Mobile Industry

Economics of the Dumb Pipe

**This is the full version of an article I wrote for this week's Reality Check column in RCR Wireless. To meet the character limit, the RCR version was truncated, and the last part of the conclusion was missing.** For the...

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Posted by Shawn Conahan on May 13, 2008 at 11:10 AM

“Social” is the next evolution of the mobile communication experience

I have not blogged in awhile because I just have not had time. We had a great week in Barcelona last week, announcing some important relationships as we continue to expand our footprint in mobile social networking. We will announce...

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Posted by Shawn Conahan on February 19, 2008 at 12:47 PM

Open is the new black

Open platforms. Open networks. Open devices. OpenSocial. Open APIs. OpenID. Do you think the term “open” is being used with some recklessness of late? Or perhaps if not recklessness, with a certain degree of definitional liberty? In case I haven’t...

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Posted by Shawn Conahan on November 28, 2007 at 12:17 PM

This whole mobile thing is a real pain in my ass

Hey everyone, Fake Steve Jobs here. Thanks to Intercasting Corp for allowing me to post to their blog as a guest. It is part of my initiative to reach out to the mobile industry audience and do a little damage...

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Posted by Steve on October 17, 2007 at 10:18 PM

CTIA parties

Available here: http://www.ctiapartylist.com/ That's a handy little resource. I thought you would find it useful. It doesn't even list ALL of the parties, either. I got an invitation today that says, "Don't forget to RSVP for the Only Exclusive VIP...

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Posted by Shawn Conahan on October 15, 2007 at 03:43 PM

Objectively In Support of Gary Forsee

I am looking at my email inbox. I have a folder into which I siphon the various trade newsletters and such. The recent subject lines: CTIA SmartBrief - October 5, 2007 - Reports: Sprint considers new leadership FierceWireless - |...

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Posted by Shawn Conahan on October 07, 2007 at 06:36 PM

The Sony CDP-101 and my new iPhone

I got my new iPhone last Saturday. I was in Denver for the weekend and I happened to walk by a store downtown. There was no line. They had 47 left when I bought mine. After a week, I must...

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Posted by Shawn Conahan on July 08, 2007 at 07:40 AM

The 386, Diamonds and Mobile Phones

This iPhone hype reminds me of the early days of the PC, when marketing centered around major breakthroughs. Remember the PET? TRS-80? Sinclair? Commodore 64? Apple II? IBM PC? They were all notable for certain reasons. Maybe it was “pre-assembled”...

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Posted by Shawn Conahan on June 28, 2007 at 06:24 PM

Does Amp’d bode ill for Helio?

Does Amp’d bode ill for Helio? I am seeing a lot of dancing on the grave of Amp’d Mobile. It is a pretty easy bandwagon to jump on: High-profile, cash-burning companies with hubris run by big-personality managers are fun to...

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Posted by Shawn Conahan on June 08, 2007 at 10:10 AM

Helio Ocean Review

I have a Helio Ocean. I got it on the first day it was available. I've used it as I would my primary phone, getting a sense for the UI, etc. I HATE it for these reasons: I cannot easily...

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Posted by Shawn Conahan on May 17, 2007 at 09:23 AM

Blocking and Tackling in the mobile space

We just announced we secured $12mm in B round funding. We are as quietly as possible executing on our platform strategy and will be rolling out this summer. The money will enable us to broaden our capabilities. Come be a...

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Posted by Shawn Conahan on May 09, 2007 at 10:17 AM

The future of mobile communication

I had lunch last week with some friends who all work at the same wireless carrier. The conversation turned to social networking, etc. There were two interesting discussion topics that I thought you might find relevant to what Intercasting Corp...

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Posted by Shawn Conahan on May 08, 2007 at 11:16 AM

Tragedy, alerts, scoundrels and social networking

Tragedy Wow, that Virginia Tech shooting was REALLY bad. Does a campus shooting seem anomalous to you? It certainly happens, but the majority of campus shootings are suicides. Here is a list of major campus shootings over the past 10...

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Posted by Shawn Conahan on April 22, 2007 at 09:28 PM

Helio Store (Field) Trip and my growing irrational love of the Ocean that isn’t any more ridiculous than your irrational love of the iPhone

A few Saturday nights ago we all went to The Field, my favorite pub in San Diego, for Mo’s birthday. We go often. I recommend it. Down the street is one of very few Helio stores, which I have been...

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Posted by Shawn Conahan on April 05, 2007 at 02:30 PM

CTIA 2007

Imagine a sultry nightclub filled with thousands of hip hop pimps with platinum grills wearing dark glasses, rappers iced to the teeth and bedecked in knockoff Burberry plaid suits and insanely hot women with navel piercings scantily clad in animal...

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Posted by Shawn Conahan on April 03, 2007 at 08:17 AM

Go to EconSM

I am in Seattle this week. On Tuesday night, I was working late with the TV on in the background and I turned on Showtime, which I don’t get at home. The L Word was on, which I had never...

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Posted by Shawn Conahan on March 22, 2007 at 10:46 AM

Microsoft buying TellMe?

I hear there’s rumors on the, uh, internets. It turns out they are just sort of for sale. This would be a brilliant acquisition by any company that wants (and has the resources) to be for the mobile space what...

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Posted by Shawn Conahan on February 27, 2007 at 08:29 AM

Airport security, handset technology and unhappy consumers

So far this year I have flown over a hundred thousand miles. I am therefore a frequent consumer of airport security services. It occurred to me today at New York’s Kennedy Airport that airport security could be staffed entirely by...

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Posted by Shawn Conahan on December 09, 2006 at 09:51 AM

Is Google Arrogant?

So, long time no post, but I was gone for most of November getting married and then there was the honeymoon, etc. (We are registered at Williams Sonoma. Please go buy us something. Since receiving the panini grill, ordinary sandwiches...

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Posted by Shawn Conahan on December 01, 2006 at 05:00 PM

Investing in the mobile space

Google is buying YouTube for $1.65 billion. (Oh, you heard that already?) That seems like a lot of money for a money-losing copyright infringement machine until you compare the value of that company today to its future earning potential as...

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Posted by Shawn Conahan on October 18, 2006 at 11:27 PM

Greg Clayman blogs now. Go read.

As co-founder of UPOC back in the day, Greg Clayman is a mobile data O.G. Now successfully heading MTV's mobile efforts, Greg has been at the forefront of mobile data innovation since 1999. That is about as long as the...

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Posted by Shawn Conahan on September 28, 2006 at 01:22 PM

A summary plan for InfoSpace when facing disintermediation in their core business

I haven’t posted in a while. I have been really busy. (And I am technically not a blogger.) For another purpose, I had pulled together a short overview of the mobile space with a view to the future and then...

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Posted by Shawn Conahan on September 27, 2006 at 11:04 AM

dotyawn

Dotmobi is available. Yay? The strongest pitch to register so far seems to be: “Better run out and register your current dotcom as a dotmobi to protect yourself from some cybersquatter beating you to it.” What does this do for...

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Posted by Shawn Conahan on September 26, 2006 at 11:37 AM

Is MySpace driving Helio subs?

I do not think so, just like MySpace isn’t driving Earthlink subs. I'll bet it is driving data ARPU on Cingular, though. I missed this when it came out, but Fierce picked it up this week: Helio drops contract requirements...

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Posted by Shawn Conahan on August 11, 2006 at 03:21 PM

Join the Mo list

The new media guys at the record labels used to be the red-headed stepchildren of that industry, then ringtones happened and they are the rising stars in their companies, plus mobile music and video is changing the structure of labels...

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Posted by Shawn Conahan on August 01, 2006 at 12:25 PM

The Mobile Ad Model

I just re-read this bit from Techdirt from a couple of weeks ago about eBay’s super-secret Skype plans. Techdirt contributor Derek Kerton was underwhelmed by the apparently small news that eBay buyers will be able to communicate directly with eBay...

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Posted by Shawn Conahan on June 28, 2006 at 01:14 AM

Moviso.com is live

I didn’t see any announcement about it, but go check out www.moviso.com, the off-deck portal from InfoSpace. Compare to www.yourmobile.com, also owned by InfoSpace, which, judging from the out-of-date content was abandoned by InfoSpace circa mid-2003. Functionally, moviso.com is essentially...

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Posted by Shawn Conahan on June 27, 2006 at 12:07 PM

WiFi Skype Phone

Via aving.net, the Belkin WiFi Skype Phone. We are starting to see the future of free personal communication take shape. I am not sure if I have mentioned it before, but Voice is going to free. In 4 years, there...

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Posted by Shawn Conahan on June 03, 2006 at 11:08 AM

Guelaguetza

“Guelaguetza” is an ancient custom among the Zapotecs of what is now the state of Oaxaca in Mexico. It is a sort of formalized exchange or barter among individuals or communities of “gifts” of work, animals, materials or food. When...

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Posted by Shawn Conahan on May 24, 2006 at 08:24 AM

CTIA was fun

I was going to write a detailed trip report, but I am going to a wedding this weekend and really won’t have time, and by the time next week gets around you will have already moved on to something else...

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Posted by Shawn Conahan on April 07, 2006 at 06:35 PM

Tip for your meetings at CTIA

Off to CTIA - no time for long-winded blogging this week, but I will have a trip report of some sort next week. If you are going to the show and want to see Rabble, stop by the Kyocera booth...

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Posted by Shawn Conahan on April 04, 2006 at 09:06 AM

Moviso an upcoming D2C brand?

Please forget what I said before about Moviso being a lame direct to consumer brand: I will know they have not shaken their infrastructure DNA and adopted a consumer marketing mindset if they announce a consumer strategy under the InfoSpace...

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Posted by Shawn Conahan on March 12, 2006 at 06:52 PM

You say potato, I say potizzle

Mobizzo launched, and it is a smart move forward. My phone's wallpaper now proudly supports Pedro. Lucy Hood is a key driver in this industry. With her pioneering efforts on American Idol and her vision for mobisodes, her track record...

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Posted by Shawn Conahan on March 03, 2006 at 08:34 AM

There’s a wooden horse building contest in Troy

Does the mobile industry view "WiFi Disintermediation" as a threat or an opportunity? From the deals being done, I would argue there is more support for “opportunity.” But the word “disintermediation” should be a hint to the contrary. Isn’t it...

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Posted by Shawn Conahan on February 28, 2006 at 08:48 AM

What I learned at 3GSM

My opinion on 3GSM is that it has jumped the shark: It is too big, too far to go and too much to spend to not get enough done, and 600 euros for an exhibits pass is ridiculous. I did,...

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Posted by Shawn Conahan on February 21, 2006 at 03:25 PM

FierceMoSoSoLoBaCoNews

Did you get the email from Jeff at Fierce Wireless on Friday announcing that they are starting a new sub-newsletter called FierceMoCo? Is it just me or is this a little confusing? There are two newsletters that everyone in our...

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Posted by Shawn Conahan on February 06, 2006 at 12:15 PM

Simplicity is key.

I am in Las Vegas at CES. I saw the “O” show, wherein dozens of nubile gymnasts perform impossibly complex and breathtaking acts of derring-do to the amazement of the very impressed crowd. It is the sheer complexity of the...

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Posted by Shawn Conahan on January 06, 2006 at 01:50 PM

MoMo SD at Intercasting Corp Dec. 19

We are hosting the Mobile Monday San Diego chapter event next Monday at the Intercasting Corp World Headquarters. Starts at 6:30. Clicky for details. I am told that they will be coming off the presses this weekend, and if so...

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Posted by Shawn Conahan on December 14, 2005 at 04:20 PM

JAMDIS

I got a call this morning from a buy-side analyst. They were smart guys with an eye on the space, just wanting to chat about where mobile media is going. I think our general agreement was that it is going...

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Posted by Shawn Conahan on December 13, 2005 at 02:35 PM

3GSM 2006 in Barcelona

Regarding 3GSM, I have nothing important to offer but this: You might want to start thinking about booking your hotel, as options are already thinning out. I just booked my travel, and I was reminded of a tip I have...

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Posted by Shawn Conahan on October 29, 2005 at 05:38 PM

There is more headroom for INSP

Like I said before, INSP is undervalued. Even with today's boost on yesterday's earnings call, this company is still only trading at roughly 2x cash on hand. I read Needham and Co.'s report this morning maintaining a Buy rating for...

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Posted by Shawn Conahan on October 26, 2005 at 10:42 PM

Tripping the Chocolate Fantastic

Did you see Trip's speech at CTIA last week? I wasn't there, but someone sent me this article about it saying it sounded similar to our vision. (It is good to see more people moving in the right direction.) "If...

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Posted by Shawn Conahan on October 03, 2005 at 09:45 AM

InfoSpace for Sale?

Sure, why not? Reuters ran a story yesterday that bankers are pitching InfoSpace as an M&A target. Of course, this doesn’t mean InfoSpace has retained an investment bank to shop them around. This week’s announcement of (their president) Kathy Rae...

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Posted by Shawn Conahan on September 30, 2005 at 04:18 PM

Get Your CTIA On

I am at CTIA, and it’s a good conference for us this year. More on our momentum in a future post, but generally speaking, things are looking good, planets are aligning, etc. We'll have a slew of announcements in Q4....

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Posted by Shawn Conahan on September 28, 2005 at 01:41 PM

Mobile Content World

I am off to Mobile Content World in London, leaving in a couple of hours. I will be speaking on the panel Reaching Out To Youth. If you will be there and would like to meet, please shoot me an...

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Posted by Shawn Conahan on September 13, 2005 at 08:24 AM

JAMDAT Soup

Investors punished JMDT last week and it continued today. I think this is an exaggerated response to the 3rd-quarter guidance. I have some broader observations about it, and like InfoSpace’s recently tanking stock, I foresee a ripple effect throughout the...

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Posted by Shawn Conahan on August 15, 2005 at 01:18 PM

More on InfoSpace

Analysts Sending Me Emails, Read This: Here are my answers to the four questions I am consistently getting from various financial analysts: Yes, there really is seasonality in the ringtone business. It is lowest in the 2nd and 3rd quarter....

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Posted by Shawn Conahan on July 29, 2005 at 10:26 AM

About InfoSpace

This Stock Price Does Not Reflect Their Opportunity INSP just plunged 30% to a new 52-week low of 24 and change on lower than expected guidance for the year. Sounds pretty bad, but don’t be too quick to judge. I...

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Posted by Shawn Conahan on July 28, 2005 at 07:08 AM

BREW2005 Recap

First of all, the Hawaiian Tropic girl was very hot. How do I compete with that? I pulled up my pant leg a little bit to show some leg in an effort to attract more attention to our booth, but...

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Posted by Shawn Conahan on June 04, 2005 at 10:15 AM

Qualcomm’s BREW Conference Is June 1-3

A post not about populist media I am writing this from Boston at the moment, having endured last week’s unseasonally cold nor’easter. I am therefore happy that the BREW conference next week will be in usually sunny San Diego. It...

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Posted by Shawn Conahan on May 29, 2005 at 06:04 PM

May 13, 2008

Economics of the Dumb Pipe

**This is the full version of an article I wrote for this week's Reality Check column in RCR Wireless. To meet the character limit, the RCR version was truncated, and the last part of the conclusion was missing.**

For the entirety of my career in the wireless space, I have always worked for a small company selling something to or through wireless network operators. As such, I have made a good number of friends who work at these various carriers. I have observed that the most reliable way to get their dander up is to casually insert into the middle of any conversation, “Well, it doesn’t really matter because you are eventually just going to be a dumb pipe anyway.” Then I sit back, sip my mojito and watch the ensuing rant. Fun times.

Last week I tried this with a friend of mine who works at a carrier, and he said, “I prefer to think of it as ‘an open marketplace of ideas and innovation.’” Attitudes on this topic are changing. In fact, there is great enthusiasm for what most people agree will be a reduction of friction if we all embrace the word “open.” This got me thinking. First off, my friend is absolutely correct: When cast in a slightly different light and without the derogatory descriptor, a “dumb pipe” has the potential to be a very good thing. That simple realization led me to wonder how good it could actually be, and specifically from a financial standpoint. Could a major wireless carrier flip a switch to full “dumb pipe” mode and in so doing, take massive operational cost out of their equation and increase their value overnight?

What follows is an admittedly rough analysis of that possibility, so the conclusion may only be within spitting distance of the truth, but if it is even that close, I am very surprised by the conclusion.

BASELINE
I started by looking at the financials and structures of some of the world’s largest wireless carriers. There are certainly some differences between them, but at a high level, the structure is essentially the same. I could have used any of them as a model, but for my exercise, I happened to use Sprint’s publicly available financials from 2004 which I found to have a very readable structure and some useful details. (Also, I looked only at the wireless division, and not the consolidated financials.)

At the end of 2004, Sprint had 24.7mm wireless subscribers, 7.7mm of which were also data subscribers. Here is the revenue and margin analysis for that year: (numbers are in millions)

Net Operating Revenues $ 14,647 100%
Operating Expenses
Costs of services and products 7,096 48.4%
Selling, general and administrative 3,406 23.3%
Depreciation 2,557 17.5% (includes amortization)
Amortization 6
Restructuring and asset impairments 30 .2%
Total operating expenses 13,095 89.4%
Operating Income $ 1,552 10.6%
Adjusted Operating Income $ 1,577 10.8%
Adjusted EBITDA $ 4,140 28.3%

These are solid financials, and a 10% operating margin is quite respectable. Here is some other important data:
- 26,288 employees
- $557,000 in revenue per employee
- $2.5 billion in capital expenditure
- ~$62 ARPU
- ~15,500 retail sales outlets
- 800 branded stores and kiosks
- 17.5mm direct customer base

The gross add distribution mix is interesting and also an important part of the analysis:
Stores and kiosks: 38%
Alliance partners: 22%
Other direct: 18%
3rd party national/local: 22%

ANALYSIS
So now let’s make some assumptions and do some back-of-the-envelope math. First, I define “dumb pipe” as “branded access” with the closest analog being an ISP. I also roughly estimate the employee functions into four buckets, and used percentages based on anecdotal information from a few sources at different carriers:

Salespeople 20%
Customer Care 40%
Network Operations 25%
Management and HQ 15%

(The first time I heard that it is not at all unusual for a present-day carrier to have Customer Care represent 40% of their employee base, I was astounded, but it is fairly standard across the industry.)

Now then, how would turning a present-day carrier into what would essentially be an ISP change our key metrics? First of all, all the company-owned stores and kiosks would close. (Have you ever seen an Earthlink store? No.) This is not to say that all the salespeople go away, but there would be a shift to consumer commodity sales practices, relying more heavily on retail channels like big box retailers. Direct sales would be limited to large accounts and “1-800” ordering. Let’s say roughly half of the sales personnel go away. The effect to overall sales would be negative, and I will assume it isn’t effectively replaced. So that means 38% fewer gross adds, which shrinks the subscriber base.

A smaller base would obviously mean fewer Customer Service Reps, but how else might that cost be affected? I will assume a “Bring Your Own Phone” model, where all phones are unlocked, the consumer buys it at full price and chooses whatever carrier they want. It is reasonable that the large percentage of calls to Customer Care having to do with the device itself will go away, or more to the point that the carrier will make them go away through effective communication and education. Furthermore, our “dumb pipe” carrier will push “no-frills” plans for people who are smart enough to operate their mobile phone most of the time and don’t need to call Customer Care. Built into our marketing message will be that our customers are paying less per month for our “Do It Yourself” service. I will further assume the large number of all calls about the application they downloaded that won’t work will go away, because there is no storefront and no editorial function. Billing issues will still arise, so let’s say we cut our CSRs by 50%. This will also mean all the business development and product people who deal with application publishers and content providers will go away. So we can cut a few people out of HQ. Network operations basically stays the same.

The marketing expense of any current-day carrier is very large, and typically consists of an ongoing national television branding presence, an ongoing print presence and channel support. Given our reliance on channel partners now, I think I will keep the national television spend, kill the full-page newspaper ads and shift that part of the budget to in-store support, cutting a conservative 25% of our billion dollar budget in the process. I am also dropping the consumer price and killing the myriad incremental price plans. I like $50/month, all you can eat.

To summarize, we would lose 38% of our gross adds, bringing the total subscriber base down to 24.2mm. Total revenue obviously decreases given our new, lower price and smaller base. I lowered the COGS to reflect the historical 48% range then took our marketing savings ($250mm) off the top. I took our cost savings on sales, customer care and management (32%) out of SG&A. To be thorough, I upped our restructuring to $100mm to cover severance, etc. Here is what our new financials look like:

Net Operating Revenues $ 12,100 100%
Operating Expenses
Costs of services and products 5,558 45.9%
Selling, general and administrative 2,316 19.1%
Depreciation 2,557 21.1% (includes amortization)
Amortization 6
Restructuring and asset impairments 100 .8%
Total operating expenses 10,537 87%
Operating Income $ 1,563 10.6%
Adjusted EBITDA $ 4,126 34%

CONCLUSION
It really is not a compelling case. I shared this scratch analysis with a few friends who work at carriers, and they all agreed that it roughly made sense. I fully expected there would be more cost savings and more dramatically improved margins. The most interesting thing to me is that the bottom line is virtually unchanged in this exercise. Wireless carriers are generally very well optimized. The problem is that this is a very capital-intensive business. COGS and Depreciation are the big costs, and they are due to the high cost of spectrum, network equipment and operations.

For a final comparison, I took a look at Earthlink’s 2007 financials. As I mentioned earlier, as an ISP, they are the best example of a branded “dumb pipe.” At 5.3mm subscribers at the end of 2007, it is a much smaller business than some of the largest wireless carriers, but look at the leverage in their model. They generated $1.22 billion in revenue with just 996 employees. That is $1.2mm per employee, more than twice as much as our carrier example. Their COGS is 35%, so a little lower, but their total SG&A is higher at almost 50%. Operating income was a comparatively thinner 4.1%. Earthlink has swung to a loss in recent years due to the underperforming Helio investment, but even if you back that out, the “dumb pipe” model, even if it does create a vibrant atmosphere of innovation, is less attractive not least because such a company does not capture the value of that innovation itself. On top of it, the expected cost saving does not appear to materialize by handing the greatest driver of value – the services that consumers want to access – to 3rd parties. Lastly, if every carrier embraced such a model, I would also expect to see downward margin pressure as consumers perceive the commoditized “branded access” model as undifferentiated, which would increase competition on price, driving ARPU down.

Like I said before, this is obviously very unscientific, and maybe I missed something. But if the broad brushstrokes are about right, and the assumptions are close to reality, and the comparison to analagous industries is sound, then it is worth questioning whether the enthusiasm for “open access” is a catalyst for very welcome innovation in our industry or just a race to the bottom for the incumbents where the ultimate winners are today’s internet titans. Maybe it is both. Time will tell.

Posted by Shawn Conahan at 11:10 AM

February 19, 2008

“Social” is the next evolution of the mobile communication experience

I have not blogged in awhile because I just have not had time. We had a great week in Barcelona last week, announcing some important relationships as we continue to expand our footprint in mobile social networking. We will announce more on our international expansion this week.

But for now, I want to share how I am seeing mobile social networking become a “replacement” technology on many levels and how that is incrementally changing the mobile space.

It is a strange time in communication history right now. In the telecom sector alone, we have observed decades of expansion and growth that is now reaching saturation. Many countries are approaching 100% penetration in wireless. At the same time, the dizzying pace of technology is creating overlapping curves of technology that are sometimes complementary and sometimes not, but my key observation is that all the trends I see are toward “replacement” of the consumer communication experience.

I see three dimensions:
1. Micro level: consumer communication behavior is changing. When I look at the world and think about our business, I try to add a social anthropology filter. Like, WHY do we communicate the way we do?

One of my favorite historical examples of a communication trend is the fax machine – something that nobody needed before they had it, which everybody needed for awhile, and which is now rapidly becoming something that nobody needs. Did technology create the behavior? Or was there an unmet need to transfer documents immediately and so the technology rose to the occasion? It seems that the latter makes the most sense, but if the fax machine had never been invented, would the world have screeched to a halt? No. But here is the big question: What asshole decided it had to be on hard-to-use curly thermal paper and why do consumers put up with it? (I know there are a lot of plain paper faxes now, but still.) Raise your hand if you have ever received a thermal paper fax and subsequently photocopied it onto regular paper. Yes you have.

It is interesting to me how consumers will put up with a tool that is substandard for their purpose for so long. That there is a nearly universal threshold of sufficiency for all consumers about the same product fascinates me. I generally expect that 0% of my landline calls will be dropped, but I fully expect 10% of my wireless calls will be dropped. I put up with it for the same reason I sometimes use a butter knife in lieu of a screwdriver: It is good enough for my purpose.

This relates to social networking, which is a technology that was introduced (the same way the fax machine was) to facilitate communication. The same general questions apply: Why do we embrace the notion of “social” communication so strongly? Did we all universally desire to be connected to our friends and strangers but just lacked a tool before MySpace? And regarding the threshold of sufficiency, why are so many legitimate business contacts “friending” me on Facebook, a tool created by kids for kids, complete with a “poke” function that I find radically out of context for all of the people who find me on Facebook? That these colleagues will torture Facebook into a communication tool in a professional context means that there is clearly a desire, if not a need to communicate “socially” that transcends a particular demographic.

That is a vastly important point. The very notion of communication is evolving to include a social aspect. Hundreds of millions of consumers cannot be wrong. “Social communication” is replacing other forms of communication along the entire spectrum from a one-to-one experience to mass media. I only have so much time in a day, and I am spending it more on MySpace and less on talking on the phone and watching TV. That is a big deal.

Which brings me to the second dimension.
2) Intermediate Level: Devices and other tools are evolving to embrace social communication. The number and variety of handsets and other devices will continue to grow as OEMs attempt to identify every minute consumer desire and create a feature for it. As true as that might be, it is also true that there are key functions that every device must have. A camera is a good example of something that nobody thought needed to be on a mobile device until someone realized that the cellular telecommunications industry is not in the business of facilitating voice communication, rather it is in the business of facilitating all forms of communication, including pictures and video. Location awareness is another example. Along the same lines, in a few years, every mobile device will include a social communication toolset.

It makes perfect sense. The device manufacturers are the intermediaries that create the tools that consumers use to communicate, and an audience of hundreds of millions of consumers is something to pander to. What makes a consumer pick a certain handset off the shelf instead of the hundreds of others is that thing that enables them to communicate in the way they want to communicate. So if social communication is a replacement for one-to-one communication, then device manufacturers must embrace this evolution lest they create a market opportunity for some other company to fill the need.

And they are embracing the evolution in a big way. Every major OEM that we work with is integrating social communication tools into their devices, and you will start to see these devices roll out this year. Your address book will ingest your friends on MySpace or Bebo. Your camera will automatically background send to your Photobucket or Flickr account. The social communication experience is going to be brought closer to the surface for mobile consumers, and it is going to have ramifications because this is communication replacement technology: The things you use your mobile phone for today are not going to go away, but the percentage of your experience using traditional features versus these social tools will decline. Take the camera as an example. Just two years ago, nearly 100% of pictures sent from a mobile phone were sent via MMS to another mobile subscriber. Now, as much as 20% of pictures sent are going to a non-human recipient like Flickr or Piczo, and they are generally bypassing the MMSC and being sent via IP or email. This has a ripple effect for a long chain downstream, but the most important is the carriers themselves.

Which brings me to the third dimension I am observing as social communication replaces today’s communication standards.

3) Macro Level: The underlying enabling technology of mobile communication is changing, which is focusing efforts on superserving the existing mobile consumer base. I was in Barcelona last week, and it was amazing how many carriers I talked to that have abdicated their positions already and are totally happy with the notion of being “dumb pipes.” Also amazing was the much larger number of carrier representatives that had the exact opposite “over my dead body” attitude about it.

Of the former category, the general message was that competing air interfaces will force their hand anyway, so better to get ahead of the curve. Fair enough. Of the latter category, the spirit of competitiveness is very strong, and rightly so – I wouldn’t throw my hands up if I had 50 million paying subs. But I can say as a vendor serving almost every carrier in North America that there is an active drive toward consolidation of services and vendors. For so many years, carriers have been expanding the offerings on their decks (which has generally been good) that now there is literally too much on the deck to be useful for consumers. While I still think ultimate choice is the best policy and so do most carriers we work with, we are seeing a focus on core value drivers, and those are the services being meaningfully integrated into the native mobile experience. This makes perfect sense to me.

EVERY carrier is upgrading their camera and photo sharing experience.
EVERY carrier is upgrading their address book experience.
EVERY carrier is upgrading their data messaging experience.

And, (speaking from a position of certain insight) EVERY carrier is actively working to integrate social communication into their native communication experience. There is demonstrated high value in enabling consumers to communicate with their social networks seamlessly and frictionlessly. Some of the solutions are pretty amazing. We are fortunate to be involved directly in the plans of carriers and OEMs to see how this area is evolving.

The replacement strategy at this level is interesting because the carriers and OEMs are not looking at social networking as “an application that goes on the deck.” Rather, they view it as an obvious replacement for their core communication bread and butter (voice, SMS, email, IM, etc.) and are keen to integrate it meaningfully to capitalize on the massive opportunity it represents. While WAP is an important part of any service provider’s mobile strategy, any company focusing only on WAP will find the high ground is already occupied by the integrated few chosen to drive the greatest amount of value.

In summary, consumers’ changing personal communication habits are intersecting an industry that is very motivated to evolve to meet their changing desires and the result, while perhaps incremental compared to some of the advances we have seen in the mobile space in the past five years, is still a major shift in how we communicate. What is truly amazing is the number of moving parts required to be part of the same machine, and the fact that it is actually happening is great to see. I am very excited about 2008 and the changes that it will bring in this space.

Posted by Shawn Conahan at 12:47 PM

November 28, 2007

Open is the new black

Open platforms.
Open networks.
Open devices.
OpenSocial.
Open APIs.
OpenID.

Do you think the term “open” is being used with some recklessness of late? Or perhaps if not recklessness, with a certain degree of definitional liberty?

In case I haven’t mentioned it before, our award-winning ANTHEM™ platform is open. That means that any company, carrier, content provider, ad network, media company or OEM that wants to use our platform is free to do so. OF COURSE they are free to do so, because we are in business to make money, and the more people who use our platform, the better. But that isn’t what “open” means.

Our open platform works seamlessly with every other open platform because it is open. It interfaces to Google’s Android open platform that is going to run on Verizon’s open network, (as soon as someone creates an open device) and using our open APIs, any developer can build a widget for our widget that any user can put on their Facebook page that enables them to access any social networking site in the OpenSocial alliance right from their mobile phone.

The added value, of course, is that our open platform, due to the fact that it was architected with a superset of openness from the start, automatically interfaces to every other open platform on the planet.

And we wrote it in Erlang. So it is also massive.

So yeah.

I am wondering about two things:
1.) What is the definition of “open”?
2.) Is it really better to be “open”?

1.) What does “open” mean? It’s recent banality invites scrutiny.

Now, I know there is a definition of Open Source. The distribution terms of open-source software must meet 10 criteria to be considered truly open source. But that is pretty specific and is not necessarily what companies mean when they talk about their “open platform.”

How about an open standard?
From this wikipedia link:
“The terms "open" and "standard" have a wide range of meanings associated with their usage. The term "open" is usually restricted to royalty-free technologies while the term "standard" is sometimes restricted to technologies approved by formalized committees that are open to participation by all interested parties and operate on a consensus basis.”

There is apparently no concensus on the definition of “open standard” but there are no fewer than nine specific definitions, which is at least a valiant attempt to help. Ironically, if France’s definition differs from Spain’s definition, (and it does) that actually creates a more fractious environment and greater friction in the market.

To me, the best example of an open standard working for the greater good is the W3C. Here is their stated mission:
“The mission of the World Wide Web Consortium (W3C) is to lead the World Wide Web to its full potential by developing common protocols that promote its evolution and ensure its interoperability.”

Can you imagine having half of the internet using a competing standard to HTTP? Not good. So, yay the W3C, open = good.

But that is not the spirit of the current enthusiasm for openness. This is about accreting value using “openness” as a strategem. The best example from history I could think of is the .pdf format, which is an “open format.” It was developed by Adobe as a proprietary format and later provided on a royalty-free basis, though Adobe holds the patents.

Here is the history of PDF openness from an Adobe Technical Standards Evangelist:
http://www.acrobatusers.com/blogs/leonardr/history-of-pdf-openness/

More interesting is this interview from Adobe CEO Bruce Chizen from September 2003.

This quote sums it up:
“We realized that if we could provide more applications around the PDF as the file format and Acrobat Reader as the rendering platform, not only could we make many customers much more efficient and productive, but it could be a valuable revenue opportunity.”

The recent push by for-profit enterprises for opening everything is based on the desire to become a de facto standard around which an ecosystem of value can be built. The beauty of calling your system/network/platform/software/hardware/whatever open is that you push the cost of building that ecosystem of value to an army of enthusiastic developers, which has the added benefit of percolating the most innovation to the top. Or so the theory goes. But that brings me to my second question:

2.) Is it really better to be “open”?
Inside every entrepreneur is a monopolist. The more value he or she can consolidate, the better. As an entrepreneur, the ultimate accomplishment is for your product or service to become the de facto standard, which is a form of, and next best thing to, a legal monopoly.

How would you like to reap the value from the British East India Company, which you may remember was set up as a legal trading monopoly? How would you like to have built Standard Oil? Or pre-1980 AT&T? DeBeers? TicketMaster? TCI? Microsoft? Even the beloved Apple, so admired by so many Appleheads everywhere, was accused of creating a vertical monopoly with their closed music delivery value chain. (Which many devotees love.)

Let me answer for you: “Yes, I would like to own DeBeers.” (Owning all da beers in the world would rock. I kid.)

Like I mentioned about the W3C, there are plenty of examples where creating an open standard – say, XML – which did not financially benefit a single owner of the standard nonetheless benefited an entire industry of single owners as part of the ecosystem. In this way, the standard is the glue that binds the various parts of the ecosystem.

But if you are one of the parts of the ecosystem, can you effectively promote your standard as the glue just by calling it open? Or is your value naturally locked inside your four walls?

I just read an interesting post from Giles Bowkett that argues that “…social networking web sites aren’t platforms – they’re nightclubs… if you're building a Facebook app, you're building a sound system you can never take out of the club. Spending money on something which won't work anywhere else only makes sense if the payoff is immediate. It's not really an investment, because assuming any given social network will persist for any given amount of time defies history.”

Read the whole thing - it's good:
http://gilesbowkett.blogspot.com/2007/11/facebook-apps-facebook-trap.html

Facebook’s very non-secret strategy clearly runs counter to that notion – they appear to believe they will persist. They want to “own the social graph.” That is far reaching. It means they want to be the first link on the communication value chain, as in “the first place you always go to execute your personal communication.” If creating the Facebook “platform” and calling it “more open than your open platform” accelerates that end goal, then it is a reasonable ploy.

It’s like Google saying “we want to own search.” And, given their market share, they fairly do. Does that make Google a monopoly or a de-facto standard? Does it matter?

Not to me. I would just point out that where all this “openness” leads is ultimately to one company winning what they see as a zero-sum game because there is, after all, a finite number of consumers, and the goal of any for-profit enterprise is to maximize value by accreting more value to themselves.

My last thought on this, then, is that value accretes to utility, not to openness. Think about, for instance, how difficult it is to deal with wireless carriers as a vendor. If Verizon Wireless presents developers with an “open” network that isn’t really truly open, but it is “more open” than all other wireless carriers and thus comparatively reduces friction between developers and the Verizon consumers they want to reach, then they will have achieved their goal of accreting more value to their network. But even attracting developers doesn't get 'er done - ultimately what makes or breaks a company, open or not, is their ability to engage consumers, and consumers have proven time and again (I bought a very-closed iPhone) that they don't care what you call it as long as it works.

Posted by Shawn Conahan at 12:17 PM

October 17, 2007

This whole mobile thing is a real pain in my ass

Hey everyone, Fake Steve Jobs here. Thanks to Intercasting Corp for allowing me to post to their blog as a guest. It is part of my initiative to reach out to the mobile industry audience and do a little damage control. (I found out recently that, unbelievably, not everyone reads my blog. We are working on a fix for that, but for now this will have to do.)

Let me just be up front and say it: The mobile industry is a fucked up place to try to make a buck. Are you people masochists or what?

I know it must look like things come very easily for me, but that’s just because I am operating on a much higher plane of creativity than you. To put it simply, "I think different." (We ended up dropping the “I” from that campaign, but it still worked.) You think stealing the UI from Xerox PARC and building the Macintosh around it and then taking credit for being a genius was easy?

Well, actually that was pretty easy, but what about the iPod? YOU try making a white MP3 player and then convincing everyone that you created the category. That was hard, man.

My point is that being the custodian of perfect consumer electronics design and setting the standard for how everyone should interact with their electronics and on top of that making everything white – I am personally responsible for a worldwide shortage of white paint – is hard work. But I endure, because the world needs me.

But this mobile thing? This is harder than anything I have ever done. My plan, as usual, was perfect: First, I had to create the most beautiful mobile device ever. That part was easy, because I am me. Then I had to go sell a whole bunch of them, so I did a deal with AT&T, which worked out fine and life was good. I fired up the hype machine and we were off to the races.

Then the shit started to hit the fan. First, some people complained about the network connection being slow, as if this was my beautiful iPhone’s fault. Can I help it if nobody told me about this G3 thing or whatever you call it? It works fine in my hermetically sealed sterile underground bomb shelter office environment, every cubic inch of which is awash with glorious wifi. Who doesn’t have wifi everywhere they go these days anyway? Hell, these naysayers are lucky I even allowed it to work on a wireless carrier at all. Anyway, that wasn’t so bad – I am used to dumb people not “getting” my genius.

But then we got sued. Twice! First it was because we were conspiring to be a monopoly with our “locked” device approach. First of all, we’ve only sold a million of these damn things, and with 250 million mobile subscribers in the U.S. alone, you tell me how having less than a quarter of one percent of the market makes me a monopolist. Maybe I have a monopoly on the cool and beautiful mobile subscribers who appreciate having their cool and beautiful iPhone, but c’mon. Secondly, how easy do I have to make it to unlock the damn thing? Are you dumbshits so lazy that you cannot employ circa 1975 hacking techniques? My weimaraner could unlock this thing. Do I have to put a goddamn iUnlock Magic Wand in the package or what?

So while I am dealing with that nonsense, I get all these financial analysts blogging about how we’re not going to sell enough iPhones and that is going to hurt our stock price. To be honest, I planned all along to drop the price eventually anyway. I just wanted to see how many people would spend twice as much as it was worth. So then I drop the price in a gesture of magnanimity so that more of the world could enjoy the perfection that is the iPhone and what I do I get? Two things: 1) A bunch of whining customers, and 2) Another lawsuit!

Here I am on the balcony saying, “Let them eat cake for the low price of $299,” and what happens? A fucking blogospheric revolt of customers who were perfectly happy with their elitist touchscreen device they were smugly using just a week before to demonstrate their consumer electronic buying power and hipness. And all of a sudden I'm the asshole? What gives? So then I offered a store credit so these bitches could buy a bluetooth headset or some other sort of white plastic accessory or whatever. That sort of shut them up, but I still had the other lawsuit to deal with. This time, I was named personally along with my company and AT&T for “price discrimination, underselling, discrimination in rebates, deceptive actions, and other wrongdoings” all because I lowered the price because I was trying to be a nice guy. “Other wrongdoings”? Can you really sue someone for that? WTF? “Yeah, so, I am suing Bob for just generally being an asshole. Gretchen in the cube next to him totally agrees, so I think we have a strong case.” Seriously. They might as well add "mischief and buggery" to their list of asinine claims. Welcome to my world.

Oh, and the daily phone calls from AT&T aren’t helping, either. Now they’re like, “Hey Jobso, pure genius of course and we're totally committed, but so maybe this whole alleged monopolistic racketeering allegation is bad for business.” So then I have to bow to pressure again and announce a fully unlocked iPhone in France. I wonder how many days I have to wait for THAT to generate another lawsuit. What’s it gonna be this time? I can just see some dipshit alleging, among other things, “non-monopolistic normal business practices causing unfair competitive advantage,” and "other such atrocities." And perhaps releasing an SDK so people can write applications for the damn thing will result in another lawsuit, too.

Seriously, I am starting to rue the day I said, “Man, my cell phone sucks. I think I will bring my unparalleled genius to the mobile space.” And to think I put off the iPlanet project for this. By now we could have had the entire world painted white and every sign would be in a perfectly kerned tasteful silver font. But no – I had to go and dramatically improve the telecom industry first.

Whatever. Like all of my very important work, history will judge the iPhone with fondness and respect. I just cannot believe anyone is trying to make a buck in this industry of thankless consumers. It is very unApple-like. I’ll be glad to move on after this. In the meantime, go buy an iPhone and show your support.

Posted by Steve at 10:18 PM

October 15, 2007

CTIA parties

Available here:

http://www.ctiapartylist.com/

That's a handy little resource. I thought you would find it useful. It doesn't even list ALL of the parties, either. I got an invitation today that says, "Don't forget to RSVP for the Only Exclusive VIP Mobile Partnership Reception At CTIA." I don't know who is hosting the party or why I was invited. (God knows I am not on any "it" lists.)

A dozen of us are getting together on Monday night for dinner because it was the only night that worked for everyone. That happens to be the same night of the mocomixer, which is a real bummer, plus the Warner Music party, and also the INmobile reception. I wouldn't trade my Monday dinner for the world, but it got me thinking about what all the parties are for in the first place. It's goodwill, right? I invite you to my party, you get free booze, then you talk about how awesome my party was. It's a form of promotion.

Remember the MTV party in Orlando? That was seriously awesome. They should do that every year, and anyone else stupid enough to have a party on the same night cannot say they weren't warned: Everyone would rather go to the MTV party. Those MTV guys are top notch.

See? I am still talking about it.

While I was writing this, the mail came. I got an envelope from Transpera. Inside is a card that says, "Who says there's no such thing as a free ride? Avoid long taxi lines and crowded parking during CTIA. Enjoy a complimentary lift in a luxury Transpera town car." And there is a number to call to reserve a car anytime, anywhere. I just saved like $70 on a cab ride from Oakland airport. Now THAT is impressive promotion. With all of the free booze parties, trying to stand out with yet another free booze party is not a good strategy. But this. This is real value.

Have you seen Transpera's video solution, btw? Slick shit. Go see for yourself.

Intercasting Corp will not be hosting any parties, and we will not be paying for your cab fare. We will, however, be available. Do you want to see the new version of ANTHEM that will first be launching later this year in Europe? It is pretty cool. How about our super cool proxy messaging module or our OEM preload module? How about our localization engine that makes multiple language support a snap? Also, with full device and 3rd-party media service integration, it's like a whole different paradigm for communication and social distribution of media and services. I realize that isn't a very descriptive sentence now that I re-read it. Whatever. If you are interested in mobile social networking and want to see our view of it, please send me an email and we'll get together (for free booze at someone else's party) and I will show it to you.

Posted by Shawn Conahan at 03:43 PM

October 07, 2007

Objectively In Support of Gary Forsee

I am looking at my email inbox. I have a folder into which I siphon the various trade newsletters and such. The recent subject lines:

CTIA SmartBrief - October 5, 2007 - Reports: Sprint considers new leadership
FierceWireless - | 10.05.07 | New Sprint CEO by December?
FierceWireless - | 10.04.07 | Investors lose confidence in Sprint CEO
MocoNews.net - [Oct 4, '07] CTIA MocoMixer Opens Again; MySpace-O2; Sprint Leadership

It seems Sprint’s CEO, Gary Forsee, is under fire.

Here is an excerpt from the WSJ story:
Sprint Nextel Corp. is quietly seeking a replacement for Chief Executive Gary Forsee, said people familiar with the matter, just two years after he engineered the $35 billion purchase of cellular operator Nextel Communications Inc. to keep pace with rapid consolidation in telecommunications.
The combined company has been plagued by high customer turnover, merger hiccups and unhappy investors. Sprint, now the nation's third-largest wireless carrier by subscribers, has been lagging behind larger rivals AT&T Inc. and Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, in the race to add new customers.

They further reported that the board wants to announce a new CEO by December.

Fierce posted this story:
Sprint Nextel's Chief Executive Gary Forsee is feeling pressure from activist investor Ralph Whitworth who told The Wall Street Journal that investors have lost confidence in the leader.

Since gaining a stake in Sprint earlier this year, Whitworth has rattled the cage with management regarding its investments in WiMAX as well as what he calls poor attention to the company's core mobile-phone business. He also asked the company to consider the potential sale of its fiber-optic-networking and long-distance operations. Sprint has been struggling with churn in its core mobile-phone business, its integration of Nextel and heavy spending on WiMAX.

Whitworth, however, isn't demanding Forsee step down, but places responsibility on the board. His company, Relational Investors, owns about 53.1 million shares, or 1.9 percent, of Sprint's shares outstanding. Whitworth has experience in ousters. He played a role in the departure of Robert Nardelli, former CEO of Home Depot, and the ouster of Sovereign Bancorp CEO Jay Sidhu.

I don’t know any details about the situation, and I do not know Gary Forsee. I do, however, question the wisdom of an activist investor calling for the ouster of Forsee based on “…high customer turnover, merger hiccups and unhappy investors.” If an activist investor is going to materially affect my stock (what little of it I own) I want it to be for the right reasons.

Have you read Marketing Myopia by Theodore Levitt? I re-read it at least once a year as part of my reading list. Here is a free .pdf of it. This classic Harvard Business Review article was published in 1960, and its simple truths endure to this day.

Levitt opens with a challenge to management:

Every major industry was once a growth industry. But some that are now riding a
wave of growth enthusiasm are very much in the shadow of decline. Others, which
are thought of as seasoned growth industries, have actually stopped growing. In
every case the reason growth is threatened, slowed, or stopped is not because
the market is saturated. It is because there has been a failure of management.

He continues with a relevant example from the period:

The failure is at the top. The executives responsible for it, in the last
analysis, are those who deal with broad aims and policies. Thus:
The railroads did not stop growing because the need for passenger and freight
transportation declined. That grew. The railroads are in trouble today not because the
need was filled by others (cars, trucks, airplanes, even telephones), but because it was
not filled by the railroads themselves. They let others take customers away from them
because they assumed themselves to be in the railroad business rather than in the
transportation business. The reason they defined their industry wrong was because they
were railroad oriented instead of transportation-oriented; they were product-oriented
instead of customer-oriented.
…
What the railroads lack is not opportunity, but some of the same
managerial imaginativeness and audacity that made them great.
…
It is impossible to mention a single major industry that did not at one
time qualify for the magic appellation of "growth industry." In each case its
assumed strength lay in the apparently unchallenged superiority of its product.
There appeared to be no effective substitute for it. It was itself a runaway
substitute for the product it so triumphantly replaced. Yet one after another
of these celebrated industries has come under a shadow.

This should give you an idea, but you owe it to yourself to read the whole thing anyway. It is fascinating to me because the lesson never seems to get learned. My favorites from recent history:
- The digital camera destroying Kodak’s film business because they did not realize it was a replacement product
- Napster cutting the record industry's value in half because they didn’t realize they were in the music business
- Skype decimating the long distance business because the telcos thought they provided “landline” communication and not “communication”

When I look specifically at the cellular telecommunications industry today, I see barbarians at the gate. Who do the wireless network operators compete with? It isn’t other network operators unless you think it is worth fighting over the shrinking available market of people who do not yet have a mobile phone. No, Levitt would argue that network operators facilitate communication. Then you have to define communication. It used to be “voice.” That was when it was easy to be the CEO of a telco. In a digital world, you have to add “data” communication. What is “data?” It is everything. Voice is data, and that’s why the VoIP companies are kicking ass. But so is music, video, messaging, location, etc. Google, and who knows who else, is going to bid on 700Mhz spectrum. Did they seem an unlikely competitor a few years ago? In the meantime, competing wireless technologies, including WiMAX, are threatening the very investment upon which the existing cellular industry was built.

Communication is increasingly non-voice, too, as a new generation of teenagers (who will grow up to be adult business people themselves) have stopped using email altogether, are about to stop using instant messaging, and prefer to communicate via their favored social networking site. That’s right – any social networking site, if properly focused, has a chance of disintermediating the network operators when a critical mass of users stop using their phone's PIM to originate communication and instead go straight to a social networking site (maybe via WAP?) and initiate their communication from that friend list. Today a network operator may think they are making decent data revenue on those SMS and page views, but they could be precipitating their own demise for a few million dollars if that same user finds a lower-cost alternative to access that server-based friend lst. A very strategic approach is required to give consumers what they want while doing so without shooting yourself in the foot. (Or worse, in the head.)

Anytime you want to rile someone who works at a network operator, talk to them about the inevitability of becoming a dumb pipe. “I just don’t see where you are adding any value other than QOS, and every carrier drops as many calls as the next,” you might say. “I’d rather have a wifi phone with a VoIP client on it and do all my business from Starbucks than pay a carrier $80 a month,” you might add, as you observe that you are indeed meeting said carrier employee over a triple grande latte. I have a lot of friends at carriers, and they don't even get offended by this conversation anymore - they already know it and are trying to make sure they don't help sink the ship. Every one of them hopes that their CEO isn't "a fucking idiot bell head who can't learn new tricks." (That is a direct quote from one such friend of mine, whose name, I hope you'll understand, will remain undivulged.)

Technology is game-changing. It isn’t clear to everyone what competitive pressures a telco faces today, but from where I am observing, it is apparently clear to Gary Forsee, who has made two critically important bold moves:
1) Content and distribution need each other, and to protect margins, you take inventory off the market. Further, to ensure a competitive stance in a consolidating market, you take inventory off the market. He did this by merging Sprint and Nextel. This established a sizable customer base that can later be converted to the new game.
2) He established a sizable market lead in WiMAX that will leave competitors a year behind. The price advantage of WiMAX has been estimated at as much as 1000x less than competing 3G technologies. Opinions vary, I realize, but CEOs are supposed to make bold moves, and this is what I am observing.

From his actions, I see a guy who recognizes that there is no reason for an incumbent industry to give its future away to a smaller and nimbler (and worse, unforeseen) competitor.

The traditional telecom industry is threatened by so many other challengers that it reminds me of the railroad example in Levitt’s article. The challengers to the railroads such as “cars, trucks, airplanes, even telephones,” bear a striking resemblance to the telco challengers such as "cable companies, the internet, WiMAX, and even social networking sites."

I am willing to sacrifice some short-term growth if it means there is at least a future to be secured. Measuring the success of these long-term strategies by their short-term returns is not wise in my opinion. But maybe that is the problem; Maybe the "unhappy investors" do not see that the future is threatened and are simply comparing Sprint to other telcos. I suppose you don't get credit for making an investment until it pays off.

The only CEO I would want at the helm of any telco, wireless or otherwise, is one who is thinking differently about the future and showing vision beyond reducing subscriber churn. Has Forsee not demonstrated a vision for the future beyond Sprint’s current business? He has to me, and as a Sprint investor, that is what I want to see.

UPDATE MONDAY 10/8/07: Gary Forsee resigned today, as some had expected. I maintain that Forsee's key initiatives while at the helm were not just opportunistic but necessary moves to position Sprint well for the future.

Posted by Shawn Conahan at 06:36 PM

July 08, 2007

The Sony CDP-101 and my new iPhone

I got my new iPhone last Saturday. I was in Denver for the weekend and I happened to walk by a store downtown. There was no line. They had 47 left when I bought mine. After a week, I must say I love it, though it is funny how quickly your expectations can rise. For instance, some other people in the office got iPhones last weekend, too, and on Monday we were all standing around talking about it. We commented that we felt like an iPhone should do something in the presence of another iPhone, like we were in some secret club and the devices would sense each other nearby and do something special like speak Furbish to one another. They do not.

The set up was annoying. As someone who does not care to build my digital life around Apple, I resented the requirement to download iTunes. I resented the fact that it snarfed my music and then shared it with everyone with an email (which it also snarfed) that also resides on their server. This is before I even set up my phone, btw - so I had to learn how to turn off all the invasion-of-privacy-ware before I even got to the activation part. Once that was done, set up was relatively simple, though I had to call customer support several times anyway because the rate plans available through iTunes did not include the advertised unlimited messaging plan.

Here is my quick micro-review of the iPhone: Compared to the iPhone, every other mobile phone on the market today seems like the last best cassette player in 1982. That's when Sony shipped the first CD player. At first, compared to the CD, rewinding a cassette seemed kind of quaint, didn't it? Then it seemed woefully outmoded. Now it is sort of embarrassing that we ever put up with linear magnetic media in the first place. Now your kid just looks at you with his or her head cocked to one side, puzzling as you try to explain the medieval technology of your youth.

This experience raised a few questions in my mind. How "mobile" is a mobile device that is more or less tethered to a PC from birth? And what does that mean for the growing divide between the technology 'have's and 'havenot's? Nobody wants to have this conversation with me for some reason. We know from experience that a large percentage of data sales come from people who do not own or have regular access to a PC. There are twice as many mobile phones in the world as their are PCs. The best argument I get on this conversation is that "those people" aren't buying $600 mobile phones. To this, I say that "those people" are buying $140 sneakers, $350 iPods and $175 jeans, so why not $600 mobile phones? Not having a PC doesn't necessarily mean not having disposable income. It could simply correlate to lack of a broadband connection.

Whatever. Even if you don't buy the "have not" argument, it still seems wrong to walk into a wireless store and walk out without an activated device. The same is true of mobile applications that require you to go to a website to register. A mobile phone is not another access point to the internet that exists in a PC-connected world. Rather, it is increasingly the primary access point to a communication network that happens to include the internet, a term that is rapidly devolving to mean a subset of the overall connected communication experience, particularly in the mobile space.

Yes, I love my iPhone, but this experience got me thinking about where I place my affinity, which I realized is tied closely to responsibility. The highest value I am receiving in a communication system that includes a device and a network connection is from the network connection. In an emergency, when I MUST make a call, they network is vastly more important than the device from which I place that call.

So I have higher affinity for the network provider. When something happens to my service, I will call AT&T. When something happens to my device, I will still call AT&T, because I know that they know that if they want to keep me as a paying customer, they will bend over backward to make me happy. The last person who received my dollars accepts the responsibility for making me happy, and six months from now when my July Visa bill is long forgotten, I will still have paid another monthly $100 to AT&T.

So how do you become more important than the network service provider? Make my personal data portable and accessible from any network.

This brings up an important point: I view AT&T as my communication service provider. As great as the iPhone is, I do not view Apple as my communication service provider - Apple is my device provider. I will be happy to receive software updates from them for my iPhone. But the thing about iTunes that I mentioned I hated is actually very cool and really useful. Transparent relationship management and externalized PIM and media makes a lot of sense, and I have to admit that I actually want that - FROM MY COMMUNICATION SERVICE PROVIDER. It feels excessive and mismatched to me that the company that sold me a device, and not a subsidized device that might entitle them to something extra from me, wants to own my data. But AT&T storing that data for me so that when I drop my device in the toilet (again) so that they can provide me excellent customer service by just restoring it to my new device? Awesome. AT&T allowing me to turn on certain features like automatic PIM snarfing that make my communication service more useful? Great. Apple automatically defaulting the same service to "ON"? Not cool.

The company that I allow to manage my data owns the relationship with me. This should be the company to which I am paying a monthly service fee. If it is not, then my monthly service provider just got disintermediated because my affinity will shift to the highest value provider.

It's funny that the iPhone is the current perfect device, and the more I use it, the more I realize that its great contribution is simply user interface. Even without the touchscreen, if the iPhone software were available on any other device, its simplicity and usefulness would still represent a major leap forward. But I also realize that that is just the tip of the iceberg, and the real revolution will come when AT&T (or Apple, if AT&T is myopic enough to let them) starts offering personal data management services that truly enhance my communication experience.

Posted by Shawn Conahan at 07:40 AM

June 28, 2007

The 386, Diamonds and Mobile Phones

This iPhone hype reminds me of the early days of the PC, when marketing centered around major breakthroughs. Remember the PET? TRS-80? Sinclair? Commodore 64? Apple II? IBM PC? They were all notable for certain reasons. Maybe it was “pre-assembled” or maybe it was an attractive price point or maybe it was color. Compare to mobile phones today: iPhone, RAZR, Sidekick, Blackberry. They are all notable for certain reasons. (Thankfully they are all pre-assembled.)

Over time, the PC became commoditized as it hit the mainstream consumer market. This was generally good for consumers because it gave them a basis for decisions and clarified where models differed. So I thinking that the wireless industry might end up going the way of the PC industry. After all, wireless service, while differentiated in the final offering to consumers, is essentially a commodity. When I try to find the absolute root of the problem, I always come back to the consumer. Does the bell curve of the consuming public KNOW that their phones can do more than complete a voice call? Do they care? Where do they get educated?

If you asked me to characterize the primary marketing message of any wireless carrier, it would be “X minutes for X dollars per month.” Every advertisement I see leads with this value proposition, so that is apparently the most important education a carrier wants a consumer to receive. I honestly don’t know how effective the rest of the messages are. I personally cannot remember any of those messages. “We have the best network” is bouncing off of me know, after every carrier has made this claim in some form. What else is there? I don’t know. And I think that is part of the problem: The industry has taught me that the “language” I need to compare service providers is a simple formula which is more minutes for less money. If that is the only education consumers are getting, does that mean they are the only dimensions on which any carrier can compete?

A brief history of computing:
1st generation: Mainframes based on vacuum tubes and punch cards. (ENIAC, 1946)
2nd generation: Mainframes based on transistors. (The transistor was invented in 1947)
3rd generation: The Integrated Circuit (invented in 1958 and commercially deployed in 1963) ushered in the era of the Minicomputer.
4th generation: Intel commercially releases the first Microprocessor, the 4004, in 1971, underlying the architecture of the famed 8086 microprocessor used in the IBM PC in 1981, and paving the way for the Microcomputer revolution.

And that is where we stand today. Architecturally, computers are essentially the same as that first IBM PC in 1981, albeit better, faster, etc. The last real innovation in personal computing was the Mac OS in 1984, followed by the Windows OS in 1985.

Where it gets really interesting to me is how computers were marketed to consumers. Read Intel’s “Anatomy of a Brand Campaign” for what I think is the move that really paved the way for a later shift in how we buy computers. They started by marketing their 386 processor, and then their 486 processor. Because those were not legally protectable trademarks, every manufacturer used them, which was akin to educating consumers to understand cars as having engines with 6 cylinders or 8 cylinders.

Think about it – the awareness by consumers that something under the hood differentiates the ultimate value of the overall product, even if they don’t fully understand how it works or even what it really is, is a powerful concept that gave them the tools they needed to compare computers side by side. If you were shopping for a computer and they both had 486 processors, how did you differentiate them? Megahertz. Nobody really knows what a megahertz is, but they know it measures speed, and faster is better. Thus the language of computers was born, and today anyone who buys a computer knows intuitively that industrial design aside, the decision will be based on:
- the processor
- its speed
- RAM
- Hard drive capacity
- operating system
- monitor size
- and several other secondary but also homogenous attributes including wireless connectivity, graphics processor, etc.

This language is really what enabled the likes of Dell and Gateway to sell computers sight unseen. Most importantly, when Microsoft Windows became the defacto OS for the vast majority of computers, consumers no longer had to worry about whether or not the available library of software applications would work with the computer they wanted to buy. People only buy computers to run software on them, so application portability was key to consumer adoption. When you can boil down a purchase decision to a set of specs like a checklist, the price-to-value equation quickly dominates the decision. Add a money-back guarantee and you take the risk completely out of the buying decision.

I just watched a stock ticker scroll by on TV. Blue Nile (NILE) is up about 100% since this time last year. Their market cap is almost $1 Billion. They sell diamonds over the internet.

Would you buy a diamond over the internet? I would. Aside from the fact that they are irrationally expensive and typically purchased for occassions where rationality is suspended, this is one of the lowest-involvement purchases a consumer can make. Why? Because all you have to know is the spec on the rock you want, and it is widely understood that that spec contains only these attributes on the checklist:
- color
- cut
- clarity
- carat

These attributes have sliding scales from bad to great, and their combination drives cost. It is that easy.

Just as there are literally millions of combinations of differentiable attributes that drive consumer adoption of computers, so are there literally millions of different things you can do with a diamond to make someone want it. You can make a ring, a necklace or a bracelet or any other category of jewelry, but it starts with those four attributes. A sparkly diamond will work in basically any setting. This is a form of application portability.

This somewhat obvious (now) marketing approach has simplified the buying process of computers and made bling available to a much broader consumer market.

So what about mobile phones?
How did you buy your last mobile phone? How will you buy your next one? If you answered, “Over the internet” you are still in the minority. Here’s a short treatment on the subject of this “clicks-to-bricks” product category, where a lot of research is done online, but the actual purchase is done hands-on in a retail store.

Why is that? Could it be that differentiation is so great among manufacturers and individual devices that there is no common point of reference for consumers? Could it be that this is greatly retarding adoption of data services?

Does that last sentence seem like a leap of logic? Let me explain. The blogosphere is perenially alight with the “walled garden” discussion, and there are strong points for and against.
I am personally in favor of walled gardens, if you want to call them that, because I believe that if the capital was deployed to create a closed network and consumers are ok with it, then those capitalists are entitled to protect their investment. One of the best arguments against walled gardens is that the applications you buy on one carrier do not go with you to your next phone or your new wireless carrier, should you decide to switch either.

Ok, that’s a problem for consumers, but look at the problems that preceed it:
1) There is no “language” for consumers to commoditize basic mobile phone functionality. Any application developer will tell you that the RAZR, in all of its incarnations, is underpowered and very difficult to develop for. Any consumer will tell you that the touch-sensitive keys on the Samsung Heat, with their millisecond-delayed response time, make for a difficult user experience.

These are specific examples of tribal knowledge around particular devices that could only influence satisfaction of a purchase decision AFTER the fact. But what are the attributes that you would compare to make a purchase decision between mobile phones? Do consumers know that processor speed actually matters to the final user experience? Shouldn’t ARM be differentiating to consumers to solidify their leadership position the same way Intel masterfully executed on their Intel Inside campaign?

What about memory and removable media? As the mobile phone morphs into a music player and an internet browsing device, won’t memory and storage capacity matter? Yes, but still all the marketing you see is about a device’s “thinness” or its ability to play video. This is 2007 - I EXPECT it to play video, but how well does it play video and why?

2) There is no common frame of reference for what a mobile device does. This is the common operating system argument. Hand your mobile phone to someone you know and tell them to buy a game or a song or a ringtone. Most people will not be able to do it because all mobile phone UIs are different. Think of how many times in your life a friend/spouse/coworker/complete stranger has called you up and asked you how to do something on their computer.
Them: “How do I make that annoying paper clip man go away?”
You: “Click Start, Settings, Control Panel and click Add/Remove Programs…”

You were only able to do this over the phone because you had the same OS. Try that same thing today: Call someone right now and ask them to walk you through how to watch a mobisode of the hit television series 24 on your mobile phone.

The Tribe Around Us is an oft-overlooked source of marketing power. Back when I was at Moviso, we found that one of the main reasons ringtone sales took off was that other people around you heard your phone ring and that educated them about customized ringtones. There was a high incidence of the question, “Can you send me that ringtone?” (To which the answer remains today, “No.”) Worse than not being able to leverage the Tribe Around Us is the fact that the devices are tied to services that are offered by wireless carriers that are trying to differentiate their service offerings based on the combination of services they provide. This means that the most powerful promotional medium – word of mouth – is unavailable to carriers to drive adoption of data.

The worst incarnation of this effect is, of course, that even if that word of mouth promotion is working to some degree, in practice there is no ability for consumers to act on that promotion. I am talking about a concept as simple as cutting and pasting a URL and sending it to a friend. This functionality simply does not exist in the mobile space.

But these barriers are not insurmountable:
- We need a “language” to describe mobile devices; we need a “386” or “the 4 Cs of diamonds” to educate consumers and drive purchase decisions.
- We need a common UI. Carriers and device makers have tried to differentiate on this dimension and it hasn’t helped – can we please try an OS that works across all devices so that device manufacturers can differentiate on features and functions instead of whether the left or right soft key ends a call? This is Apple’s second chance at licensing a defacto standard OS for an entire product category instead of tying it to hardware sales. Were they too successful with the iPod to think this isn’t a winning strategy? Am I missing something here? If they want to own the entire mobile space within only two short years, shouldn’t they, shortly after the launch of the iPhone, announce that the whole iPhone OS is available to all device manufacturers?
- We need application portability. Consumers see messages – expensive messages – telling them that they can get TV/music/games/ringtones on their mobile phones or that they can vote for American Idol via text message. “Now was it American Idol on Cingular and TV on Verizon or the other way around? It only works on certain phones? Which ones? Shit, I better go into the store for the very painful and time-consuming retail experience to get some answers.” Not only should consumers be able to understand which applications work on which devices, they should generally understand that ALL applications work on ALL devices because those devices exist to separate me from my money in exchange for an application that either saves time or wastes time. It should be as simple as that.

So, are mobile phones like PCs?
When I step back and look at how network operators plan to increase data ARPU, it is by and large through applications. (Applications that live on the device, like software on a PC.) If this is the case, shouldn’t we, as an industry, be looking at how to make the device more deeply integrated to the applications that will drive ARPU? Would that drive revenue? I think so. Would you buy a computer with Windows on it that didn't have Office? Most people consider Office to in fact be part of Windows and expect for it to come pre-loaded as an integrated part of the device.

The more an “application” on a device feels like a “feature” OF the device, the more it will get used. The only problem I see is that while my mobile phone comes pre-loaded with software, the most useful items like the calculator, clock and Bubble Breaker do not drive ARPU. The applications that DO drive ARPU (SMS, Camera, MMS, Email, Browser) are just stuck in a decidedly "1.0" revision cycle - they are very useful, but not as useful as they could be to the mainstream consuming public. When the other 90% of mobile consumers start sending pictures, it will be in part because we will have made the leap to the next generation of this basic functionality.

The first version of Windows was not more useful than DOS. In fact, it wasn't until Windows 3.11 that it really started to make sense.

Posted by Shawn Conahan at 06:24 PM

June 08, 2007

Does Amp’d bode ill for Helio?

Does Amp’d bode ill for Helio?

I am seeing a lot of dancing on the grave of Amp’d Mobile. It is a pretty easy bandwagon to jump on: High-profile, cash-burning companies with hubris run by big-personality managers are fun to love on their way up and fun to ridicule on their way down.

I read the bankruptcy filing documents, and I have no comment other than to say that, yeah, apparently it is difficult to set up and run a wireless network, even if the network part has already been done for you. Got it.

But how difficult is it? Because there could be implications for all MVNOs. I mean, is it prohibitively difficult? Like is there no point in even trying? Is the cost of capital today too high to get a share of an opportunity that was started with 1980s-era money?

I don’t know.

I often see Helio compared to Amp’d, maybe because they started around the same or maybe because they are about the same size in terms of subscribers. So is it more or less likely that Helio will flame out? (Get it? Their logo is a little blue flame.)

I’m going to go with less likely for this reason: Helio understands that the only use case the mobile space wants to understand is communication.

Communication is a commodity with a certain degree of elasticity in its demand. Certain forms of communication have higher value, but they all have some value. (To call you and make sure that call goes through, I am perhaps willing to spend a few cents. To call 911 and make sure that call goes through, I may be willing spend thousands of dollars, depending on why I am calling 911. This is why the two best carrier marketing messages are “low price” and “fewer dropped calls.”)

I am looking at my Helio Ocean right now, and I see a focus on communication. The Fastmobile implementation of their universal inbox is great, even if it does seem to overtax the processor in the device. The new MySpace mobile app is 1000x better than the last one. Front and center is email, Yahoo messenger, AIM, Windows Live and Gmail. Their Buddy Beacon works ok. These are all communication applications, and the Ocean seems to be built around them more than it was built around the camera or the music player, which are both less prominent than the messaging functionality.

Compare to some other MVNOs:
ESPN – “Sports content” Failed.
Voce – “Really really expensive” If I am right, they shouldn’t survive.
7-11 Speak Out – “Convenient prepaid voice and messaging” Yes.
Boost Mobile – “Simple pricing, lifestyle marketing” Yes.
Bratz Mobile – “Non-aspirational brand for tweens” Probably not going to make it.
cool.Prepaid – “music, ringtones, one expensive handset” Probably not going to make it.
Disney Mobile – “for tweens, sell to parents, focus on family communication” This makes sense to me, and I think they will be successful.
Jitterbug – “Simple phones with big buttons for old people” My grandma would be offended, and I think this is really about the device and not the concierge service, so probably won't make it.
Movida – “prepaid for hispanic community” Yes.
Tracfone – “prepaid for hispanic community” Yes.
Universal Music Mobile – “Universal Music Mobile” This should fail.
Virgin Mobile – “Prepaid youth market” Yes.

This short list shows some big brands that have failed or that will fail and some small brands that have done really well. Brand is apparently not enough in this segment – the service has to match consumer expectations, which I believe is first and foremost that a phone is supposed to be a communication device.

This is a meme we will be seeing in the mobile space for the next year: There will be scrutiny of content, including music, ringtones, games, MVNOs, mobile TV – everything having to do with content will be called into question as to its absolute or strategic value. More emphasis will be placed on communication – communication apps, tariffs, business models, marketing plans and unique consumer offerings, including which MVNOs are built around delivering solid communication value and which are not.

I wish Helio great success, but here's a problem: No carrier builds their own proprietary applications. They use a network of outsourced vendors to integrate their innovation. That network of vendors is incented to work with as many carriers as possible, and the best ones do. This means there is no exclusive functionality on which a carrier can differentiate. "Exclusive" in the mobile space means "for a limited time" and consumers know that it is only a matter of time before an important application on one carrier makes it to their carrier.

Great. Let's make consumers happy. But from which link on the value chain? "Lowest cost communication" is a hard message to beat, and the only network operators I would want to be running right now are Cricket or metroPCS. Beyond the irresistible basic voice and messaging value they provide to consumers, I think the sweet spot in the mobile space is broad communication applications that can be built on top of basic services, regardless of the positioning of those basic services. Games, Ringtones and Music captured a novelty market and don't seem to growing at the hockeystick rate that messaging is, and we all know it.

Therefore, as an industry, this year we will pull hard in the direction of communication applications. Social networking, IM, better email, MMS, picture transfer and handling, group messaging, blogging and even certain LBS applications are all poised for success over the next couple of years as we figure out that what consumers really want is communication.

Posted by Shawn Conahan at 10:10 AM

May 17, 2007

Helio Ocean Review

I have a Helio Ocean. I got it on the first day it was available. I've used it as I would my primary phone, getting a sense for the UI, etc.

I HATE it for these reasons:

I cannot easily read the clock
I know it may sound ridiculous, but I stopped wearing a watch about a year ago because I always have my phone with me and it has a clock on it. I am amazed at how often and how casually I glance at my phone to check the time. On most flip phones, the outside LCD dims but does not shut off completely so you can just glance at the time. You cannot do this with the Ocean.

The Ocean is a double slider, so it slides one way for the phone keypad and the other way for qwerty. When closed, that state is a keylock. Whereas other phones, to prevent pocket calls, either automatically keylock or prompt the user to do so, the Ocean just assumes that you do not want to pocket call someone and so none of the external keys work when closed. That is a smart design decision, but it comes with a major drawback, which is that because the LCD goes completely dark, you cannot press one of the keys to light the LCD so that you can glance at the clock.

That small annoyance really totally sucks.

The Camera could work better
The keylock feature is compounded by the fact that the hard key camera button is also locked, so you cannot press it to invoke the camera. I have been sliding the qwerty keyboard open then pressing the camera button, (which brings up a menu) then pressing it again to invoke the camera. This isn't too bad, but it seems like it is a result of the keylock and not a fully intentional feature.

The music player is difficult to access
Same for the music player - those are hard keys, too, so they don't work when the device is closed. 7 clicks to play music: You have to open the slider, select "menu" then "video+music" then "music" then "songs" then "play." This brings up a pretty cool player that maps the 5-directional buttons pretty well. Now, if you close the device, the music keeps playing, and the hard keys on the side of the device work, but the 5-directional buttons mapped on the screen do not. I personally do not care about the music aspect of this device, so this is not a big deal for me, but it does seem awkward to have hardware buttons that do not work until you open the device.

I LOVE it for these reasons:

fastmobile is really THE reason I love this device
The rest of the device works like any other Helio device, except for the messaging function. It is a universal inbox that consolidates all your messages, IMs and emails from various providers in one place, and it works incredibly well. fastmobile should be on every device in the world. It integrates tightly to the PIM and works seamlessly with my Yahoo Email and IM, for instance. Every carrier reading this: I know there are several vendors pushing "universal inbox" but of the few I have seen, fastmobile is the most impressive. Really, well done, and kudos to my favorite company this week, fastmobile.

The physical device is awesome
First of all, the industrial design is stellar. It is like something that Sony would build, and in fact feels very much like the Mylo in that regard. The sliders are smooth and precise, and the qwerty keypad is the best of any device so far. I have large enough hands that most keypads do not work for me, but these keys are perfectly spaced. For comparison purposes, the keyboard is much better than the Sidekick 3, and slightly better than the Sidekick 2.

The phone keypad is stylish and works fine, though I gave it to my wife to get her opinion and with her smaller hands, it was clear that even with some time getting used to it, the numeric keys are too spaced out for her to effectively key in a number with one hand. This would be a two-hand device for her even in phone mode. I didn't think I would have that problem, and really, how often do you key in a number vs. selecting one from your PIM? After a couple of weeks, I have to agree that the numeric keypad doesn't quite work due to how spaced out the keys are, but like I said - how often do you actually punch in a number?

Messaging is a breeze
Aside from the fastmobile deployment which makes messaging better, the Ocean itself is a fantastic messaging device. It is a little smaller than the Sidekick, but the keyboard is extremely usable, taking full advantage of the horizontal space. For SMS, they nicely mapped one of the softkeys which cuts out a click. (I wonder though: Wouldn't it be great if I could customize the Ocean so that when I slid open the qwerty, it took me straight to the message composer, because, like, why else would I want to slide it open?)

Overall, this is a great device
I understand the "don't call it a phone" messaging from Helio, because the Ocean is much more than a phone. I imagine they have been working on this device for a long time and it just took that long to get it to market. It is a little big compared to other devices, but not really for those in its class, like the Sidekick 2 and 3. The industrial design plus the fastmobile integration makes it just useful enough to be my new, single device and make me happy enough to work around the things I hate about it. If the Sidekick didn't already exist, this would be a category-defining device.

Last-minute note: I wrote this post last night and was going to post it this evening, but an hour ago I saw a device that blows the Ocean out of the water. (No pun intended.) I cannot say what it is, and that's not the point anyway. The point is that the pace of technological innovation is amazingly fast. Just two weeks ago I was gushing to my friends about my Ocean, and everyone I handed it to was duly impressed. And today I see a device that is smaller, better, etc.

Posted by Shawn Conahan at 09:23 AM

May 09, 2007

Blocking and Tackling in the mobile space

We just announced we secured $12mm in B round funding. We are as quietly as possible executing on our platform strategy and will be rolling out this summer. The money will enable us to broaden our capabilities. Come be a partner.

We do not currently need:
- venture debt
- recruiting services
- offshore outsourced development services
- another PR firm
...so please stop asking. And now to today's post...

“Blocking and Tackling” is an often misused phrase. Most people think it is a football reference, and use it in a business context to mean all the tactical stuff you have to do in order to “score” or “get over the goal line” or “into the end zone,” etc. In this sense, I guess you block your opponents and tackle them before they can win.

It is actually a sailing reference. A block is a pulley or set of pulleys and the tackle is the rope that goes through the pulleys. This system increases purchase while decreasing effort, like to lift a heavy object. “Blocking and tackling” means setting up all the lines and rigging on your boat before you set sail. In a business context, it would therefore mean all the preparation you have to do in order to “set sail” or “win the race” or “not sink.” It’s true meaning is therefore more strategic than tactical.

I like to mix my metaphors, and “blocking and tackling” mixes well in the business world. You need to set up your rigging smartly beforehand, because it is much harder to do in a storm out on the open sea while you are also trying to block and tackle your opponents who have come onto your ship to play football. Or whatever.

I have been thinking of this phrase differently and more directly lately, as in how many sites or services are Blocking various other “web 2.0” sites or services, a cornerstone of the value of which is their ability to connect to the sites that are blocking them. Or how many “web 2.0” sites are now Tackling the problem of discovering what their business model is. I put the term “web 2.0” in quotes to point out that it is as hackneyed a term as “Y2K” was, and I am already tired of the “we’re a web 3.0 company” jokes. “Web 2.0” is supposed to refer to a type of “two-way web” or “read/write web” company, and there have been some standout examples of massive success. I hate to see it happen, but I am seeing the term embody much more than that, now encompassing the business model, as well, which for most “web 2.0” companies that call themselves “a web 2.0 company” means “hoping to get bought by Google.” Don't get me wrong - I am high on the concept and know what it means in a positive sense, I just wonder if that is at all dangerous, as the negative sentiment is starting to creep in, the same way that “dotcom” became a loaded term, tinged with negativity.

Anyway, that’s a longer post for another time. I am mostly interested in how it relates to the mobile space.

I’ll use as an example the recent blockery of Photobucket video by MySpace. These are obviously both very successful consumer products. Some very large percentage (I have heard as much as 65%, but I am too lazy to research it) of photos on MySpace are hosted by Photobucket. MySpace is a top 5 website. MySpace’s business model is selling advertising, and they are very clear about their rules regarding third parties selling advertising on their site: It isn’t allowed. Nor should it be. Photobucket’s videos apparently had pre-roll advertisements in them. MySpace blocked them. As much as I personally love Photobucket, it doesn’t keep me from thinking that MySpace acted appropriately. Check out Om Malik’s “5 lessons from the Photobucket Fiasco.”

I love what the web has turned into. Email used to be touted as the killer app of the internet. That was when it was the most useful communication tool available. Not so anymore. As a multitude of very open and cooperative widgets and tools that enable sharing of everything from content to time and space, (like geocaching) the internet is now its own killer app, which is exactly what it was supposed to become. Like a Mandelbrot set, it is chaos, but when you step back and look at it, it works out beautifully. Everything overlaps and when you zoom in, you see how recursive it is, and how well defined even the smallest of its parts is.

It is amazing to me how “always on” the internet has become over the past few years. I remember going to Streaming Media West back in 1999 when I worked at MP3.com, when the concept of a broadband internet was a big idea. That was when Akamai looked like a really good investment. But then it wasn’t during the cold, dark winter following the dotcom meltdown. But now it is again.
(Scott Woolley’s article about Akamai in Forbes is great, btw. Read the whole thing.)

Downloading is an artifact of an inefficient market, required because of narrowband connectivity. But now think about YouTube: You don’t ever actually download anything. You just “play” and “share.” That is an important fundamental shift that has significant negative implications in the mobile space.

Search for “open API” and among the top ten results are pages explaining the open APIs of many well-known “web 2.0” companies including Flickr, Zillow, Twitter and Plaxo. (btw, I know a lot of people are predicting the quick demise of Twitter, but I personally think it is fun.) Click the link from O’Reilly written in 2000 by Rael Dornfest predicting that web APIs are the future.

The downside of open APIs is that they are typically for non-commercial use, so while it may be cool to mash up Google Maps and Craig’s List, if you intend to make money, think again.

Similarly, if a site has no open APIs but allows embedded widgets, usually the same rules apply. Every company that has a slide in their pitch deck about their MySpace widget would be smart to bear in mind that MySpace can, and will, shut you off with the flick of a switch, as Photobucket and iMeem found out recently. (iMeem is awesome by the way, and is going to be one of the biggest sites on the net in a year.)

Big sites like MySpace are interested in staying big, and they do that in part by making sure audience is not slurped off of their site in any way.

So what about mobile?
Well, do you know any other big companies that are interested in staying big and do not want their audience slurped away? (carriers?)

The internet is a broadband streaming universe of open network connected dots that all add up to value somewhere for someone, probably. This is incompatible with the mobile space, which is a narrowband island of closed network connection points that add up to value for the the owner of the network, and rightfully so.

There is an interesting dynamic evolving at the intersection of “web 2.0” and mobility.

My first observation is that wireless network operators, when they redefined their business from “providing wireless voice services” to “providing wireless services,” had to redefine their competitive matrix, as well. The PIM (address book) is the onramp to the mobile user experience. That means that wireless network operators are competing with any company that builds its value around a PIM, address book, buddy list, friend list, contacts, whatever. Cingular and Verizon are competing for their share of communication transactions with IM, VoIP, email and social networking sites, to name a few categories. But the carriers also recognize that if they can bring that user behavior to their environment, they can monetize it in a way not possible on the web. (As an example, IM is free and ad-supported on the web, but directly monetized in the mobile space.) The problem is that many web-based competitors see the network operators as more of a nuisance than an enabler. Why?

Because carriers operate closed networks. The difference between the internet and a closed wireless network is like the difference between going to the middle of the desert to go hunting and going to a private game reserve. The latter comes with a fee and they are harder to get on than simply driving to the desert. The former is fine if you like to eat snakes and coyote meat. But is it worth it?

Yes. But my second observation is that web-centric companies are just that – web-centric. There are twice as many mobile phones in the world as there are computers, but many web-centric companies do not seem to care about this simple fact. The CEOs at web-centric companies that I have talked to about this say that the mobile space is incompatible with their business model, which is to give consumers something for free so that they can sell ads. That’s a fair enough response, though I know better.

But that brings me to my third observation: On the internet, the advertiser is the customer but in the mobile space, the customer is the customer. There is a fear on the part of web-centric companies to even try to tackle the mobile opportunity because they don’t think their business model will translate. And they are right. It probably won’t. But that doesn’t mean the service won’t be valuable to the mobile subscriber. Try a different business model. Expect a different use case. Expect a different user. It is ok to ask consumers to pay for something of value, and they will.

That is what ANTHEM does, btw – we have not replicated web-based functionality 1:1, rather, we have faithfully reproduced web-based functionality in a mobile package that works better and then added features that only make sense on a mobile device. The result is a more useful communication tool. This solves two problems: 1) Carriers want the value of social networking but in a package that respects their particular constraints; and 2) Social networking providers want their users to have an optimized mobile experience and not “the web on the phone.” Mostly, for social networking sites we offer a direct path to the mobile consumer, which is harder to pave than you might think.

At EconSM, I talked to a VC who said he would not invest in any company that includes “working with wireless carriers” in its pitch. Worse in my opinion would be investing in any company that includes “going around the wireless carriers” in its pitch. While the former is a difficult path, the latter practically ensures failure. This is because the trend toward connectedness means putting network-connected applications in the mobile space.

T-Mobile this week quietly pushed an update that wiped off all non-T-Mobile-sanctioned apps. I am not sure how wide it was - we saw the effect on the Sidekick and some other handsets. That is the mobile version of blocking. It is kind of like a non-commercial API and T-Mobile is (rightfully) saying, “Yeah, that’s great that you went around us and got all those users. Now they are all gone byebye.” And the only way to tackle the challenge of working with carriers is to walk in the front door. That is what we provide for social networking providers and community sites: We are a sanctioned interface to the mobile consumer because we have done the blocking and tackling to get the job done right. At the end of the day, we just want to make the mobile device a better communication device. We think we know how to do that in our area of influence and we hope you will agree.

Posted by Shawn Conahan at 10:17 AM | Comments (1)

May 08, 2007

The future of mobile communication

I had lunch last week with some friends who all work at the same wireless carrier. The conversation turned to social networking, etc. There were two interesting discussion topics that I thought you might find relevant to what Intercasting Corp does:
1) Personal connectedness
2) Mobile communication silos

Personal Connectedness
What does “personal connectedness” mean? During our conversation last week, we were talking about LinkedIn. Opinions varied as to what the value of LinkedIn really is. Someone thought it was more of a Monster.com killer, its greatest purpose being to find a job. Three people said they only logged in a few times a year. Some of us paid more attention to it than that, logging in once a week or more. The concept of invitations was fascinating to me. What is the value of declining an invitation on LinkedIn? Well, it doesn’t feel like it helps to decline anything. Maybe that small reward of seeing your number of connections increase by one is incentive enough to add connections rather than not add them. (And, of course, there is no deleting.) We concluded that in a pure economic sense, it is potentially less costly to accept an invitation (even from someone you don’t know) than to decline an invitation to join someone’s “network.” Why is that? Well, because you never know. For most people, LinkedIn has not paid massive dividends on the amount of time invested, but there is this thought in the back of your mind that someday it might, even if you don’t fully understand yet how that might happen.

I am personally very positive about LinkedIn, mostly because of what I think it will become in the future. Taken to its logical extension, assuming most people do not decline invitations to connect, at some point in the future we will all be connected through LinkedIn. Then what? Well, wouldn’t they then essentially replace the address book that is tied to your PC? I mean, if all of your contacts are on their server, then why maintain a separate instance of it locally? This is different from replicating those server-based contacts locally, which would make sense for times when you are not connected and need the contact information. Isn’t a centralized server-based master contact directory hugely valuable to end users? This is not to mention the value to the custodian of that data. Imagine the knowledge you can mine from knowing all of the overlapping personal networks and the communication patterns between and among them. LinkedIn is potentially more valuable than Google in the future.

LinkedIn is a specific company slowly building its value from information that already exists. Its value is in recognizing that it is the personal connection that matters and not the interface to that connection, whether it is an email address, phone number or whatever, all of which are temporary. In the abstract, the concept of LinkedIn makes a ton of sense.

So who else has a similar store of information that could be used to improve personal communication? How about carriers themselves? Take a tier-1 carrier in North America with roughly 50 million subscribers. All of those subscribers are identified by a unique MSISDN and all of those MSISDNs are related to all of the other ones. Until recently, the relationships between those numbers could only be derived based on actual calls placed. But if carriers were to provide a server-based PIM that is replicated to the device, imagine the enhanced services that could be delivered to users.

The current mindset is that the PIM lives on the handset and can be “backed up” to a server, in some cases for a fee. While the “lost phone” insurance policy may be a true value for a small percentage of users, and thus a decent but small revenue stream for carriers, the real opportunity is to own the PIM in the abstract and service it a million different ways for consumers, including presence, integrated comm