Investment opportunities in Digital Entertainment – Alap Bharadwaj

A quick analysis of the entertainment sector that is served via technology in the US reveals three main areas of interest – Music, Gaming & Video.  Music & Video can be further divided into purchased and radio/streaming and Gaming into console and handheld, all of which are doing fairly well in the west. Given India’s status as a late adopter, the question remains – Will the country’s entertainment focused technology companies see the same success that their American counterparts have?

The answer varies for all three subsections and in my opinion hinges on a critical difference in the engagement propensity of users when interacting with these different mediums. Beginning with music, I don’t believe tech companies focused on this space, be it pay and download or radio, will have much of a future. The average internet consumer in our country has gotten used to downloading music in ‘lossy’ (mp3, etc) compressed formats and widespread piracy of the latest music both in Hindi and English hardly provides much incentive to switch to paying. Hard evidence exists in the form of Apple’s continued reluctance to open their blockbuster iTunes music buying service to the Indian public.

Additionally the problem with offering a radio service in India is plagued with its own issues. The ability to listen to internet radio at work would be disabled for the majority of India’s working public (due to strict work policies against such actions) and the poor quality plus high cost of India’s 3G networks make streaming of radio and on demand music a distant dream. While a case for exception can be made for technology companies focused on providing cloud services for people’s personal music collections, these too would suffer from the access problems mentioned earlier. Above all music as an entertainment medium might have many consumers but suffers from the critical flaw I mentioned earlier – the users are not engaged, thus reducing inclination to pay for such content.

Gaming and Video however do not suffer from this flaw. Both sections boast scores of engaged users with the inclination to pay. The gaming market has largely been tapped and conquered by the Xbox360, Playstation 3 and the Nintendo Wii, but what off the online video market? This is the area I believe with the largest chance for growth. Indian GEC and Bollywood content has virtually no presence online and any exceptions are pirated content that regularly get booted off websites like YouTube. Indian content is crying out for a desi version of NetFlix or Hulu backed by demand across India and more importantly abroad. Investors would queue up for companies that would be able to offer a high quality offering in this space as the model has both a proven growth strategy and significant exit potential due to the availability of appetite from retail investors for public equity of this nature as well as global acquirers.

I strongly believe that video will be the space to watch in the coming years on a variety of fronts. Content aggregators (a la Netflix) as well as companies focused on enhancing the viewing experience and constructing analytics and software for the unique conditions in India will flourish in the coming years. Investors have already backed certain players – Althea Systems, that makes a social video browser called Shufflr, raised US$ 3 MM from Intel Capital in November 2010 and Apalya Technologies, that specializes in Mobile video streaming, has raised three rounds of funding, the latest in January of this year. Given that the video focused technology space has seen investment, we now expect to see significant investor appetite for players in the content aggregation and video destination space.

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Quick Guns – How smartphones are becoming the champions of new gaming – Alap Bharadwaj

If I was playing a video game fifteen years ago, I would have not expected the gaming industry to have overtaken the movie business. In fact as of today it has become the biggest generator of revenue across the entertainment sector. In April, the Guinness World Records announced that the game Call of Duty: Modern Warfare II had broken the world record for the best launch day in terms of dollar revenues in the history of the entertainment industry. The US $ 50 billion gaming industry is growing, highly profitable and has been historically dominated by two major platforms – gaming consoles (that are solely video game focused pieces of hardware) and the more general all purpose personal computer. Just to give you some market information, today along with the PC the three console OEM’s – Microsoft (makers of the Xbox), Sony (makers of the PlayStation & Playstation Portable) and Nintendo (makers of the Wii and Nintendo DS) dominate the industry with a combined total of 95 percent (Console + Portable) of the market. While this stat might look like plain vanilla at the outset, the interesting point to note is that just a year ago gaming’s bellwethers held 99 percent of the market. Boasting a growth of 400 percent, but there’s a new kid in town and its name is – the “Smartphone”.

There are several reasons for the smartphone’s ascent up the ladder of choice as far as the gaming population is concerned. It is the ease of use and universal reach that makes Smartphones an obvious answer to the next generation’s gaming platform. I feel there are other reasons that are more significant pointers to the growth of this space. Smartphone gaming largely focuses on Social games. These games appeal to many non gamers as they are simple and intuitive and don’t alienate newbies like their much more complex console counterparts. Looking forward I feel this will result in a dramatic shift in the demographic of gamers in the years to come. Further the hardware strength of today’s iOS and Android Smartphones also plays a big role in the increased popularity of these devices as gaming platforms. Today’s top 2 smartphones in terms of processor power – the iPhone 4 and the Samsung Galaxy S boast the following specs:

iPhone4 Samsung Galaxy S

CPU

ARM Cortex A-8 (2.0 DMIPS/

MHz in speed from 600

MHz to greater than 1 GHz)

Samsung Hummingbird

S5PC110, 1 Ghz

GPU

PowerVR SGX 535

PowerVR SGX 540

Memory

512 MB eDRAM

512MB RAM

These are incredibly powerful pocket sized devices capable of running extremely graphic intensive applications. This was demonstrated recently by id software running its new game called ‘Rage’ on the iPhone at a steady 60 frames per second, faster than the Xbox or Playstation 2 (pre cursors to the current Xbox 360 and Playstation 3). Ultimately, the convergence taking place coupled with the unique opportunity to access over tens of thousands of games on various App stores will inevitably push Smartphones into the public eye as the most cost effective and accessible platform to play games on. I personally reckon Smartphones will eventually overtake Consoles in terms of market share, giving the current incumbents of gaming leadership more than a few things to worry about.

The Mobile Wars: Apple vs. Google – Alap Bharadwaj

At Viedea we keep a tab on the day to day action of the ever changing ‘mobile’ space. This domain receives a lot of coverage from the media and lately the news has become even hotter because of the scintillating race for dominance that is emerging. The battle for mobile supremacy has well and truly commenced and the main event clearly belongs to former collaborators Apple and Google. With a certain contender from Redmond, WA undoubtedly out of the race, this will be one of the few times that two of the “good guys” will be ‘duking’ it out. The question remains, however, as to who will set the tone that others will follow and I believe I have the answer.

Google and Apple will draw swords in four main arenas of mobile warfare – Hardware, Software, Advertising and Search, and a close inspection of each reveals that the race isn’t as close as it seems.

The Hardware portion is a no brainer – The iPhone has been a game changer and has rapidly eaten away at Nokia and RIM’s market share, while Google’s Nexus One has been a colossal disappointment with major carriers Sprint and Verizon refusing to continue to offer it and Google itself admitting that its sales strategy (selling through its own store) was flawed.

Moving on, the software battle might look deceivingly close but the statistics do not lie. Apple’s iTunes App Store boasts more than 200,000 applications compared to Android’s 50,000 with comparable market share. Moreover while Google’s ‘open’ operating system might seem to have a leg up on Apple’s closely held iPhone OS, Google’s Open Handset Alliance (a group of carriers, software developers and handset makers that supported the Android Open Source Project) is showing significant signs of strain and struggling to maintain partner interest.

Carrying on to the hotly contested world of Mobile Advertising where both Apple & Google have employed the inorganic route to bolster their capabilities. In my opinion Google significantly overpaid for ‘AdMob’ buying them at almost 25x (Deal Value: US$ 750 MM) the 2009 revenues compared with just 12x (Deal Value: US$ 250 MM) that Apple paid for Quattro. While ‘Admob’ does boast significantly larger click volume, the firm only outdoes Quattro by approximately US$ 10 MM in revenues, which is not very encouraging for Google. Moreover Apple’s iAd plans which include “exclusive integration with the App Store” and ensuring iPhone, iPad and iPod advertising remains exclusively in house present a daunting challenge for Google.

Finally we look at Search, the cornerstone around which Google has built its sprawling internet Empire and something that poses a seemingly insurmountable challenge for its Californian neighbor. Apple has dealt with this trial in an ingenious manner – by changing the way people access information on their mobile devices – through apps. According to Nielsen the average number of apps on any smartphone hovers around 22 (with the iPhone at 37!), clearly indicating that search is being replaced by apps as an information access starting point. A superb blog post points out that “Apple has trained us to look for apps and use apps, not web sites”, thereby rendering the browser and in effect Google search to a large extent ineffective! Apple has made significant strides to change the mobile user experience in order to negate Google’s influence via search.

Ultimately Google’s mobile strategy might pan out, but only if it can manage to attract a significant customer base to its software and services, which is no easy task. Meanwhile it’s hard to look past Apple as the clear leader of the new school when it comes to the world of Mobile. The others better get their act together soon or they will be relegated to being mere observers in the smart phone race, struggling to stay relevant only by playing in the highly fragmented and low margin world of feature phones.

Please press * to continue:

‘Indian Mobile VAS industry revenues estimated at $2bn by 2008’- Well, this is the sort of headline that overestimates the size of this nascent industry. One common practice (mistake) that most market researchers commit while trying to estimate/project the size of Mobile VAS is to include the P2P (person-to-person) SMS revenues as well. However, when one is purely looking at revenue recurring to VAS players, the number is surprisingly small.

The skewed revenue distribution is one reason to boot. The revenue from P2P SMS is entirely pocketed by the Telco’s; hence pure VAS players (except for the platform providers) do not make any money out of it. Out of the rest of services under VAS, the Telco’s continue to pocket another 60-80% of the revenues from the end user. Here’s what a recent research report by IMRB suggests in terms of revenue share.

MVAS Revenue
Telco’s 2,185-2,910 crores
Technology enabler 364-730 crores
Content Aggregator 364-545 crores
Content Owner 180-364 crores
Total (Including Telco’s share) ~3,100-4,500 crores
Total (Excluding Telco share) ~900-1650 crores
ARPU Split of Rs 250
Call charges & Rentals 90% Rs 225 Rentals, Call Charges, etc.
P2P SMS 5% Rs 12.50 This does not through to the VAS Providers
VAS 5% Rs 12.50 ~ $1 billion annualised revenue
Revenue for VASPs 15-20% of the above Rs 2 $250-350 million annualised revenue

As the tables show, the revenue accruing to the VAS players is about $200-350 Mn (Never mind that OnMobile’s turnover is ~$200 Mn). Net-net, VAS players make just Rs 2 out of Rs 250 ARPU. This turnover however, does not include the revenues of platform & software providers, which we estimate at ~$100 Mn, taking the total revenues accruing to VAS related players to about ~$300-400 Mn. But, look at the number of investments in the space, the total size is close to ~$200-300 Mn in the past few years.

A $300 Mn investment into an industry with a size of $450 Mn- seems a bit stretched? But the investment thesis is based on the growth rate estimations which are upwards of 50-70% YOY for many years to come. With ARPU’s at $6-8 a month and declining further, along with a ‘cooled off’ subscriber growth- the 70% growth mark seems like an uphill task.

The VC’s who joined the bandwagon and generally the investment community seems to have woken up to this idea. Any new VAS business plan, according to them must ‘by-pass the mobile operator’- well, that’s easier said than done. This one time ‘hot’ investment sector can now be found in the ‘deep freezer’ cabinets (There are odd investments like Telibhramha which have ‘by-passed’ the telco’s, though). So, where do we see the industry headed- when you start hearing ‘nobody’s making money in our sector’, start counting the days before you hear about an acquisition. ‘Consolidation’ is knocking at the door -and we expect that it’s about time the VAS players opened their doors.

Consolidation has already started- OnMobile acquired Voxmobili SA, a French company that provides software services to telecom companies, for $35.12 million. It acquired another company Telisma a speech recognition software product company with capabilities in 10 Indian languages and ITFinity Solutions, a company funded by stellar private investors. The management has been reiterating its intentions to buy ‘products’ to strengthen its portfolio of offerings and to acquire new technologies (e.g.: ITFinity had a strong Java client, which OnMobile wanted).

We believe that the trend will continue in the next few years and to quote OnMobile’s management – “We believe that there will be consolidation – the large will become larger, and a large number of smaller players will consolidate.” The key deal drivers will include technology, products and once steam has gathered again, the ones present in other emerging markets as well. We however believe that content will not be an important driver alone for deals in this space.

A note on mobile social networking

An introduction

Mobile social networking, as defined by Wikipedia, is “one or more individuals, with similar interests or commonalities, conversing and connecting with one another using the mobile phone”
Broadly speaking, mobile social networks can be classified into 3 categories:

-Mobile extensions of existing internet social networks
-Mobile centric social networks with a web component for registration and user profile management.
-Mobile-only social networks with no web interface

The media buzz around mobile social networking has been more about online social networks such as MySpace and Facebook building mobile extensions to their online communities, rather than social networks that are mobile centric or exist purely on the mobile side. A social network that exists purely on the mobile side may have many limitations around usability and features. It is fairly obvious that mobile is a perfectly complimentary angle to internet social networks, but whether mobile social networks can exist as a stand alone model without any web component is debatable.

It can be argued that the success of sites like Youtube is more to do with the ‘metadata’ than the content. Be it Saddam Husseins’ hanging or a Brazilian model cavorting the beaches of Rio, it’s easy for users to tag it, post comments, send the link to friends and find other clips of public hangings or Brazilian models. The big question is how does one manage this with the screen size and usability limitations of a mobile phone? As Charles Golvin, Principal analyst at Forrester Research says, the model of building an online social network and extending that to mobile is far more likely to succeed than building a mobile-only social network.

Even social networks that are centered on the mobile phone, such as Playtxt and Dodgeball, use a web interface for registration and profile management and are not mobile-only in that sense . A few purely mobile-only social network services do exist, such as the SeeMeTV service on 3 in the UK or mobile blogging services on many operators around the world. However, it can be argued that these are not so much ‘social networks’ as channels for user generated content. The social interactivity elements for these services come from users rating video clips or tagging them.

Success factors

For any stakeholder or potential stakeholder in a mobile social networking service, it is important to have some background of social networking theory. The same ‘sociality’ theories that apply to the real world or online world extend to the mobile world. This knowledge of social networking theory will certainly help VC’s and entrepreneurs decide whether a particular idea will succeed or not.

The older theory of social networks simply looks at social networks as a map of relationships between individuals. This ‘Social network’ theory is good at representing links between people but it doesn’t explain what connects those particular people and not others. A number of existing online and mobile social networks are based on the “friends of friends” model that is derived from this.

However, a more recent theory called Object Centric social networking believes that people don’t just connect to each other, they connect through a shared object. Sociologists such as Karin Knorr-Cetina and Jyri Engestrom advocate this theory and believe that ‘social networking’ makes little sense if we leave out the objects that mediate the ties between people. Objects are the reason why people affiliate with each specific other and not just anyone. For instance, if the object is a job, it will connect the user to one set of people whereas a date will link to a radically different group. These sociologists believe that this is common sense but unfortunately it’s not included in the image of the network diagram that most people imagine when they hear the term ‘social network.’ The fallacy is to think that social networks are just made up of people. They’re not; social networks consist of people who are connected by a shared object.

The older ‘social just means people’ model provides a format for representing people and links, but no way to represent the objects that connect people together. The social networking services that really work are the ones that are built around objects. An object can be a place, date, job, or even content like videos (YouTube), photos (Flickr), URL’s in the book marking network del.icio.us and events in the event publishing network SEraja (www.seraja.com).

The object-centered sociality theory can be used to identify new objects that are potentially suitable for social networking services. An example is the use of ‘place’ as an object. With the advent of mobile technology, services such as dodgeball or Plazes which provide cheap and reliable ways of capturing “place” have a good chance of succeeding.

In conclusion, evidence strongly suggests that passive social-networking services that merely aggregate our friends, and their friends, eventually lose their luster. Statistics show that a majority of users who register for sites such as Linkedin or Orkut become inactive after 3 months.

Revenue models

Monetizing the network may actually be less of an issue for mobile social networks than it is for online social networks. One obvious source of revenue for mobile social networks in the data charges that all operators levy. Increased usage of mobile social networking services will mean that people sign up for higher data plans or pay for increased SMS usage. However, as with all mobile Value Added Services’ the operators are the ones who will benefit the most from this. What percentage of these revenues can social networking service providers get is the question?
The answer may lie in a hybrid of Premium SMS and phone based application. For example, users send PSMS to get some information for free (there are 3 women who match your profile in the vicinity) but has to pay a small fee to find out who they are and get contact details.
However, business models in the mobile social networking world are far from clear and may eventualy see the emergence of a advertising based models in the near future.

Disclaimer : I have read several articles and white papers on social networking for this blog, and have used theories originated by other authors. I do not claim originality for the theories mentioned in this article.

m-payments- a good investment opportunity?

The buzz about m-payments

Mobile payments or m-payment are not new buzz in India; attempts at creating m-payment solutions go as far back as 1999 and has even seen some VC investment in the space. However, the market was clearly not ready for it and m-payment was more a conceptual experiment than any real paradigm shifting opportunity. The second coming of mobile payments in recent months is an entirely different story. It has the backing of a 135 million user base that is growing at 5% a month, and a retail economy that is poised to take off into stratosphere.

m-payment is a broad term for any mechanism that allows a user to make a payment for a service or goods, or transfer money to another person using a mobile phone. The m-payment solution typically works in conjunction with an existing bank account or credit card the user holds.

The basic hygiene factors for an effective m-payment solution are:

– Ease of use
– Maximum device support to cover a large user base
– Support for a number of banks or credit cards
– Security
– Large merchant base

m-payment providers in India:

The m-payment space in India has seen two recent investments by leading VC’s. Sherpalo Ventures and Kleiner Perkins Caufield & Byers, two of Silicon Valley’s most reputed venture capital firms invested about $5 million in Paymate, a Mumbai based m-payments solution provider and Helion Ventures invested $2.2 million in Ji Grahak, a Bangalore based m-payments company.

Paymate and Ji Grahak offer very different solutions and a comparison is shown below:

Paymate:

  • SMS based, no GPRS connection needed.
  • Currently available only for Citibank credit or debit card customers
  • Works on almost every phone model in India
  • No need to enter and submit credit/debit card details on the phone
  • Current model will only work for online purchases
  • Person to person payments currently not supported

Ji Grahak:

  • Needs GPRS and a java client to be downloaded
  • Currently available for any credit card holder
  • Works only on high end java phones
  • Need to enter credit card details at least once on the phone
  • Current model seems online focused, but no real clarity
  • Person to person payments currently not supported

The fact that Paymate works on any phone model with SMS capability, does not require the user to hold a credit card and works without GPRS makes it appear to be much more compelling proposition than Ji Grahak. Moreover, Paymate does not require the user to enter or submit card or account details over the phone, another huge benefit in India where consumers are only just beginning to become comfortable with using their credit cards online. The only advantage Ji Grahak seems to have in the short term is that it supports any credit card and is not restricted to Citibank customers. However, this may not be such a great advantage as Paymate signs up more banks eventually.

In the long run however, as data usage in India becomes more widespread (GPRS), the Ji Grahak solution offers a much more secure infrastructure for payments than Paymate’s simplistic SMS based solution. Moreover, a Java client on the phone also provides scalability in terms of exchange of information with Point of Sale (POS) systems to purchase goods in physical retail stores should Ji Grhak go that way.

While the Paymate model seems to be more in tune with Indian market needs than Ji Grahak, it still needs to address several issues in order to have a chance of success. For starters, the current model only supports on-line retailing, i.e, the user browses a web site such as rediff.com and decides to buy an item. When the user reaches the purchase screen she is presented with the option of paying via her mobile phone and enters her mobile phone number and clicks submit. If the user is a pre-registered Paymate user, then an sms is sent to the users phone with the item code and the user needs to reply with the item code and PIN number to confirm the purchase. Secondly, SMS is inherently not very secure and it’s not uncommon for messages to get lost or remain undelivered.

The biggest hurdle faced by both paymate and Ji Grahak is extending the model beyond online retailing to physical store retailing. The big advantage of m-payments in the Indian context is that it takes advantage of high mobile penetration to provide an effective alternative payment method to cash. So what exactly is the benefit of solutions that merely displace the last click of an online browse and buy transaction?

And from an investor’s point of view, what is the revenue model for m-payment providers? Both Paymate and Ji Grahak are free of charge to the user; does the merchant pay them for every transaction? Can they break even with only online merchants?

A third m-payment solution, mChq, and has been around for over a year now. This is again SMS based but the transaction process is one where the retailer/merchant sends an SMS mentioning the amount to the customer. The customer enters his/her personalized PIN number and sends an SMS back to the retailer acknowledging the amount to be paid. Both the parties then get a confirmatory SMS indicating the completion of the transaction. The mCheq solution addresses physical retailing more effectively than paymate or Ji Grahak. mChq pilots were launched by ICICI bank and Visa cards and SBI also launched a solution on the platform subsequently.

Are m-payment solution providers a good investment opportunity for VC’s?

There is no big m-payment success story anywhere in the world today, barring maybe Japan. Having said that, India probably has the best chance of producing an m-payment success story. Market factors for an alternative payment mechanism to cash are clearly evident – high mobile penetration even in tier-2 and 3 cities, relatively low credit card penetration (98% of transactions in India are cash and cheque), a relatively low internet user base and rising middle class consumption and disposable income.

The biggest challenge will remain consumer adoption. The market is large enough to support 3-4 m-payment solution providers with different solutions that cater to different consumer segments. Moreover, competition is essential to create consumer and merchant adoption on a mass scale. Several m-payment solutions are likely to emerge in the next few years in India, as the market evolves and lessons are learnt. From a VC investment perspective, a solution that effectively addresses the hygiene factor of m-payment and then goes that extra mile, and a management team that has strong networks with the banking community are certainly worth taking a closer look at.

Mobile VAS event in Bangalore

I’m moderating a panel titled “Raising & Leveraging Venture Capital ” at Venture Intelligence Mobile VAS Connect, a Roundtable focused on Venture Capital opportunities in the Mobile Value-Added Services sector. Details are below…

Mobile VAS Connect
December 12, 2006 Bangalore

The Mobile VAS sector has emerged as one of the favorite sectors among venture capitalists. However, there are several significant challenges facing the sector – including in the basic business models being adopted, relationships with operators, etc.

In this context, Venture Intelligence Mobile VAS Connect, scheduled for December 12 in Bangalore, presents an ideal platform for leading Venture Capital investors and top executives from Mobile VAS companies to network, discuss and share best practices.

Confirmed panelists include top executives from Sequoia Capital India, mportal, Nazara Technologies, Paymate, ACL Wireless, Phoneytunes, Mobile2win, etc.

This event also features Venture Intelligence DEMO, where select technology companies showcase their products in the form of demos.

Who Should Attend?
– Venture Capital funds looking to invest in IT and Mobile Services companies
– IT and Mobile VAS companies planning to raise VC financing

For more information, visit http://tsjmedia.com/ev-121206.htm

Mobile Search, yet to come of age…

Mobile search is such a hot topic right now that you cannot open a wireless magazine or newsletter without search related articles screaming at you. It’s not just the bigges like Google and Yahoo who are making all the noise, there are numerous start up’s each claiming to have the killer technology to offer the best user experience. I personally have met with four mobile search start up’s in the past week, all based out of Bangalore.

Mobile search is a broad umbrella that has various niches- content search on WAP portals, localalized and location based search for information, paid search, unpaid web search, sms based interactive search, voice based search, etc. In the mobile content world, offering consumers easy, intuitive content search capabilites are thought to be the most important factor for increasing usage given that efficient content discovery is so difficult on the limited real estate available on the phone screen. Apart from using search for content discovery, building models for paid search is a as bandwagon everybody wants to jump on.

Intrigued by all the noise about mobile search, I decided to use the search capabilities on O2’s WAP portal in the UK (O2 active), a few days ago. My experience left a lot to be desired and clearly mobile search has a long way to go before it becomes the goldmine it is predicted to become. I record my experience below and hopefully very soon this will sound like people talking about their dial up internet days in todays broadband world :).

“I read about MTV’s listing on O2 active and tried finding the MTV link on O2 Active a few days ago. Browsing the portal under the ‘entertainment’ section did not help me find it, I decided to use the FIND tab at the bottom of the page. I typed in MTV in the text box, clicked on FIND and was taken to a search page powered by Motionbridge, a white labeled mobile search provider and then I was being redirected to an ….mtv.co.uk WAP page when an error message popped up on my screen saying ‘file format not supported’ and was left stranded on a page showing “connectibg to mtv, powered by motionbridge”. Hmm…

I clicked on the back button and went back to the FIND tab and typed in ‘beatles ringtones’. This time I was taken to a page that said “results for beatles”, via the Motionbridge intermediary page, and was shown a listing of truetone and ringtone categories – recommended O2 hot picks, Scissor Sistors, The killers, and some general categories such as UK top 10, best sellers, More charts, Artists and Bands, etc. I went down a level on each of the links displayed and could find NO mention of the Beatles. Finally at the bottom of the bottom of the listings page, there was a text box with the prompt “search for 20000 ringtones”. I again typed in Beatles and was taken to a page with 23 Beatles polyphonic tones and wallpapers listed. NOTE – this second search was not powered by Motionbridge and finally showed me relevant content. Phew! It took me a good 10 minutes and innumerable clicks to find what I wanted. “

Surely, mobile search, even in its most basic form, can only get better from here. However, improved user experience is not a concern, that is bound to happen very soon. My bigger concern is revenue models for the search start-up’s that are dotting the landscape from Seattle to Cambridge to Bangalore. None of the search start-up’s I spoke to had a convincing revenue model thought through.. Even more fascinating is the amount of VC money these search start up’s are raising without even a half baked revenue model. And of course, the big bad wolves named Google and Yahoo are waiting to gobble up all the small furry animals in their path…

Building destination brands for D2C success

The big issue with Direct to Consumer mobile content retailing has been and continues to be the problem of getting enough consumers to find your service. Print and TV advertising are the most popular above the line marketing channels used world over. Some players with deep pockets managed to build pure play mobile media brands, mainly in Europe. Jamba/Jamster, Zingy and the Mob stand out here. However, a vast majority of players who saw D2C mobile retailing as a quick and easy way to make big bucks have met with varying degrees of failure. The high cost of customer acquisition, lack of ability to retain a customer without sneaky underhand “crazy frog” like methods, inability to differentiate and low margins due to too many players in the food chain, unsupportive operator policies have all been responsible for this.

I personally have been in involved in D2C services across several geographies for different types of mobile content and themes. Above the line marketing, integrated with movie releases or TV shows campaigns, or standalone print and TV campaigns, have not really set the cash registers jangling. Even with better messaging, targeted ads, clever merchandizing (value bundles, etc), the response has only marginally increased. Even Europe, with all the D2C hype I’ve heard over the years, seems to be operator portal dominated in reality, more so for mobile games.

So with the wisdom of failure backing me, a few ideas are beginning to emerge about how the mobile D2C space will evolve:

1. Merely running a short term ad campaign on the TV or in a magazine and expecting thousands of people to buy your stuff will simply not happen. Nobody remembers a shortcode even 5 minutes after they’ve seen or read the ad, leave alone the keyword or URL.

It really is about a long haul brand building campaign. Isolated mobile only strategies are unlikely to succeeed. Media brands need to build “destinations” with mobile content strategies integrated with overall digital media plans and provide the consumer access to multiple consumption channels. These “destinations” are more likely to be integrated web and mobile brands rather than stand alone mobile brands.

2. Big media companies with deep pockets have the best chances. The mom and pop content kiosks and the medium sized short term players may make their pennies, but can hardly expect to survive in the long run.
A News Corp and Viacom through their multiple media destinations or an MSN and Yahoo through their strong web destination brands are more likely to be the mobile D2C dominators rather than the first generation players like the Mob or Zingy. Evidence that the world is moving towards this comes from the recent NewsCorp acquisition of Jamster.

4. In India, Indiatimes got the dynamics right from the beginning. Their shortcode 8888 is probably the only genuine mobile “destination brand” in India. Web and print properties have been exploited brilliantly to create an integrated destination for mobile content. Yahoo mobile in India is trying to get there and should, given their deep pockets and captive web user base.

In a recent meeting I had with the world’s biggest game publisher, they emphasized that their strategy for D2C was to build “destinations” for mobile content around two of their biggest game franchise brands. The discussion we had validated my own thoughts on D2C.

The gaming phone is still alive


I thought with Nokia’s N-gage experiement had put the skids on the gaming phone experiment. Last week I came across this in Paddington station. Very interesting, shows operators and handset OEM’s still see the core gamer as a big enough demographic to position phones specially for that segment. Actually, I do see the sense of it, given that mobile gaming has been dominated by casual gamers, there must be a large community of core console and PC gamers out there who are untapped. With more sophisticated handsets and better quality mobile versions of console games, I can see why Operators still believe in the gaming phone. Isn’t Sega owned by Nokia though?? Wonder what they’re doing on a Sony Ericsson :)!

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