The mobile revolution is just getting started

[Posted by Thomas Husson]

Follow me on

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.

Music Subscriptions wherefore art thou?

[Posted by Mark Mulligan]

Follow me on

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.

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.

Apple's App Store vs Apple Music Store: The Race is On

[Posted by Mark Mulligan]

follow me at Mark_Mulligan

Apple today announced that 2 billion Apps have been downloaded from its App store in just over a year.  The App store has taken just 5 quarters to hit the same milestone that the music store took 14 quarters to reach (see chart below).

 

Granted we’re not comparing like for like here.  Many (most?) of those App downloads will be free, and the iTunes platform is mature now, whilst it was nascent during the emergence of the music store.  Indeed, the App Store’s success is built upon the prior success of the music store.

 

But even with those caveats aside, it is worth considering that whilst all iPods and iPhones support music store downloads, only 24 percent of all devices sold support Apps (i.e. the iPhone and the Touch).  Put a different way, to date the total number of iTunes tracks per sold supported device is just over 39, whereas the total number of iTunes Apps per sold supported device is 40. 

 

So in just over a year the App store has reached the same maturity of adoption among its addressable device audience as the music store took 6 years to reach.

 

This doesn’t mean that music downloads are dead: at 8.5 billion downloads to date Apple music store is more than 4 times as successful as the App store in absolute terms.  But in the context of potential, momentum and addressable audience adoption, the App Store is setting the pace.

Nokia’s Music Strategy – Some Thoughts

[Posted by Mark Mulligan]

follow me at Mark_Mulligan

I’ve spent the last couple of days with Nokia here in Stuttgart and have had some really interesting conversations.  What is clear from these meetings, and from the official announcements at Nokia World, is that Nokia is wholeheartedly committed to its services strategy.  They’re learning their way, but Nokia is a company that prides itself on renewal and they’re keen students of the lessons of their marketplace experiences.  It is easy to see that Nokia’s Ovi strategy has much more focus and clear vision than 2 years ago and that focus will continue to sharpen.

 

Music is the spearhead of Nokia’s Ovi strategy, and Comes With Music is the key element of their music play.  Regular readers will know that I’m a fan of CWM, and I consider it to be one of the best tools that the music industry has to fight piracy with.  Unlike Spotify, CWM enables users to take their music with them on their portable device and to keep it forever.  Those are strong assets for pulling kids off file sharing networks.  But it’s no secret that CWM hasn’t set the world alight yet, even if it has had better uptake in emerging markets than developed markets.  Some have used this as evidence of why the CWM model is flawed.  I don’t agree.  CWM’s slow start has been due to a combination of:

 

• At launch, unclear positioning and marketing that undersold the value proposition.
• Too disruptive to mobile operators to encourage many operators to support CWM
• Weak consumer understanding of the value proposition

 

To Nokia’s credit, all of those are now being addressed.  There is now a stronger story for operators, as evidence by the fact that 20 operators now carry CWM across 9 markets.  If enough meat is in the game for operators (i.e. strong revenue sharing) CWM is actually a strong value proposition for operators: they get to have music differentiation, data plan adoption, subscriber retention, music revenue, but no hefty upfront investments in their own (often poorly differentiated) music services.

 

It’s interesting to compare the positioning of Spotify with CWM.  Spotify spent little on above the line marketing, but the marketplace has clear understanding that it is an unlimited free music service.  Nokia invested heavily on marketing but the marketplace understanding is much less clear.  Few understand that CWM is also a free unlimited music service.  (OK, the cost is hidden in the device cost, but it feels like free to consumers).

 

Nokia played it too safe when launching CWM – they should have been bolder and called a spade a spade.  Of course there were a number of good reasons why they didn't, but now the time is right for a bolder play.  Consumers (and the media) still think there’s a catch with CWM.  There isn’t.  Nokia need to simplify and clarify the CWM message: it is unlimited, free, portable music that you own for ever.

 

There are a couple of interesting dynamics that Nokia will need to face up too over the coming years.  Outside of the UK CWM has a stronger story to tell, with a solid start in emerging markets such as Mexico. This raises the intriguing possibility of Nokia becoming the dominant digital music provider for emerging markets even if they are less successful in developed markets.  The other issue is that the music industry is increasingly heading towards supporting household music services (e.g. Sky, Virgin Media) which raises questions about where Nokia’s individual-focused music strategy fits.  Should Nokia make a play for household solutions?  Should they hone their offering to explicitly coexist with household services?  Or should they just carry on without change? Each alternative has its respective merits and risks.

 

All in all I am confident that Nokia will continue to make solid progress over the coming years. The launch of new great new CWM exclusive music handsets such as the X6 and X3 will be strong drivers of adoption.  But it’s not realistic to expect rapid success.  CWM is an entirely new value proposition.  It will take time for consumers and channel partners alike to become comfortable and familiar with it.  Back in September last year I wrote a report stating that the CWM has great value, but that it will take time to take hold.  That advice remains as true one year on.

 

Spotify's Marathon

[Posted by Mark Mulligan]

follow me at Mark_Mulligan

The news that Spotify’s mobile app is now available for the Android platform, coupled with an anticipated Autumn US launch, are both part of the music service’s inexorable rise and media interest.  Spotify undoubtedly has momentum and potential in abundance.  But, even without considering the issue of cash burn, it is also important to keep a sense of scale. Spotify has done a great job of acquiring a sizeable audience after a short period of time, but needs many more users before it can be considered on a par with some more established services that get a lot less attention (these days at any rate).

 

In the chart below I have mapped the number of users of Spotify and a number of other key free music services, each from launch.  What is clear is that Spotify has made a solid start is growing at a stronger rate than Pandora was at the same stage.  If Spotify ever reaches Pandora’s scale and business model viability, it will rightly be considered a success.

 

But it is also clear that other services like Last.FM and imeem grew more quickly.  And just to put the absolute scale of Spotify into perspective, the Pandora iPhone app alone is mapping almost exactly in line with Spotify’s entire user base. (No coincidence of course that Spotify see the iPhone app as a crucially important ticket to further success).

 

So what can we conclude from these numbers? 

 

• Extrapolating Spotify’s early user growth suggests that if it is sustained it could reach the 20-30 million user range within 2 years
• A US launch will significantly accelerate audience growth (all of the other services mapped here have US reach.  imeem and Pandora have reached their scale in the US alone.)
• Spotify will need to accelerate its revenue model maturation if it is going to be able to sustain this projected level of growth 

 

The last point is key. All of the other services in the chart have had to deal with the challenge of audience cost sustainability:

 

• imeem has had well publicized financial difficulties with WMG writing off millions of debt.
• Last.FM recently closed its free service to countries it couldn’t operate in profitably
• Pandora closed its non-US operations when it couldn’t strike deals with rights owners that would enable it to operate profitably in international markets

 

Spotify has run a fast first lap, but it is a very, very long race.

Textbooks On iPhone: New CourseSmart App Launches Today

[Posted by Sarah Rotman Epps]

Today CourseSmart, a joint venture of five of the biggest textbook publishers, is launching an iPhone app to augment its Web subscription service for eTextbooks. Its subscription service offers access to more than 7,000 textbooks, at an average of 50% off print prices. Currently, CourseSmart has a few hundred thousand student subscribers, out of a potential addressable market of 13 million US college students (they only target higher education, not K-12, for now).

The iPhone app is nice, with a snappy thumbnail browse feature. It's not something you'd read on, per se, but offers easy access to look up something, search for something, or access your notes. Having the option of mobile access will undoubtedly increase the appeal of CourseSmart's subscription service, assuming the company is successful at marketing the new feature.

Currently, CourseSmart's content isn't integrated into the Kindle or other dedicated reading devices; this app marks its first move into increasing access to eTextbooks on any kind of mobile device. Maintaining print-identical formatting and pagination is a crucial aspect of its product; eReading devices aren't ready to support this type of content yet, but the iPhone is a move that makes sense.

The app is significant, too, for what it implies about Apple's intentions (or lack of) for entering the eBook space itself. Apple's recent approval of this app refutes the rumors about Apple killing eBook apps categorically. We still think, though, that Apple could easily add ePub file support to the iTunes store, and in doing so, become a huge player in the eBook market overnight, which would render many eBook apps unnecessary. (CourseSmart doesn't use ePub format; it has its own proprietary image-based format.) For now, though, CourseSmart has a big head start in the eTextbook market, one that other eBook sellers like Amazon don't come close to matching.

Follow me on Twitter at www.twitter.com/srepps.

24x7 People and the Rise of 24x7 Social Computing

By Ian Fogg (bio, recent research)

Too many firms are building their mobile strategies as a mere extension of the PC Internet, and are missing out on what's now possible when mobile, but which remains impossible using a PC.

A PC is always going to be limited to deliver a part time Internet experience. They are too bulky, too heavy, too power hungry, and increasingly too dependent on the assumption that a super fast fixed-quality broadband connection is present to be something that people will have with them all of the time 24x7. If a PC evolved to be suitable for 24x7 use it wouldn't be a PC anymore.

Today's Internet mobiles offer people that 24x7 digital life. People are becoming connected 24x7 through their Internet phones and that must transform the strategies that firms adopt. Mobile enables a 24x7 relationship between brands and consumers. Mobile enables people to interact with websites 24x7, both to consume -- read and browse -- and to contribute. Mobile opens up new business models through the fusion of location awareness and a 24x7 Internet-connected device.

The first and clearest example of this new world is what's happening with social computing. People are now able to lurk on Facebook or Bebo at anytime, or post photos onto Flickr that are taggged with where they were taken (as well as when).

Read this new report for more on 24x7 people:-
How Mobile Handsets Will Deliver 24x7 Social Computing

I'll be developing this theme in future reports this year.

Why Spotify Needs an iPhone App to Get to Market

[Posted by Mark Mulligan]

follow me at Mark_Mulligan

Spotify’s much anticipated iPhone app has been submitted to Apple for approval and certainly looks the part…in fact it almost looks too much the part.  This level of integration into the iPhone music playback experience may well be deemed by Apple to be too competitive to the core iPhone functionality. There is precedent, the Podcaster app was rejected, reportedly because it was too similar to iTunes functionality (it since developed a scaled back RSS Reader iPhone app).  The Spotify app certainly seems to mimic core iPhone music playback functionality (e.g. utilizing standard iPhone / iPod Touch playback controls) and would therefore be likely to compete with iPhone iTunes music playback. 

A cynic might argue that Spotify are already concerned that Apple won’t approve and are doing their best to raise the profile to build consumer demand by posting the preview video on YouTube and putting it in the hands of key tech journalists.  Will it work?  Not necessarily.  Spotify is currently little more than a minor irritation to Apple, most pertinently because it’s not in Apple’s core market (the US) but also because it’s largely been a complement to iTunes.  This app could make it a competitor, but only if Apple will let it.  Apple’s App Store is an unregulated monopoly.  It’s easy to forget that, but as developers become more adventurous more and more apps will fall at the approval hurdle (as Nine Inch Nails recently discovered).

 

But leaving the approval conjecture aside, the Spotify iPhone app is potentially a really important development.  It provides on demand streaming music on the go, but crucially with off-line playlists, which means that you can listen to ‘streaming’ music without being connected.  This really blurs the lines between what is a download and what is a stream.  This doesn’t mean the distinctions will become irrelevant, but they’ll certainly become less key as these sorts of consumer experiences proliferate, which I posit is an inevitability, regardless of whether Spotify’s iPhone app passes muster.

 

Spotify really need to make their premium business to work. They’ve got a clearly market leading consumer value proposition, but they have yet to develop a vibrant business model.  Advertising revenue is important, but alone simply isn’t going to cut it.  Not seeing ads is clearly not reason enough alone to convince sizeable enough chunks of Spotify’s millions of users to pay 9.99 a month.  Equally Spotify know full well that they can’t ‘slice and dice’ their way to premium subscriptions: if they take away from their free offering they’ll soon lose lots of users, and therefore weaken their ability to generate ad revenue.  Mobile is the most logical way to drive near to mid term premium revenue.  So even if this iteration doesn’t make it, Spotify will make sure that one does.  They quite simply can’t afford not to.