney and Time Warner. These players digital content distribution solution offered historically enjoyed significant control by Napster and disintermediated the music over the development, Virtually every service and application delivered industry with its vertically integrated iTunes aggregation, rendering solution. Because the lion’s share of Apple’s over the Anywhere Network incorporates digital and distribution of media profitability in this area comes from selling media of some kind. This significantly disrupts and entertainment iPod devices rather than the music services. Leveraging media-focused players and has pushed the entire content—it is not beholden to revenue their market control share arrangements with content providers, value chain to develop innovative solutions that in conjunction with and disrupted traditional content-centric encompass media in some shape or form. the quality of their business models for music distribution that content, brand and were based on the physical distribution of they audience developed lucrative revenue digital content on compact discs. As large streams from subscriptions and advertising. media providers lose control over their These models are under considerable traditionally captive markets, revenue from pressure as the Anywhere Network begins to subscriptions and advertising have fallen take hold. significantly. The Anywhere Consumer is spoiled by choice and at the same time Exhibit 4. Strategic E-Commerce Hooks in the Face of Stiff Competition overwhelmed by the variety of media and Source: Yankee Group, 2007 entertainment services and the excess of information available on the Anywhere Integration between Anywhere Network. In some cases, consumers are Network and opting for solutions that were not Bricks and Mortar developed for monetary purposes. Virtually every service and application Logistics, Business and Operational Support Systems delivered over the Anywhere Network incorporates digital media of some kind. This significantly disrupts media-focused players Internet and has pushed the entire value chain to Third-Party Portal Transaction Browser Device Plug-Ins Interface Management develop innovative solutions that encompass Interface media in some shape or form. Google focuses on harvesting digital and video content, Third-Party Transaction Federation Management combining the content with its robust search Services capabilities and communities to broaden its (e.g., eBay, PayPal) advertising revenue. Carriers are implementing solutions such as IPTV, mobile TV and partnering with companies such as Apple to deliver content and video services over their © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved. 7
  • 8. March 2007 networks. Sling Media and others are The communications solutions offered by players Communications-Centric capitalizing on their ability to redirect video such as Skype illustrate the benefit of bringing Solutions media from set-top boxes to the internet. And communications and messaging capabilities to companies such as Amazon have extensive captive communities. As the Anywhere Network Communications will continue to be an integral catalogs of digital media that they distribute continues to mature, personalized and access- function of the Anywhere Network. Social from their e-commerce portal. News Corp neutral communications capabilities will became networks and communities have shown the made a series of strategic acquisitions, standard within the Anywhere Network business potential of peer-to-peer connectivity and including MySpace, expanding its portfolio models. As this occurs, Anywhere Network communications. Communications was once from the traditional to the new media users will come to expect the availability of the sole domain of telecom network operators domains. News Corp, in conjunction with key interoperable peer-to-peer VoIP and IM with carrier-centric business models. partners such as Google is also exploiting the capabilities, leading to the eventual The openness of the internet, the proliferation MySpace community to bolster its media commoditization of technologies that support of VoIP and instant messaging technologies distribution and advertising capabilities. them. With Skype, eBay has a powerful paved the way for a new breed of communications-centric asset that provides a communications to emerge in the internet New media will infiltrate the variety of services competitive differentiator for the near term. environment. Companies such as Vonage and applications enabled by the Anywhere Skype functionality, which eBay acquired for have a very similar business model to Network. Traditional and new media players $2.5 billion in 2005, will be commoditized traditional carriers, but designed their must aggressively integrate sophisticated within the next 24 to 36 months. technology and operations from the outset media search, management, integration and for VoIP These companies offer competitive . personalization capabilities, user-generated plans and packages similar to traditional telcos and premium content, communication and and more recently transaction capabilities that rival those offered by specialist providers. The Anywhere cablecos that offering The Anywhere Consumer will utilize an bundled telephony Consumer will utilize an ever-increasing volume ever-increasing volume of media and benefit services. Players such of media and benefit from its integration with as Skype and Yahoo! from its integration with other complementary other complementary functionality. At the same time, the market will be surprised how offer peer-to-peer VoIP functionality. At the same time, the market will solutions, which, by users consume these integrated services. For be surprised how users consume these offering low-cost example, the vast majority of music video services that capitalize integrated services. downloads from Apple’s iTunes are viewed on on global internet PCs and laptops rather than an iPod. connectivity, significantly disrupt the According to Nielsen Media Research, Video underlying business models of the traditional iPod users consume video 1 of the time. 1% carriers. Through viral adoption, Skype reached 136 million subscribers at the end of the Digital rights management (DRM) and third quarter of 2006, less than 5 years after copyright continue to be major issue as media being established. is unleashed over the Anywhere Network. Media distribution through social networks and peer-to-peer connectivity will tax traditional approaches to DRM and copyright management. It will drive careful evaluation of the intrinsic value of the underlying media and content versus the manner in which it is delivered. Because the social networks tend to disrupt traditional subscription-based distribution models, indirect revenue sources from advertising, e-commerce and other transactions will become critical. 8 © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.
  • 9. March 2007 Services and applications that offer community Community-Centric Solutions Search-Centric Solutions are a natural evolution of the Anywhere Network. They enable much-needed service Community-centric solutions incorporate Google and Yahoo! made search and ad- segmentation to better manage the seemingly offerings ranging from blogs to a variety of supported search-centric business models infinite variety of potential services and structured social and commercial networking hugely successful. Google mastered a business applications. Furthermore, players will combine applications where much of the content is model well suited to non-premium advertising; community-centric services and applications user generated. Blogs are the most widely Yahoo! has focused more on premium with powerful search and discovery capabilities, adopted community-centric solutions today. advertising, such as complex brand-focused which will demand a degree of personalization They are easily applied to the traditional campaigns run by ad agencies. Non-premium and ultimately drive the Anywhere Network internet allowing ad-hoc interactivity. Other advertising opportunistically drives users to towards the delivery of user-centric solutions community-centric solutions offered by particular company sites based on complex illustrated in Exhibit 2. In addition, the LinkedIn, Facebook, Plaxo and XING, enable prioritization algorithms, and premium coordination of like-minded parties will create subscribers to coordinate and expand their advertising is focused on the subtle activities viral peer-to-group (P2G) and peer-to-peer contact networks for personal or business associated with bolstering company brands. interactions that capitalize on the integration of purposes. These solutions help members seamless communications, media distribution identify and contact former college friends Both Google and Yahoo! aggressively pursue and ad-hoc transaction capabilities that will or previous work colleagues. Solutions expansion strategies to implement emerge from the commerce-centric capabilities. support personal-generated content such as complementary solutions, such as instant pictures and videos, and other functionality messaging, e-mail, video and other types of including targeted job media services, partnerships with telecom advertisement outreach. These Services and applications that offer service providers, and a variety of infotainment companies create viral networks community are a natural evolution of the solutions. Although diversification is critical for of like-minded individuals by these players, they run the risk of diluting the Anywhere Network. They enable much- allowing friends and business value of their core solutions by spreading acquaintances to share contact needed service segmentation to better themselves too thin. Vertically integrated information. Facebook has more manage the seemingly infinite variety of technologies and approaches will challenge than 40,000 virtual networks in them to move beyond highly complementary potential services and applications. which users affiliate with a offerings, such as the storage and indexing of particular community. MySpace media and search capabilities. and YouTube have emerged from community- centric origins, but captured greater mind Both players are known for their dictatorial share by applying user-generated content to approach to the market, which does not interested groups with both direct and indirect position them as particularly good ecosystem relationships with the content authors. partners. Their current search capabilities need to evolve to offer greater granularity and search accuracy with the increased market demands for personalization, service discovery and ubiquitous capabilities. A slew of startups aspire to be the next Google with improved search capabilities. Chances are that Google will acquire one or more of them, particularly while it still enjoys a lofty enterprise valuation. © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved. 9
  • 10. March 2007 Craigslist and Wikipedia are among the other Traditional internet search providers must Connectivity-Centric Solutions search-centric business models. Wikipedia is a innovate to broaden the scope of their nonprofit and relies on user-generated content offerings. In the process of doing so, they Throughout the Anywhere Network, for its electronic encyclopedia. Craigslist will face challenges in migrating beyond residences, enterprises and municipalities are classified advertisement service operates with complementary service offerings, without deploying private networks to meet specific modest revenue essentially to cover its costs. dramatically changing their vertically requirements (such as Wi-Fi in the home or in The approach that craigslist and Wikipedia are integrated approaches to technology hot spots throughout a community). These adopting disrupts ad-supported search- innovation. Yahoo! has already confronted wireless solutions typically rely on unlicensed centric models. It dilutes usage of sites such as this challenge—one of its senior executives radio spectrum, operate independently of Google and Yahoo! and offers search and acknowledged that it has spread itself too other networks and use rudimentary discovery capabilities without being thin in the marketplace in a memo leaked to management systems. These are in contrast to encumbered by advertising. the Wall Street Journal (the so-called the highly coordinated networks offered by “Peanut Butter Manifesto”). broadband, media and communication The Anywhere Network is enabling the companies, which leverage dedicated resources commoditization of traditional search such as licensed radio capabilities, requiring major players such as Ask, Google and Yahoo! continuously Non-premium advertising opportunistically spectrum and operate over wide coverage areas. Lacking broaden their capabilities. Although these drives users to particular company sites coordination between local players have well-known brands, they run the based on complex prioritization algorithms, networks and challenged by risk of losing their market positions if they lag in innovation. The key drivers for the and premium advertising is focused on the using shared resources such as unlicensed radio spectrum, commoditization in traditional internet subtle activities associated with bolstering the private residential, search include: company brands. enterprise and municipal • Increased demands of Anywhere Consumers networks have traditionally as their usage of the Anywhere Network been unable to scale beyond local and metro- becomes more specialized, personalized and wide network area solutions. sophisticated. • The emergence of companies with limited Companies such as Wibiki, FON and Ozone revenue aspirations, such as craigslist offer connectivity-centric solutions that interest groups, rely on user-generated capitalize on the widespread adoption of content such as Wikipedia, and other private residential Wi-Fi technology. These companies that offer compelling substitute players give owners of residential Wi-Fi the internet search capabilities. opportunity to opt into community-wide • Increased variety of online advertising, networks of consenting residential access- and increased sophistication and point owners. These companies aggregate expectations of advertising agencies. and manage the residential Wi-Fi access • Increased integration of search capabilities in points into a patchwork of wireless coverage other Anywhere Network service offerings, offered to those consenting parties. This including media and service-centric social nascent market’s success will depend largely networks that seemingly emerge overnight, on the level of service ubiquity and network such as MySpace and YouTube. coverage it can achieve with the early adopting market and the extent to which it can incorporate networks with broader coverage into the initial patchwork. British Telecom signed an agreement with FON to create an integrated wireless network as an 10 © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.
  • 11. March 2007 extension of its FusionOne fixed-mobile Conclusions network offering. In the interim, this approach requires hybrid solutions, perhaps based on The media and communications industries Yankee Group’s Anywhere Network research least-cost routing algorithms in the devices, are in apparent chaos as they try to meet the agenda will tackle these topics with to enable adequate service coverage. Success ever-increasing demands of the Anywhere interviews, primary research and analysis of connectivity solutions will accelerate Consumer and Anywhere Enterprise. As during the next 24 months. Upcoming improvements in the performance of solutions drive support for community-led Yankee Group Reports include: unlicensed systems, including low-cost and user-centric control, they disrupt • Next Trillion Dollars for the Anywhere Telco transmission solutions and low-cost smart existing and emerging business models and • Anywhere Networking in Economically antennas and cognitive radios. continuously create opportunities for new Emerging Markets entrants. Although it’s clear how existing • Regulatory Rights and Risks on the Road The creation of ad-hoc consumer networks business models must evolve to capture the to the Anywhere Network holds promise in creating significant emerging Anywhere Network opportunities, • Navigating the Anywhere Network Anywhere Network communities that could there are a variety of unanswered questions Technology support business models. If they succeed, that will be investigated in future Yankee these networks will dramatically change the Group publications. In particular: delivery of media and communication • What are the technological underpinnings The media and communications services to the Anywhere Consumer. Even as that will enable the proliferation of the the provisioning of fixed network capacity industries are in apparent continues, wireless and mobile resources will Anywhere Network? • How will the Anywhere Consumer and chaos as they try to meet the be deployed in an ad-hoc manner and minimize the role of mobile service providers Anywhere Enterprise respond to the ever-increasing demands of in network operations. opportunities afforded to them by the the Anywhere Consumer and Anywhere Network and its associated service offerings? Anywhere Enterprise. • How must vendors and service providers prioritize and appropriately time their investments to maximize their revenue opportunities? • What innovations and business models are likely to act as change agents and how can industry players position themselves to capitalize on these change agents? • What appropriate transition strategies must vendors and service providers use to capitalize on the evolution of Anywhere? • What are the primary anchors and major technical and commercial sensitivities associated with the various solutions enabled by Anywhere? © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved. 11
  • 12. Yankee Group Yankee Group | the global connectivity expertsTM Yankee Group has research and sales staff A global connectivity revolution is under way, transforming the way that businesses and consumers interact beyond anything we have experienced to date. The stakes are high, and there are new needs to be met while power shifts among located in North America, Europe, the Middle traditional and new market entrants. Advice about technology change is everywhere—in the clamor of the media, the East, Africa, Latin America and Asia-Pacific. boardroom approaches of management consultants and the technology research community. Among these sources, Yankee For more information, please contact one of Group stands out as the original and most respected source of deep insight and counsel for the builders, operators and users of connectivity solutions. the sales offices listed below. For 37 years, we have conducted primary research on the fundamental questions that chart the pace and nature of technology changes on networks, consumers and enterprises. Coupling professional expertise in communications development and deployment with hundreds of interviews and tens of thousands of data points each year, we provide qualitative and quantitative information to our clients in an insightful, timely, flexible and economic offering. Corporate Headquarters 31 St. James Avenue Yankee Group Link As technology connects more people, places and things, players must confront challenging questions to benefit from the BOSTON, MASSACHUSETTS 02116-4114 changes: which technologies, what economic models, which partners and what offerings? Yankee Group LinkTM is the 617-956-5000 phone research membership uniquely positioned to bring you the focus, the depth, the history and the flexibility you need to 617-956-5005 fax answer these questions. info@yankeegroup.com Yankee Group Link membership connects you to our qualitative analysis of the technologies, services and industries we assess in our research agenda charting global connectivity change. It also connects you to unique quantitative data from the dozens of annual surveys we conduct with thousands of enterprises and consumers, along with market adoption data, Europe comprehensive forecasts and global regulatory dashboards. 55 Russell Square LONDON WC1B 4HP UNITED KINGDOM Yankee Group Link Research 44-20-7307-1050 phone As a Link member, you have access to more than 500 research reports and notes that Yankee Group publishes each year. Link Research examines current business issues with a unique combination of knowledge and services. We explore 44-20-7323-3747 fax topics in an easy-to-read, solutions-oriented format. With the combination of market-driven research and built-in direct euroinfo@yankeegroup.com access to Yankee Group analysts, you benefit from the interpretation and application of our research to your individual business requirements. Yankee Group Link Interaction Our analysts are at your further disposal with data, information or advice on a particular topic at the core of a Link membership. We encourage you to have direct interaction with analysts through ongoing conversations, conference calls and briefings. Yankee Group Link Data Yankee Group Link Data modules provide a comprehensive, quantitative perspective of global connectivity markets, technologies and the competitive landscape. Together with Link Research, data modules connect you to the information you need to make the most informed strategic and tactical business decisions. Yankee Group Consulting Who better than Yankee Group to help you define key global connectivity strategies, scope major technology initiatives and determine your organization’s readiness to undertake them, differentiate yourself competitively or guide initiatives around connectivity change? Our analysts apply Yankee Group research, methodologies, critical thinking and survey results to your specific needs to produce expert, timely, custom results. Yankee Group Live! The global connectivity revolution won’t wait. Join our live debates to discuss the impact ubiquitous connectivity will have on your future. Yankee Group’s signature events—conferences, webinars and speaking engagements—offer our clients new insight, knowledge and expertise to better understand and overcome the obstacles to succeed in this connectivity revolution. www.yankeegroup.com The people of Yankee Group are the global connectivity experts™—the leading source of insight and counsel for builders, operators and users of connectivity solutions. For more than 35 years, Yankee Group has conducted primary research that charts the pace of technology change and its effect on networks, consumers and enterprises. Headquartered in Boston, Yankee Group has a global presence including operations in North America, Europe, the Middle East, Africa, Latin America and Asia-Pacific. © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.