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Vision Mobile - 2008 Mobile Mega Trends

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    VisionMobile Research

    Mobile Megatrends 2008

    Knowledge. Passion. Innovation.

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    Mobile Megatrends 2008

    Andreas Constantinou, Ph.D.Research Director,

    VisionMobile

    Knowledge. Passion. Innovation.

    updated: 14 December 2007 licensed under a Creative Commons Attribution 3.0 license.

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    15 Mobile Megatrends

    From mega-portals to me-portals.Content is aging;Content communication is king.The internet is reachinginto the phone.The war of the application environments.

    Value in mobile software is bubbling up.OEMs go forservices and vertical propositions.Brand as the new formof equity in handsets.Network operator strategies areshifting.Browsing is out; engaging experiences are in.Browser proxies bring the internet to the masses.Open

    source is disrupting the status quo.Nokia is now a tier-0OEM.Mobile is transforming to a FMCG business.Channel ARPU: a new source of revenue.

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    selected 2006/7 analyst reports

    On-Device Portals:Beyond WAP(ARCchart)

    High-Capacity SIMs(Informa)

    Mobile SoftwareManagementReport

    The New Age ofHandsetCustomisation:2006-2011(ARCchart)

    Mobile OperatingSystems: The NewGeneration

    Activating the IdleScreen: UnchartedTerritory(Informa)

    MDM Case Study:Motorola(Ovum)

    Firmware OTA:From Hype toMarket Reality(ARCchart)

    Open Source inMobile: 2007-2012(Informa)

    Five Defining Traitsof Open Source(Informa)

    GPLv2 vs GPLv3White Paper

    VisionMobile:a research & market intelligence firm

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    selected clients

    VisionMobile:delivering strategic market know-how to the mobile industry ecosystem.

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    Mobile Megatrends 2008

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    From mega-portals to me-portals.1

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    From mega-portals to me-portals.

    From all-in-one mega-portals (e.g AOL), to vertical portals (vortals, e.g.

    music, sports, healthcare), to personalised my-portals (e.g. iGoogle), to

    user-centric me-portals (e.g. Facebook)

    Source: eMarketeer,company reports(via NY Times)

    20001995

    my-portals

    2005

    portals

    vortals

    2010

    mega-portalsme-portals

    web

    mobile my-portalsportalsvortals me-portals

    1

    Mega-portals are aging:The history of web portals and mobile portals

    Coming next: community OSes, COMOs (e.g. Open Social)

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    Content is aging; Content communication is king2

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    Content is aging; Content communication is king

    The sale value of content is decreasing and DRM walls are falling

    % of subs buying a ringtone fell consistently over 12 months in GB, FR, DE, IT, ES (M:Metrics, 4Q07)

    see also Amazon mp3, Y! Music, Virgin Digital, Nokia Comes With Music (subscribe, but own)

    Content communication, personalisation and remixing is attracting capital

    2

    10s of photo sharing sites: Facebook, MySpace, Picnik,

    Picasa, flickr, flauntr, thebroth, snipshot, ClickFriends,

    Faces, Photoshop Express online, Shozu, Mosh, Pix-Yu

    MoJungle, PixPulse, PixSense, SharpCast, SnapFish,

    rmbr, Kodak gallery, Shutterfly, Photobucket, Webshots,

    Smugmug, Fotki, Dotphoto, Phanfare, Splashup,

    Vi.sualize.us, Pixrat, FFFFound, PicURLs, Zoomorama

    up to 25% of the entertainment being consumed in five years will be what we call 'Circular.. people willhave a genuine desire not only to create and share their own content, but also to remix it, mash it up andpass it on within their peer groups. Mark Selby, VP Multimedia, Nokia, Dec 07

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    The internet is reaching into the phone3

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    The Internet is reaching into the phone

    2001+: the phone reached out to the internet through WAP and web.

    But the phone was only open to the short head of 10s of 2nd parties (OEM partners) and 100s of

    3rd parties with strong funding.

    2007+: the internet is reaching into the phone..

    The long tail of 1,000s to 1,000,000s of 3rd party developers and scripters are reaching out to the

    phone thanks to availability of AJAX, Widget platforms and Web runtimes

    e.g. Nokia Web RunTime, Nokia S60 browser, Motorola WebUI, Nokia WidSets, Opera Widgets,

    Bling Software, Webwag.

    2009+: the phone becomes an active node of the internet

    Consuming and producing services, e.g. Nokia S60 web server, efforts by Conveneer

    3

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    The war of the application exec. environments4

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    The war of the application exec. environments

    2002+: the war of the operating systems has faded

    - Symbian OS shipments are dominated by Nokia (outside Japan) and DoCoMo (in Japan)

    - Windows Mobile is for enterprise segments only (at least up to version 6).

    - The new Palm OS is still slideware and one year away. Will it follow the fate of Cobalt ?

    - Most mobile Linux operating systems are in alpha stage (Celunite, ALP, A la Mobile, OpenMoko),

    not shrink-wrapped (Greensuite), or not backed by a big services firm (Purple Labs).

    2007+: the war of the application exec. environments (AEEs) is raging

    - Flash Lite vs Java;Adobes aggressive subsidy vs Suns JCP standardisation process.

    - Java SE vs Java ME; Androids Dalvik, and Suns strategy to phase out Java ME

    - web programming vs open OS; AJAX, Widgets and web runtimes vs open OS platforms (S60, WM)

    - interpreted languages vs C++; AppForge, Python, Ruby, .NET (Red Five Labs) vs S60

    4

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    Value in mobile software is bubbling up5

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    Value in mobile software is bubbling up

    Mobile software carries high risk & reward and long lead times

    If you are a software vendor in the

    OpenOS or RTOS business, you need

    - $2M - $30M seed capital

    - 2 years technology development

    - OEM sales cycle of 6-12 months

    - operator sales cycle of 18-36 months

    - 18+ months for royalties to kick in

    - but biz model requires scale

    - scaling to new regions,

    OEMs and operators is non-linear

    - a lot of factors outside control to do with handset sales

    The mobile software business is like the Hollywood business; you re either big or youre out.

    -12-18

    handsetlaunch

    -6

    biz dev

    (months)

    handsetlifecycle

    NREs royalties

    investment

    returns

    OEM dealagreed

    s/wembedded

    5

    NREs

    +6

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    Value in mobile software is bubbling up

    The sale value line (line of commoditisation) is moving up the stack

    .. accelerated by open source

    collaborative software development

    efforts (e.g. Web Kit)

    - Googles Android will further

    accelerate this commoditisation effect

    - Value will bubble up to UI and service

    delivery layers.

    - Software vendors without unique IPR

    are not viable

    Middleware

    Operating System

    services andcontent

    Embedded apps

    $0.1 $10m

    $0.1 $5m

    $0.2 $20m

    $2 $0.1m

    per-unitrevenue

    cost tobuild

    valueline

    UI & service layer

    $2.5 $500m

    5

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    DeliveryBrowse, buy, create,

    view, share content,UIs, services

    post-salespre-sales

    intra-

    dev

    icevalue

    extra-

    dev

    ice

    value

    Tools & platformsfor building content,UIs, and services

    User dataMessages, photos,

    videos, profile,preferences..

    Handsetsoftware

    stack

    Value in mobile software is bubbling up

    Value Quadrants for mobile handsets & services

    5

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    DeliveryBrowse, buy, create,

    view, share content,

    UIs, services

    post-salespre-sales

    intra-

    dev

    icevalue

    ext

    ra-

    dev

    ice

    value

    Tools & platformsfor building content,UIs, and services

    User dataMessages, photos,

    videos, profile,preferences..

    per user, per use, flat rate, pertransaction, per level, subscription.

    free orbundled

    NRE, per-developer seat

    NRE,per unit

    Handsetsoftware

    stack

    5 Value in mobile software is bubbling upValue Quadrants represent a shift in revenue models

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    DeliveryBrowse, buy, create,

    view, share content,UIs, services

    post-salespre-sales

    intra-

    dev

    icevalue

    ext

    ra-

    dev

    ice

    value

    Tools & platformsfor building content,UIs, and services

    User dataMessages, photos,

    videos, profile,preferences..

    NRE, per-developer seat

    NRE,per unit

    Softwarestack

    Value in mobile software is bubbling up..but device software is an essential enabler

    5

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    OEMs go for services and vertical propositions6

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    OEMs go for services and vertical propositions

    in order to increase ailing profit margins.

    OEM acquisitions 2006-7:

    - Nokia acquired Avvenu (file sharing), Navteq (LBS), EnPocket (mobile advertising), Twango (media

    sharing), Pixto (physical world connection), Loudeye (digital music), gate5 AG (LBS) and Intellisync

    (mobile device management).- Motorola invested in Tilefile (content sharing) and acquired Leapstone (SDP), Modulus Video (video

    codec), Tut Systems (content distribution), Broadbus (content on demand) and Good Technologies

    (email sync).

    Own OEM services:

    - Nokia (Ovi, Maps, Mosh, Medeo, Comes with Music, Internet Radio, Download!), Motorola Screen 3,

    SEMC (TrackID, PlayNow)

    Vertical propositions:

    - Sony Ericsson Walkman & Cybershot, Nokia E-Series, N-Series.

    6

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    Brands as the new form of equity in handsets7

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    Brands as the new form of equity in handsets

    "The mobile-wireless environment is going to create a whole new set of

    brands:brands around devices, brands around the experiences,

    and also brands around the way people are connecting and

    researching on the Internet. You'll see new brands around this mobile

    world, hopefully some from Motorola, because we are thinking about

    creating distinct brand experiences underneath the parent brand Motorola

    in the mobile space in the future."

    Kenneth Casey Keller, Chief Marketing Officer, Motorola

    in Advertising Age, October 2007

    7

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    Brands as the new form of equity in handsets

    OEMs have been creating co-branded handsets since 2004:

    - Sony Ericsson: Walkman, Cybershot

    - Nokia: E-series, N-series, location-aware devices, Zac Posen, Versace, Aston Martin, WESC

    - LG: Prada, Shine, Chocolate, SD410 sports

    - Samsung: Armani, B&O Serene, B&O Serenata, credit-card sized phones

    - Motorola: D&G, Pininfarina, Aston Martin, Vivienne Westwood, Red

    Operator own-brand devices are making a comeback:

    - Vodafone tried with 4 Simply handsets since 2005, but scaled down due to retailing challenges

    - Huawei, ZTE and Sharp devices are still going strong, as are partnerships with Ferrari

    - Vodafone hinted that own-brand devices might make up 10-20% of portfolio (May 2007)

    - Lots more to come in 2008.

    7

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    Network operator strategies are shifting8

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    Network operator strategies are shifting

    Operator one-stop-shops and walled gardens are not viable.

    Operators are moving to

    - traffic pipes, or

    multi-network connection services, e.g. TMO, Telenor or wholesalers, e.g. KPN)

    - service-pipes

    enabler strategies focusing on device-based service delivery(e.g. Vodafone, Three, DoCoMo)

    T1 operators are now at third era of service-delivery: container projects

    container projects leverage on economies of scale for development & deployment and aim to control

    the relationship with service delivery suppliers.

    8

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    Browsing is out; engaging experiences are in9

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    Browsing is out; engaging experiences are in

    Mobile operators, handset OEMs and media brands are deploying on-

    device portals as the evolution of web/WAP.

    e.g. Orange Downloads, Vodafone ODP, Nokia Content Discoverer,

    Nokia Download!, Three ODP, Refresh Mobile

    ODPs surpass web/WAP in terms of

    - reduced click-distance to purchase, therefore increased revenue

    - preview before buying

    - faster startup time & less resource-hungry

    - better device integration- graphical richness & improved user interaction,

    - low latency (background content fetching & intelligent caching)

    - lower bandwidth costs.

    9

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    Service delivery spills out of

    the browser into the user journey10

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    Service delivery spills out of the browser,

    into the user journey

    i.e, into:

    - siloed applications (e.g. ODPs, music and mobile TV applications)

    Action Engine, Adobe FlashCast, Airmedia, Cibenix, Communology, Crisp Wireless, Geniem,

    Handmark, Mobile Scope, Itfinity, mPortal, Mobinex, Nellymoser, Nokia Download!, Nokia WidSets,

    Opera, uiOne, RefreshMobile, Streamezzo, SurfKitchen, U-Turn, weComm, Yahoo! Go, uActive.

    - active idle screen (AIS) applications

    Abaxia, Acuity Mobile, Aditon, Adobe Flash Home, Bling Software, Celltick, Cibenix, IntroMobile,

    MobiComp, Mobile Posse, Qualcomm uiOne, SurfKitchen Surftop, Nuance T9 Tool, Zi Qix.

    -web, widget and AJAX runtimese.g.Nokia Web RunTime, Nokia WidSets, Opera Widgets, Bling Software, Webwag, Openwave MIDAS

    - UI Frameworks: end-to-end platforms for designing core applications

    e.g. Acrodea, Digital Airways Kaleido, TAT Cascades, Mentor Graphics Inflexion, uiOne HDK, Flash UI

    10

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    Browser proxies bring the internet to the masses11

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    Browser proxies bring the internet to the masses

    Proxies optimise web content delivery for increased addressable market,

    lower latency, lower traffic and higher speed.

    - Speed proxies:image compression, efficient page contents caching, HTTP & content pipelining.

    e.g. Bytemobile, NSN, Flash Networks (NettGain), Venturi VServer, Novarra

    - Transcoding proxies: page reformatting, image reduction,

    menu simplification, session tracking, SSL session handling, XHTML/MP adaptation

    e.g. InfoGin IMP, Google Wireless Transcoder (ex Req Wireless), Novarra nweb,

    Volantis Transcoder, WiderWeb, Greenlight Wireless Skweezer, Clicksheet

    - Pre-rendering proxies:pre-renders page before sending and improves navigation.

    e.g. Opera Mini, Bitstream ThunderHawk

    11

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    Open-source is disrupting the status quo12

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    Open-source is disrupting the status quo

    starting with the browser industry..

    2003-2006: 80% market = Openwave, Obigo (Teleca), ACCESS Netfront

    But the mobile browser industry has been facing many challenges

    - declining per-unit royalties

    - rendering of street HTML and scripting are very complex software to maintain.

    - mobile devices exposed to billions of web pages vs 1,000 simplified WAP pages

    - browser value is in zooming, navigation, device integration, not the rendering and scripting core.

    May 2007: Openwave and Teleca break the dismal story

    In May, browser vendor Teleca announced that it had halted investments into renewal of Obigo product,while Openwave announced it was up for sale following a 50% tumble of its share price in 12 months.

    Open source Web Kit -based browsers used by KDE, Apple, Nokia, Android and Motorola

    12

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    Open-source disrupting the industry status quo

    .. continuing with handset operating systems.

    Android is not a service delivery, but a service access platform.

    Designed to liberalise service delivery and platformise the OS business,

    so that Google can offer the best, easiest, friendliest service delivery platform to every developer.

    Android is unique for several reasons:

    - Declarative XML UI framework helps rapidly develop the UI for new applications.

    - Every application (incl. idle screen, dialer, main menu) is a Web 2.0 citizen.

    - source code to be released under Apache 2 (non-copyleft) license); modify code, ship, retain IPR

    - Java SE platform deeply integrated with OS; a departure from Linux development

    - Androids Dalvik Java VM means OEMs dont have to pay TCK royalties to Sun

    - zero royalty to use the Android OS (purported but not confirmed)

    - Open Handset Alliance comprises of handpicked members; covering complimentary regions (OEMs,

    MNOs) and complimentary technology solutions; very different to LiMo, OMTP, LiPS, GMAE.

    12

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    Nokia is now a tier-0 OEM13

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    Operating profit (US$ million)

    39.20%

    37.10%

    source: Strategy Analytics

    +

    3Q07 operating margins: Nokia 22.2% SEMC 12.4%, Samsung 12.3%, LG 8.4%, Moto -3.1% (Reuters)

    source: Fitch Ratings, Reuters

    Global market share (3Q07)

    Nokia is now a tier-0 OEM

    The only OEM left with cash-flow for heavy investments

    .. with an unbeatable cost + supply chain mgmt (300 million components per day)

    .. and who is strong at both the high-end and low-end of the market

    13

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    Mobile is transforming to a FMCG business14

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    Making phones has tiny margins and no consumer value.

    As in the fast moving consumer goods (FMCG) business, value is in:

    a) defining the right niche segment & proposition,

    b) last mile customisation, retailing and placement,

    c) in-life experience; delivering compelling services across the user journey

    marketresearch

    brandlicensing

    industrialdesign

    hardwaredesign

    assembly &manufact.

    softwareintegration

    last milecustomisation

    certification& QA

    channeldistribution

    retailing &placement

    customersupport

    productdefinition

    servicedelivery

    sale

    valueopps

    Mobile is transforming to a FMCG business14

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    Channel ARPU: a new source of revenue15

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    Beyond voice and data ARPU, there is a new source of revenue

    revenue from delivering 3rd party services/products through the last mile to the end user.

    Channel ARPU comes from:

    - UI inventory leasing through auctioning of handset UI inventory to advertisers and promoters

    - Retail sub leasing leasing of shelf space to OEMs and service providers, e.g. visual service retailing

    - Service delivery channels e.g. Vodafone, Telefonica, TIM revenue share with Nokias Ovi

    - Bundling e.g. Amazon Kindle + newspaper subs or Nokia Download! bundling of service providers.

    - Access to consumers e.g. iPhone subscription revenue share, Blyk ad-funded MVNO

    - User analytics leasing e.g. info on user location, billing, call graphs, presence, service usage

    Channel ARPU is about growing wallet share based on collaboration

    Contrary to voice and data ARPU which are about growing wallet size based on customer ownership

    Channel ARPU: a new source of revenue15

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    Contact:Andreas Constantinou, Research Director

    [email protected]

    Further reading:Mobile Operating Systems: The New Generation

    Five Defining Traits of Mobile Open Source

    www.visionmobile.com/whitepapers


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