The biggest companies in the mobile ecosystem are investing billions in the mobile-web Connected Services space, or the software and synchronization services to connect and deliver innovative user experiences on the phone, web and PC, in an effort to build direct relationships with customers.
As mobile phones have become mobile computers, and are constantly capturing our lives, the four horsemen – Apple, Microsoft, Google and Nokia – are all aggressively moving to secure a stronghold through the core operating system and services largely based on synchronization in a market that ships more “mobile computers” annually than there are traditional computers in the world.
Device makers and mobile operators around the world face a number of new challenges with the rise of open mobile operating systems and the associated application stores. Consumer demand for smartphone capabilities and the promise of data revenue to offset the decline in voice is enticing, but what has caught some wireless companies off guard in their attempts to meet customer demand is how they manage openness in a way that doesn’t cause them to lose the direct connection with the customer.
DEVICE MAKERS
Apple’s entrance and rapid growth has fundamentally shifted the landscape in the industry. Apple is focused on a triple pronged attack strategy with Mac OS X, iTunes and MobileMe. As a result, a battleground has emerged between Apple, Microsoft, Google, and Nokia, each of whom is investing heavily in assets to compete.
If you’re a device maker who is not Apple, you have a challenge in how you differentiate your offering, win mindshare, and customer loyalty vs. a $99 iPhone 3G, or $199 3Gs. Device manufacturers looking to combat the Apple challenge have three software choices: Symbian, Windows Mobile, or Android. Building a proprietary mobile operating system is no longer feasible to compete in a world where developers are key to its success. Apple is not going to license and neither is RIM. Palm WebOS is a potential licensed platform depending on how successful sales of Pre/Pixi and other iterations go in the next 6 months, but at the moment, Symbian (Nokia), Windows Mobile (Microsoft) and Android (Google) control the open mobile operating systems that device manufacturers can license to compete in the market. Because Windows Mobile doesn’t support the level of deep user interface customization, and Symbian S60 is a bit of legacy operating system that is hard to differentiate from what Nokia ships, we are seeing more device makers choosing Android. The added complexity for device maker differentiation on top of the app ecosystem that is specific to a platform, is how to deal with the services that come with their choice of Symbian (Nokia Ovi), Windows Mobile (Microsoft MyPhone, Marketplace), or Android (Google Sync services); services that allow these companies to create direct connections to customers, help build loyalty and capture revenue.
Device makers are ramping quickly to support delivery of mobile-web connected services. Nokia (Ovi), Motorola (MOTOBLUR) and HTC (TouchFlo 3D, Sense and social contact cards), have all staffed up with talented software developers to help them differentiate with cool services beyond just simple user interfaces on top of the mobile operating systems on which they are betting.
As the largest global manufacturer of mobile computers, Nokia is making the move to shift its entire company to be able to compete with software services. With over $10B invested in Ovi (including Navteq acquisition), this transition is being driven by its CEO, Olli-Pekka Kallusvuo. OPK recently stated during Nokia’s Q2 earnings call (16 July 2009): “We are setting 6 month targets that will take us to 300M active users [Ovi services] by end of 2011. This call reflects the first step towards success as a mobile solutions company. It measures our success in acquiring, retaining and deepening customer relationships which is the new battleground in this evolving industry.” Nokia has even gone on record to state that it will break out the number of services attached to each smartphone beginning with its Q3 call.
MOBILE OPERATORS
If you’re a mobile operator, including those that sell the iPhone, you have a challenge in differentiating your network and devices, and that becomes more difficult with each open mobile phone that you ship unless you have a strategy to create and deliver innovative services across your smartphone (not feature phone) portfolio. While AT&T loves having exclusivity on the iPhone in the US market, the cost is not only beefing up the network to support the data, but a tolerance to lose the direct customer connection to iTunes and MobileMe, a move that has emboldened others in the industry to aspire for the same type of customer relationship. There are many exciting opportunities for operators to leverage Connected Services.
One example of how an operator is dealing with this shift is Vodafone. Vodafone recently announced Vodafone 360, what is essentially the Vodafone Live concept of branded services, repackaged for the current generation of smartphones and social networks via the help of software leadership (Pieter Knook, formerly of MSFT and Windows Mobile) and companies Vodafone acquired around synchronization of user content, social networking and location (Zyb and Wayfinder) to deliver mobile and web experiences. Another example of an operator strategy to differentiate is T-Mobile USA. T-Mobile USA has said it will differentiate on Android, and the G1, MyTouch3G, and upcoming Motorola CLIQ support that mission. T-Mobile’s approach is interesting because according to an interview with CTO, Cole Brodeman, “each device will be focused on a different consumer segment…There’s a couple of paths you can take: You can partner close with Google, and it has Google brand sprinkled throughout, and then there’s the carrier and handset initiative—and non-Google based innovation. We are going to take both paths to market, and you’ll see different elements sprinkled in.” The CLIQ will be a hot phone with MOTOBLUR, the new social networking integration that Motorola has added to Android as its primary differentiator, and it will hit a consumer segment that will be excited for what it offers. The reality however is that Motorola will provide MOTOBLUR (and other device makers will provide their flavor of differentiation) on all their Android (or other platform) phones, and many operators will assort, making differentiation beyond exclusive device deals difficult.
The mobile operators face a challenge of how to harness and act upon the threat of disintermediation being caused by each open mobile phone that it sells. On the one hand, consumer demand for smartphones must be met, and increased revenue per user with data plans is a good thing. On the other hand, every time a store sells a Windows Mobile phone, that customer can sign up for Microsoft MyPhone and build a direct connection with Microsoft. A sale of a Nokia phone means a customer can sign up for Ovi and build a direct connection with Nokia. With an Android phone from Google, a user can’t even get to the main screen without entering a Google username and password, and at that point Google is building the relationship with the customer as it captures data. And obviously the same is true of an iPhone sale, as users sign up for iTunes and MobileMe, two services where the operator is cut out. One could argue the operators should just let the software companies innovate , and instead of getting into the mix, continue to focus on tying up exclusives, phone sales and increasing revenue per month, while making sure the networks can support the increase in data traffic. For the consumer, that may be welcome, especially if an operator doesn’t come to the table with something awesome. But because the mobile phone is such a personal part of everyday life, and the data shows people replace their phones at least every 18 months, consumers are unlikely to want their data trapped in a service from say Microsoft if it means they have to continue buying only Windows Mobile phones to access their data and benefit from the value the service provides.
CONCLUSION
Device makers, mobile operators, retailers, and developers are eying the tremendous opportunities made possible by mobile-web Connected Services. Whether it is the chance to build a social network around the users’ mobile address book; create real-time sharing experiences between phones, computers, and the web on a level well beyond what MMS was designed to deliver; a chance to build an “iTunes Genius”-like feature to help users select themes, apps, rings and monthly plans based on usage; to sell applications; to target and deliver interactive location-based advertising; help increase the switching costs as the iPhone/iTunes/MobileMe service combo has demonstrated; and sell more phones and boost revenue per user, the significant investments being made in mobile-web Connected Services are a strategic bet that will pay dividends if companies are successful in building direct customer relationships, and ultimately, direct monetization.
At Dashwire, we believe innovative connected services can be delivered not just as siloed services to a particular platform, but across the various open mobile phone platforms. Our shift to offer DASHWORKS, a Connected Services platform, is our belief that we can help other companies thru licensed software to accelerate innovation for consumers around the world regardless of operator or device manufacturer.
- The Mobile Social Graph – Where Software Companies are Going
- Connected Services – The Next Wave of Mobile Phone Computing
