By Mark Lowenstein
I am very pleased to inaugurate this series of monthly opinion columns with Fierce Wireless, reprising the role I had for several years at Wireless Week. As many of you might know, I was most recently vice president, market strategy at Verizon Wireless. I have moved back to Boston and re-launched Mobile Ecosystem, the consulting firm I ran for five years following my role as leader of the Yankee Group's wireless practices.
So, let's get right into it with a provocative question: Name two or three companies who have built a substantial, sustainable business out of the $100+ billion in data revenues that the U.S. operators have reported this decade. Let's look at what has happened recently to some of the companies that were so instrumental in building the first generation of wireless data:
- OpenWave: Operates mobile data gateways in more than 70 carriers around the globe, and its browser is on more than a quarter of the world's phones. Market cap is less than $100 million.
- Verisign. Buying spree included M-Qube, which had emerged as the leading firm powering mobile marketing and off-deck content, and Jamba, one of the leading ringtone providers. Most of senior management team has left and the firm plans to divest of several wireless assets.
- Infospace. Rode the ringtone wave for a time, but lost share in mobile portal business. Was acquired by Motricity in December 2007 for a modest $135 million.
- Motricity. Along with Infospace, operates the "vending machines" and powers the mobile Web for the majority of North America operators. Yet this company has burned through some $300 million of its investors' money, has never reported a profit, and just laid off one-third of its staff.
- Qualcomm (BREW). Qualcomm's BREW platform has successfully powered several leading operators' wireless data offerings. But the signals are pretty clear that signature operators are looking to reduce their dependence on BREW with the movement toward a more open development framework.
- Handmark and Handango. These are two leading content aggregators that have done a respectable job of building a solid content library and some meaningful partnerships. Both have raised a substantial amount of money and are still looking to break out.
Now, here's another question: Thinking about all the companies you work with, the press you see, the columns you read, and the events you attend - who are the four companies that are receiving the most attention as key players in the next generation of wireless data? I would posit they are Google, Apple, MySpace and Facebook. Up there but trailing slightly behind are Nokia, RIM and Yahoo. And maybe Microsoft or AOL if combined with someone else to counter Google.
So here's what's interesting: device revenues aside (for Nokia, RIM, and Apple), few of this second wave of players is an incumbent in the wireless data value chain, and none is generating meaningful revenues today from wireless data content or applications. Also notable, if not obvious, is that the list is dominated by today's Internet kingpins, which is ironic because we've been saying for years that the mobile Internet will not be the same as the wired Internet.
Even though these companies are receiving plenty of hype and attention, their success in wireless is not a foregone conclusion. Their plans are based on the movement toward a more open, Internet model for the development of content and applications--and we are still in the very early stages of that. The monetization scheme is also highly predicated on the success of mobile advertising in various forms.
Some of the more exciting start-ups in wireless today are taking an Internet-centric approach to wireless. Look at how JumpTap and Medio, two companies with early traction in mobile search, are placing greater emphasis on advertising, or how AdMob is trying to be the "DoubleClick of wireless." And how about the seemingly dozens of companies that are taking a "widget" out of the Apple playbook (OK, I apologize) and are building, yes, widgets/tiles/applets for the mobile device.
Even as we discuss the evolution to a more Internet-like model, I think the "walled garden" will continue to be an important force. This vertically integrated approach still delivers a superior user experience, despite more limited content offerings. A good example: RIM's Facebook application is the best execution yet, in my view, of mobile social networking. But this only works on a Blackberry--and by the way, RIM is not making any additional money from this or any other app on Blackberry.com (yet). Hmmm...
What we could see is a "shifting" of the walled garden, to include some viable additions or counters to the operators. My view on the strongest contenders:
- Apple. In addition to the iPhone, iTunes could become a powerful distribution mechanism for mobile content, as has happened recently with TV and movies in addition to music.
- Nokia. We discount them in the U.S. because of their relatively low market share here. If you look at the moves they have made over the past three years, they are clearly looking to take on Apple and Google in the evolution of wireless.
- Yahoo (along with someone). They are gaining traction with operators around the globe after years of false starts. They could be the closest the operators get to a true partner in search and advertising, especially if Google is perceived to be an increasing threat.
- RIM. A dark horse candidate. They have maintained share in the smartphone market and are accelerating their product development cycle. But they need to play a greater role in the multimedia and applications universe. To compete on a larger stage, they will have to make some acquisitions, or develop more meaningful partnerships with the Internetarati.
So, for my first column, lots of food for thought...and debate. I'd love to hear your comments. Please feel free to email me.