mobile internet

Surviving 2014

 

2014 won’t be an easy year for the digital news business. The good news is the list of mandatory actions is coming into sharper focus. Today, we look at key items.  

The hard part is finding positive signs. My own guess: for the news industry, the excruciating migration from print to digital will get worse before it gets better. If I had to draw a J curve, as economists put it, it would look like this:

303-J-curve

Note that the green list is longer than the red one. But we are still not through with the negative key factors.

For the news media industry, advertising will remain problematic this year. The graph below sums up the sector’s dire situation (a US view that mostly applies to other mature markets):

303 revenue

For 2014, planet remains badly aligned:

There is nothing is sight to correct the huge imbalance between the supply of digital advertising space and advertisers’ demand. Digital media continue to produce millions of new URLs per day that banners simply can’t match. As long as no one is willing to reduce the supply-side, the imbalance is likely to last. This is even more regrettable when considering how the media industry will need to increase its own promotion activities in order to support the diversification that is key to its survival. Practically, if an online publication decided to close 30% of its inventory and assign it to promote its mobile apps, verticals, ancillary products, etc., it would win on both ends. First, it would recreate some scarcity, meaning higher revenue metrics and, second, it would beef up the promotion of its own products. Unfortunately, such an idea won’t last a minute in a short-term budgetary review.
– Thanks to Real-Time Bidding (RTB), publishers actually fuel the price deflation
by auctioning their leftover inventory on various marketplaces. In doing so, they generate some revenue – at the expense of the format’s per unit value (in such auctions, expect no more than 5-10% of nominal prices). In addition this process mechanically applies negative pressure to premium placements because the advertisers will opportunistically purchase a guaranteed and targeted audience wherever available. Even the New York Times will jump on the RTB bandwagon  — “in [its] special way”, it claims. We’ll see.
- Making serious money with mobile ads will remain elusive. For most digital news outlets, mobile users are likely to pass the 50% of the total audience later this year. Unfortunately, the magic advertising formula has yet to be cracked as a mobile user only brings a fraction of the equivalent web revenue. I don’t believe in a miracle ad format that will make the commercial experience “engaging” or “enjoyable”… You don’t “engage” people on the move. You grab, seduce, retain them with repetitive and attractive contents that properly fit their time-wise needs and cognitive availability. Then, if the content is good enough, unique, and able to create a reflexive daily habit — then you might be able to convince a fraction of the audience to pay for it. Note the italics, they point to significant obstacles on the road to the mobile pot of gold.
On mobile, I feel interface quality and selectiveness of functionalities are even less forgiving than on the web: you can’t allow useless stuff on a smartphone screen, there is simply no tolerance for it. All contents being equal, the success of a mobile news product will largely depend on the quality of its interface.

Now let’s turn to the green part, the hopeful one.

Agility. One of the benefits of the continuing newsrooms shrinkage (no, we’re not through, yet) will be news staffs making further gains in agility and polyvalence. As Scott Klein, senior editor for news applications at ProPublica, puts it in the NiemanLab Predictions for 2014 (worth a read):

You can be a good journalist without being able to do lots of things. But every skill you don’t have leaves a whole class of stories out of your reach. And data stories are usually the ones that are hiding in plain sight.

Scraping websites, cleaning data, and querying Excel-breaking data sets are enormously useful ways to get great stories. If you don’t know how to write software to help you acquire and analyze data, there will always be a limit to the size of stories you can get by yourself. And that’s a limit that somebody who competes with you won’t have.

To put it more bluntly, in 2014, thriving newsrooms will share the following characteristics: (a) they will be fastest to inject a critical proportion of new blood in their ranks and (b) they will invest in training to add the skills, mostly tech ones, required by modern journalism.

New Forms of Ads. Digital Advertising is half-way through a decisive transformation. As I wrote here many times, the market will stretch at its extremities; one will end up with more automation (the aforementioned RTB trap) while the other end might be more virtuous. It will be based on tailored promotional operations and Branded Content product lines (see coverage in the Monday Note), both form carrying higher CPMs and better reader acceptance. I’m a true believer in the continuity — not the blend nor the confusion — between journalistic contents and commercial editorial. Brand, companies, have a lot to tell beyond traditional advertising. Most publishers will be slow movers in that field. Even if such new forms of ads turn to be a fad (which I don’t believe), it won’t be a costly mistake to hire a commercial editor flanked by a couple of smart people, a combination of writers and strategic planners (not easy to find, I’ll admit, you might instead consider training existing staff), able to understand and convert client needs into good storytelling aimed at attracting (but not deceiving) readers.

2014 will be the year of media companies realizing they must morph into technology companies — or embrace, one way another, the technologies that guarantee their survival. Consider the following factors: advertising requiring better audience profiling; smart recommendation engines becoming mandatory to retain readers; semantic “footprint” becoming the de rigueur instrument to serve a solvent and loyal readership; journalism thriving through data… These all make the need for tech people able to understand editorial issues more pressing.

As long as those prerequisites are well understood, I’m bullish on the future of digital news.

–frederic.filloux@mondaynote.com
@filloux

Shameless Carriers

 

Wireless carriers used to rule smartphone suppliers. In 2007, Steve Jobs upended such rules. Why can’t the carriers accept the change and enjoy the revenues the iPhone generates for them… and why do tech journalists encourage their whining?

Until about two weeks ago, it seemed that our major wireless carriers had given up whining about the unjust subsidies imposed by a certain overly-confident (they said) handset maker. I hoped that their silence on the topic meant that they had finally realized that the extra revenue (ARPU) generated by these smartphones more than made up for the “subsidy burden”, for the exorbitant amounts of money that (they thought) ended up in the wrong coffers.

Then, I saw this this headline:

Everyone Pays No 5c

The article’s lede promises to reveal secret Apple deals that squeeze rivals and tax you. According to the piece’s “logic”, Apple’s one-sided agreements force carriers to swallow inordinate numbers of iPhones, an arrangement that produces all-around nefarious results. To meet their volume commitments, carriers allocate disproportionate amounts of shelf space to iPhones, thus crowding out competitors. And because the Apple contracts drain their finances, carriers are forced to price other handsets higher than they otherwise would. Hence an “iPhone Tax” that everyone must pay, even when using another brand.

In the same piece, we find dark suggestions that Verizon is threatened by a $12B to $14B shortfall in meeting it’s $23B commitment to purchase Apple handsets. A bit of googling led me to a pair of July 2013 articles (here and here) that back up the prediction by pointing to an anal-ist’s write-up of Verizon’s SEC filings (a medium that, as Regular Monday Note readers know too well, I happily wallow in, especially the always-rich MD&A [Management Discussion and Analysis] section where execs are supposed to help us navigate the filing’s sea of numbers).

I went to Verizon’s SEC Filings page and looked up quarterly and annual reports. The first mention of an Apple agreement appears in the 10-K (annual) filing of February 28th, 2011. Since then, no word whatsoever of any purchase commitment, whether for the iPhone or any other device. If you search for “purchase” and “commitment” in the latest October 2013 SEC document, you’ll only find talk of pension funding and share-repurchase obligations:

Verizon 10-Q Oct 2013 Commitments

One would think that a looming $12B to $14B shortfall — more than a third of Verizon’s $30B quarterly revenue — would be mentioned to shareholders. The worried articles fail to explain Verizon’s silence.

This is both novel and familiar.

The novelty is finding Apple guilty of forcing carriers to raise prices on competitors‘ handsets. I hadn’t seen this angle before.

The familiar is the carriers’ use of journalists who present themselves as independent observers/reporters when, in fact, these practitioners of access journalism carry water for their corporate connections. During a lunch conversation some years ago with a Wall Street Journal repentito, I pointed to a fellatious Microsoft article in his old paper and questioned the excessive reverence: ‘Access, Jean-Louis, access. It’s the price you pay to get the next Ballmer interview… ‘

We saw the process at work in a December 2011 WSJ article titled How the iPhone Zapped Carriers, a devotional piece that makes the key points in the carriers’ incessant complaint:

Carriers do all the grunt work while handset makers and software developers take all the money.
The $400 subsidy per iPhone (and now a similar amount for its best competitors as well) is clearly excessive and must stop.
We need a new business model to account (to monetize) the shift from voice to voracious use of data.

Let’s rewind the tape. Once upon a time, there was The Way of The Carrier. Verizon, Sprint, AT&T treated handsets makers the way a supermarket chain treats yogurt suppliers: We’ll tell you the flavors and quantities we want to carry, we’ll set the delivery schedule, dictate the marketing/branding arrangements, define the return privileges and, of course, we’ll let you know what we want to pay for your product — and when we want to pay it.

Then Steve Jobs hypnotized AT&T’s management. He convinced them to let Apple set the terms for iPhone distribution in exchange for AT&T’s “running the table”. This meant no AT&T fingerprints on Apple’s pristine iPhone, no branding, no independent pricing, no pre-installed crapware — content and software would be downloaded via iTunes, only.

In this arrangement, the iPhone helped AT&T steal customers from its main competitor, Verizon. When Verizon finally signed up with Apple in 2010, they were in a much weaker position than if they had obliged at the very beginning of the Smartphone 2.0 era.

Apple is master of the slow-but-steady, surround-from-below approach. First, sign up a weaker player who will accept Apple’s stringent control in exchange for the opportunity to take business away from the dominant player who balks at Cupertino’s terms. After enough customers have switched to the smaller competitor, the market leader changes its mind and signs up with Apple — on Apple’s terms.

The drill has worked in Japan. The smaller SoftBank signed up with Apple while DoCoMo, Japan’s largest wireless carrier, refused. DoCoMo wanted to install its own software on the iPhone; Apple wouldn’t budge. Subscribers migrated to Softbank in numbers significant enough to change DoCoMo’s mind. The happy ending is DoCoMo and its competitors now appear to sell large numbers of iPhones.

Turning to China, the same maneuver is at work. China Unicom and China Telecom have been selling iPhones with the expected result: They’re taking customers from the giant China Mobile. (There are rumors of an Apple-China Mobile agreement, but it’s unclear when this will happen. We should know soon.)

This only works if – and only if – the iPhone is a great salesman for the carrier. Apple extracts a higher price for its iPhone for two reasons: strong volumes and higher revenue per subscriber compared to other sets. In Horace Dediu’s felicitous words [emphasis mine]:

‘I repeat what I’ve mentioned before: The iPhone is primarily hired as a premium network service salesman. It receives a “commission” for selling a premium service in the form of a premium price. Because it’s so good at it, the premium is quite high.’

Carriers should stop whining; these are robust companies run by intelligent businesspeople with immense resources at their disposal. As explained in previous Monday Notes (here and here), there’s no rational basis for their kvetching. Assuming they bleed an extra $200 when subsidizing an iPhone (or a top Samsung handset, now that the Korean giant followed suit), they only need $8/month in extra subscriber revenue from the “offending” smartphone. And yet here we are: Randall Stephenson, AT&T’s CEO, predicts the end of subsidies because  “wireless operators can no longer afford to suck up the costs of customers’ devices”.

I don’t know if Stephenson is speaking out of cultural deafness or cynicism, but he’s obscuring the point: There is no subsidy. Carriers extend a loan that users pay back as part of the monthly service payment. Like any loan shark, the carrier likes its subscriber to stay indefinitely in debt, to always come back for more, for a new phone and its ever-revolving payments stream.

I was told as much by Verizon. In preparation for this Monday Note, I went to the Palo Alto Verizon store and asked if I could negotiate a lower monthly payment since Verizon doesn’t subsidize my iPhone (for which I had paid full price). Brian, the pit boss, gave me a definite, if not terribly friendly, answer: “No, you should have bought it from us, you would have paid much less (about $400 less) with a 2-year agreement.” My mistake. Verizon wants to be my loan shark.

In the meantime, AT&T has finally followed T-Mobile’s initiative and has unbundled the service cost from the handset. If you pay full price for your smartphone, an AT&T contract will cost you $15 less than with a subsidized phone on a 2-year agreement. This leads one to wonder how long Verizon can keep its current indifferent price structure.

All this leaves carriers with conflicted feelings: They like their iPhone salesman but, like short-sighted bosses who think their top earner makes too much money, they angle for ways to cut commissions down.

On the other side, Apple’s teams must be spending much energy finding ways to keep generating high monthly revenues for their “victims”.

JLG@mondaynote.com

Other carrier news: Sprint, now owned by SoftBank’s Masayoshi Son, is said to be preparing a $20B bid for T-Mobile. We barely avoided excessive concentration when the Department of Justice nixed AT&T’s attempt to acquire T-Mobile; now we again risk a three-way market and its unavoidable collusions. As much as I admire SoftBank’s founder and am happy he took control of Sprint, I hope our regulators won’t facilitate more concentration.

This might be the last Monday Note for 2013. I’ll soon be in Paris where jet-lag and various (legal) substances will conspire to make writing more difficult. If so, Happy Holidays to Monday Note readers and their loved ones. –

The not-so-quaint charm of the email newsletter

 

In spite of today’s obsession with social networks, the email newsletter remains a potent vector for the dissemination of news and for driving traffic back to websites. It comes with one condition, though: reintroducing a human touch. 

Today, producing a newsletter looks so easy: Select RSS feeds from your site, fire a plug-in to extract selected headlines and areas, insert the feeds in a template and send the whole thing via a router interface. Done.

Many sites do it on auto-pilot. And the result of such automated treatment is crude newsletters throwing together a bunch of headlines and snippets. On the surface, the output does reflect the content of a site, but it actually fails to reveal any editorial choice other than the basic home page hierarchy. An opinion piece, an in-depth profile, or an investigative report will be processed in the same mechanical way: headline, nutgraf, a couple of links and nothing further.

Based on my personal use, such work ends up in a special designated folder I created on my main Gmail account for each publication I subscribe to. After a while, I stopped looking at those robotized emails. To make things worse (for the senders), Google does the filing for me — unbeknownst to me, actually. A couple of months ago, Gmail created several tabs, one of them titled “Promotions”, that collect all newsletters, including the ones I willingly subscribed to. Google chooses for me the emails should I read first. Great. I don’t understand why this arbitrary filtering didn’t trigger any outcry, both from subscribers and publishers of legit newsletters (I happen to be both). Needless to say, the opening rate of emails falling into the infamous Promotions folder is significantly altered. All at the pleasure of Google and its algorithms.

Coming back to the newsletter itself, we can detect the beginning of a shift away from robotized email towards the written-by-humans form.

Again, I’ll refer to Quartz, the business site launched a year ago by the Atlantic Media Group (see a previous Monday Note series here). Their email newsletter is called “The Daily Brief”; it is 800-words long, no images, cleverly written and edited, sent to about 45,000 subscribers worldwide, in three editions (US, Asia, Europe and Africa.)

Here is how it looks on mobile devices:

qz phones

The structure is simple: Five main headers containing five to seven items, each summing up what the story you might click on is about. The headers are: “What to watch today”, “While you were sleeping”, “Quartz obsession interlude” (it refers to Quartz’ proprietary revision of the old beat structure), “Matter of Debate”, and “Surprising discoveries”. A good mixture of news, fun, serendipity, thoughtful items. The links do not always send back to qz.com, they can lead anywhere. Sounds pretty simple at first. But, as Quartz editor Kevin Delaney recently told me, the Daily Brief is the result of a thorough editorial process. The email newsletter is touched by no less than four people, including two seasoned editors, Gideon Lichfield, Quartz global news editor who spent 16 years at the Economist, and Adam Pasick, the Asia editor and a 10-year Reuters veteran. Newsrooms who assign junior writers to expedite email newsletters should think again… Quartz is one of the few media I know to actually devote sizable resources for such a “simple” news product (also read this analysis on MailChimp, Quartz email router). But many are now considering the formula: The Wall Street Journal recently launched its “10-Points” email newsletter, built on the same principles as Quartz’s Daily Brief.

wsj-10points2

Sophisticated email newsletters are not new. For years, bloggers affiliated or not with large media organizations have been using them to promote their work and attract readers, gaining significant traction in the process. To name but a few, Andrew Sullivan’s Daily Dish on Politics, or Andrew Ross Sorkin’s Dealbook (part of NYTimes.com) have become full-fledged news brands. I asked Juan Señor, partner at Innovation-Consulting, who worked on many newspaper modernizations, for his opinion on the matter:

Conceptually, our take and that of other newspapers investing in newsletters or news briefings – as we call them – is that you have to move from commodity news to selling intelligence. In an age of abundance you have to sell scarcity. The laws of economics prescribe that the more abundant a product is, the less valuable it is in price. The more volume I have, the less value I can extract from it.’ 

Juan adds two critical factors needed to create a valued product: Timing — sending a news briefing at the right time to maximize its impact — and the multi-device format.

In spite of their age, email newsletters remain a relative primitive stage. Let’s talk first about the user interface. A newsletter begs to be read both on mobiles and on a desktop. You can no longer decide for the reader which screen size h/she will read your stuff on. Responsive design is mandatory. But applying responsive design techniques is way more complicated for newsletters than it is for websites. Even large medias such as the NYT are providing single formats newsletters. (I will humbly admit that, while the Monday Note blog switched to responsive design a while ago, I’m still struggling to do the same for our newsletter.) While I want to send a newsletter from a series of blog posts in a single stroke, I’m still waiting for the WordPress plug-in that will let me do that through a wide range of email routers. In the same fashion, I would welcome add-ons to the most popular word processors that would output good-looking, responsive html emails.

Another thing about email design: It must be conceived to be read offline. I live in a 4G city (Paris) but I still get poor 3G or even EDGE service in too many places (French carriers are said to slow down network speed in order to accelerate the switch to 4G). Therefore, the ability to read complete content offline beyond headlines is, in my view, a basic feature. Going a bit further, I would dream of newsletters pre-loading multiple layers of reading, allowing the reader to jump from the main page to one or two levels down — without requiring a connection.

Deeper improvements to newsletters will come from the usual combination of analytics and semantics. A well-crafted engine will detect what parts of an email newsletter I read the most, what subjects I’m more inclined to click on. Then, the system will adapt the content of my newsletters in order to increase my propensity to open and to engage (i.e. to click on links.) This will make the old-fashioned newsletter an even more powerful website traffic vector.

frederic.filloux@mondaynote.com

 

News: Mobile Trends to Keep In Mind

 

For publishers, developing an all-out mobile strategy has become both more necessary and more challenging. Today, we look at key data points and trends for such a task. 

#1 The Global Picture
— 1.7bn mobile phones (feature phones and smartphones) were sold in 2012 alone
— 3.2bn people use a mobile phone worldwide
— Smartphones gain quickly as phones are replaced every 18 to 24 months
— PCs are completely left in the dust as shown in this slide from Benedict Evans’ excellent Mobile is Eating the World presentation:

ben-evans

The yellow line has two main components:
— 1 billion Android smartphones are said to be in operation worldwide (source: Google)
— 700 million iOS devices have been sold over time, with 500 million still in use, which corresponds to the number of iTunes accounts (source: Asymco, one of the best references for the mobile market.)
— 450 million Symbian-based feature phones are in operation (Asymco.)

#2 The Social Picture 

Mobile phone usage for news consumption gets increasingly tied to social networks. Here are some key numbers :
— Facebook: about 1.19bn users; we don’t exactly know how many are active
— Twitter: 232 million users
— LinkedIn: 259 million users

When it comes to news consumption in a social environment, these three channels have different contributions. This chart, drawn from a Pew Research report, shows the penetration of different social networks and the proportion of the US population who get their news from it.

300_pew

One of the most notable data points in the Pew Report is the concentration of sources for social news:
— 65% say to get their news from one social site
— 26% from two sites
— 9% from three sources or more (such as Google +, LinkedIn)

But, as the same time, these sources are completely intertwined. Again, based on the Pew survey, Twitter appears to be the best distributor of news.

Among those who get their news from Twitter:
— 71% also get their news on Facebook
— 27% on YouTube
— 14% on Google+
— 7% on LinkedIn

Put another way, Facebook collects more than half of the adult population’s news consumption on social networks.

But a closer looks at demographics slightly alters the picture because all social networks are not equal when it comes to education and income segmentation:

If you want to reach the Bachelor+ segment, you will get:
— 64% of them on LinkedIn
— 40% on Twitter
but…
— only 30% on Facebook
— 26% on G+
— 23% on YouTube

And if you target the highest income segment (more than $75K per year), you will again favor LinkedIn that collects 63% of news consumers in this slice, more than Facebook (41%)

Coming back to the mobile strategy issue, despite Facebook’s huge adoption, Twitter appears to be the best bet for news content. According to another Pew survey, the Twitter user is more mobile :

Mobile devices are a key point of access for these Twitter news consumers. The vast majority, 85%, get news (of any kind) at least sometimes on mobile devices. That outpaces Facebook news consumers by 20 percentage points; 64% of Facebook news consumers use mobile devices for news. The same is true of 40% of all U.S. adults overall. Twitter news consumers stand out for being younger and more educated than both the population overall and Facebook news consumers

 And, as we saw earlier, Twitter redistributes extremely well on other social platforms. It’s a no brainer: any mobile site or app should carry a set of hashtags, whether it’s a stream of information produced by the brand or prominent bylines known for their insights.

 #3 The Time Spent Picture

Here is why news is so complicated to handle in mobile environments. According to Flurry Analytics: On the 2 hours and 38 minutes spent each day on a smartphone and an a tablet by an American user, news accounts for 2% as measured in app consumption, which accounts for 80% of time spent. The remaining 20% is spent in a browser where we can assume the share of the news to be much higher. But even in the most optimistic hypothesis, news consumption on a mobile device amounts to around 5 to 6% of time spent (this is correlated by other sources such as Nielsen). Note that this proportion seems to decrease as, in May 2011, Flurry Analytics stated news in the apps ecosystems accounted for 9% of time spent.

This view is actually consistent with broader pictures of digital news consumption, such as these two provided by Nielsen, which show that while users spend 50 minutes per month on CNN (thanks to is broad appeal and to its video content), they only spend 18 minutes on the NYT and a mere 8 minutes on the Washington Post:

300 nielsen

All of the above compares to 6hrs 42min spent on Facebook, 2hrs on YouTube or Yahoo sites.

In actionable terms, this shows the importance of having smartphones apps (or mobile web sites) sharply aimed at providing news in the most compact and digestible way. The “need to know” focus is therefore essential in mobile because catching eyeballs and attention has become increasingly challenging. That’s why The New York Times is expected to launch a compact version of its mobile app (currently dubbed N2K, Need to Know, precisely), aimed at the market’s youngest segment and most likely priced just below $10 a month. (The Times also does it because the growth of digital subscriptions aimed at the upper market is slowing down.) At the other end of the spectrum, the NYT is also said to work on digital magazine for iPad, featuring rich multimedia-narrative on (very) long form such the Pulitzer winning Snow Fall (on that matter, the Nieman analysis is worth a read).

This also explains why the most astute digital publishers go for newsletters designed for mobile that are carefully – and wittily – edited by humans. (One example is the Quartz Daily Brief; it’s anecdotal but everyone I recommended this newsletter to now reads it on a daily basis.) I personally no longer believe in automated newsletters that repackage web site headlines, regardless of their quality. On smartphones, fairly sophisticated users (read: educated and affluent) sought by large media demand time-saving services, to the point content, neatly organized in an elegant visual, and — that’s a complicated subject — tailored to their needs way.

#4 The ARPU View

On mobile devices, the Average Revenue per User should be a critical component when shaping a mobile strategy. First, let’s settle the tablet market question. Even though the so-called “cheap Android” segment  ($100-150 for a plastic device running an older version of Android) thrive in emerging markets, when it comes to extracting significant money from users, the iPad runs the show. It accounts for 80% of the tablet web traffic in the US, UK, Germany, France, Japan, and even China (source: Adobe.)

The smartphone is more complicated. A year ago, many studies made by AppAnnie or Flurry Analytics showed that the iPhone ecosystem brought four times more revenue than Android. More recently, Flurry Analytics ran a story stating that the average app price for Android was $0.06 vs. $0.19 for the iPhone and $0.50 for the iPad.

The gap is closing as Android terminals attracts a growing number of affluent users. Still, compared to iOS, it is notoriously difficult to carry paid-for apps and services in the Android ecosystem, and Android ads remains cheaper. It’s likely to remain the case for quite a while as iOS devices are likely to remain much more expensive than Android ones, and therefore more able to attract high-end demographics and the ads that go to them.

How this impacts a smartphone strategy: Publishers might consider different business models for the two main ecosystems. They could go for fairly sophisticated apps in the iOS world, served  by a well-oiled payment system allowing many flavors of In-App add-ons. By contrast, the Android environment favors a more “go-for-volume” approach; but things could evolve quickly as the Android share of high-end audience grows and as the PlayStore gains in sophistication and gets as friction-free as the AppStore.

frederic.filloux@mondaynote.com

The Circa App: News Exclusively for Mobiles

 

by Frederic Filloux

Suddenly, everybody talks about Circa, a simple application that delivers news in an astutely condensed format. Is there a Circa secret sauce? And can it last? 

Circa’s concept is simple. It’s an iPhone-only app, meaning it doesn’t offer an iPad variant. Circa delivers content in the most digestible of ways, for people on the move, eager to quickly drill down to the essence of news. Period. No animation, no frills, but a clever sequential construction. Here is an example from this weekend’s stream: Google’s announcement that, in order to avoid fines in Germany, its News service will only index sources that have decided to explicitly opt-in to being shown in G-News Germany. Here is how it looks on Circa:

Scroll #1 : the nutshell

01-photo-8

Scroll #2 & 3 : a short development and main quotes

01b-photo-6.02-photo-7

Scroll 4 & 5, the end of the development and related stories

04-photo-5.05-photo-4

Now, tap the “i” icon to get source information (in green):

06-photo-1

Of course, sources — “Citations” in Circa’s parlance — are clickable and send the reader to the original article displayed by a browser embedded in the application (a web-view). In doing so, Circa’s editors are able to keep the story in the most compact format possible. Instead of the classical story construction taught at journalism schools that results in endless scrolling, Circa’s pieces require no more than 6 or 7 screens.

In last week’s presentation in Paris at the Global Editors Network Conference, David Cohn, co-founder and editor-in-chief of Circa, provided a comparison between an AP story, viewed traditionally (left) and through Circa’s lenses (right, click to enlarge) :

07-capt dual

“At Circa, we atomize, not summarize”, says Cohn. “Atomization is when a story gets broken into into its core elements: facts, stats, quotes, media [images, maps, etc.]“. Pretty efficient indeed. If the reader wants to check the origin of a piece of information, s/he’ll unfold the sources’ deep links. Because, of course, Circa’s is an aggregator in its purest form: No original reporting whatsoever, just clever repackaging.

When I challenged David Cohn about this very point, he countered that Circa’s stories always have multiple sources and that he and his staff added “a high touch of editorial at every step of the process”, including “serious [web based] fact-checking”. He continued: “In many ways we are at the same level as other news organizations”. He meant relying on third party sources or press releases from various entities… That’s not exactly a consolation to me… At some point, the aggregation ecosystem might simply run out of original news to feed — or prey — on.

With its staff of 14 — including five people on the West coast, four on the East coast, one in Beirut and another in Beijing — Circa produces 40 to 60 news stories every day and, more importantly, 70 to 90 updates. Because, aside of its truncating obsession, Circa’s most appreciated feature is the way it follows a story.  ‘Traditional media always feel the need  to recall all the background of a given story’, adds David Cohn. ‘At Circa, when a reader wants to follow a story he will be served with update notifications each time he reconnects to the app. See this abstract from David’s presentation:

08-followStory

OK, but what about the revenue side? Circa was launched last October and, as expected, has no plan to yield a single dime before next year. For now, the founders are building their audience base as fast as they can. After the iPhone app, an Android version is scheduled for the Fall, as well as a first redesign that will further simplify its user interface. After that, Circa’s team sees several possibilities. The most obvious is advertising, although David Cohn acknowledges that a poor implementation could swiftly kill the app. A flurry of banners, or intrusive formats such as interstitials would irremediably sully the neat user experience. (I’m still astonished to see how slow traditional media are to leave these old formats behind while native internet projects abandon exhausted advertising apparatus much more quickly…) Circa will rather rely on native ads (see a previous Monday Note on the subject) that blend in the flow of stories, like in Forbes or Atlantic Media’s business site Quartz.

Another natural way to monetize Circa would be a business-to-business iteration of the app. Many companies might be willing to support a lightweight application focusing on their sector, with features encouraging adoption and stickiness within large corporate staffs.

What about a paid-for apps? After all, Circa could be close to a million users by year-end. “We might go for an In-App purchase instead, maybe for niche segments”, says David Cohn. The financial sector looks like a natural candidate. Cohn also notes, in passing, that the rigorous formatting of stories could lead to a well-structured corpus of news, ideally suited for all sorts of data-mining in the future.

Circa is in many ways a contemporary product. First, it neatly addresses the attention span challenge. Remember: it’s 9 seconds for a goldfish, 8 seconds for a human in 2012 — vs. 12 seconds in 2000 —  and let’s not forget that, according to Statistic Brain, 17% of web pages are viewed for less than 4 seconds. Seriously, Circa found ways to save our precious time. Second, its content is more than neutral, it’s sanitized, deodorized. It’s a perfect fit for a generation of readers for whom facts are free and abundant, opinions are suspect and long form stories a relic of the past…

frederic.filloux@mondaynote.com

Tech as a boost for development

 

Moore’s Law also applies to global development. From futuristic wireless networks for rural Africa to tracking water well drillings, digital technology is a powerful boost for development as evidenced by a growing number of initiatives.  

Last week, The Wall Street Journal unveiled a Google project designed to provide wireless networks in developing countries, more specifically in sub-Saharan Africa and Southeast Asia. According to the Journal, the initiative involves using the airwaves spectrum allocated for television signals or teaming up with cellular carriers already working there. In its typical “outside-of-the-box” thinking, the project might also rely on high-altitude blimps to cover infrastructure-deprived areas. Coupled with low-cost handsets using the Android operating system, or the brand new Firefox OS for mobile, this would boost the spread of cellular phones in poor countries.

Previously unavailable, mobile access will be a game changer for billions of people. At the last Mobile World Congress in Barcelona, I chatted with an Alcatel-Lucent executive who explained the experiments she witnessed in Kenya, such as providing the equivalent of index cards to nurses to upgrade their knowledge of specific treatments; the use of mobile phone translated into an unprecedented reach, even in remote areas where basic handsets are shared among many people. Similarly, tests for access to reading material were conducted by UNESCO, the United Nations branch for education and culture. Short stories, some loaded with interactive features, were sent to phones and, amazingly, kids flocked to read, share and participate. All of this was carried on “dumb” phones, sometimes with only mono-color displays. Imagine what could be done with smartphones.

Moore’s Law will keep helping. Currently, high end smartphones are out of reach for emerging markets where users rely on prepaid cards instead of subscriptions. But instead of a $400-$600 handsets (without a 2-year contract) currently sold in Western markets, Chinese manufacturers are aiming at a price of $50 for a durable handset, using a slower processor but sporting all expected features: large screen, good camera, GPS module, accelerometers, and tools for collective use. On such a foundation, dedicated applications can be developed — primarily for education and health.

As an example, the MIT Media Labs has created a system for prescribing eyeglasses that requires only a one-dollar eyepiece attached to a smartphone; compared to professional equipment costing thousands times more, it runs a very decent diagnostic. (This is part of the MIT Global Challenge Initiative).

This, coupled with liquid-filled adjustable glasses such as this one presented at TED a couple of years ago, will help solve vision problems in poor countries for a couple of dollars per person. Other systems aimed at detecting vision-related illnesses such as cataract or glaucoma are in development. So are blood-testing technologies based on bio-chips tied to a mobile app for data collection.

Last week, I attended the Google’s Zeitgeist conference in the UK — two days of enthralling TED-like talks (all videos here). Among many impressive speakers, two got my attention. The first is Sugata Mitra, a professor of education technology at Newcastle University. In his talk — filled with a mixture of Indian and British humor — he described self-organizing systems experiments in rural India built around basic internet-connected computers. The results are compelling for language learning and basic understanding of science or geography.

The other speaker was the complete opposite. Scott Harrison has an interesting trajectory: he is a former New York nightclub promoter who changed drastically his life seven years ago by launching the organization Charity:Water. Harrison’s completely fresh approach helped him redefine how a modern charitable organization should work. He built his organization around three main ideas. First, 100% of donations should reach a project. To achieve this, he created two separate funding circuits: a public one for projects and another for to support operational costs.

Principle number two, build a brand, with all the attributes that go with it: Strong visual identity and well-designed web site (most of those operated by NGO’s are terrible); the web site is rich and attractive and it looks more like than an Obama campaign fundraising machine than a NGO, (I actually tested Charity:Water’s very efficient donation system by giving $100, curious to see where the money will land.)

The third and probably the most innovative idea was to rely on simple, proven digital technologies to guarantee complete project traceability. Donors can find precisely where their money ends up — whether it is for a $60 sand-filter fountain or a $2000 well. Last, Charity:Water funded a drilling truck equipped with a GPS tracker that makes it visible on Google Maps; in addition, the truck tweets its location on a real-time basis. Thanks to a $5 million Google funding, the organization currently works with seven high-tech US companies to develop robust water sensors able to show in real-time how much water is running on a given project. About 1000 of these are to be installed before year-end. This will help detect possible malfunctions and it will also carries promotional (read: fundraising) capabilities: thanks to a mobile app, a kid who helped raise few hundreds bucks among his friends can see where his or her water is actually flowing.

As I write this, I see comments coming, denouncing the gadgetization of charity, the waste of money in technologies not directly benefiting the neediest, Google’s obscure and mercantile motives, or the future payback for cellular carriers from the mobile initiatives mentioned earlier. Sure thing, objections must be heard. But, at this time, everyone who has traveled in poor areas — like I did in India or in sub-Saharan countries such as Senegal, Mauritania and Burkina-Faso — comes back with the strong conviction that all means must be used to provide these populations with basic things we take for granted in the Western world. As for Charity:Water, results speak for themselves: Over six years, the organization has raised almost $100m and it provided drinkable water to 3m people (out of 800m who don’t have access to it in the world — still lots of work left.) Like in many areas, the benefits of new, disruptive models based on modern technologies far outweigh the disadvantages.

frederic.filloux@mondaynote.com

Carriers Still Think We’re Idiots

 

“Carriers are confident we won’t read the small print that contradicts their tricky advertising. Once in a while, a public servant really does his job and forces a retraction. Why so rarely?.”

‘My goal in life has been to have just enough money to ignore 8-point Helvetica!’ Thus spake a close friend one night in a quiet San Francisco bar. His objection was neither stylistic nor ophthalmologic. We were, once again, lamenting the shenanigans and ruses, the hidden fees and “some restrictions apply” (see, if you can, Sprint’s mendacious use of Truly Unlimited here and here), the roach motels of mileage plans, the nickels and dimes extracted by subterfuge, legally or not. In a word, or six, the tyranny of the fine print.

By accumulating “just enough money”, my friend has the luxury of not having to fight the schemers to the last dollar, of not spending hours on the phone arguing with a robohuman who has been cruelly programmed to confuse and outlast the overly-curious customer. His benign neglect allows him to keep a sunny view of life and a calm mind.

Lucky man.

Most of us don’t lead such a charmed life. We can’t, or shouldn’t, ignore the amendments, refinements, and exceptions that belie the marketing come-ons. But the fine printers — the airlines, credit card companies, internet providers and, most of all, the cell phone carriers — rely on our neglect, benign or not. They think they can prey on us, that we’re too stupid or lazy to fight back, to protest their obfuscating plans and bizarre bills.

Because of their ubiquity, the cell phone carriers get the most heat. They’ll sell you a $650 iPhone for a mere $200…and then recoup the $450 shortfall by adding a bit of the difference to each installment of your (mandatory) 24 month “service” contract. If you try to break the manacles, you’ll pay for the fractured iron. It’s right there in the fine print.

Last year, a group of concerned professionals called for an end to the confusing and wasteful smartphone subsidies. The group? The carriers themselves (see Carriers Whine: We Wuz Robbed!).

Verizon and AT&T make a spectacle of groaning under the weight of these awful subsidies. They get the Wall Street Journal and others to repeat their stories wholesale in articles such as this one: How the iPhone Zapped Carriers.
Horace Dediu, for one, doesn’t buy the sob story:

“I repeat what I’ve mentioned before: The iPhone is primarily hired as a premium network service salesman. It receives a ‘commission’ for selling a premium service in the form of a premium price. Because it’s so good at it, the premium is quite high.”

Dediu’s observation applies equally well to all the top smartphone brands. They’re all bait, a great way to hook the customer into a revolving 24 month agreement, with high ARPUs (Average Revenue Per User) stemming from the nature, the breadth and attractiveness of services provided by these high-end devices.

T-Mobile, the perennial dark horse, has been one of the more vocal plaintiffs. Besides clearly stating that the company didn’t need the iPhone, T-Mobile has hinted that it would get rid of the blood-sucking payments to handset makers altogether.
Last month, the hints became reality. T-Mobile “re-imagined” itself as the Un-Carrier:

T-Mobile’s pitch:

With no more annual service contract required, we don’t lock you into a big commitment with our Simple Choice Plan.

It’s a clever idea: T-Mobile has seemingly decoupled hardware and service. If you bring your own phone, you just pay for service. If you need a phone, T-Mobile will be happy to sell you one, let’s say a 16Gb iPhone 5 for $99…and as an added convenience (watch the left hand), they’ll offer you a 24-month contract at just $20/month! You want out before serving your 2-year sentence? No problem! Just pony up the full price of the phone; other terms and conditions may apply.

Inexplicably, some pundits (who should know better) have fallen for the pitch. Here’s David Pogue in the New York Times:

“Last week, the landscape changed. T-Mobile violated the unwritten conspiracy code of cellphone carriers. It admitted that the emperors have no clothes.”

The forums buzzed with the party line: It’s the end of contracts and subsidies.
But the company’s too-clever way with words didn’t sit well with other observers. The no-contract claim is obviously disingenuous; it only applies to people bringing their own phone, a tiny minority. For typical customers — those who get their phones from their carriers — the manacles are too familiar.
The claim also didn’t sit well with Bob Ferguson, Washington State’s Attorney General. Ferguson didn’t dither, saying “No Dice” to T-Mobile’s deceptive “No-Contract” advertising:

“As Attorney General, my job is to defend consumers, ensure truth in advertising, and make sure all businesses are playing by the rules.” 

T-Mobile backed down. The company admitted that there actually is a contract, a subsidy, and they offered to make things right with customers who accepted the agreement under murky pretenses.
Happy ending, congratulations to the vigorous AG.

Still, what were T-Mobile execs thinking? Did they really think that we’re such idiots that we can’t see a 24 month obligation as a contract? What sort of corporate culture produces this type of delusion?
In theory, T-Mobile was onto a good idea. You bring your own phone, you truly pay less and you’re not tied to a contract. Come in, stay as long or as little as you’d like, pay by the month.
But this isn’t how the market works in practice. The rapid succession of new phones makes the latest model more desirable. As a result, carriers have an opportunity to tie their customers down by offering the newest device at an artificially low price — and get a comfortable two-year income stream to recoup the subsidy.
Meanwhile, there’s other news in the carrier world:

  • Verizon is locked in difficult negotiations for the purchase of Vodafone’s 45% share of the company. This is in a context where, two years ago, Vodafone made the decision to shed its participation in other carriers such as Orange, SFR or China Mobile. In their bid/ask conversations, Vodafone and Verizon are $30B apart, Verizon offering a mere $100B while Vodafone won’t take a penny less than $130B.
  • Softbank and Dish Network are in a bidding war for Sprint, probably out of gluttony for more punishment. Masayoshi Son, Softbank’s leader, graciously spared us the carrier-as-victim lament. But if Dish Chairman Charlie Ergen prevails, we can be sure this seasoned sob story practitioner will fit right in once he becomes a cellular operator.

These are the people who tell us subsidies are killing them. They really do think we’re idiots.

JLG@mondaynote.com

Facebook Home: Another Android Lock Pick

 

Facebook’s new Home on Android smartphone is an audacious attempt to demote the OS to a utility role, to keep to itself user data Android was supposed to feed into Google’s advertising business. Google’s reaction will be worth watching.

Amazon’s Kindle Fire, announced late September 2011, is viewed as a clever “Android lock pick“. Notwithstanding the term’s illicit flavor, Amazon’s burglary is entirely legal, an intended consequence of Google’s decision to Open Source their Android mobile operating system. Download the Android source code here, modify it to your heart’s — or business needs’ — content, load it onto a device and sell as many as you’d like.

Because it doesn’t fully meet the terms of the Android Compatibility Program, Amazon’s proprietary version isn’t allowed to use the Android trademark and the company had to open its own App Store. In industry argot, Amazon “forked” Android; they spawned an incompatible branch in the Android Source Tree.

The result of this heretic version of Android is a platform that’s tuned to Amazon’s own needs: Promoting its e-commerce without feeding Google’s advertising money pump.

And that brings us to Facebook’s new Home.

(The company’s slick presentation is here. Business Insider’s also provides a helpful gallery.)

Zuckerberg’s new creation is the latest instance of the noble pursuit of making the user’s life easier by wrapping a shell around existing software. Creating a shell isn’t a shallow endeavor; Windows started its life as a GUI shell wrapped around MS-DOS.  Even venerable Unix command line interfaces such as C shell, Bourne, and Bash (which can be found inside OS X) are user-friendly — or “somewhat friendlier” — wrappers around the Unix kernel. (Sometimes this noble pursuit is taken too far — remember Microsoft’s Bob? It was the source of many jokes.)

Facebook Home is a shell wrapped around Android; it’s a software layer that sits on top of everything else on your smartphone. Your Facebook friends, your timeline, conversations, everything is in one place. It also gives you a simple, clean way to get to other applications should you feel the need to leave the Facebook corral… but the intent is clear: Why would you ever want to leave Home?

This is audacious and clever, everything we’ve come to expect from the company’s founder.

To start with, and contrary to the speculation leading up to the announcement, Facebook didn’t unveil a piece of hardware. Why bother with design, manufacture, distribution and support, only to sell a few million devices — a tiny fraction of your one billion users — when you can sneak in and take over a much larger number of Android smartphones at a much smaller cost?

Second, Home is not only well-aligned with Facebook’s real business, advertising revenue, it’s even more aligned with an important part of the company’s business strategy: keeping that revenue out of Google’s hands. Android’s only raison d’être is to attract a captive audience, to offer free services (search, email, maps…) in order to gain access to the users’ actions and data, which Google then cashes in by selling eyeballs to advertisers. By “floating” above Android, Home can keep these actions and data to itself, out of Google’s reach.

Facebook, like Amazon, wants to keep control of its core business. But unlike Amazon, Facebook didn’t “fork” Android, it merely demoted it to an OS layer that sits underneath the Home shell.

On paper and in the demos, it sounds like Zuckerberg has run the table… but moving from concept to reality complicates matters.

First, Facebook Home isn’t the only Android shell. An important example is Samsung, the leading Android player: it provides its own TouchWiz UI. Given that the Korean giant is obviously determined to stay in control of its own core business, one wonders how the company will welcome Facebook Home into the family of Galaxy phones and phablets. Will it be a warm embrace, or will Samsung continually modify its software in order to keep Home one step behind?

More generally, Facebook has admitted that differences in Android implementations prevent the first release of Home from working on all Android phones. In order to achieve the coverage they’ll need to keep Google (and its Google+ social networking effort) at bay, Facebook could be sucked into a quagmire of development and support.

Last but not least, there’s Google’s reaction.

So far, we’ve heard little but mellifluous pablum from Google in response to Home. (Microsoft, on the other hand, quickly attempted to point out that they were first with an all-your-activities-friends-communications shell in Windows Phone but, in this game, Android is the new Windows and Microsoft is the Apple of the early 90’s.)

Google has shown that it can play nice with its competitors — as long as they aren’t actually competing on the same turf. The Mountain View company doesn’t mind making substantial ($1B or more) Traffic Acquisition payments to Apple because the two don’t compete in the Search and Advertising business. Facebook taking over an Android smartphone is another matter entirely. Google and Facebook are in the same game; they both crave access to user data.

Google could sit back and observe for a while, quantify Facebook’s actual takeover of Android phones, keep tabs on users’ reactions. Perhaps Home will be perceived as yet another walled garden with a massive handover of private data to Facebook.

But Google already sees trouble for its Android strategy.

Many Asian handset makers now adopt Android without including services such as Google Search, Gmail, and Google Maps, the all-important user data pumps. Samsung still uses many of these services but, having gained a leading role on the Android platform, it might demand more money for the user data it feeds to Google, or even fork the code.

In this context, Facebook Home could be perceived as yet another threat to the Android business model.

A number of possible responses come to mind.

In the computer industry, being annoyed or worse by “compatible” hardware or software isn’t new. As a result, the responses are well honed. You can keep changing the interface, thus making it difficult for the parasitic product to bite into its host and suck its blood (data, in this case), or you change the licensing terms.

Google could change or hide its APIs (Application Programming Interfaces) in order to limit Home’s functionality, or even prevent it from running at all (at least until a particularly nasty “bug” is fixed). Worse, Google could makes changes that cause the Facebook shell to still run, but poorly.

I’ll hasten to say that I doubt Google would do any of this deliberately — it would violate the company’s Don’t Be Evil ethos. But… accidents could happen, such as when a hapless Google engineer mistakenly captured Wifi data.

Seriously, FaceBook Home is yet another pick of the Android lock, a threat against Google’s core strategy that will have to be addressed, either with specific countermeasures or with more global changes in the platform’s monetization.

JLG@mondaynote.com

The Mobile Rogue Wave

 

Publishers are concerned: The shift to mobile advertising revenue is lagging way behind the transfer of users to smartphones and tablets. Solutions are coming, but it might take a while before mobile ads catch up with users.
(A mistake in the ad revenue chart has been corrected) 

Last week, at a self-congratulatory celebration held by the French audit bureau of circulation (called OJD), the sports daily l’Equipe was honored for the best progression in  mobile audience. (I’m also happy to mention that Les Echos, the business group I’m working for, won the award for the largest growth in overall circulation with a gain of +3.3% in 2012 — in a national market losing 3.8%.) In terms of mobile page views, l’Equipe is three times bigger than the largest national daily (Le Monde). Unfortunately, its publisher tarnished the end the ceremony a bit by saying [I'm paraphrasing]: “Well, thanks for the award. But let’s not fool ourselves. The half of our digital traffic that comes from mobile represents only 5% of our overall digital revenue. We better react quickly, otherwise we’ll be dead soon”. While that outburst triggered only reluctant applause, almost everyone in the audience agreed.

Two days before, IREP (an advertising economics research organization) released 2012 data on advertising revenue for all media. Here is a quick look:

All media........... €13,300m......-3.5% 
TV...................€3,300m.......-4.5%
Print press (all)....€3,209m.......-8.2%
National Dailies.....€233m........ -8.9%
Internet Display.....€646m.........+4.8%
Internet Search......€1,141m.......+7%
Mobile...............€43m.........+29%

A few comments:
— The print press is nosediving faster than ever: In 2011, national dailies where losing 3.7% in revenue; in 2012, they lost almost 9%; and Q1 2013 doesn’t look better.
— On the digital side: Search is now almost twice as big as the display ads and it’s growing faster (7% vs. 4.8%). Google is grabbing most of this growth as the €1.14bn in revenue mentioned by IREP is roughly the equivalent of Google’s revenue in France.
— Mobile revenue is the fastest growing segment (+29%), but weighs only 2% of the entire digital segment (€1,830m revenue in 2012).

Looking at audiences reveals an even bleaker picture. Data compiled by the French circulation bureau for 87 media show that, between February 2012 and February 2013, the mobile applications audience grew 67% in visits and 102% in page views — again, in a segment that only grew 29% for 2012:

The conclusion is dreadful. Not only do audiences massively flock to mobile (more visits), but people spend more time in their favorite media app (with an even greater increase in page views) but, also, each viewer brings less and less money as ad revenues grew slower than visits — by a factor of two — and slower than page views — by a factor of three.

At the same time, in order to address this shift in audience, media are allocating more and more resources to mobile: Apps gain in sophistication and have to run on a greater number of devices. By the end of this year, the iOS ecosystem, until recently the simplest to deal with, will have at least five different screen sizes, and Android dozens of possible configurations. To add insult to injury, mobile apps don’t allow cookies, which prevents most measurements and users tend to randomly switch from their mobile devices to their PC or tablet, making tracking even more difficult…

Where do we go from here?

Publishers have no choice but following their readers. But, in doing so, they better be smart and select the right vectors. The coming months and years are likely to see scores of experiments. Native applications, meaning dedicated to a given ecosystem, might not last forever. As for now, they still offer superior performance but web apps, served from the internet regardless of the terminal’s operating system, are gaining traction. They become more fluid, accommodate more functionalities and improve their storage of contents for offline reading, but it will be a while before they become mainstream. In addition, web apps allow permanent improvements; if you look at the version number of web apps, you’ll see publishers pushing new releases on a weekly basis. They do so at will, as opposed to begging Apple to speed up the approval of native applications (not to mention the absence of a direct link to the customer.)

Similarly, many publishers are placing serious bets on responsive design sites that dynamically adjust to the screen size (see a previous Monday Note on Atlantic’s excellent business site Quartz). Liquid design, as it is also called, is great in theory but extremely difficult to develop and the slightest change requires diving into hugely complex HTML code (which also makes pages heavier to download and render.)

Technically speaking, in a near future, as rendering engines and processors keep improving, the shift to the mobile will no longer be a problem. But solving the low yield of mobile advertising is another matter. The advertising community evangelizes the promises of Real-Time Bidding; RTB basically removes the Ken and Barbie from the transaction process as demand and supply are matched through automated market places. But RTB is also known to pushes assets prices further down. As usual in the digital ad business, the likely winner will be Google, along with a few smaller players — before these are eventually crushed by Google.

The mobile ecosystem will come up with smarter innovations. Some will involve geo-located advertising, but the concept, great in demo, has yet to prove its revenue potential. Data collected through various means are much potent vector to stimulate mobile ads. Facebook knows it only too well: in the last quarter of 2012, it made $305m in mobile ads (that’s more than five times the French mobile ad market… in one quarter!); it accounts for 23% of FB’s total revenue.

Other technologies look more farfetched but quite promising. This article in the MIT Technology Review features a company that could solve a major issue, that is following users as they jump from one device to another. Drawbridge, Inc. was founded by Kamakshi Sivaramakrishnan, a statistics and probability PhD from Stanford. Her pitch (see a video here): bridging smartphones, tablets and PCs thanks to what she calls a “giant statistical space-time data triangulation technique”. In plain English: a model that generates clusters (based on patterns of usage and collected data) that will be used to create a “match” pinpointing an individual’s collection of devices. The goal is giving advertisers the ability to easily extend their campaigns from PC to mobile terminals. A high potential indeed. It caught the interest of two major venture capital firms, Kleiner Perkins Caufield & Byers and Sequoia Capital, who together injected $20m in the startup. Drawbridge claims to have already bridged about 540 million devices (at a rate or 800 per minute!)

This could be one of the many boards used to ride the Mobile rogue wave and, for many players, avoid drowning.

–frederic.filloux@mondaynote.com

Growing Forces in Mobile

 

As seen last week in Barcelona, the mobile industry is red hot. The media sector will have to work harder to capture its share of that growth.

The 2013 edition of the Mobile World Congress held last week in Barcelona was as large as the biggest auto-show in the world: 1500 exhibitors and a crowd of 72,000 attendees from 200 countries. The mobile industry is roaring like never before. But the news media industry lags and will have to fight hard to stay in the game. Astonishingly, only two media companies deigned to show up: Pearson with its huge education business accounting for 75% of its 2012 revenue (vs. 7% for its Financial Times unit); and Agence France-Presse which is entering the customized application market. No other big media brand in sight, no trade organizations either. Apparently, the information sector is about to miss the mobile train.

Let’s begin with data that piqued my interest, from AT Kearney surveys for the GSM Association.

Individual mobile subscribers: In 2012, the worldwide number of mobile subscribers reached 3.2 billion. A billion subscribers was added in the last four years. As the world population is expected to grow by 1.1% per year between 2008 and 2017, the mobile sector enjoyed a 8.3% CAGR (Compound Annual Growth Rate) for the 2008-2012 period. For the 2012 – 2017 interval the expected CAGR is 4.2%. The 4 billion subscribers mark will be passed in 2018. By that time, 80% of the global population will be connected via a mobile device.

The rise of the machines. When machine-to-machine (M2M) connections are taken into account, growth becomes even more spectacular: In 2012, there were 6.8 billion active SIM cards, 3% of them being M2M connections. In 2017, there will be 9.7 billion active SIM cards and the share of M2M connections will account for 13% with almost 1.3 billion devices talking to each other.
The Asia-Pacific region will account for half of the connection growth, both for individual subscriptions and M2M.

We’ll now turn to stats that could benefit the media industry.

Mobile growth will be mostly driven by data usage. In 2012, the volume of data exchanged through mobile devices amounted to .9 exabytes per month (1 exabyte = 1bn gigabytes), this is more than the all preceding years combined! By 2017, it is expected to reach 11.2 exabytes, that’s a 66% CAGR!

A large part of this volume will come from the deployment of 4G (LTE) networks. Between now and 2017, deploying LTE technology will result in a 4X increase in connection speeds.

For the 2012 – 2017 period, bandwidth distribution is expected to grow as follows:

M2M:......... +89% 
Video:....... +75% 
Gaming:...... +62% 
Other data:...+55% 
File sharing: +34% 
VoIP:........ +34%

Obviously, the huge growth of video streaming (+75%) points to a great opportunity for the media industry as users will tend to watch news capsules on-the-go in the same way they today look at a mobile web sites or an app (these two will be part of the 55% annual growth).

The growing social mobility will also be an issue for news media. Here are the key figures for today in active mobile users

Facebook:...680m 
Twitter:....120m 
LinkedIn:....46m 
Foursquare:..30m

Still, as important as it is, social usage only accounts for 17 minutes per day, vs. 25 minutes for internet browsing and a mere 12 minutes for voice calls. Most likely, the growth of video will impact the use of social networks as Facebook collects more and more videos directly uploaded from smartphones.

A large part of this growth will be driven by the rise of inexpensive smartphones. Last week in Barcelona, the largest stand was obviously Samsung’s. But a huge crowd also gathered around Huawei or ZTE showing sophisticated Android-powered smartphones — at much lower prices. This came as a surprise to many westerners like me who don’t have access to these Chinese devices. And for emerging markets, Firefox is coming with a HTML5 operating system that looked surprisingly good.

In years to come, the growing number of operating systems, screen sizes and features will be a challenge. (At the MWC, the trend was definitely in favor of large screens, read this story in Engadget.) An entire hall was devoted to applications — and software aimed at producing apps in a more standardized, economical fashion. As a result, we might see three approaches to delivering contents on mobile:
– The simplest way will be mobile sites based on HTML5 and responsive design; more features will be embedded in web applications.
– The second stage will consist of semi-native apps, quickly produced using standardized tools, allowing fast updates and adaptations to a broad range of devices.
– The third way will involve expensive deep-coded native apps aimed at supporting sophisticated graphics; they will mainly be deployed by the gaming industry.

In upcoming Monday Notes, we will address two majors mobile industry trends not tied to the media industry: Connected Living (home-car-city), a sector likely to account for most machine-to-machine use; and digital education taking advantage of a happy combination of more affordable handsets and better bandwidth.

frederic.filloux@mondaynote.com