For the latest installment of Q&As with leading mobile industry analysts, Bytemobile sat down with Saverio Romeo of Frost & Sullivan. Saverio’s area of expertise is Mobile Content in Europe, including mobile TV, music, games, and social networking.
1) Mobile advertising has been extremely hyped up within the industry, and yet it has still yet to prove itself as a lucrative revenue stream for carriers or as an effective way to reach consumers. What, in your opinion, will it take to get mobile advertising off the ground?
Mobile advertising brings together two separate worlds with different modus operandi: on one side, the creative space of the media and advertising industry; on the other side, the technological attitude of the mobile industry. This relationship is a complex affair! The mobile industry is looking to make valued-added services a strong source of revenues. They see advertising as an approach to developing business models that are affordable for consumers and profitable for them. They are also aware of the enormous power of the mobile phone for reaching consumers and groups of consumers: everyone has and carries one, everyone uses it in different ways, everyone is part of a community of mobile users. The advertising industry perceives the value of the mobile phone as a social object and lifestyle identifier, but they do not fully understand its technological nature and the variety of its uses for advertising simply because it is a new medium for them. This disalignment is one of the main reasons for the slow growth of mobile advertising. However, this should not be interpreted as an impassable barrier, but rather as a critical, but unavoidable, step when two different worlds decide to work together. Intense synergy and collaboration will help the two industries to overcome this phase and transform mobile advertising into a strong opportunity. During the last two years, several initiatives and activities have seen the two worlds working together, experimenting with different modes of mobile advertising, launching successful campaigns, and addressing technological and strategic issues that have not been discussed here but are equally important - such as mobile advertising metrics and the role of the conduit in mobile advertising. All of this is very promising, but the two industries must intensify these activities in order to reach the desired momentum for mobile advertising.
2) Earlier this year, Frost and Sullivan published a report which stated that telcos need to focus on innovation in order to survive the economic downturn. Do you think this has been the case? Are there any companies that you think have shown particular innovation in their products, services or business model?
There is a school of thought in the economics of innovation, which goes back to the economist Joseph Schumpeter, that argues how moments of crisis are ideal for new ideas and, consequently, new products and services. It also claims that creativity - and innovation is creativity - is the right approach to strongly answering economic crises. It is also important to highlight that innovation does not necessarily mean only inventions, but also the ability to design solutions using existing products, services and procedures. Joseph Schumpeter talked about new ideas coming from a combination of existing ideas. The focus on innovation in the current economic climate needs to be interpreted mainly in this sense. This also has another consequence: the role of collaboration between different players becomes crucial in order to design innovative ideas that are able to capture the attention of the market. The phenomenon of the application stores can be seen from this perspective. The application store is a new idea to promote mobile content to consumers, built on collaboration amongst mobile device manufacturers, content developers and technology enablers. The call to a collaboration between telcos and the public sector in order to promote broadband in Europe is another example. Integrating social networking and location-based services in order to build context-aware social networking solutions and the increasing use of network-sharing models between mobile network operators are another two examples. To sum up, apart from an initial moment of shock, the telecommunications industry is looking at innovation as a way out of the crisis.
3) Where do you see the future of mobile app stores? Do you think there are any companies that will ultimately even approach Apple in this regard?
At this stage of development of the mobile application, stores, that is the “million dollar question”. Apple has recently disclosed some numbers on their stores and they are very promising. The reasons for the success of the iPhone and the Apple Application Store go beyond technological excellence. Apple has a clear social status. Its products are associated with lifestyle and ways of being. The iPhone brings all this on the move. With the app store, the iPhone becomes more than a communication tool - an object that entertains, informs and defines the user. Consequently, the next question would be: do the other app stores have this social power? Apple has it because of a store of objects with such a feature (i.e., iBook, iTunes and so on). This aspect is not present in the other competitors. RIM can count on devices (Blackberry) with a specific social identification: intelligent devices for professionals. This allows RIM to specifically design the Blackberry Apps World around this social segment. Google with Android has a strong software dimension, but no hardware, and the mobile industry is traditionally hardware. Google has a long path ahead. The other app stores seem to play on quality of apps, interactivity with users and price. But, it is still too early to draw conclusions. The “million dollar” question remains without a clear answer!
4) Can you give us your take on the state of the mobile TV/video industry in Europe?
Throughout 2008, the mobile industry and policy makers, mainly the European Union, have dedicated significant attention on mobile broadcast TV. The European Commissioner for Information Society and Media, Viviane Reding, has pushed the development of mobile TV and the adoption of the DVB-H standard. In fact, this standard became part of the EU List of Standards in 2008. Several national regulatory authorities have launched discussions and tenders on frequencies for mobile TV broadcasting. Meanwhile, technology providers have offered various solutions, including mobile TV technologies over existing cellular networks. The argument is that you do not need a new network, as DVB-H requires, but you can deliver broadcast TV using your existing network and, consequently, reduce costs. There have been many trials and also commercial solutions. Despite all these activities, mobile TV still remains an unclear segment. The most suitable revenue model is not clear, and there are not many best practices to learn from. 3 Italia and Orange France mobile TV solutions are two examples of success. However, there are some interesting indications: a hybrid model combining premium channels and ad-funded free-to-air seems to work well, and various forms of bundled services have also attracted customers’ attention.
Stay tuned for commentary from other key industry influencers on the trends and issues important to the mobile internet ecosystem. If you have any questions you’d like us to ask, feel free to leave a comment or send an email to sinfantino@bytemobile.com.
-Stacey Infantino
