Friday, November 24, 2006
Advertising Could Subsidise Phone Services
Informa Telecoms & Media has released a report which focuses on the future of the mobile market and a barometer of industry opinion based on a survey of more than 1,800 senior industry professionals. The report highlights a bullish outlook from the mobile industry as a whole, with 65% of respondents feeling more confident about prospects for 2007 than for 2006.
Yet mobile operators do not share such a positive outlook. While handset manufacturers and equipment vendors look set to profit from the continued growth of the communications industry, the figure falls to only 54% among mobile operators, who face challenging times ahead as they battle to halt the slide in voice revenues and determine the best strategy as convergence takes hold.
The rise of advertising Operators are having to reassess their business models in light of revenue pressures from several quarters. Informa believes many will start to consider moving from subscription- based services towards an advertising-based business model - a view backed up recently by Vodafone, which is teaming up with Yahoo! to offer cheaper services for customers who accept adverts, and 3, who have just announced mobile internet partnerships with firms such as eBay, Google and Skype.
"The telecommunications industry is evolving at lightening speed, undermining and refashioning business models for all players in the value chain," comments Mark Newman, Informa's Chief Research Officer. "In the future, a mobile business model could look much more like broadband and Internet economics, with the operator charging for access to the Internet and deriving advertising and click-based revenues,"
Earlier this year, Informa predicted mobile advertising to be a US$11.35 billion market by 2011. Will mobile content raise revenues? Rather than being used to grow Average Revenue Per User (ARPU), most mobile operators would now acknowledge that the main aim of launching new mobile services and applications is to slow the slide in ARPU resulting from declining voice revenues.
Almost half of operators believe 3G will be the most important technology in raising mobile revenues, and the shining star of mobile content in 2007 looks to be mobile TV - 41% of all respondents thought this would be the most interesting service on offer next year. This optimism is reminiscent of the excitement felt around mobile music 12 months ago, and music has certainly had a major impact on the mobile handset market over the last year. But T-Mobile's Rene Obermann recently declared that he does not see mobile TV or music generating a significant proportion of his company's revenues.
Network convergence The survey respondents across the mobile sector overwhelmingly (63%) selected integrated fixed and mobile operators as those best placed to profit from fixed-mobile convergence, but the voice telephony future looks uncertain for mobile operators.
The dominance of the fixed-mobile operator is a likely scenario, but Informa believes that certain operators - particularly those who are competing against integrated fixed and mobile operator groups - will also increasingly see fixed-mobile substitution as an opportunity. Few in developed markets have aggressively pursued this strategy until now because it would require a sharp cut in per-minute pricing, but competition is bringing down mobile voice prices to levels where consumers will substitute fixed for voice minutes.
The worst-case scenario for mobile operators is the separation of access and services - where consumers access the Internet through public access Wi-Fi or Wi-Max and use applications such as Skype to make calls. The arrival of dual-mode cellular/Wi-Fi devices could mean the bypassing of mobile operators becomes increasingly common in the future.
Global outlook "Fixed-mobile substitution, convergence, wireless broadband and IP are fundamentally changing the dynamics of the mobile industry, but these trends will impact different markets at different times and to differing degrees," commented Mark Newman.
Where fixed line residential telephony is entrenched - in Europe, North America and developed Asia - fixed-mobile convergence and substitution will take root more quickly and have a greater impact on the market. Likewise, markets with high broadband penetration will be quicker to see the impact of IP and a more open approach to providing access to the Internet than countries where mobile telephony is the de facto communications medium. Many markets are now saturated, with greater than 100% mobile subscription uptake, but there are still real opportunities for growth in unsaturated major markets, including China, India, Mid-East and Africa.
"The only certainty about the mobile communications business is that mobile phone ownership in mid-to-high income countries is becoming a basic human need. And even in developing markets, governments are using mobile telephony as a key driver to develop their economies," concluded Newman.
Thursday, November 23, 2006
The new order....Like Ive always maintained its all about expectations and managing them smartly ! Its interesting to see a 7 year old internet services company, with revenues primarily from advertising, beating stalwarts like GM, IBM, HP, Intel and even Chevron in the market cap sweepstakes !!
Forward PEs for other tech peers based on forecast earnings highlights this rather starkly (with Apple being the sore exception) :
* Microsoft - 18X [fye Jun08]
* Nokia - 14X [fye Dec07]
* Motorola - 15X [fye Dec07]
* Apple - 28X [fye Sep08]
* Cisco - 18X [fye Jul08]
* Google - 38X [fye Dec07]
* Yahoo - 48X [fye Dec07]
* Ebay - 28X [fye Dec07]
* Amazon - 62X [fye Dec07]
Google shares go through the roof
by Martyn Warwick - 22/11/2006 10:19:47
In a pre-Thanksgiving Holiday market surge, the price of Google shares yesterday rose to more than US$500. Last night the search engine company was valued at $154 billion, 730 million bucks, putting it ahead of the likes of Intel, IBM, Hewlett Packard and even oil company Chevron. Of all California’s high-tech companies, only Cisco is now worth more than Google.
If anyone of you out there reading this had the foresight –or sheer blind good luck– to buy Google stock when it first went on sale on the Nasdaq on August 2004 (yes, it really was as recently as that) you would have paid $85 a share. By October 2004 the share price had risen to $200 and in November 2005 they passed the $400 barrier. By yesterday afternoon when the Nasdaq closed, Google shares were changing hands for $509.65, up $14.60 (or 3 per cent) on the day.
Google’s two founders, Larry Page and Sergey Brin, set up Google in the by now traditional Silicon Valley garage in 1999. Both aged 33 they are multi-billionaires, each owning stock worth more than $15 billion despite their having sold-off substantial trances since the company floated.
Even at today’s giddyingly high price, most industry analysts still rate Google as a “buy” proposition. However, there are dissenters and Scott Kessler of Standard & Poor's in New York said last night, "A lot of the rewards are already priced into the shares. Now people should start thinking about the risks."
At $500 a share, analysts say Google’s value is now 37 times its forecast earnings for 2007. That is high indeed, and some measure of comparison can perhaps be made when one realises that Microsoft's current share price to earnings ratio is 21 times expected earnings.
However, market optimism – and its corollary, the remarkable share price – is based on expectations that Google will quickly be able to exploit the opportunities to boost online advertising revenues from YouTube, the company that Brin and Page bought a few weeks ago for $1.65 billion.
David Garrity, the director of research at Dinosaur Securities said, "Arguably, Google is positioning itself yet again to play in an emerging market that is going to be very significant."
And, like other Internet stocks in the US and Western Europe, Google is also benefiting from the lift that normally accompanies the Christmas and New Year present-buying season.Many analysts believe that Google’s incredible climb will continue. Several research houses say the shares will be worth $550 by the Spring and could even top $600 during 2007.
Wednesday, November 22, 2006
* Nokia : 16X
* Motorola : 13X
* Cisco : 28X
* HP : 18X
* IBM : 16X
* Microsoft : 24X
* Google : 65X
* Yahoo : 34X
* EBay : 46X
* Amazon : 62X
Its all about long term expectations and it becoming a virtual world ! However, remember we are still waiting for EBay to monetize its acquisition of Skype and the same goes for Google and YouTube and NewsCorp and MySpace else somebody is going to have to take that haircut !
Web valuations again
Reader’s Digest, more than 80 years old, was sold last week for $1.6 billion. In contrast, the one-and-a-half year-old YouTube was recently acquired by Google for the same amount ($1.6 billion). You could argue that the Reader’s Digest enterprise value (including the debt taken on board by the buyer) comes to $2.4 billion. Still, the contrast should set investors and media entrepreneurs thinking. For there is also Myspace, a social networking site that was recently acquired by Rupert Murdoch for $580 million. If Mr Murdoch’s reported presentation to investors in Australia is anything to go by, it could now fetch a staggering $6 billion. These figures highlight how new economy valuations are being turned on their head in cyberspace, and hark back to the mood at the start of the decade when a relatively young company like AOL could buy up the venerable Time-Warner.
Reader’s Digest is a family magazine with a global following over several decades. It has over 80 million “die-hard” users who are not going to desert it in a hurry. YouTube, on the other hand, has over 70 million videos (now estimated to be 100 million) daily. Do the maths and you get to a figure of 2.1 billion videos being watched monthly, which is many times the size of the Reader’s Digest franchise. Even if you assume multiple readers per copy of Reader’s Digest, the total is almost certain to be smaller than the YouTube franchise. Will these comparisons hold over time? Reader’s Digest readers are “die-hard” and “active”, not “fickle” like users of YouTube. However, even if you discount for 25 per cent users being “fickle”, the franchise is still substantial.
What is the market telling the media business about the future? While many have termed the valuations as “bizarre”, the fact is that just as in the dotcom era, these social networking, interactive or community sites (also classified as Web 2.0 companies) are gathering steam.
One may argue, though, there is a problem with copyrights of the uploaded material on these sites. In fact, Universal Musical Group has sued MySpace, alleging the site infringes on the copyrights of thousands of songs and videos. YouTube, on the other hand, has struck deals with the Universal and Warner music groups. Besides, these sites are experimenting with technologies (as in the case of MySpace) to eliminate unauthorised music and clippings from being uploaded. Sooner or later, they are bound to find an answer just as Napster did.
Their business models (where they exist), though, may not make sense to many. Even Microsoft CEO Steve Ballmer recently told BusinessWeek, “[You’ve got to ask] could Google do whatever it is they’re hoping to buy without paying $1.6 billion?” But did Microsoft itself miss the bus when it reportedly lost the $30 million Flickr deal to Yahoo, and can it create or buy another YouTube? Remember, YouTube was set up with just $11 million of venture capital money.
As for valuation models, some of them certainly remind people of the methods and numbers used, and the assumptions made, at the height of the dotcom madness—combined with very high price-earning multiples. If that invites scepticism, there is the question of first mover’s advantage and barriers to the entry of potential competitors. Duplicating the YouTube technology is easy. Replicating the brand and community will be much more difficult, because in some senses the space is already taken. That brings up another point—have Indian dotcoms too missed the bus? India’s Web 2.0 sites will have to do more than merely ape a YouTube, MySpace or Facebook to get these valuations. Finally, here’s some more food for thought: in September, RBC Capital analyst Jordan Rohan predicted that MySpace would be! valued at $15 billion over the next three years.
Thursday, November 09, 2006
Am a great proponent of - (i) Advertising subsidised usage and (ii) Permission based advertising.
Ad-Funding Can Dramatically Increase the Size of the Mobile Business
The use of advertising to fund mobile services will significantly increase the consumption of mobile content and generate a new revenue stream for operators, according to live trial results released by Amobee Media Systems.
Aggregated data from multiple trials with tier 1 operators in multiple markets shows that for every person that paid to download mobile content, up to 50 took the 'ad-funded' version in return for accepting advertising.
The advertising revenues can be worth as much as four times the equivalent download value. "There's a limit to how much we can expect consumers to continuously increase their spend on new content services," said Eden Zoller, Principal Analyst with Ovum's Consumer Practice. "This has the potential to impact the growth of data ARPU, which is critical in markets where voice ARPU is declining. In this context driving revenues from mobile advertising is important, but you will only succeed if ads are relevant and contextual - and permission-based."
For ad-funding the mobile games business, Amobee provides games developers with a small SDK called HAPI (Handset Application programming Interface) which can be integrated and activated in minutes making the games 'Amobee ready' and conditioned to take ads.
Insertions are served to a subscriber's screen during idle time in the game, for example between levels or during loading. The subscriber then has the option of engaging with the advertising brand to receive information, even initiate a transaction, or can opt not to view the ad and to go straight the next level.
Karl Woods, Vice President Sales and Marketing at Kiloo, a mobile entertainment publisher that has integrated Amobee's HAPI into its games, said: "Amobee-ready games will dramatically increase the number of downloads through subsidized games, helping generate new revenues. The ease and simplicity of integrating The Amobee Media System and the intelligence generated on user behaviour, for example number of game plays after download, average length of time spent on a level and on an ad, or level reached, provides us with the ability for deep user analysis and the ability to create better games."
Wednesday, November 08, 2006
However, with that said, the venturing business is about hitting pay dirt only in a cluth of the multiple investments typically bet on. Thats the fundamental essence of venturing and thats why these folks look for IRRs way above expected from investments in mature/proven businesses. Risk-reward trade off !
Success rate at the idea stage is typically as low around 1/20,000 and improves as ideas sieve through various sanity checks and get fleshed out more. At the start-up stage, the success rate improves to typically something like ~1/100 as ideas by then typically have gone through various gating processes to secure angel/venture funding.
It is venturing that gives a tremendous fillip to innovation as if we were to bet only on whats sure to succeed we would have anything new or different. However, I agree that due heed needs to be paid, particularly in view of our learnings from web1.0, to the maturity and scalability of the business model. Its can't be a pure play specultaion on expectation !!
Venture firms are pouring money into Web 2.0 startups in hopes of funding the next MySpace. But is the frenzy getting out of hand—again?
by Peter Elstrom
Venture capital investors have finally found something they're excited about.
After a sharp decline in investments following the tech bust of 2000 and 2001, venture firms are beginning to pour money into a new crop of Internet companies, in businesses such as social networking and online video. Together, they're called Web 2.0 companies. Venture firms have put a total of $455.5 million into 79 of them during the first nine months of the year, according to a study released on Nov. 7 by market researcher VentureOne, which is part of Dow Jones & Co. (DJ). That's more than twice the amount of money that was invested in such companies during the same period in 2005.
One of the reasons for the surge is the success of several high-profile Web 2.0 companies. Last year, News Corp. (NWS) bought the parent company of MySpace for $580 million, and the surging growth of the social-networking leader has since made the deal look like a bargain. Then in October, Google agreed to pay $1.65 billion for YouTube, the online video sensation.
Flurry of Deals Questioned
Venture firms may envy the success of some of the early investors in such deals. The sole venture-investor in YouTube was Sequoia Capital, a prominent Silicon Valley firm led by Michael Moritz. The firm put $11.5 million into YouTube, largely because Sequoia's Roelof Botha had worked at PayPal with the video site's founders, Chad Hurley and Steve Chen. Sequoia ended up reaping about $500 million after the Google acquisition.
Sequoia has been one of the most active investors in Web 2.0 companies. According to VentureOne, the firm has put money into 14 such deals between 2001 and this year. Only Draper Fisher Jurvetson and Benchmark Capital have had more, with 15 each.
Yet, might the Web 2.0 frenzy be getting out of hand? Some think so. "Obviously there are too many companies being funded in the area," says Todd Dagres, a longtime venture investor who worked at Battery Ventures and started Spark Capital last year. "What we're seeing is inflation similar to back in the bubble."
Dagres is a believer in the future of Web 2.0 opportunities and has invested in several. One of the highest-profile is his stake in Veoh, an Internet site that plans to deliver TV-quality programming. Its backers include Time Warner (TWX) and Michael Eisner, the former chief of Walt Disney (DIS). Yet he's worried that many of the Web 2.0 companies won't be able to offer strong products and services to attract customers. "It's still a competitive market and the consumer is fickle," he says. "You've got to do a great job of satisfying the customer."
Care to Venture a 1% Success Rate?
He's not the only one with bubble déjà vu. "This is scarily like 1998 in some ways," says David Card, a senior analyst with Jupiter Research. "There's easy money out there, and there are some bad ideas getting funded."
In particular, he points to the dozens of social-networking sites that are popping up, in imitation of MySpace. "I'm highly skeptical about social networking," he says. "I think it's a feature. It's not a business." MySpace, he points out, isn't even that good as a social-networking site. Rather, "it's building itself into a youth portal," he says. "It's a Yahoo! (YHOO) for youth."
Certainly, many Web 2.0 companies will simply go under, for lack of an audience or funding. Booms and busts are part of the venture business. Typically two or three big hits will be plenty to pay for seven or eight clunkers. But the number of Web 2.0 companies getting started has raised concerns that the percentage of losers this time will be much higher than in the past. "For every one that works, another 100 will fail," predicts Dagres.
Venture investments in Web 2.0 companies certainly aren't high enough to push funding back to bubble levels. Some $19.5 billion was invested during the first nine months of this year, according to VentureOne, indicating that total investments for the year will come in at around $26 billion. That would be up slightly from the $24 billion last year. But it's still a far cry from 2000, when the venture firms threw $95 billion into companies.
Tuesday, November 07, 2006
The Nokia E61 beats the Motorola Q and the Sony Ericsson P990 as best new converged device.
In a study just released by Strategy Analytics' Advanced Wireless Laboratory comparing three key competitors in the converged enterprise space, the Nokia E61 came out on top, beating both the Motorola Q and the Sony Ericsson P990i by a wide margin. With some luck these studies can have some influence on enterprise buyers and certainly will get the E61 some good press over the coming days. While this is a win over a product from two key handset vendors, it could also be noted as an encouraging win S60 win over Windows Mobile as well as over the UIQ interface.
"The Nokia E61 is rated the best new Converged Device according to Strategy Analytics’ latest user benchmarking in London, UK. The E61 out-scored the Motorola Q and Sony Ericsson P990i with higher user ratings for both usability and style/design. Despite being preferred by females for Style/Design, the Q was let down by poor menu usability and unintuitive HMI. The unique interface of the Sony Ericsson device, along with its clunky form factor meant that it was the lowest rated device in this test."
Fastest fingers rake in millions SMS-ing for television shows boost viewer participation and revenue for channels
Mobile VAS today constitutes ~ 10% of mobile operator revenues, with SMS accounting for 60% of the same with the remaining primarily attributable to ringtones and IVR based content.
The challenge for mobile operators in broadening this content lies in limited data penetration and plethora of local languages.
Some of the emerging VAS we are just about witnessing or likely to witness in the next 12 months - Voice SMS, Mobile TV, IM, Visual radio, Advertising, etc.
Fastest fingers rake in millions SMS-ing for television shows boost viewer participation and revenue for channels
November 05, 2006 at 0000 hours IST
In an era when interactivity is the key, SMS-ing has emerged as a mode of creating a link between audiences and television channels. What started off as an experiment has turned out to be a potential moneyspinning vehicle for content providers, service providers et al. A quick look at the numbers is an eye-opener: KBC II received over 130 million responses through SMSes, Sony’s Indian Idol, got 55 million SMSes and Fame Gurukul received 50 million, Zee TV’s Sa Re Ga Ma Challenge 2005 claims to have got 100 million SMS-es.
It’s a well-known fact now that reality television spells big money: if it is assumed that Sony made just Re 1 for every SMS it received for Indian Idol, that would mean a gain of Rs 5.5 crore, if Star’s share in the SMS for KBC II was Rs 1 per SMS, the channel, was richer by Rs 13 crore. No wonder then that channels prefer to ignore contestants openly buying SIM cards and distributing among well-wishers, cluster-voting and even power roting (when SMS-es can be sent every three seconds from the same number after being linked to a PC). In simple words: a sizeable chunk of money is at stake for channels for every SMS sent in. Globally SMS-es/interactivity contributes to 80% revenue of a channel, while in India, SMS-es contribute only to 20%-30% of the channels revenue.
“Channels need to be careful about introducing public voting. SMS-ing is an important means of creating real time link between the audience and the contestant. In an industry which garners Rs 120,000 million a year we still haven’t tapped the real worth of SMS-es as a revenue model. But this is a sure way of figuring out what the audience wants more than TVRs do. Judges can’t guarantee the success of a show, interactivity is vital and that’s where SMS-ing figures. There have been instances when people have objected to Debojit winning Sa Re Ga Ma Challenge or Qazi Touqueer winning Fame Gurukul — if regional voting helps them win, what can you do about it? Anyway losers always crib,” chips in Ashish Kaul, VP, Zee TV.
While a regular SMS costs just 50 paise, contest SMS-es could set you back by Rs 3-Rs 6 per SMS depending on the arrangement between the channel hosting the show and the mobile operator. If a channel has tied up exclusively with a mobile operator for a particular show, it would get 50% of the revenue generated through SMSes sent by viewers. If the channel allows voting through several mobile operators, the operators keep most of the revenues.
Kaushal Modi, head, Licensing and Telephony, Sony, elaborates: “SMS-es have replaced competition postcards and gives the audience a sense of immediacy. There are 120 million mobile subscribers as opposed to 60 million satellite homes, so the power of SMS is more. SMS-es help build consumer loyalty for a show. But, we monitor cluster voting and power roting of SMSes. In our new show, Bigg Boss where 13 celebrities will be locked together in a house, it will be tough to influence outsiders, so there will be complete transparency of voting.”
Satya Raghavan, VP (marketing & communications, Star India explains: “Today the viewer has many more easier ways to interact. Viewers express their views and participate in a show through these methods of interactivity. All the methods of interactivity are invaluable for the timely feedback. Whenever we use SMS as a means of interaction, there is also a revenue share which the mobile/telephony operator gives us.”
Considering channels gain so much from interactivity,it’s imperative to start closely monitoring cluster SMS-es from same numbers/regions to avoid controversies. If celebrities are exposed for rigging SMS votes as Manav Gohil-Shweta Kawatra were, there’s a lot to lose besides self-respect, like audience support which is vital for interactive shows!
I am sure Google cant be very much behind !
Yahoo's Grand Mobile Ad Experiment
The popular Web portal will start including ads with wireless content. Will users on-the-go slow down for a message from a sponsor?
by Catherine Holahan
Cell phone users have long been able to use their wireless devices to search the Web, often without the banner ads that adorn sites viewed on a bigger screen. That may soon be changing. On Nov. 7, Yahoo! (YHOO) begins testing an advertising platform that will serve up ads specifically tailored to the smaller screens and bandwidth constraints of mobile devices.
Yahoo has offered mobile-phone-compatible versions of its main properties—such as the Yahoo homepage, e-mail, instant messenger, and finance sites—since 1999. Unlike sites formatted for a computer screen, the mobile sites didn't previously include banner ads or other forms of interactive sponsor messages. PepsiCo (PEP) will be among the first advertisers to try the new mobile platform.
Following the Consumers
Michael Bayle, senior director of a business that Yahoo calls Monetization for Connected Life, says the ability to deliver messages to consumers on the go has become increasingly important to advertisers, particularly as mobile devices have become more feature-rich and able to surf the Web.
"It is where consumers are going, and advertisers want to make sure that their brand is seen where consumers are spending time," says Bayle.
Advertisers spent $104.4 million on mobile advertising in 2005. Visiongain, a consultancy that tracks mobile ad spending, estimates U.S. marketers will spend $602.3 million by 2009. Other research firms put the number at more than $1 billion by 2010. By some estimates, mobile advertising will eventually make up more than 25% of the $100 billion spent annually on branded advertising (see BusinessWeek.com, 3/24/06, "Now Playing on Your Cell Phone").
An ability to serve mobile ads would undoubtedly be a boon for the company, which has looked for ways to better match advertisements with search results and other content (see BusinessWeek.com, 10/17/06, "Yahoo's Project Panama Back on Track").
New Targets, New Templates
Bringing ads to cell phones will help advertisers reach a younger crowd, as the mobile audience skews slightly younger than Yahoo's overall audience. Bayle says it also tends to be made up of two kinds of people: those in a hurry who want an answer to a specific question such as "what car rental places are close to the airport" and those whose mobility has been halted because of a travel delay, postponed flight, and the like. The former group is, presumably, amenable to advertisers whose services provide answers to their questions. The latter group could be bored
enough to both shop and surf.
Formatting sites especially for mobile devices has become increasingly popular as more cell phone users buy handheld devices equipped with Internet access, color screens, and other features. In September, an Irish company began a new top level domain, dot-mobi, intended to host only Web sites formatted for cellular phones. Customers who purchased a dot-mobi domain name were automatically given templates to help design their pages to fit portable screens (see BusinessWeek.com, 9/28/06, "A New Wave of Web Addresses").
Yahoo's new service also features several templates for advertisers. The page and advertisement that best fit the mobile device in use is automatically displayed, thanks to technology from Yahoo and cell phone providers.
Yahoo's Bayle says he believes mobile advertisements will evolve way that Web-based ads did. As Internet connections become faster and screens become more capable of displaying details, ads will change from simple graphical text ads to the multimedia and video ads currently on the Web. And, unlike with search ads, where Yahoo trails Google (GOOG), Yahoo wants to be at the forefront of this evolution.
Already, the site is partnered with more than 50 mobile device manufacturers and service providers. "Yahoo has established itself as an early leader in mobile advertising, and is continuing to help drive growth of this emerging market," said Steve Boom, Yahoo's senior vice-president of mobile and broadband. "We are uniquely able to create and deliver innovative, interactive marketing solutions to a targeted audience of engaged consumers."
Monday, November 06, 2006
Real value for telcos lies in owning the end consumer and not just the access which is increasingly becoming a commodity. To garner and retain the customer it increasingly becoming important to offer a convergent bundle of 'sticky' services and a great overall user experience.
Some of the areas I think they need to focus on - Emracing the internet and evolving service offerings accordingly (VoIP/IM services), offering content based VAS (TV, music, LBS, gaming), exploring alternate revenue opportunities such as advertising and improving customer care.
Cisco: Telcos need to think more like Starbucks
by Grahame Lynch - 1/11/2006 08:28:29
Cisco is urging telcos to abandon their "narrow ways of thinking" and embrace a "Starbucks-style" approach to the market.
The networking giant rolled out senior executives and customers for Asia Pacific analysts in Singapore yesterday with the message that telcos are currently missing out on the fruits of convergence and need to think more about how they can sell customers a total user experience.
Cisco's Asia Pacific vice president for service providers, David Caspari, said that content and application providers such as Disney, Salesforce.com, Apple, TiVo and Skype are currently gaining most of the value from the expansion in wireless and broadband net-works and that telcos need to think more "outside the square" if they are to share in industry growth.
“A lot of the new services are being delivered over the top of the traditional telco”, Caspari said. “New players are effectively disintermediating them and telcos need to make sure they keep some of the value."
Mr. Caspari uses the example of Starbucks, a company that can take coffee beans worth only a few cents and sell a cup of coffee for a few dollars. He says, “Starbucks don’t sell coffee, they sell a user experience. You can sit on a sofa, listen to music, hook up to the Internet. People are paying for that."
Likewise, he says, telcos need to think more about selling experiences to customers. “They need to think differently. Telcos currently define themselves by the access medium. They say I am a wireless ser- vice provider or a fixed service provider.”
With traditional service revenues flatlining, telcos need to figure out how they can take a greater share of addressable sources of revenue such as advertising, entertainment, financial services, retail and software.
Almost all growth in addressable markets over the next ten years—which Cisco estimate will reach a cool US$1 trillion extra a year—will come from these sources and will go to non-telco players such as Ebay, Skype and Google if telcos don’t move to seize their opportunities, Mr. Caspari believes.
His colleague Jeff Spagnola,the vice president, d for service provider marketing worldwide, continued the theme, pointing out that Wall Street has already made an early judgment on who will win the race, awarding much higher price earning ratios to the likes of Google and eBay than to traditional telcos.
However, he also noted that North American cable TV giants Comcast and Rogers enjoy the highest PE ratios of all, suggesting they provide a role model for others.
“Service providers with strong content distribution capabilities get higher values,” Mr. Spagnola said, adding there are already encouraging signs for telcos that had embraced a broader vision. He citednVerizon’s early experiences with its fibre-to-the-premises offering, which was that 79 per cent of customers took a triple play package of voice, video and data whilst churn had been reduced to 1.5 per cent.
Meanwhile, Comcast has made available over 7,000 free downloadable video programs, generating 180 millionstreams a month and had cut churn by up to 75 per cent..
Mobile Blogs To Remain a Niche
Unless market conditions change drastically, "moblogging" - the practice of posting personal content, usually photos, from mobile camera phones directly to websites for sharing with friends and the public - will remain a minority recreation for the foreseeable future, according to a new Research Brief from ABI Research.
According to senior analyst Ken Hyers, "At the end of 2006 there will be about 655,000 active mobloggers worldwide. The word 'active' is important, because many people start moblogs, but nearly as many abandon them within weeks. And even in 2011, when there will be some 3 billion mobile subscribers, we expect a mere 2.7 million to be moblogging."
Given the popularity of social networking websites such as MySpace and YouTube, what is holding moblogging back? The generally poor quality of the pictures made by most camera phones is one factor, as well as the sometimes clumsy upload processes. "And," says Hyers, "for most people there's simply not enough going on in their lives that they're going to be uploading pictures on a regular basis."
All this would suggest that moblogging is not, as an industry, much of a money-spinner. However, some kinds of content, and some business models do offer promise. Mobile operators garner revenues from the data services that power every picture upload. Some moblogs feature adult content and that is frequently paid for by advertising. Advertising also supports high-volume photo sharing sites such as Flickr. Moblogging can contribute additional data revenue through heavy MMS use by mobloggers. Operators and handset vendors should work with popular moblogging web sites to encourage mobile subscribers to moblog.
"Moblogs should be tied to other types of online communities," says Hyers, "where they can be supported by banner ads on the site, by targeted marketing aimed at the special interests of specialized online communities, and by additional services such as photo printing."
Hearing the first noises of the same in India too whereby a leading mobile operator is willing to not charge the subscriber for his local call provided he agrees to listen to an ad jingle before his call gets connected.
Blyk's Radical Mobile Phone Plan
The nascent London/Helsinki-based mobile outfit won't be the first to offer free calls in exchange for ads, but it aims to target consumers
by Jack Ewing
A new company backed by some of the leading names in European technology is setting out to shake up the wireless business with an offer that can't be beat: free phone calls. Called Blyk, it aims to launch in mid-2007 in Britain and then roll out service on the Continent. The catch: To get the service, customers will have to sign up to receive ads on the screens of their handsets.
Few startups enjoy Blyk's gold-plated backing. Its CEO is Pekka Ala-Pietilä, the former president of Nokia (NOK), and the roster of other Nokia veterans on the staff includes Marko Ahtisaari, who was previously director of design strategy for the Finnish mobile giant. Blyk's financial backers include Paris-based Sofinnova Partners, one of Europe's top venture capital firms. "For a venture capitalist it's challenging to find a team like that," says Jean Schmitt, a managing partner at Sofinnova. "These guys are totally proven."
BusinessWeek has learned that the company, based in London and Helsinki, also counts as one of its investors Hasso Plattner, the billionaire chairman of German software maker SAP (SAP) and one of Europe's most prominent tech entrepreneurs. Plattner could not be reached for comment.
Why are so many smart people backing a company that has no revenue and doesn't even plan to start operating until next year? If the company's approach proves successful, industry watchers say, it could dramatically affect the mobile phone industry and pose a serious threat to existing operators. "It's going to change the business model for mobile telephony in a big way." says Falk Müller-Veerse, managing partner at Cartagena Capital, a Munich-based boutique investment bank specializing in the mobile phone industry.
Blyk's free, ad-supported service initially will be aimed at British 16- to 24-year-olds. They're prime targets for youth-oriented advertisers, and they are at the vanguard of the trend for using phones not just for talking but also as multimedia devices capable of playing music and video.
Ad-supported mobile service is not a completely new idea. In the U.S., for example, Xero Mobile is planning to offer low-cost mobile service to college students who agree to watch a certain number of ads (see BusinessWeek.com, 4/14/06, "Will Xero Mobile's Numbers Add Up?"). Virgin Mobile USA also gives customers free minutes of service if they watch ads.
But Blyk co-founders Ala-Pietilä and veteran ad exec Antti Öhrling promise that their offering will be different. Instead of a reward system, the messages will be targeted to users and be integrated seamlessly with the handset.
"The fundamental principle is that advertising never interferes with primary function of the phone," says Öhrling, chairman and CEO of Contra Advertising, which has offices in London and several other cities around the world. "If you do it in the right way, it's not just how much [advertising] can you tolerate—it's something people find useful and fun."
The two founders, both 49, who have known each other since they were university students, are coy about how the service will actually work. They say they don't want to reveal too much before the service launches next year. Blyk—a made-up word with no meaning in Finnish—will debut in Britain because it's the second-largest ad market in the world.
Learning the Fundamentals
Blyk will be a so-called mobile virtual network operator, or MVNO, meaning it will market service under its own brand but use the wireless network of an operator still to be named. MVNOs such as Virgin and easyMobile have proliferated in Europe "but nobody has done it as a free operator, which is really the novelty," Cartagena's Müller-Veerse says.
The startup also faces serious challenges, which raises skepticism in some industry observers. Carrie Pawsey, an analyst at London market research firm Ovum, cautions that the MVNO model is not as easy as it looks. "The idea is very good, but the practicalities of running a mobile service are often overlooked," she says.
For example, getting young people to sign up for the service will be a challenge, as will the logistics of shipping customers the SIM cards they need to use, and making sure the technology works. Ala-Pietilä and Öhrling wouldn't discuss details of how they plan to market Blyk.
Blyk must also convince advertisers. Theoretically, advertisers will be able to target their audience more precisely than is possible with broadcast TV or radio. But analyst Pawsey argues it will be difficult to measure what effect the ads are having. "What's to say it's better than TV or another medium?" she says. "Media companies will be looking for quantification".
Still, Blyk was generating buzz among insiders even before the founders opened the kimono on Nov. 2. And the company has instant credibility because of its management and backing. Says venture capitalist Schmitt, "In this respect it's not a startup." Soon the market will determine whether consumers are as enthusiastic as the backers.
Ewing is BusinessWeek's European regional editor.
Thursday, November 02, 2006
The web is quickly moving from a monologue to a dialogue ! Collaboration tools like Wikis are definitely a key catalyst.
By pursuing development of web resident applications and collaboration tools for individual/enterprises and probably not charging for the same (based on Google's track record/existing business model), Google seems to be throwing the gauntlet to the stalwarts (or maybe' old guard') of the technology arena such as Microsoft.
Google Acquires California Wiki Startup
Tuesday October 31, 9:09 pm ET
By Anick Jesdanun, AP
Internet Writer Google Acquires California Startup That Develops Wiki Collaboration Tools
NEW YORK (AP) -- Google Inc., expanding its efforts at providing software that helps users create and post their own materials on the Internet, has acquired a California startup that develops online collaboration tools known as wikis. The announcement came Tuesday through separate postings at Google's and JotSpot Inc.'s Web journals. Terms were not disclosed.
JotSpot Chief Executive Joe Kraus said JotSpot would be able to tap into the Internet search leader's large user base and robust data centers capable of handling any growth.
"Our vision has always been to take wikis out of the land of the nerds and bring it to the largest possible audience," Kraus said in an interview. "There's no larger audience that you can reach than one you can reach through Google."
Wiki tools, popularized by the online encyclopedia Wikipedia, let users create, modify and even delete information on items that others in a group have produced.
In July, JotSpot released a new version that aims to make shared pages similar to spreadsheets, photo albums and other software people already use. In the past, Wiki tools have generally mimicked basic Web pages or word-processing documents -- photographs, for instance, might appear as a list of attachments, with no thumbnails previewing the image before downloading.
Kraus said Google shared his company's vision for helping groups collaborate online. As the two companies talked over the past nine months, he said, "we were completing each other's sentences."
The deal isn't Kraus' first encounter with Google. Long before Google became a household name, co-founders Larry Page and Sergey Brin considered forgoing their own search engine and licensing their technology instead. According to John Battelle's book "The Search," Page unsuccessfully tried to get $1.6 million from Excite, an early search engine Kraus had co-founded.
Google's acquisition of JotSpot, which closed Monday, comes as the search company prepares to purchase the online video-sharing site YouTube Inc. for $1.65 billion in stock.
Earlier in the year, Google said it bought Upstartle, the maker of the online word-processing program Writely. Google has since packaged Writely with an online spreadsheet it developed in-house. The free tools could help groups simultaneously work on documents over the Web and provide alternatives to Microsoft Corp.'s dominant business-software applications, which largely run on computer desktops rather than the Internet.
Kraus said Google's acquisition of JotSpot "validates the notion that people want to do more online than just read. The Web is moving from a monologue to a dialogue."
As JotSpot makes the transition to Google's systems, new registrations have been suspended. Existing users can continue using the service, and JotSpot will stop billing for paid accounts.
Kraus declined to discuss future product plans under Google. In the past, Google turned the Picasa Inc.'s $29 photo organizer into a free download, but it sold a premium version of Google Earth, a mapping product that incorporated technology acquired from Keyhole Corp.
JotSpot currently has 30,000 paid users at about 2,000 companies using a service hosted on premise or at JotSpot. About 10 times as many people use the free, JotSpot-hosted service, which restricts the number of pages and the size of the collaborating group.
Kraus said Google has yet to determine whether existing users would eventually have to sign up for free user IDs through Google, as Writely users ultimately had to do.
The universal identity could heighten privacy concerns, making it easier for governments to obtain one's search history, e-mail messages, word-processing documents and now wiki data with just one subpoena. Kraus said users could delete accounts before migrating to Google.
JotSpot's 27 employees will move about six miles from Palo Alto, Calif., to Google's Mountain View headquarters. Shares of Google fell 18 cents to close at $476.39 on the Nasdaq Stock Market.
Wednesday, November 01, 2006
This trend doesnt bode well for the traditional advertising media as I foresee this trend getting accentuated in the near term in all markets with high broadband penetration. I also expect mobile advertising in countries with a high mobile/low PC penetration (like India or China) to take off in a big way.
Google 'will overtake Channel4 in UK ad revenues'
By Andrew Edgecliffe-Johnson, Media Editor Wednesday Nov 1 2006 02:35
Google will make more advertising revenues in the UK this year than Channel 4, the broadcaster's chief executive has said, highlighting the threat to traditional media models from rapidly-growing online rivals.
The US search engine group would "extract" about £900m in advertising from the UK market in 2006, Andy Duncan estimated, compared with Channel 4's annual advertising income of about £800m. "People need to wake up and realise that this is not just a cyclical issue. There is deep structural change taking place," he told the Financial Times. "If we want to protect the fantastic legacy of UK broadcasting, we need to wake up to this sooner rather than later." Broadcasters could not afford to be "in denial" about the "fundamental change" to their industry, Mr Duncan warned, likening the phenomenon to global warming.
His comments come as Channel 4 is lobbying the UK government for more support, in the form of free access to digital broadcasting spectrum, arguing that it may otherwise not be able to provide effective competition in public service broadcasting in an era of fragmenting audiences and advertising revenues.
Mr Duncan said he had visited Google's headquarters in Mountain View, California last month, and Channel 4, the second largest commercial broadcaster in the UK after ITV, had held discussions about making its programming available through Google. Google could not immediately be reached for comment.
The Internet Advertising Bureau estimated last month that online marketing grew by 40 per cent in the first half of the year to £917m, or 10.5 per cent of the market, and was on course to overtake spending on national press advertising by the end of 2006. Internet advertising is already half the size of the UK television advertising market, which fell by 1.3 per cent in the same period, according to the IAB. It is now twice the size of outdoor or magazine advertising, and three times the size of radio advertising.