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April 04, 2006

Wireless Wow

I am posting this blog from Sin City, Las Vegas Nevada, where the annual wireless industry conference, CTIA, is taking place.  Simply put, it is overwhelming and impressive.  There are a reported 40,000 attendees here, making it the largest show in the industry’s history.  And it’s easy to see why:  the wireless platform is arguably poised to surpass TV and the Internet as the center for business, news and entertainment.

I spent today between two separate “tracks” – the Mobile Marketing track and MECCA (Mobile Entertainment, Content and Commerce Applications).  A few takeaways from each:

Mobile marketing

  • 1996 All Over Again.  A common theme from the various speakers was that the state of mobile marketing is much like Internet marketing 10 years ago:  very promising, but nascent and full of confusion and immaturity.
  • Consumer Hate Ads, Love Promotions. When surveyed, consumers express zero interest in mobile advertising (after all, who volunteers for an ad?), but are joining in promotions by the millions.  American Idol is of course the well-known case study.  But a few others jumped out at me.  The magazine Maxim ran a promotion on their website where consumers text in their cheesiest pick-up line; sponsored by Kraft Macaroni and Cheese!  A mediocre TV Show called Veronica Mars doubled their ratings and increased Web traffic 500% when they ran a “get a call from Veronica” promotion – the show’s star would call your cell phone 15 minutes before the weekly episode aired to provide a sneak preview.
  • Still Early – Lots of Groping.  Although 170 million US cell phones are WAP-enabled, only 24 million actually are using WAP access.  This means there’s a lot of experimentation going on and the speakers were pretty cynical about the ability of traditional agencies to provide the blend of creativity and technological savvy tools.
  • Investment Opportunities?  My focus, of course.  As the cliché has it:  when in a war, the arms dealers make all the money.  There’s a whole ecosystem around Web advertising that has yielded some interesting start-up companies.  In theory, mobile marketing should have similar potential.

MECCA (Mobile Entertainment, Content and Commerce Applications)

  • Carriers Making All The Money?  Unlike the Internet, wireless carriers have a lot of power in the m-commerce ecosystem.  Thus, they appear to dominate the economics, often taking 1/3rd to ½ of the top-line revenue imply for being a transport mechanism.  A Cingular executive boasted that they made $2.7 billion in profits last year on data services.  Is anyone else making big money or just seeing high-volume, low-margin transaction volume?
  • Strategic Confusion or Land Grab?  The early players have clouded strategies, typical of an early market land grab (remember Netscape:  a consumer browser company that made middleware for enterprises and e-commerce applications!).  The two main strategies are around mobile content vs. infrastructure/platform services?  The emerging gorilla in the m-commerce market, Verisign, is clearly playing it both ways.  Even their M&A strategy suggests a double-down – first they buy Jamba, a European content play; then they recently announce their acquisition of M-Qube, an infrastructure play.
  • Maturing Industry or Another Explosion Coming?  There are a few worrying signs that the market may be slowing down.  Ringtone download revenue was $500m in ’05 (100% growth over 2004, but only $600m in ’06 (20% growth).  Only 10% of US subscribers download ringtones each month.  And game downloads were reported flat for the last 7 months.  New services are emerging – ringback tones, radio, video – but they are emerging somewhat slowly and consumers seems resistant to signing up for subscription products.  The hypergrowth stage isn’t over, but there is a bit of worry in the air that we may be near the peak.

So those are the observations from the front line.  Now I’m off to where the real action is at these shows – the evening parties and schmooze fests.  If there’s anything worth reporting on tomorrow, I’ll let you know.

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Better be careful with your take on Veronica Mars...there are a lot of viewers out there who would disagree with your assessment of "mediocre."

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