The mobile revolution is just getting started

[Posted by Thomas Husson]

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I just presented the latest findings of a new research published "Mobile Technographics in Europe" to Forrester clients at our London Consumer Forum.

This report looks at the state of the European mobile market and at how consumers are using mobile services. We have created different profiles looking at how consumers are using their mobile phones in the different countries.

Over the past two years, the introduction of the iPhone has changed the way consumers and brands perceive mobile phones. It acted as a marketing catalyst, raising awareness of smarter devices and conveying the idea that there are as many mobile services as there are consumers. Consumers will continue to shift their attitudes toward mobile phones — perceiving them not only as communication tools but also increasingly as entertaining and productive devices that can help them in their daily lives. More than 40% of European consumers are beginning to demonstrate sophisticated usage of mobile services.

We expect this to grow over time led by the two most sophisticated group of users (SuperConnecteds and Entertainers). They will change the general perception of mobile phones:

I had a number of conversations with financial institutions, retailers, travel companies and global CPG or luxury brands either planning to add a mobile dimension to their strategy or already doing so. Most of them recognized that mobile could be potentially as disruptive as the PC a decade ago. Japan or South Korea are not exceptions. The question is not if but when and how to phase out their mobile investment.

I have also met executives that are still skeptical saying the market is not mature enough and acknowledging they are still struggling with their online strategy. We believe they are wrong because the path of innovation is accelerating like never before and because they are growing even if limited opportunities to tap into today. The key is to identify the relevant audiences.

Companies that hadn't anticipated the disruption of the PC internet such as media companies are now doubling their efforts to catch up in the digital space, not only on the PC but also on mobile.  

Let's face reality, mobile is not going to change drastically their P&L even in 2010. However, it is time to make the most of new consumer behaviors and to anticipate changes.

One first step is to look at the mobile profile of your own customers to at least know the potential you can tap into today...and to plan ahead for tomorrow.

Clients can access the research here. If you want to discuss this more in depth, feel free to contact me at thusson AT forrester DOT com.

Why EMI's Launch of Abbey Road Live is a Peek into the Future

[Posted by Mark Mulligan]

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EMI have announced the launch of Abbey Road Live, a service that records high quality audio and video footage of live concerts and produces take away CDs, DVDs and USB sticks for concert goers.  Though this may not be as big a headline grabbing story as MSN Music’s attempt to take on Spotify, it is illustrative of an arguably much more important trend. 

 

Forrester clients and other regular readers of this blog will know that we’ve spent much of this year developing our big idea about Media Meltdown and the associated series of research documents.  (For those not up to speed see this blog post and this report and this report.)  The overly boiled down summary is that traditional media companies are having to reinvent themselves as consumers’ willingness to pay for content nosedives.  Hence 360 deals etc.

 

But why I like this EMI announcement is that it isn’t just about revenue diversification, it’s about recognizing which of its assets consumers still attach core value to an building around that.  For the music industry, live is one are where consumers still clearly attach a massive amount of value: a ticket for a U2 gig for example can work out more than ten times more expensive per minute than buying the entire back catalogue on CD.  

 

So in the context of the Media Meltdown, where online availability of content has washed away true scarcity for good, media companies need to coalesce around where consumers retain value (see chart below).

The reason that these events have value is because they are unique – their value comes from the personal experience in the here and now. The EMI Abbey Road Live venture explicitly builds upon this theme by giving consumers the ability to extend that unique experience into their homes and MP3 players.  

 

Rebuilding the media industries won’t exactly be an easy task, but what is clear is that there are vital assets that can form the basis of new, important revenue streams.  It is not so much a case of media businesses dying as of media companies building new media businesses around their core media assets.

 

This is a topic I’ll be talking about in much more length at Forrester’s forthcoming EMEA Marketing Forum in London.

 

I’ll be presenting on the 17^th November at 2.00pm on the following topic:

The Digital Transition Of Media: How Media Will Never Be The Same Again

I hope too see you there.

Spotify: Comes With Music's Latest Threat

[Posted by Mark Mulligan]

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As I referenced at the end of my previous post, Spotify – the European streaming music service – has struck a deal with UK mobile operator 3, bundling the cost of their premium subscription into the phone tariff.  I’ve done a few press calls on the story today and the recurring question has been “where does this leave Nokia’s Comes With Music”.

 

Although the business model and value proposition are very different in many respects (thus suggesting risk of direct competition is low), there are also many similarities. Both offer unlimited music free to the end consumer, and now both are mobile. The distinctions between streaming and downloading is becoming increasingly irrelevant to end users (though rights bodies will continue to obsess about the distinction). The differences the consumer feels are of course what matters.  Given that CWM and Spotify have comparable catalogue, the key differences between fully subsidized mobile offerings will be:

 

1. Ownership of the music
2. Amount of music you can play ‘offline’
3. The device / service experience

 

The latter is what will really count.  Ultimately what people want from a mobile music experience is something that works well as an extension of their device (compared to a PC centred experience where demands and expectations are higher).  In effect mobile music services have to work well as a feature of the handset. So Spotify and CWM both need to achieve deep handset and operator integration (e.g. permanent home screen buttons etc.) to make the experience feel like an integral feature of the phone experience. If either achieve that, and create a compelling business case for operators, they’ll stand a good chance of success with multiple partners, by being a feature rather than a service.

Music Subscriptions wherefore art thou?

[Posted by Mark Mulligan]

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With paid music downloads falling far short of offsetting the impact of declining CD sales, next generation subscription services need to succeed if recorded music sales are ever going to come out of their nose dive.  There is certainly lots of supply side activity, with services launched or announced in the last year from, Nokia, Spotify, TDC, Sky, Virgin Media to name but a few. And the incumbents have been busy reworking their offerings (cf Napster’s new 50%-price-cut-with-MP3s play).

 

Music subscription services have a lot of history but not a huge amount of success, so what gives the current new crop any chance of survival, let alone success?  The key will be hiding some or more of the cost to the consumer and adding real value.  The bottom line is that many consumers are simply unwilling to pay for music and even fewer are interested in paying a monthly fee for it.  So success lies in making the services free or ‘feel like free’ to the end user, subsidizing the costs through savings to, or increased revenue from other core products.  TDC, the Danish telco, has pioneered this approach with its free-to-consumer service that is available only to its customers.  (A cynic might argue that Spotify is doing the same, subsidizing its free offering with VC funding!) 

 

TDC Play has enjoyed strong adoption (100 million downloads in 15 months, not bad for a country of just 5 million, and yes, that does translate to 20 tracks for every single Dane).  Crucially though, TDC reports that Play is delivering strong benefits to their core business, which in the end is what the service is all about.

 

But not everyone is having so much success giving music away to consumers (you’d think it would be a straightforward enough task right?).  Reports have  emerged that Nokia has acquired just 100,000 Comes With Music subscribers across 9 international territories, one year after UK launch.  I remain a firm believer in the Comes With Music business model and value proposition (free unlimited music on your phone and PC that you keep for ever, the entire cost hidden in the handset and tariff).  But there is not question that 100,000 subscribers after one year is nowhere near enough return for Nokia. Nokia needs to up its game, (and indeed is doing so) because if they don’t someone else will.

 

Mobile is becoming an increasingly important element of the next gen subscription services. Spotify are using mobility as they key driver for their paid offering and are even playing the subsidized game as well with a partnership with 3 in the UK.

 

There is no lack of service innovation, but there needs to be some consistency in the experimentation. For example, what value does Sky Songs deliver for 7.99 GBP for unlimited streams and some MP3s that Napster doesn’t for 5 GBP? 

 

Continued product innovation will of course be key to feels-like-free subscriptions becoming a success, but unless this is done within a consistent framework, consumers will remain largely disinterested except for the occasional service that gets its positioning right (e.g. TDC).  Whilst that would be good news for a few companies, it could be little short of catastrophic for the music industry.

Why mobile could reinvent social computing

[Posted by Thomas Husson]

You can also follow me on Twitter at Thomas_Husson

Many innovative start-ups have pioneered mobile social networking in the last few years: BuzzCity, Peperoni, Fring, Nimbuzz, eBuddy, Zyb, Plazes, Loopt, Foursquare and many others demonstrated the potential of the market.

 

In the last few months, a bunch of announcements clearly showed that the convergence between mobile and social computing is gaining traction and attracting the largest stakeholders:

 

·         In September 2009, Facebook announced it had passed the 65,000,000 mobile users' monthly mobile audience mark (which represents more than 20% of a global online audience of 300M users). Bebo, Friendster, MySpace, Orkut also are among the top mobile Web destinations in countries where they have significant online audiences. Twitter partnered with Vodafone and O2 in the UK while offering a mobile VoIP offering with Jajah.

·         Operators such as Vodafone with its “360” initiative and to a lesser extent Orange with “Social Life” are going one step further than just offering access to social networking sites.

·         Handset manufacturers are trying to integrate online social experiences in their devices: INQ gained lot of attention with its INQ 1 (see below a pic from a recent trip in Italy) by winning the “handset of the year” award at MWC, while Nokia recently announced a deeper integration of Facebook in the N97, not to mention the Motoblur product.

 

In the UK, 40% of 16/25 years old are either accessing (17%) or interested in accessing social networking (23%) via their mobile phones. Of course, mobile social computing is primarily a youth activity today. However, it has a strong potential to unlock.   

 

Most of the digital revolution has taken place on the PC so far, with the emergence of email, instant messaging, blogs, photo- and video-sharing sites, and social networks. The ubiquitous nature of mobile phones has changed the way we live and communicate. Letters, diaries, address books, and memories have gone digital, while communication with friends, relatives, and colleagues has never involved such a mix of our personal and professional lives. However, mobile phones are not only communication tools. Mobile phones have unique characteristics that will enhance and modify existing PC-based Social Web experiences.

 

Indeed, mobile social activity is more than just accessing social networking sites while on the go. Mobile phones have the potential to become the hub of Social Computing activities and to be more than just a complement to the PC experience. Mobile phones will increasingly become the glue that holds the social graph together, offering creative tools and immediacy, presence, location, and context when interacting with the real world. The “always on” mobile connected handset frees the Social Web from the chains of the PC and thrusts it into the real world.

 

As Social Computing is still primarily about social communication, traditional telecom and online players will start fighting to tap into consumers’ social address books. It is too early to say who will win the race: stakeholders have different assets, and uncertainties around business models still exist. In fact, stakeholders have no other choice but to collaborate, as no single player can really own a person’s social graph. They need to balance business opportunities with the need to respect consumers’ privacy concerns by providing them with the tools to manage their digital identities.

 

Despite massive communication audiences, traditional online giants have failed so far to turn their communication audiences into social audiences — a lesson that traditional telecom stakeholders should bear in mind! Moving away from personal information management (PIM) to fun, exciting social experiences is not an easy game.

 

If you want to know more about this topic, Forrester Research just published a new report: “Why mobile could reinvent social computing”. Clients can access it here.

 

I had some interesting discussions with my colleagues serving Interactive Marketers and there are still lots of unknown and open issues around the convergence between mobile and social computing. I’d be curious to know your thoughts on this nascent and exciting topic. If you want to share your ideas, feel free to comment below.

Sky Songs: First Take

[Posted by Mark Mulligan]

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Finally we get to see some fruits of the labour of the protracted negotiations between the UK music industry and the ISPs.  Sky’s long mooted service - Sky Songs - will go live on the 19^th October with content from all the majors, powered by Omnifone  In doing so Sky brings three major assets to the table:

• a scale of marketing clout and expertise that other music subscription services could only dream of
• proven and deep understanding of packaging and marketing entertainment products
• a large installed base of premium customers to target

 

At launch the service is to be marketed to all UK broadband customers rather than explicitly to Sky customers. This gives a wide addressable market, but it does mean that two other key assets are currently untapped:

• bundling this offer with Sky TV packages
• integration with Sky’s hardware

 

Sky does though, leave these as distinct possibilities on the road map, which is very wise as they could prove to be the secret sauce that could make Sky Songs a success.

 

Sky also do one other very smart thing that will stand them in good stead: they enable customers to ‘dip in an out’ rather than locking them in to a year’s commitment.  This is added to competitive pricing:

 

• pay £6.49 and download either a £6.49 album or 10 songs, and receive unlimited access to listen to over four million songs online for one month; or
• pay £7.99 and download either a £7.99 album or 15 songs, and receive unlimited access to listen to over four million songs online for one month.

 

I can’t emphasize enough how important the ‘dipping in and out’ should prove for Sky Songs.  UK and other European consumers have proven largely unwilling to pay premium subscriptions services and even in the US no premium music subscription service has broken the 1 million subscribers mark.  Napster’s recent price slashing is indicative of the challenges facing the incumbents.  The bottom line is that most music buyers don’t spend the amount of money that a monthly subscription fee is equivalent to, however good value for money it might be.  The annual cost of Sky Songs would be £79 or £96. By way of comparison per capita annual music spend in the UK is just £2 whilst the average spend per UK music buyer is closer to £6.  And the unlimited streaming part isn’t that much added value anymore: Spotify’s UK success has made free streaming table stakes, not a premium add-on.

 

All of which is why Sky’s decision to allow customers to effectively use the service as a good value a la carte album purchase with free streaming is so smart.  But I hope they’re similarly smart to market it that way as they educate the customer base.  Sky almost single handedly educated the UK market about the concept of TV subscriptions, now they need to do the same for music subscriptions. 

 

Music subscriptions looked like a dead man walking in 2008, but over the last couple of years the space has had new life breathed into it with a series of next generation iterations, including:

• Nokia’s Comes With Music
• Spotify Premium
• Virgin Media’s Unlimited MP3 service
• Datz Music Lounge
• Music Station
• Sky Songs

 

All of these differ markedly from each other, and that is exactly the point.  The days of the 9.99 rental streams as the future of subscriptions are gone.  The mantra of one size does not fit all applies keenly to the music subscription space.

 

This isn’t to say Sky Songs will be an instant run away success – it will probably spend a while fine tuning its proposition and positioning – but once it starts leveraging all of its assets it stand as good a chance as anyone of making the model work.  Perhaps most importantly, it heralds a crucial shift in the role of ISPs from fat pipes for illegal downloading to conduits for premium revenue.  The outflow of industry value down the ISPs pipes might finally be changing course to a partial inflow of value.

 

Forrester has recently published a report on ISP music services.  Clients can read it here.

 

Amazon Kindle launches globally, sort of

By Ian Fogg (bio, recent research or follow me on twitter)

Today, Amazon have launched a new Kindle that they are marketing internationally. Prior Kindle models were limited to use in the US. Key details:

• Big promotion in the centre of the front page of Amazon sites in the UK, France, Germany and Japan.
• Only for sale on Amazon.com and priced in USD at $279 (i.e. a $20 mark-up over existing Kindle2). Promotions above have links to Amazon's US site to buy.
• Books are also for sale only via Amazon.com and are also priced in USD (at least for now).
• This is the first Kindle that uses a GSM-standard mobile phone radio -- rather than CDMA -- for wireless downloading of books, sync of reading position with other Kindles and the iPhone Kindle app (i.e. to drive Amazon's Whispersync consumer cloud service).
• Uses AT&T's mobile network and AT&T's global mobile roaming partners for Whispersync.
• When outside the US, Kindle owners pay an additional charge for each book downloaded, currently USD1.99 per download. I imagine this also includes downloading PDFs via the email to Kindle conversion process and downloading small items like blogs or newspapers.

I'm frankly astonished that Amazon is marketing the above product internationally so strongly. Instead, it looks like a great fit for US residents who want to own a Kindle that works both in the US and when they travel abroad. Or, Amazon could have chosen a much softer and lower key international promotion on their various global sites.

For European or Japanese residents there are multiple barriers to adoption and use of this Kindle, which will cause serious issues for Amazon's famed customer service reputation: As everything is currently priced in dollars, consumers outside the US will likely hit additional credit card fees when they buy; import of the Kindle will likely incur significant customs charges; and the per download roaming fee will rapidly add up to a significant sum given it hits on every newspaper or book download.

So, why have Amazon chosen to market this product so significantly on their various non-US websites today, ahead of the launch of international Kindle stores priced in local currencies?

I suspect this indicates that Amazon has failed to secure the international mobile operator partners it needs to offer Whispersync without per use fees, and by making such a big deal of this launch internationally Amazon hopes this will put pressure back on those partners to come back to the table. But if so, then why has the Kindle iPhone app not also been launched on those countries' Apple App Store's for use on the iPhone? The iPhone version wouldn't have those same data roaming costs when a consumer is in their home country of the UK, France etc. as iPhones are sold with inclusive mobile data. Other thoughts? Please comment below.

Vodafone 360 is a Major Strategic Play for Handsets & Mobile Internet

By Ian Fogg (bio, recent research or follow me on twitter)

Vodafone has just launched a major new initiative called Vodafone 360 (release, with the new 360.com website to follow). Key points:

• Integration with social networks for an online address book and content sharing.
• Combination mobile handset + 360.com cloud service strategy.
• Single sign-on for customers or non-Vodafone customers. 360.com website available to both.
• Deep handset integration: two new Linux LIMO handsets with "full fat" experience (made by Samsung). Lesser version pre-loaded onto a number of Symbian Series 60 handsets, downloads and other versions available for around 100 handsets.
• Also includes an App store, new mobile web portal, music service, and maps service.

I'm working on a quicktake report. But this is such a major initiative with wide ranging scope, that I'm extremely curious in what others think? Specifically:

• How well positioned are operators to implement a social strategy with such deep handset integration, compared with handset makers, or the Internet social networks themselves?
• Was Nokia's OVI initiative a lightning rod that distracted many from other handset maker initiatives in this space? (Like Motorola's Motoblur, HTC Sense, Google & Android, Microsoft Myphone, or Apple's MobileMe?)
• Is 360 a better umbrella name than "Vodafone Live!" ?
• Thoughts on how well 360 fits with Vodafone's new corporate tag line, "Power to you" ?

Comment below! I'm here and will reply as appropriate.

Palm's Need to Communicate Its Differentiation

By Ian Fogg (bio, recent research or follow me on twitter)

Background - Today Palm announces the first major operator partner for its European strategy with an O2 partnership.

Back in January, when Palm unveiled the Palm Pre and its new Web OS platform, Palm's innovation was clearly differentiated and ahead of the competition. Palm had pulled a rabbit from the hat. The Pre integrated social networks with its 'Synergy' interface in an extremely modern overall touch user interface. The hardware was different too: The Pre offered wire-free charging with the add-on Touchstone and managed to combine both a capacitive (multi)touch screen with a QWERTY keyboard in a phone the same size as the iPhone.

Nine months is a long time in mobile.

Now, most of the key Internet phone makers have launched social network integration (most notably Motorola with Motoblur on the Cliq/Dext; HTC's Sense UI on Android and Windows Mobile; and INQ Mobile's various models; and others about to announce plus operators). Offering a capacitive touch screen is now table stakes for a high end Internet phone.

Palm's product strategy was smart when put in place several years ago. Unfortunately, others thought the same way. This is a key challenge for developing a product strategy that takes several years to move from inception to launch. How do you stay ahead of the game when you're stuck behind the fog of the product strategy war? (It's a great reason to use research firms to develop that strategy).

Now, Palm does retain differentiation, but mostly in how the Palm Pre does what it does. Palm has to work hard to communicate that its execution is different.

Today's announcement of an exclusive deal with O2 in various European countries will help. As a small firm, with a new launch product, Palm will benefit from the co-marketing support to evangelize its product differentiation.

Palm's other key challenge is how to maintain the r&d spend needed to ensure its next products are more innovative than its much larger competitors, while shipping significantly less handsets than any of them every quarter.

For more insights into why so many firms are integrating social computing and social networking into mobile handsets, see this report: How Mobile Handsets Will Deliver 24x7 Social Computing.

For analysis of the Internet phone category and how Palm compares with the other handset makers please read this key report: The "Smartphone" Is Dead: Long Live Smart Phones And Smart Gadgets

Mobile augmented reality

[Posted by Thomas Husson]

You can also follow me on Twitter at Thomas_Husson

The pace of innovation is accelerating in the mobile space like never before and opening up new opportunities. Mobile has the potentiel to bridge the digital and the real worlds. Not a day without a new mobile augmented reality service or application out on the market. Of course, that's still niche but it clearly demonstrates the potential of the mobile platform.

If you disagree or if you don't get my point, just watch the video below

This video is not brand new and has already been seen close to 500,000 times. The service is provided by an innovative start-up that offers a reality browser available for Android. However, these types of applications are flourishing. See for example the Métro Paris application here or more recently the Meilleursagents.com app here.

I bet the best mobile service at the next MWC conference in Barcelona will be a mobile augmented reality app or service. If you haven't submitted your service, the contest is now open at www.globalmobileawards.com.

What do you think? What are the most innovative mobile services you have seen in the recent weeks?