On the move

As with any industry in its infancy, there are traditionalist sceptics and there are vocal zealots. The insistent world of mobile is no exception. From a revenue perspective, it is already a goliath. The total worldwide advertising industry is worth $450 billion, whereas the mobile industry is worth $680 billion but, to date, this has predominantly been achieved through voice and SMS (text) revenues. The Wireless World Forum forecasts that mobile advertising itself will grow from an estimated $46 million in 2007 to $1.3 billion in 2010. However, Disney has just closed its second attempt at launching a mobile network and many brands are struggling to see revenue growth in this area. So, who should we believe?

"Mobile"… What is it?

Gone are the days when "mobile" simply meant ‘capable of being moved around’; today it is a much more ethereal term. Around the time Rupert Murdoch purchased MySpace, he was quoted as saying "mobile is the end game" – sounds exciting and future-facing, but does anyone know what exactly he meant by that?

When such media and advertising people talk about "mobile", they are usually referring to the user experience of the mobile internet. Whereas operators, such as Vodafone and O2, are more concerned with the mobile networks that support this communication and content exchange (or more specifically how to continue making money out of it – more on that later). Then there are the mobile device manufacturers, such as Nokia and Motorola accompanied by a host of mobile application providers. These latter companies are all clamouring to deliver the must-have application that will unlock the potential of mobile beyond its current use predominantly as voice and text.

In truth, the various groups within the mobile industry are not as neatly defined as this.

The operators have dabbled in managing content generation themselves; O2 has gained exclusive network rights to the new Apple iPhone and Google is planning to launch its own handset early next year. Why? Because, in an uncertain future, it’s best not to put all your eggs in one basket.

The "all in one" gadget

It would be impossible to define precisely what the mobile industry will look like in 12 months time as there are so many variables. The only certainty is that technological convergence will continue its indomitable march forward. In other words, technologies that are currently used for different purposes will be brought together to form single products that retain and add to the advantages of each of the initial components. The BlackBerry combining mobile phone, internet and email, and the new Apple iPhone adding music storage to this list, are good examples of this trend.

We can expect more of a proliferation in the range of devices used as consumers become more fragmented in the functions they most value, such as photos, music or email. The style of the phone is increasing in importance for some groups who view this gadget as a method of communicating identity. Even Prada and Dolce & Gabbana have launched their own handsets. Although with the explosion in user generated content (UGC), the ability to truly personalise the mobile phone, such as with photos and ringtones, offers an alternative to device differentiation alone.

The PC is dead, long live the PC

Along with the "all in one" gadget, the other strand of technology convergence is around connectivity between devices. This is still most apparent within the home with the PC as the central "hub", particularly for the over 30s who are focused primarily on sharing and storing content. It is still the easiest and most convenient method for, say, uploading photos and videos. In fact, storage and retrieval has seen exponential growth in recent months.

However, the under 20s are less interested in the concept of archiving and content ownership. They view content as more transitory, with communication and entertainment more important than maintaining a record. Your average 30-something would be horrified if their dinner guest began playing with their mobile phone at length – not so the under 20. Youth have a more decentralised view of connectivity and a blurring of behaviour based on physical location, and this perception is beginning to seep into the behaviour of older demographics.

A walled garden ... deja vu?

When most people access the internet on their mobile phone, they do this via their network operator’s portal such as Vodafone or 3. When you do this, you are in a strictly managed environment. No content, be it music, games, news or videos, exists within this walled garden that hasn’t been sourced and authorised by that network operator. There is a strong parallel here with how most people accessed the internet a decade ago. The window we went through was generally one of Excite, Lycos or Yahoo. Unless we were an academic or an IT wizard, we simply did not know how to get to other content outside of these portals.

However, walled gardens are not sustainable in today’s world. The explosive growth in the world wide web towards the end of the 1990s has been attributed to its lack of central administration which allowed for organic growth of the network. Web users today are used to the non-proprietary, open nature of the internet and will expect the same to be the case when accessing the internet via their phone.

Content providers are beleaguered by having to produce up to six slightly different versions of their site to suit the nuances and requests of the various network operators. Major advertisers balk at the complexity of trying to manage a campaign across such a disparate playing field. Consumers are confused both by the process as well as the cost of accessing the mobile internet. Many have suffered "bill shock" after having downloaded content outside of the operator’s walled garden, discovering the data charges are significantly higher than within.

So, if data charge costs come down, consumers will seek more content outside of the walled gardens. Content providers will scale up their offerings in this area, application providers will make access more intuitive and advertisers will become more confident in this space. But operators are umming and ahhing over when and how to do this in a significant way, and many are hoping that an advertising model is the most likely solution. Thus we have the vicious circle of which no one is quite sure how it will break and when. However, there are signs of change with brands such as ft.com already claiming significant off-portal traffic and both Conde Nast and Emap announcing plans they are to launch major off-portal offerings in response to advertising demand.

Bills to pay

The main reason network operators are unable to bring down the data download costs are that they agreed to pay out a total of £22.5 billion to the government for 3G licenses in year 2000. These 3G licenses allow for access to the mobile internet. This is a significant bill to recoup and keeping users within a walled garden allows for many more opportunities for revenue generation, in particular maintaining control of advertising revenues.

Voice calls are forecast to plateau at best within the UK. In addition, competition from new technologies such as using the internet for voice calls (voice over internet protocol, or VoIP) instead of the operator’s proprietary network, is likely to eat away at their bread and butter. After all, voice still makes up 70-90% of operators’ revenues. It is easy to see why these operators are in choppy waters.

So, why all the fuss?

There are a number of obstacles in the way of progress, but still mobile is seen by many as a prodigal industry. The zealots tell us that there are significantly more mobile handsets in the world (2.7 billion) than there are internet users (1.1 billion) and even TV sets (1.5 billion). They will also point out that it is more personal than any other device - 63% of people do not share their mobile even with their spouse. From a marketing point of view, this means that the accuracy of data garnered is unparalleled as it is on a virtually individual basis.

Add this to the ability to track user behaviour on their device and combine it with GPRS and we begin to get an inkling of the scope of opportunity for targeted marketing. In places such as Japan and Korea, the device itself is already being used as a wallet, replacing credit cards. As data marketers know, these days we value transactional data above both behavioural and demographic. Furthermore, it is possibly the only gadget which is always on. In light of all this, it is easy to understand the perspective of these zealots.

Summary

The trend towards both device and connectivity convergence is inevitable, although the details are uncertain. Even the word "mobile" is on shaky ground as wireless devices, such as iPods and BlackBerrys, are increasingly being used in the home just as they are when on the move. There will continue to be mergers and acquisitions and there will be winners and losers. Those companies who put the customer at the heart of all of their plans stand the best chance of success in the future. But there are few companies in this industry writing detailed business plans beyond six months.

By 2010, we will have become more used to a blurring of space and time in our lives. How we behave at home, at work, socially and whilst in transit will have subtly shifted to a new paradigm, with much more of a ‘wherever’ and ‘whenever’ attitude. We will still be concerned with privacy but less so with people knowing who we are (identity). Instead, we’ll worry about our personal content such as pictures. It will become the norm to use our mobiles for things such as getting into cinemas, to check in at airports, communicate in new ways and be entertained. Whether they will make our lives better is a moot point and, as with everything to do with mobile, a very personal view.