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Making Money on
Mobile
Businesses seeking
to prosper in the unfolding Mobile Age - and seeking to avoid a dotcom
debacle - need to adopt a business model that has six basic ingredients.
By David James,
Oct 3, 2001
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| David James |
Business
opportunities in the Mobile Age will not be identified by the earmarks
of past successes, nor will they be implemented with business models that
pay rich dividends today. We are talking about the future here. And, as
Yogi Berra - that great baseball player and philosopher - once said, "The
future ain't what it used to be."
How will the mobile
Internet evolve? And what are the basic ingredients of successful business
concepts that will build and sustain wildly popular and profitable services
and applications?
Profusion
confusion
These
are turbulent times for the mobile Internet as it struggles to find form
and footing. A profusion of technologies is emerging to carry and manage
data, some of which will dominate broad segments of the market while others
will provide specialized or unique services.
GSM is duking it
out with CDMA to become the dominant 3G technology, each migrating from
earlier technologies on different paths. Wireless protocols and languages,
such as WAP, Java/XML and XHTML, are laboring to deliver Web content to
wireless devices efficiently and economically.
Wireless local area
networks (LANs) are springing up in offices, airports and convention centers
to connect the mobile masses at high speeds up to 11 Mbps. Wireless wide
area networks (WANs) are establishing broader coverage at slower speeds
up to 128 Kbps.
Infrared connections
- in partnership with the mobile Internet - are transferring data effectively
via line-of-sight links at close range. Likewise, Bluetooth technology
is connecting at greater distances - up to ten meters and without the line-of-sight
limitation - and is being rapidly incorporated into a variety of wireless
devices.
For users of mobile
technologies, there is a profusion of hardware devices - mobile phones
of various shapes and sizes, laptops, PDAs, pocket PCs, palmtop computers,
and two-way pagers and organizers (including the popular BlackBerry).
Between the technologies
and the users is a complex array of network infrastructure software, middleware
and gateway interface connections, connection management software, and
applications and content. And there are wireless application service providers
(WASPs), wireless Internet service providers (WISPs), portals and proxies.
Boundless
boundaries
In
this confusing environment of rapid change and growth, opportunities would
seem to be boundless. For those who would tap into these opportunities,
the trick is to adopt a business model for a service or product that can
be provided at a profit over a sustainable period of time.
The first step is
to decide what it is that a substantial number of potential customers will
want - and will be willing to pay for.
In the wireless arena,
where popular applications to date are mostly voice communications and
paging, there are two notable business models. NTT DoCoMo has thrived on
its popular i-Mode service in Japan, and Research in Motion Ltd. found
a winner with its BlackBerry wireless devices in North America.
The keys to i-Mode's
successful business model have been providing a wide selection of third-party
mobile content and incorporating the fees for the content into a single
bill from NTT DoCoMo. The key to BlackBerry's successful business model
has been a simple always-on e-mail and SMS service.
Model
mania
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| "The basis of any successful business model for
the mobile Internet is giving customers what they want," says Peter Rysavy. |
As
the mobile Internet emerges, it's clear that people will want - and will
pay for - a lot more than just voice communications and messaging. Here
are some of the areas that will surely spawn a number of successful mobile
business models:
* Entertainment -
games, gambling, and downloading video clips, music, e-books and other
content
* Information - breaking
news, sports scores, weather, traffic, stock prices
* Alerts - warnings,
sales offerings, options, margin calls
* M-commerce - online
purchasing, stock trading, price comparisons
* Location-based
services - vendors' offerings to passers-by, search for restaurants and
vendors in an immediate vicinity, locate family and friends
* Research - searches
for data and information formatted for mobile devices or downloaded
"The basis of any
successful business model for the mobile Internet is giving customers what
they want," says Peter Rysavy, president of Rysavy Research, a wireless
networking consulting firm based in Hood River, Oregon.
"For carriers, that
means reasonable pricing - $1 per megabyte of data or less - for a broad
set of applications, including office productivity apps such as Microsoft
Exchange, Lotus Notes and Web-based applications, and providing broad coverage,
good roaming options and good security. Add support for all platforms,
including laptops, PDAs and WAP. Do all this and the customers will take
up the service in droves."
Six
basic ingredients
1.
Market Potential. There must be a need or use that customers will demand
- and pay for - over a sustainable period of time. Not a fad or a novelty
that will evaporate when the next fashionable innovation comes along.
2. Value-Based
and Payment-Simple. As with all successful businesses, the customer
must feel that he or she is getting something worth the price. This is
a price satisfaction ingredient, and an important part of it involves price
clarity and ease of payment.
Fixed pricing plans
quickly became the norm for Internet service providers when customers resisted
tiered pricing plans. Mobile services - owing to high costs and complex
delivery systems - present a greater pricing and payment challenge.
A key factor in the
success of NTT DoCoMo's i-Mode service is the single monthly bill. And
recently, because its i-Mode and new 3G services are based on packet-switching
(which delivers data in irregular streams), the company is offering pricing
plans based on timed-data connections.
3. Provider Synergy.
Let's
face it. Carriers are not going to create all the interesting content and
applications that the mobile masses will want. And service providers are
not going to profit if they can't easily deliver their services and collect
fees. Mobile business models need to stimulate content creation and facilitate
delivery and payment. This calls for collaborative models.
NTT DoCoMo's i-Mode
business model has proved to be highly synergistic for the third-party
content and application services that i-Mode delivers. It is a revenue-sharing
model, with DoCoMo collecting the third-party's charges and remitting the
revenues after taking a fee for its collection service. The model has proved
successful for everyone involved, and it has spurred the creation and delivery
of services that people want.
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| "A compelling user experience is the key to mass
adoption of the mobile Internet," says Gayle Moss. |
4. Platform Versatility.
Wireless
Internet services will be accessed by a wide variety of devices often utilizing
different technologies. No doubt some of the mobile devices will converge
in design, but additional devices will probably appear. While the manufacturers
of mobile devices seek uniform capabilities, they also seek to introduce
technologies and gadgets that are new and better.
A basic ingredient
is the ability to serve as many customers as possible. For device manufacturers,
this means the capability of its devices to access as many services as
is feasible for the device. For service providers, it means being able
to work on as many device platforms as is feasible for the service.
5. Mobile-Friendly.
Mobile
devices and services - for their business models to succeed - will need
to be easy to use, interesting and intuitive. Disenchanted users will complain
of "thumb fatigue" in manipulating complicated menus and entering data
on small keypads, of "text trauma" in reading long messages on small screens,
and of "data depression" while downloading music and video at slow speeds.
"A compelling user
experience is the key to mass adoption of the mobile Internet," says Gayle
Moss, vice president marketing of BitFlash Inc., an Ottawa, Ontario, Canada
developer of software that delivers visually rich content and applications
to mobile users.
Moss believes that
visually enticing graphics and user interfaces can significantly enhance
a mobile Internet business model, even for existing applications such as
text messaging. A message from an investment advisor has far greater impact,
for example, if it shows a stock's graph or chart, claims Moss. "The Internet
had been around for over 30 years but only became a household word when
the World Wide Web provided a graphical user interface," she says.
Other mobile-friendly
solutions will be found in voice activated commands and interfaces. The
conversations we will overhear in a public place may well be between a
person and a computer, rather than between two people.
6. Future-Founded.
Today's
mobile business models need to be based on tomorrow's mobile lifestyles
and needs. This is where creativity and luck come in. Those creating a
mobile business model must predict the future and be lucky enough to be
mostly correct - or quick enough to adjust course along the way.
One of the best ways
to predict the mobile future is to consider how our current activities
would change if we used a mobile device - that is, how today's non-mobile
activities might become mobile. If a mobile device could do something better,
or could make the activity easier or more enjoyable, that's probably where
we are headed.
For example, instead
of swiping a credit card and signing a piece of paper, we'll probably click
once on a PDA or mobile phone. Instead of checking for headlines, stock
averages and traffic reports on a TV set or radio, we'll probably glance
at a mobile device or listen to its response while on our way to a meeting.
Instead of mailing photos to family members, we'll probably send them off
over the mobile Internet as soon as we take them.
Location-based services
are bound to be the source of a number of successful business models in
our (distant) mobile future. Apart from accessing maps that show one's
precise location, a user will be able to obtain advanced 'value-adding'
services.
A good mobile Internet
business model calls on each of us to look to the future. We need to be
guided by another sage thought of Yogi Berra: "I don't want to make the
wrong mistake here."
David
James is president of Business
Strategies International, a San Francisco-based consulting and venture-development
firm specializing in technology business opportunities.
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