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  1. 1. knowledge. passion. innovation Knowledge. Passion. Innovation.VisionMobile ResearchMobile Megatrends updated: 4 May 2010 Copyright VisionMobile 2007-2010
  2. 2. Knowledge. Passion. Innovation. Mobile Megatrends 2010 Andreas Constantinou, Ph.D. Research Director, VisionMobile follow me on twitter: @andreasconLicensed under Creative Commons Attribution 3.0 Unported License ( are free to Share or Remix any part of this work as long as you attribute this work to VisionMobile ( Copyright VisionMobile 2007-2010
  3. 3. Distiling market noise into market senseAnalysis + Mapping + Strategy Business Intelligence Market maps Strategy definition competitive analysis, visual maps of whos who in strategy design, ecosystem commissioned research, the mobile industry positioning, product definition company due diligence Active Idle Screen Who will own the screen? GPLv2 vs GPLv3 White Paper Mobile Industry Atlas Mobile Megatrends 1,100+ companies, 70 sectors (Jan 2010 update) 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: Generation Top-100 analyst blog 100 million club mobile industry 2,800+ subscribers tracking successful evolution centres of 90% mobile industry insiders businesses in mobile gravity Copyright VisionMobile 2007-2010
  4. 4. Trusted by industry brandsClients selected VisionMobile clients Copyright VisionMobile 2007-2010
  5. 5. Mobile Megatrends 2010Vertical propositions Web platforms OEM monetisationa 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 futuresHow 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+consumersApp Stores Recommendationsthe long-tail future of app stores and reaching into every cornerthe untapped retailing opportunity of the mobile services world Copyright VisionMobile 2007-2010
  6. 6. 1 Vertical propositions: a one-way street or a quick detour? Copyright VisionMobile 2007-2010
  7. 7. 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, functionalitybased on: Charles Fine: Clockspeed and Clayton Christensen: Skate to Where The Money Will Be Copyright VisionMobile 2007-2010
  8. 8. Evolution of the network business from vertical to horizontalHorizontal industry structure Vertical industry structure 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 Copyright VisionMobile 2007-2010
  9. 9. Evolution of the handset OEM business from vertical to horizontal and back Horizontal industry structure Vertical industry structure 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 networksmanufacturing 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 Copyright VisionMobile 2007-2010
  10. 10. Clock-speeds differHandset OEMs move 2x as fast as network operators Network operators: Handset OEMs: 50 years/cycle 25 years/cycle slow-moving agile rigid fragile Copyright VisionMobile 2007-2010
  11. 11. 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 walledMNOs 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 sourceOEM browsers and operating systems handset OEMs 1999 1990-8 first MVNOs standardisation of radio and ODMs and SIM interfaces chipset appear OEMS Copyright VisionMobile 2007-2010
  12. 12. Centres of Gravity are being formedby integrating all value layers under one roofand 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 Copyright VisionMobile 2007-2010
  13. 13. Centres of Gravity moving to capture value across the stack Apple Nokia RIM HTC Google Qualcomm MediatekComponentsServicesService deliveryService distributionDevice designUI designCore appsApp environmentOperating systemHardware platformChipset IPManufacturing denotes where player started Copyright VisionMobile 2007-2010
  14. 14. 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) Copyright VisionMobile 2007-2010
  15. 15. 2 The evolution of revenue models How revenue models are changing in the mobile industry Copyright VisionMobile 2007-2010
  16. 16. Introducing Value Quadrants cloud value created in the cloud the whenpre-load of value creation post-salesvalue 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 Copyright VisionMobile 2007-2010
  17. 17. 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 areaspre-load post-salesvalue 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 Copyright VisionMobile 2007-2010
  18. 18. ..and distinct revenue modelsValue 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 modelspre-load post-salesValue Revenue models Revenue models Value - 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 Copyright VisionMobile 2007-2010
  19. 19. The evolution of revenue modelsValue Revenue models Revenue models Value 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 distributionValue Revenue models Revenue models Value - 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 Copyright VisionMobile 2007-2010
  20. 20. 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 managementKey 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) Copyright VisionMobile 2007-2010
  21. 21. 3 App Stores: the long-tail future why App Stores will take retailing where it’s never been before Copyright VisionMobile 2007-2010
  22. 22. Top-5 App StoresNo one has been able to copy Apple’s recipe. Is it that hard?App Store comparative analysis (end- 2009). Source: VisionMobile Copyright VisionMobile 2007-2010
  23. 23. 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! Copyright VisionMobile 2007-2010
  24. 24. The 2-year future of App StoresTo 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 Copyright VisionMobile 2007-2010
  25. 25. 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 Storesolutions 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), specialistcontent (e.g. adult or enterprise), region-centric stores (e.g. Seattle apps)3. Co-existence: several App Stores will co-exist within a handsetCase in point: LG and Samsung phones which shipped in 4Q09 in Korea came with four (!) app stores co-existingwithin the same handset; one from the OEM, one from the platform provider (Windows Mobile) and two from theSouth Korean operator SK Telecom.4. Low barriers: App Malls will enable low-cost shops-in-shop setupsSDP vendors will offer the infrastructure, catalogue and recommendations technology allowing wannabeapp retailers to be setup at very low cost, with proven revenue models (setup fee + rent + sales commission) Copyright VisionMobile 2007-2010
  26. 26. Key predictions for App Stores (2010-2012)5. Retailing will triumph- app retailing has been a bottleneck up to 2009Case in point: the Apple App Store top-25 is the main channel by which apps have been able to grab userattention. 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 opportunityApppopular, 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 beforeApp Malls (shops-in-shop), friend endorsements, inventory micro-targeting, gift/beg options, second-handapp 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 businessIn 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. Copyright VisionMobile 2007-2010
  27. 27. 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 sophisticationOpen 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?) Copyright VisionMobile 2007-2010
  28. 28. 4 Web platforms and why the future of software development is still elusive Copyright VisionMobile 2007-2010
  29. 29. 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.. Copyright VisionMobile 2007-2010
  30. 30. Which platform?Many platform choices for application developers and handset OEMs Copyright VisionMobile 2007-2010
  31. 31. For what player? Differences between 3rd parties and 2nd parties 3rd parties 2nd partiesDefinition any software developer without a software developers and service providers commercial relationship to handset OEMs supplying directly to handset OEMsDeveloper 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 toolchainsApplication 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 Copyright VisionMobile 2007-2010
  32. 32. The platform chasmplatforms 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 Copyright VisionMobile 2007-2010
  33. 33. 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 Copyright VisionMobile 2007-2010
  34. 34. 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 Copyright VisionMobile 2007-2010
  35. 35. 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 RTOSesOpen 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) Copyright VisionMobile 2007-2010
  36. 36. 5 Open is the new closed how companies are using open source to further own agendas Copyright VisionMobile 2007-2010
  37. 37. 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 Copyright VisionMobile 2007-2010
  38. 38. Licenses vs Governance modelsin 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) Copyright VisionMobile 2007-2010
  39. 39. Control points in open sourceControl points can detract the freedoms open source is meant to bestowOpen source freedoms Control pointsUsers should be free to run the - Incomplete software: Sponsor can retain key building blocks as closed source, meaning that users will notsoftware be able to create fully functional derivativesSoftware source code can be - Private codelines: Sponsor can use private codelines which are feature-wise very advanced compared to theaccessed 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 thefreely 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 contributionsNo discrimination against any - Private visibility: Sponsor can make the product roadmap or strategy available only to members of a paid-forperson 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 createfields 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. Copyright VisionMobile 2007-2010
  40. 40. 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 Copyright VisionMobile 2007-2010
  41. 41. 6 Recommendations everywhere raising the bar for mobile services Copyright VisionMobile 2007-2010
  42. 42. 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 Copyright VisionMobile 2007-2010
  43. 43. Reaching every niche of mobile servicesvery 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) Copyright VisionMobile 2007-2010
  44. 44. 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 Copyright VisionMobile 2007-2010
  45. 45. 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) Copyright VisionMobile 2007-2010
  46. 46. 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 ensueOpen 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) Copyright VisionMobile 2007-2010
  47. 47. 7 OEM monetisation products, services or distribution? Copyright VisionMobile 2007-2010
  48. 48. The telecoms value stack and how value is shared across the stack from 1990 to 2015Value Description Value Boundaries Boundaries Value 1990 2010 in 2015Services e.g. voice, messaging, IM, Facebook, Zyb, 3rd party apps .. NaaS, mbilling MNOs MNOs 70% ofService delivery e.g. voice, text, web, WAP, software, on-device integration industry widgets, OSGi revenuesService distribution which device and where on the device service inventoryDevice design OEMs industrial design, packaging design cross-UI design design of the entire user interface optimiseCore apps core apps (dialler, call logs, menus, idle screen, inbox) OEMs 15% ofOperating system industry chipsets software middleware and hardware interfaces optimisation revenuesHardware platform integrated hardware reference designs scalabilityChipset IP for apps processors, radio processors, graphics, etc performanceManufacturing component sourcing and assembly supply chain mngmt Copyright VisionMobile 2007-2010
  49. 49. Value areas and boundariesfor 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) Copyright VisionMobile 2007-2010
  50. 50. OEM valuewhere 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) Service distribution Service distribution 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 Copyright VisionMobile 2007-2010
  51. 51. OEM valuewhere 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 Service distribution 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) Copyright VisionMobile 2007-2010
  52. 52. 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 segmentsKey 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’ ? Copyright VisionMobile 2007-2010
  53. 53. 8 Operator futures: bit-pipes or supermarkets? New smart pipe strategies at the junction of brands+consumers Copyright VisionMobile 2007-2010
  54. 54. 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 StoresAre operators destined to become bit-pipes? - not if they don’t choose to Copyright VisionMobile 2007-2010
  55. 55. Value layers in telecoms and boundaries between OEMs and MNOsTo add:Radio spectrumNetwork infrastructure - analytics, network APIsPayment and authentication - mbillingVoice/text/data - resell data via OEMs, etcValue-added services - brand deliverables Copyright VisionMobile 2007-2010
  56. 56. 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) Copyright VisionMobile 2007-2010
  57. 57. 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 Service distribution 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 Copyright VisionMobile 2007-2010
  58. 58. Focus where the brand value isDesigning 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 Service distribution 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 Copyright VisionMobile 2007-2010
  59. 59. Network as a ServiceDesigning a smart pipe strategy (2/7) 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 Service distribution 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 Copyright VisionMobile 2007-2010
  60. 60. Reach where VISA doesn’tDesigning a smart pipe strategy (3/7) 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 Service distribution 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 Copyright VisionMobile 2007-2010
  61. 61. Customer & service analyticsDesigning a smart pipe strategy (4/7) 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 Service distribution 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 Copyright VisionMobile 2007-2010
  62. 62. Service lifecycle managementDesigning a smart pipe strategy (5/7) Mobile PC STB Services In-hands experience is more important the out-of-the-box experience. Service delivery Implement on-device service management to: Service distribution 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 Copyright VisionMobile 2007-2010
  63. 63. Service retailingDesigning a smart pipe strategy (6/7) 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 Copyright VisionMobile 2007-2010
  64. 64. App StoresDesigning a smart pipe strategy (7/7) 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!) Service distribution 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 Copyright VisionMobile 2007-2010
  65. 65. Takeaways - MNO value is in matchmaking, micro-billing, analytics and service distributionOpen 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% ?) Copyright VisionMobile 2007-2010
  66. 66. Thanks for listening! Say hello: andreas@visionmo r: Follow me on twitte @andreascon Mobile Industry Atlas The who’s who mobile with 1,100+ companies 100 Million Club Open Source for Leaders tracking successful businesses in mobile Workshop covering economics, licensing, communities, competitive landscape & strategies. Copyright VisionMobile 2007-2010