Mobile health is all about creating systems

With apps and phones as mediators

By Johan Hallberg

Mobile Health SummitI recently attended Mobile Health Summit 2013 in Stockholm. The event presented 12 different “mini cases”, where different large and small companies showed their innovations or products followed by a great panel discussion afterwards. The common denominator among all cases was not so much about the mobile apps or even mobile phones as about service set-up. Yes, apps and phones were part of the mix, but the most important thing was indeed service setup. For what is an app without its service? A game? Or even something that only takes megabytes of space on your phone? Of course you may say, it has to be filled with content and have a clear purpose. This is why a mobile health system is somewhat different than an app…

Services at the heart of a good mobile health system
A health system is a business system purpose-built for addressing a health issue/problem – its “solution” in other words. What I heard at Mobile Health Summit was how important it is that the solution has the right service. In this context it is about how the system renders services to its users. A service, according to TOGAF (The Open Group Architecture Framework), is “a logical representation of a repeatable business activity that has a specified outcome. A service is self-contained, it may be composed of other services, and is a ‘black box’ to its consumers”.

Transparency and security are key
Quite a fuzzy definition according to myself. And should a service really be a black box to its consumers. Well, it might be, but it should not be (other than in a very technical system, do not mix it with components now…). Why? Because today, transparency is seen as more and more crucial. Any politician knows it and any teenager knows that most things will end up on Facebook, Instagram and other places, regardless whether you want to or not. Corporate transparency towards customers is getting more vital by the day, as social media and the web, with its many fora makes it so easy to complain if something is not right. So should also services providers of any kind think: We are offering our customers a service and our service must be the best available service. And our customers must rest assured that the information they have provided is secure and used in the right way.

In a health perspective it is even more important that the information provided is secure, only reached by the people who need access, at the right time: It might be a matter of life or death. Information in the wrong hands can be dangerous or at least harm the person it is regarding. So, security is crucial. But even more important is to ensure the users get the information when it is a matter of life and death.

A mobile health system has some additional unique characteristics. It must let you reach the system while you are on the run. It must be boundless in its location, and maybe even in time (if its that kind of system). Mobility the way I see it has to do with that you are totally mobile, physically and something that you can carry with you at all times or at certain times, if and when you need it – like a mobile phone or a laptop computer.

A mobile health system needs to help someone with a health issue/problem, help defining it or learn how to prevent it to even occur. It can be of general help to anyone (like a training app) or very specific (an app that helps a sick child to understand its diabetes).

Lessons learnt

Common to all 12 cases and the panel discussion was the problems faced by an innovator when trying to make a global health system, any kind of health system. Service design is vital! Every country has its own rules and laws regarding how to treat information, what policies it has and even about its infrastructure. Taking only that into account. it is hard for any small (and often also large) company to create a global solution. Of course, when talking about an app/system for weight control or an app that motivates you to go to the gym more often or even record you latest running session, service design is somehow easier from a security stand point. But now I mean health issues/problems that are more “serious”, a matter of life and death.

Innovation, personal experience and secure information

One innovation challenge in this area is to make sure that the mobile health system users have access to the specific tools that a specific situation requires. I can think of many situations where I would have benefited from this. Sometimes it is very easy, like when I broke my foot and went to the hospital. I got my x-rays, a pair of crutches, some bandaids and a “good luck” from the doctor. I was not very happy with that, so after a week or two, when it did not get that much better, I went to get a second opinion. The next doctor wanted to see the x-rays and since I had taken a picture of the x-rays with my mobile he could see it without the need to repeat taking new x-rays. In an ideal world he would have them on his computer, but since this was a private clinic and the hospital a public own facility he could not access it very easily. He said he needed to to do an additional MRI to get a better view of the complete injury, but the fact I had the x-rays with me helped him a lot and I got quicker help. The same goes for a friend who has cancer, but it is much more complex. The best way for my friend to make sure that each doctor gets the right information is for her to carry a copy of each of her medical files or at the very least the important ones. We are talking 2013?!? There should be standards for that (and yes some exists). Yet, standards are hard to decide upon, they take time and a lot of effort to implement. Security can also be a hard nut to crack, but what is the purpose of security? Is the purpose of security to ensure patient safety or to enforce hospital regulations? There is a huge difference between patient security and patient safety. Mobile systems can change this around, make it much more natural for everyone to demand access and get the right information to the right person at the right time.

What can we expect forward?

Mobile health is very important and very (very very) interesting from an innovation perspective. Mobile health is truly about how to reach the right information at the right time, and making the right decision for a patient or community or for YOU. Its mobility has nothing (or very little) to do with whether or not a mobile phone or app is involved. Mobile systems have already saved lives and given a higher quality of life for some.

In 2013 we demand that we have the right information at the right time. Most of us are mobile and we live an active life. I’m sure that mobile health systems have a great future, and that they will become commodity, eventually. We just need to agree on what is important: Share that vital and secure information and – for the sake of our kids and their kids – agree on the right standards so that we can share it with everybody that needs (and I mean really needs) that information. The expression “Mobile First” is something I am a big fan of and I am sure you do too. I wish we can make our lives better, healthier and more mobile in all aspects.

Bill Gates vision “Information at your fingertips” from 1995 has never been more real than today, but I’m sure its more mobile than he thought at the time.

Do you agree to my thoughts? What is your opinion? Please tell me and let’s discuss how we can create more systems and solutions that benefit global health.

iPhone 5: Not meeting expectations, but will it matter?

If it ain’t broke, don’t fix it

By Marlène Sellebråten

No LTE for Swedish users – at least not from start – and no support for Near Field Communication, NFC: These were the main new features we had been hoping – but not counting on – Apple would be presenting as it released the iPhone 5 yesterday. Lacking Apple’s support for Swedish LTE could mean operators may choose to roll out LTE in the 1,800 MHz band, a band that is indeed supported by Apple. New licensing rules coming into effect in January 2013 make this possible, as Swedish trade newsletter Telekom Online underlined today. As for Apple’s not supporting NFC, it may well impact the take-up of NFC itself, rather than damage Apple, at least in the short run.

No local language support for Siri in additional markets and hence no new local language content and search is another area in which we were hoping – not expecting – Apple would make an effort. Sweden is a small country but this did not prevent Google from deploying Voice Search in Swedish a few weeks ago after all, putting some hard work taking into account 51 regional dialects.

An additional set of features Apple presented had a catch-up, not to say me-too, feel: chrome-like improvements to web browsing, a wider screen – aren’t large screens Samsung’s trademark by the way? – And if we choose to be mean, new colourful iPods looking pretty much like Nokia’s Lumia line, and Spotify-like iTunes features.

This is the third time in a row that Apple fails to live up to the – somehow unrealistic –expectations of delivering something really ground-breaking, as revolutionary as the first iPhone or the first iPad. But two major paradigm-changing products in six years and a total of 400 million iOS devices sold is not a bad performance after all.

To sum it up: major ground-breaking innovation, not so much. But technical and design improvements sufficient for Apple to repeat its earlier commercial successes? Most probably yes. Here are some of the features that could do the trick: a slightly different-looking phone, thinner and lighter with a larger and nicer screen, better noise cancellation, a better camera with interesting features such as panorama view and picture taking during video recording, LTE support in additional countries, Facetime over wireless (will operators  let this happen?) and faster wifi.

Then there is the eco-system lock-in of course. Although iPhone owners typically spend more money on app purchase than Android users, the lock-in mechanism is similar; a user that spends time and money pimping its phone with applications is de facto making an investment and therefore less likely to move to another operative system where it will have to not only start afresh, but will face problems with porting some of their content. On that point, placing iCloud at the heart of iOS devices, is yet another powerful way for Apple to keep device owners in a closed Apple loop. Some would argue lock-in is a bad thing, but to manufacturers, telcos, app developers and not least consumers, it provides some pertinent benefits in the shape of device and application upgrades, loyalty, mobile plan renewals, and a sense of safety – Maslow’s hierarchy of needs is still relevant after all.

Then there is the most overlooked yet central “feature” Apple did deliver yesterday, in line with expectations: a definite release date and a price. This is were Apple – and for that matter Samsung too – is superior to its competitors, in particular Nokia and RIM. They present products that are ready to be mass produced and sold when the customer’s attention is at its highest. Nevermind how great other handsets are and there are plenty of great handsets on the market – Nokia’s Windows Phone 7 devices fitting into that category – if they fail to hit the shelves, at the right time and at the right price, with support from distribution channels, it will not matter.

In the long run, Samsung – and possibly Nokia if the vendor gets distribution right for its WP8 Lumia line – may benefit from Apple’s coming short of market expectations. But in the short run, it will most probably not hamper the iPhone 5’s chances of becoming a top selling handset. Apple’s next device will however have to bring more innovation and possibly a new design to the table to ensure the vendor stays relevant. Meeting sky-high expectations is getting tougher and tougher though, as competitors are now done with catching up with Apple and instead pack their handsets with consumer-appealing innovation and design. Surfing highest on the Android wave, Samsung also got the marketing and distribution right. The expectations it must meet may also be easier to manage: keep doing what you are doing because it is working.

A weekly round-up: TV, data protection & App.Net

Global digital, mobile and OTT news impacting the Nordic market
– And vice versa

Nordic tv market set to heat up as Netflix confirms regional plans

Image: Courtesy of Netflix

Competition for content delivery to the Nordic home screens is set to heat up as video streaming company Netflix enters Sweden, Norway, Denmark and Finland before the end of 2012. The announcement came only two months after Sweden’s market-leading cable tv operator Com Hem entered an exclusive agreement with yet another major US TV content player, Tivo, on delivering video-on-demand, pay-per-view and over-the-top content to its Swedish subscribers.

Specifically in Sweden, beyond P2P services and challenger local or regional content streaming platforms such as ViaPlay or Headweb, one of the major hurdles Netflix may be facing is the existing telecom and TV operators’ strong position. In particular, cable and telecom operators have succeeded in locking in many subscribers in single bill triple-play subscriptions bundling broadband, telephony and TV, adding paid-for DVR functions and film rentals to the mix. Getting subscribers to pay for that extra content service, the service price itself, and the content mix will be important factors for Netflix’s success. Without being more specific, Netflix promises Nordic subscribers a low monthly fee and “a wide array of Hollywood, local and global TV shows and movies”. Indicatively, Netflix is currently charging streaming subscribers around 8 USD in international markets. Despite these challenges, the Nordic region is an ideal place to launch a service like Netflix: fixed and mobile broadband penetration is high, there is a widespread acceptance for streaming, and multi-screen viewing is on the rise. Another important actor for a global company to succeed in the region is its ability to communicate and be reached by its customers, in their local language. The fact that Netflix has already set up a Nordic blog and a local language company web page, local Facebook pages in all four Nordic markets, as well as local customer service accounts on Twitter, is a positive move, if not a sign that the launch could be closer than anticipated.

At the end of 2011, Netflix stated it would not expand into additional markets – other than its stated plans for the UK and Ireland – until it reached its goal of global profitability. The international expansion seems to be accelerating instead. So are subscriber uptake and revenue. In the quarter ended 30 June 2012, Netflix had 3 million paid streaming subscribers in its international business, up from 1.4 million subscribers as of 31 December 2011. This can be compared with 22.6 million domestic paid streaming subscribers at the end of June, up from 20.1 million at the end of 2011.

But Netflix’s international streaming business has not only been contributing with new subscribers and revenue, it has also had a negative impact on the company’s profitability. To be fair, any expansion comes at a price. For the quarter ended 30 June 2012, the international business generated a loss of USD89.4 million, while domestic streaming customers generated a net income of USD83.1 million. To put numbers in perspective, the total loss generated by the international business under full-year 2011 was USD103.1 million, while Netflix’s domestic business turned a profit of USD226.1 million. During the quarter ended June 2012, international revenue was USD64.9 million and domestic revenue USD532.7 million.

Netflix generated USD3.2 billion in total revenue under full-year 2011. Its streaming service is available in the US, Canada, a number of countries in Latin America and the Caribbean, the UK and Ireland.

More on this news:

Netflix’s international expansion’s positive impact on revenue – Nasdaq Analyst blog

Netflix’s international expansion’s negative impact on profitability – The Province

Why Apple could buy Netflix and why it should not – Market Watch

Local streaming players not scared of Netflix – Internetworld (in Swedish)

Nordic data protection agencies looking into the legality of Facebook’s face recognition

The Nordic data protection agencies, under the lead of Norwegian agency Datatilsynet,  have decided to look into the legality of some of Facebook’s newest functions. The agencies and Facebook are to meet this fall to discuss the matter; a misunderstanding according to Facebook’s spokesperson in the region. The storage of chat conversations, tracking of search words, as well as Facebook’s new face recognition and picture tagging are three such functions, which could be in reach of regional data protection and personal data regulation. The Norwegian data protection agency published a case study last summer based on questions about privacy, which the agency had sent to Facebook. Here you can download the Datatilsynet’s questions and Facebook’s answers, in english.

Last week, Datatilsynet ordered Google to pay NOK250,000 for not complying with a request by the agency in April to delete all payload data gathered in connection with Google Street View project.

“Google does not have any legal basis according to the Personal Data Act to collect such data, consent has not been granted by the registered parties, the information has been stored beyond what was necessary and the information has been not deleted in accordance with the request from the Data Protection Authority”, states the agency, pointing out it had taken into account the fact that it was Google itself that reported the gathering of data in the first place.

More on this news:

An overview of the Nordic data protection agencies’ Facebook – SVT (in Swedish)

App.net: When did charging for a service become a questionable business model?

Picture: Courtesy of App.net

App.net,  which ambition is to bring to the market an ad-free, user and developer-driven alternative to established social streams such as Twitter, succeeded in its first market test, exceeding its targeted USD500,000 in fundraising by over USD300,000, and getting backing from over 12,000 people – among which many developers. As of yesterday, App.Net’s alpha had 4,000 users, with over 7,000 access requests waiting to be processed. The number of apps being developed has also increased rapidly in the past two weeks. Interestingly, web apps dominate that activity, with 22 apps in development against 12 mobile native apps. At this point in time, the alpha looks pretty much like a scaled down version of Twitter and the founders are asking users to give it time to develop into a complete service. “Just a reminder that alpha.app.net is just that: an early prototype. It was launched as a test and to provide a proof of concept for our fundraising campaign. It is not yet an operational service, and we ask that you please be mindful of that and be respectful of one another”, writes App.net in a letter to alpha users.

In our view, the price tag of USD50 may be a bit high to appeal to the masses, unless the service differentiates itself further from existing platforms. It may however be a reasonable level for existing Twitter users wanting to enjoy an ad-free stream. It is however much too early to tell weather App.Net can fly. It has in any case already demonstrated it can walk, by hitting its funding target.

What interested us most about App.net is actually the negative reviews its proposed business model managed to get. In the Swedish media and Twitterverse, App.net has received little attention if any, and much of it has been critical to the very idea of launching a fee-based web-based service. The same goes for US and international media coverage. Truth be told, coverage got slightly more positive as the likelihood of App.Net’s reaching its fundraising target increased. Looking only a few years back, the very idea of a free ad-based service was perceived as doomed. So was the idea of offering global services to a differentiated user-base instead of differentiated services locally. Point one: the idea of charging for a web-based service has become a big business no-no. The second interesting point in the discussions surrounding the creation of App.Net was how its founders’ ambition to create an alternative to established social networks, in particular Twitter and Facebook, got questionned. Not challenging established players means the end of innovation as a driving force. When did not trying become an option? Facebook and Twitter themselves would never have become that big if they had not explored their idea and brought about a high degree of disruption.

More on this news:

How App.Net could benefit from the so-called platform risk – cnet

App.net is more than a Twitter clone – GigaOm

It is not about the money, it is about third-party applications – Anders Thoresson (in Swedish)

Have a great weekend!

 

Chronicle of a death foretold: the Swedish SMS market

Myths and reality
By Marlène Sellebråten

At Close to Market Analytics, the year starts in August because it is in this glorious summer month the company was founded a year ago, almost to the day. August is also that time of the year when entries to the World Communications Awards, WCA, are ready to be analysed. As a WCA judge, my lips are naturally sealed on entry content. But sit tight: the winners will be announced on 13 November. Let us instead take a look at two projects we recently carried out, the non-NDA work we indeed can talk about.

The Swedish sms market: myths and reality

Our in-house research on the Swedish messaging market shows that the growth rate of the Swedish sms market has continued to slow down over the past year, as end-users increasingly turned to over-the-top instant messaging services. Saying sms is dead is however premature and we anticipate a continued slow decline of sms volumes – and prices – over the next two years, as the ubiquity, interoperability and reliability of the service keep it going as the default messaging tool. Telekomyheterna, one of Sweden’s leading trade newsletters, published a detailed preview version of this research in July. You can download it free of charge here. The research is based on interviews with key players, an analysis of sms data for the past 10 years as well as instant messaging app download data for the past year (analysing download estimates from Xyo Mobile App Search).

Android users are the largest consumers of IM apps – that is downloads, not usage – with an estimated share of 64 percent of all IM app downloads, our research shows. Furthermore, the dominating IM players in Sweden – Facebook, Skype, Viber, WhatsApp, Fring – have been consolidating their lead over challenger IM apps, growing at a faster rate than their competitors, and that from an already larger user-base. Our analysis of IM app download estimates shows that the top ten IM apps accounted for over 83 percent of all IM app downloads as of end of April, to be compared with about 71 percent for the global top 10 IM apps. Should this trend continue and the IM market hence become less fragmented, we can expect European regulators to start looking into these services in much the same way as traditional telecom operator services, possibly even reviewing their current position on net neutrality.

The slow decline of sms, a traditional telecom operator’s cash cow, and the rapid rise of over-the-top IM services, presents traditional players and challengers alike with a large set of threats and opportunities. Our research highlights a number of tactical short-term and strategic long-term options in order to align business models to this new competitive landscape, including pricing and partnering options. We also argue that there is a case for mobile broadband offerings at a guaranteed quality and with differentiated prices – that bit pipe business model telecom operators are not at all keen on. The research also looks at the pros and cons with rolling out RCS, yet another alternative that some major European telecom operators, including Telefonica, Vodafone, Orange, Deutsche Telekom, have heralded as the solution to halt the decline of sms and win back end-users from IM services. In Sweden, only the incumbent Telia appears to want to push it right now – although we are still waiting with a launch date after plans were announced earlier on this year. As RCS’ success is heavily dependent on a ubiquitous deployment in all networks, making it as universal a service as sms, the lack of interest by other Swedish players makes the future of RCS in Sweden look rather bleak at this point in time.

Beyond Siri: the next frontier in user interfaces

This contract research, published by market analysis and strategy firm Vision Mobile in June (available as a free download here), dives into the fast-paced voice-activated mobile virtual assistant market. As lead researcher and author of the report, we looked into the potential disruption brought about by speech-based user interfaces as they spread to all types of connected devices. The research analyses the various business models for virtual assistants, and the impact of VA on ad-based business models and, not least, on search. Developers, speech recognition and artificial intelligence vendors, telecom operators and handset manufacturers are all working on it. Recent announcements by Apple on improvements to Siri, how AT&T has been pushing its speech API within its developer program or Nuance’s launch of Nina, a VA app for mobile customer service apps, are further proof of the high activity level in the VA space.

Welcome back to work!

 

Workplace 2016 – A walk in the park? Yes, but not for dinosaurs

Next generation workplace requires next generation mindset

By Priya Sawhney

Picture this: a workplace in 2016. The median age of employees is 40 years old, a much lower global median age due to emerging market populations (for example, 50 percent of India’s population is under 25 years old today) and employees are more multi-cultural and networked than ever before. Workforce competition from emerging markets is much stronger. People live and work more prominently in green buildings that have quadrupled in number. Virtually hanging out in social networks, consuming books and magazines in e-book form and streaming music take an ever growing share of our personal time…ooops. Did I just say personal time? Personal time and professional time are so intertwined going forward that working 9 to 5 is more theory than practice. Boundaries between physical and virtual lives too have blurred even further. Devices are commodities (though Apple and Android still lead in the OS space).

This makes for interesting challenges ahead for enterprises and end-users. It might be literally a virtual workspace, wherever you are – for example on a bench outdoors – but it will be far from a walk in the park.

For starters, I hope device manufacturers are able to keep up with the demand on mobile device batteries as media consumption spreads from mainly laptops today to laptops, tablets and smartphones. This sets high expectations and demands on guarantees and quality of service for network operators.

The biggest demands on both operators and device/OS players will probably be about privacy and security. End-users need to understand the risks and proactive measures that must be taken to protect their privacy and guarantee security, while enterprises must enforce security and privacy policies. Simultaneously the industry will need to drive common standards. Though it is hard to say what or who “The Industry” will be in 2016, given the many different kinds of players and the rapidly changing market dynamics.

As the physical and virtual world and private and professional spheres converge,  the EUs Data Protection Directive (related to the processing and management of an individual’s personal data) may well turn out to be even more vital than today. And much trickier to follow.

Enterprises and individuals must start gearing up for a future that is right around the corner, one that will set demands on a different kind of infrastructure, business processes and legal frameworks.

The emerging instantaneous lifestyle combined with social media demands a shift in human capabilities too, whereby people in our Google and Twitter and Facebook society become more demanding, increasingly impatient and have a shorter attention span. This sets increasing demands on customer service, crispness in communications, performance and speedy execution. The days of the long drawn out meeting and discussions and internal politics are coming to an end. Those dinosaurs that do not proactively accept this new speedy and transparent networked world will – well – probably have the same fate as that of the dinosaurs. Only the process of extinction will be much much faster this time round.

 

MWC 2012 or how the mobile industry manages disruption

By Marlène Sellebråten

This year’s Mobile World Congress – with record attendance – was a very good indicator of the changes the mobile industry has been going through in the past few years. Not least those originally brought about by Apple. That network infrastructure, including cellular networks, has gone all IP is the true disruptor of traditional telcos’ business models, bringing data hungry applications in the palm of everyone’s hand. And the mobile web was unsurprisingly very central to services and devices presented at Mobile World Congress in Barcelona this year, even more so than in previous years.

 But where was Apple, when over 67,000 mobile industry people gathered in Barcelona last week then? Ironically, nowhere to be seen. Just as last year.

Well, Apple did not create the mobile web after all, and they were a no show in Barcelona, so why talk about them here then? Simply because Apple succeeded in placing this disruptive technology in a disrupting business model, which empowered end-users, enabled other disruptors to come to the front and ultimately gave the mobile web its original mass market appeal.

25 billion app downloads and over 500,000 direct and indirect job creations later (This is Apple alone!), and parts of the “traditional” mobile industry are still struggling to figure out how to deal with this disruption. Be it OEMs trying to take (back) the lead or operators painfully acknowledging that their business model must adapt to the mobile web. We will see tomorrow, as Apple runs an event of its own, if the company succeeds in keeping the momentum at last year’s high. For sure, Apple’s absence from Mobile World Congress – and its timely announcement of its own event during Eric Schmidt’s keynote – made the company all the more present in Barcelona.

In the meantime, web players such as Facebook and Google where the ones taking centre stage at Mobile World Congress. Not only physically, they were also top of mind when it came to a vast number of topics: Mobile data explosion, video traffic, mobile operating systems, the social web, Big Data and analytics, location-based services, not to forget user data and targeted advertising. Two companies, which only a few years back, were nowhere near the mobile industry, are now at its very heart. And we bet that within five years, keynotes will be delivered by yet another round of new disruptors taking the mobile and social web to the next level. Some of which we may even have met at MWC this year!

Foursquare CEO Dennis Crowley, HTC CEO Peter Chou and Nokia CEO Stephen Elop

Here are the key topics, which kept Close to Market busy in Barcelona. Stay tuned for more detailed posts on each and one of these!

Mobile OS: It ain’t over till the fat lady sings
Boasting 850,000 device activations per day at the end of February, Android seems unstoppable. But other players have not said their last word. Nokia, also en force in Barcelona, announced it had lowered the price point for producing Windows Phone devices, giving it a better shot at targeting migration from feature phone and going head-on against Android phones at lower price levels. Let us not forget this is where the mass market is! Nokia’s Windows Phone strategy has also started to bear fruits: In February, Nokia was for example back in Swedish Telia’s top 10 selling smartphone list, after eight months of absence. In Finland, Nokia’s Lumia topped Elisa’s smartphone sales in February. We also take a closer look at efforts by Facebook, Mozilla/Telefonica and WAC focusing on HTML5 application development and distribution. Much talk about HTML5, not so much traction yet, but given support and distribution, this may be about to change. 

Mobile data: OTT broke our business model
The “Google/Apple/Facebook broke my business model” talk is not new, but it was still going strong in Barcelona as a few prominent telco CEOs once again stated that OTT players – in particular in the video and tv space – must not only share the opportunities, but also the risks. Read: chip in and participate in network investments. Answering a question from his keynote audience about this very topic, Google’s chairman Eric Schmidt made it very clear that what a player like Google brings to the table is web services that stimulate mobile data growth. Mobile data traffic is where telcos need to look at in order to grow their revenue and recoup their costs.

Google's chairman Eric Schmidt delivering a keynote

We look at how mobile operators positioned themselves towards OTT in Barcelona, from blocking of and charging for OTT services to embracing an OTT friendly approach. We also look into more ”operator friendly” OTT players, which terminate call and messaging traffic in operators’ infrastructure. And then there is RCS of course: Is it viable and if so how, or is it too little too late?

Offload and migration to faster cellular technology a necessity
One topic buzzing all over Mobile World Congress was the need for offloading data from cellular networks onto other types of infrastructure, in particular wifi, and the increasingly pressing need to migrate to more advanced, faster technology, in particular 4G/LTE, but also IMS. Regarding offload, operators often have no visibility over what end-users offload, where they offload, and whether it is secure. But no matter whether telcos are supportive of offloading, end-users will find a way to do it, be it to gain higher access speeds, reduce data costs, and not least reduce roaming charges. We look at how telcos’ wants and end-users’ needs can be reconciled.

Mobile money: Battle of the ecosystems – which place for the end-user?
Having been a judge for the World Communications Awards in the past four years, I have had the privilege to look into many innovative mobile money services in developing countries. Services we could only dream of in our developed markets. To put it simply: in countries where the payment infrastructure is lacking, operators, merchants, employers and people must find a way to move money between one another. And they do find a way to do it. In developed markets, the question of mobile money has more to do with established players not loosing out because of new technology, as much as about what we can replace the existing payment system with. Nothing gets done, at least not quickly, because telcos, banks, card issuers and merchants all have different views about how to do it, who should own the system and who should profit from it. We look at the various value propositions presented at MWC. Few of them had the end-user at heart, which in our view is the most important success factor.

Get in touch with us for more information about how these topics affect your business. Use the comment box or send us a mail: marlene@closetomarket.com

Facebook’s 3 monetizing challenges: Payments, mobile and non-US users

As Facebook is gearing up for its USD 5 billion Initial Public Offering, IPO, the release of its prospectus at the end of last week made for an interesting read. While the social network’s revenue and income growth path since its launch in 2004 is commendable (check it out here), here are three major challenges – and just as many opportunities – which Facebook has yet to address:

  • Diversify revenue within the payment segment
  • Monetize mobile products
  • Increase revenue per user outside the US

Challenges are opportunities: For Facebook, just as much as for its competitors, telcos and new entrants. Opportunities to grow, to compete and to collaborate.

Challenge 1: Diversify and grow payment revenue
Almost all revenue within the Facebook’s payment business comes from Zynga

Payment revenue grew 425% in 2011, ad revenue 69%

Source: Facebook, Close to Market Analytics

 

 

 

 

 

 

 

Just as the US generates much more revenue than other regions – with 56 percent of total revenue of USD 3.7 billion – one customer, also based in the US, weighs a lot heavier than any others within Facebook’s payment segment: Zynga. The social gaming company actually brings Facebook close to all of its revenue within the fast-growing segment, and as much as 12 percent of the social network’s total revenue, with about USD 445 million, in 2011.

Putting things in perspective, payment revenue accounted only for 2 percent of Facebook’s total revenue at the end of December 2009, against 98 percent for advertising. At the end of December 2011, payments generated 15 percent of Facebook’s total revenue, having increased by 425 percent in 2011! In comparison, advertising revenue grew 69 percent.

This is partly how Facebook did it. Since May 2010, Facebook has been taking 30 percent of the value of every purchase in Zynga’s games on Facebook. This fee agreement will expire in May 2015 though.  Besides this deal, Facebook made the use of Facebook Payments mandatory in July 2011. The payment platform had by then already gained adoption and started to generate significant revenue.

The growth pace of Zynga’s revenue on Facebook has been slowing down over the past two years however, but its importance to Facebook has on the contrary been increasing, from less than 10 percent in both 2009 and 2010 to 12 percent in 2011. Bear in mind Zynga also spends ad money on Facebook.

A challenge for Facebook is to demonstrate that it can continue to grow within that segment beyond Zynga. Adding new payment methods, as the company is planning to do, may be one of the ways to do just that.

Challenge 2: Monetize mobile products
Facebook generates close to no revenue from mobile products

Monthly active users, MAUs, and revenue, 31 Dec 2011

Source: Facebook, Close to Market Analytics

 

 

 

 

 

 

 

Facebook said it before and states it again: Mobile products are a strategic priority. Yet, the social network must prove it can make money out of that channel. The situation with mobile is similar to that of Pages; both products are user and engagement magnets, but when used as substitutes rather than complements to Facebook’s ad bearing channels, they are a no money game.

Not only has Facebook usage via mobile products increased, accessing the social network that way has been a major contributor to higher user engagement. At the end of 2011, 425 million users were using Facebook’s mobile products, that is over half of the total user base. But again, as Facebook does not display ads in that channel, it makes close to no money there.

Facebook plans to address this gap and monetize its mobile products for instance by including sponsored stories in users’ mobile news feeds. It is said to be launching such a solution in March. In its IPO prospectus, Facebook also makes it clear it wants to ”be the fastest and most reliable way for users to communicate through” e-mail, chat and text messaging.

Facebook was able to increase its price per ad thanks to its efforts in terms of increasing relevance. There is no reason why Facebook should fail in monetizing mobile products. It could be a tough nut to crack though, as competition within mobile advertising is popping up everywhere, in all shapes and forms.

Challenge 3: Increase revenue per user outside the US
US revenue per user over five times higher than in other markets

Besides mobile, Facebook has done a remarkable job with growing revenue, revenue per user and engagement. The pace of user and revenue growth rate has of course been gradually slowing down over the years, as the social network has reached a critical mass in many markets.

Average revenue per user, Dec. 2011

Source: Facebook, Socialbakers, Close to Market Analytics

 

 

 

 

 

 

 

But there are more markets to be addressed, in particular in Asia, South America, India and less penetrated European markets such as Germany. Taking a closer look at Facebook’s business across various regions makes yet another challenge obvious: Facebook users outside of the US generate less money than US users.

Indeed, 56 percent of Facebook’s total revenue of USD 3.7 billion for financial year 2011 was generated within the US alone, while the region only accounts for 19 percent of Facebook’s total user base. This means that revenue per user in the US is more than five times higher than revenue per user outside the US, or 12.8 USD against 2.4 USD. The average revenue per user for Facebook’s total user base increased by 35 percent to 4.39 USD between 2010 and 2011. Other major revenue driving regions are Western Europe, Canada and Australia.

What does this all mean?

It means that, although Facebook has grown at an incredible path and has had a huge impact on the social web, it also face challenges. Challenges which are just as many opportunities, not only for Facebook itself, but for all other players wanting to get a piece of the pie.

Want to know more? Get in touch with us!
marlene@closetomarket.com or +46 702 955 551

 

 

 

Facebook basics: Revenue growth, user growth and geographical reach

Facebook filed its Initial Public Offering (IPO) prospectus with the Securities and Exchange Commission on February 1, 2012. The prospectus provided for some number crunching food, for all of us who had felt data starved before. We present here some of the top level figures (you will find a detailed analysis here). What these graphs show is that both revenue and users have been growing steadily since Facebook first launched in 2004. It also shows that the growth pace for both revenue and users has been gradually slowing down over the years. Looking at Facebook’s geographical reach, we can discover an almost equally sliced pie chart, between US & Canada, Western Europe, Asia and Rest of the World. Problem is that revenue is predominantly generated in the US, Western Europe and Canada (more on this here).

Facebook’s revenue and revenue growth rate over time

Source: Facebook, Close to Market Analytics

User growth and user growth rate development

Source: Facebook, Close to Market Analytics

Facebook’s geographical reach
Monthly active users (MAUs) per region, Dec. 2011

Source: Facebook, Socialbakers, Close to Market Analytics

 

 


 

 

 

 

 

 

 

 

 

 

 

 


Facebook set to transform the mobile app economy

By Marlène Sellebråten & Katarina Chowra

Fresh rumours of a Facebook phone, codenamed Buffy – the Android and Apple slayer? – have resurfaced. Taiwanese cellphone maker HTC is said to be the vendor chosen to build the mobile device, according to AllthingsD. However, according to the news outlet, Facebook is not only talking to HTC but also to Samsung, the world’s largest smartphone vendor as of Q3 2011.

The extension of the Facebook Platform to mobile back in October – with or without the rumoured smartphone, for that matter – marks an escalation in Facebook’s ambitions in the mobile space. And by mobile space, we mean apps, search, digital advertisement and not least online payments. Facebook’s mobile platform supports iOS, Android and HTML5-based web apps. It also extends Facebook Credits, Facebook’s own payment system, to the mobile web. Let us keep in mind that Facebook today has got about 800 million users worldwide, of which 350 millions are accessing the social network via their mobile devices.

In our view, Facebook’s heavy backing of HTML5 is one of the most interesting news in the mobile web space this year.

There is today no established distribution channel for web applications, only keyword search. With its huge global user base, Facebook is indeed well positioned to become that marketplace. Distribution is the key success factor for HTML5.

The rumoured Buffy phone confirms where Facebook is headed. The application platform the phone is said to be supporting is ”a modified version of Android that Facebook has tweaked heavily to deeply integrate its services, as well as to support HTML5 as a platform for applications”, writes AllthingsD, citing sources familiar with the project.

The magic world here is not so much Android – although it is indeed relevant – as HTML5.

Developing a phone around Android would allow Facebook to deepen its mobile relationship with a fast growing number of end-users. But by going all-in on HTML5, Facebook would reach out to multiple OS and handsets. Support to the existing mobile OS is nevertheless crucial. Indeed, technically, HTML5 does not yet offer all the functionalities and advantages of native applications. In particular, native applications can take advantage of handset hardware in a way HTML5 as of today fails to replicate. Developers we talked to believe it will take a long time for HTML5 to become the dominant mobile platform. In our view, the support of players such as Facebook, Microsoft and even Spotify, will accelerate the take-off of HTML5.

Google’s acquisition of Motorola Mobility Services back in August (you can read Close to Market Analytics’ take on this here), Android’s extraordinary growth and Google’s launch of social network Google+, could potentially leave Facebook hung out to dry, with no control over either handset or platform integration and development. Let us also remember that Apple integrated Twitter in its newest handset – the iPhone 4S – not Facebook. Having said that, rather than an aggressive forward-looking strategy, Google’s and Apple’s actions in the social web space look more like defensive moves against the ever more almighty player: Facebook.

That Google, also a supporter of HTML5, is not pushing harder on the standard is somehow surprising. HTML5 should be their ultimate dream for all mobile services – since it supports their ad business. For Apple, who also supports HTML5, it is a different story altogether. Promoting anything else than native apps, at least at this point in time, would be like shooting themselves in the foot. The vendor has even been accused by developers of purposefully slowing down web applications. And last we checked, a mere 1 700 web apps were available from Apple’s web app store. Quite understandably, look not for the App Store’s blockbuster apps there.

Facebook’s developing a phone, and an app marketplace, has to do with keeping control and leveraging ad and search to a massive user database, while undercutting the current market leaders. Device market dynamics also show the growth and profit margin being higher with an end-to-end streamlined solution. By pushing a web based application platform and reducing vendor dependency, Facebook could even provide telcos with a helping hand. Although these may have to adapt by offering their subscriber base a premium mobile Internet experience, and possibly accept to become ”bit pipe providers de luxe” going forward, at least in the consumer space. As far as our discussions with telcos go, the prospect of yet another apps platform is however met with pragmatism, not to say skepticism.

Now one last thing: The very fact that a Facebook phone makes sense, does not mean that such a move will be a successful one for the social network leader. A seamless Facebook integration in a smartphone, coupled with a guaranteed high quality mobile broadband plan is, in our view, what many consumers are waiting for. Considering how Android took off out of nowhere, it feels like whoever gets this seamless integration right will manage to surf on that wave. For Facebook itself, the stakes are higher though: establishing itself as the mobile application platform of choice. An application platform with a strong focus on HTML5, and support for existing platforms Android, iOS and Windows Phone.

Marlène Sellebråten, Close to Market Analytics
In collaboration with
Katarina Chowra, Mobile Marta

Get in touch with the authors

Marlène Sellebråten, Close to Market Analytics
+46 702 955 551
marlene@closetomarket.com

Katarina Chowra, Mobile Marta
Katarina.chowra@mobilemarta.com

 

Time for a telecom news roundup with Telekomnyheterna

 

Time to round up this past year’s major industry news!

Telekomnyheterna, the leading business newsletter reporting on the Swedish telecoms market, organises on 7 December in Stockholm its traditional year-end network meeting to discuss 2012’s major telecom events.

On this occasion, Close to Market Analytics’ principal analyst Marlène Sellebråten will participate in a panel discussion led by Telekomnyheterna’s editor in chief Mats Sjödin. Fellow panellists include Erik Hörnfeldt, CIO at Swedish mobile operator 3 and David Frydlinger, attorney at law firm Lindahl, with more to be announced.

The debate and mingle event will take place between 17:30 and 20:00 on 7 December 2011, in central Stockholm. Attending is free of charge but requires prior registration. Contact directly info@telekomnyheterna.se if you wish to attend.