The following is a guest column from Mark Jaffe, blogger for Mobile Mandala…
I was reminded of an Italian proverb after my son beat me in yet another game of chess this past winter break “Once the game is over, the King and the pawn go in the same box”. It is a humbling thought for anyone or any entity with power. Power truly coexists with all the other forces of the political and economic world, despite the illusion of invincibility.
The music industry of the 1990s was brusquely reminded of the limitations of a revenue model predicated upon power and control over the distribution of music. Once that control was compromised by the advent of digital files, the ease of pirating music and the inevitable behavioral changes of their consumer base, the power (and economic might) of the record industry dwindled dramatically.
As the new decade dawns, certain current kings of the mobile industry may face the same fate if they don’t acknowledge the temporal position of their power relative to the other industry players and forces in the mobile industry box.
We have heard this one for a while – the carriers will soon be a dumb pipe, and a commodity at best, if they don’t respond quickly to the changing forces in the mobile industry. But the challenge of 2010 cuts to the core of how they have positioned revenues, namely, the power to discount the price of phones in exchange for consumer commitments to pay recurring charges over a one or two year commitment.
Google’s rumored plans to go direct with unlocked phones resets the playing field. Why? Because Google can discount the introductory price of the phone based upon future ad-based revenue streams as well as other potential revenues from consumers who own the phone. While they haven’t formally announced this yet, they could. It is similar to companies who decide to self insure rather than purchase certain insurance policies – they have assessed the risks and rewards and determined they are big enough to bear the financial risks and think the rewards outweigh them.
If this comes to pass, the carriers may potentially no longer have control over the distribution of new handsets and may have to completely reassess their revenue streams to a model less dependent upon control and power. That sure sounds like the record business of 1990 to me.
Apple App Store
Apple App Store is truly a king of kings. Consumers have now downloaded over two billion apps and Apple has over 100,000 apps in the apps store. But, Google’s Android market is catching up. As of December, the Android market had over 20,000 apps availablewhich is double the number of just five months ago. Further, the Android market is expected to continue its growth with the Motorola Droid expected to sell one million units in the coming year and the release of many other android based handsets – including Google’s Nexus One.
Once again, the king may have to figure out another way to conduct business so that the current successful model of superiority and lack of competition is replaced by a market-based model of competitive advantage.
SMS Broadcast Advertising
Two years ago, virtually all mobile advertising was comprised of SMS ads broadcast on a variety of mobile networks. Last year with the advent of app based ads and other innovations, that model saw signs of erosion. In 2010, the floodgates will open for a very simple reason – the broadcast model does not work effectively on a highly personal mobile phone. Mobile phone users, for the most part, would rather have messaging that is narrowcast to them, designed for the phone’s native characteristics and only sent when they ask for it.
Furthermore, many brands have now begun to build their opted-in mobile lists and are ready to deploy more interesting messaging technologies that are better suited to excite and engage their audiences that simple SMS text.
Why? First and foremost, because text messaging is not a branding experience. As a good friend of mine is wont to say, “It’s only 160 characters and you don’t even get to choose the font!” Secondly, because with an opted-in list, brands can…and their opted-in audience expects them to… provide messaging that is targeted, interesting and engaging, or they will opt-out. The kingdom of agencies, ad networks and other ecosystem members who make a living from mobile advertising, need to readjust their models to benefit from these SMS messaging trends.
So what’s the solution for the three kings? Be open to revisions in your model, and above all make nice when you are in the box with all of the pawns. One of them may just be a perfect partner for you… or quite possibly your next king.
Mark Jaffe is a mobile industry and digital media executive with an active consulting business that enables mobile technology companies, as well as other technology and digital content companies, to achieve breakthrough revenue growth with sustainable profits from a foundation of sound strategic analysis and innovation. He is also a noted speaker at industry conferences, as well as a speaker and facilitator at corporate retreats and strategy workshops. Further biographical information can be found at www.markjaffe.com. His mobile industry blog, Mobile Mandala, can be viewed at www.mobilemandala.com