Android: What's in it for Google

Why is Google so aggressive about giving away millions of copies of its royalty-free mobile operating system? It is expected to lead directly to mobile search revenue. Jeffries &Co. thinks Google mobile search revenue will cross the $500 million mark in 2011, up from roughly $180 million in 2009, for example.

Android devices will be available on all four leading U.S. mobile carriers in 2010, so the issue is how much penetration the Android operating system will be able to get.

Beyond what Android means for Google, the issue is what it means for the service providers selling devices powered by Android.

There is speculation that Verizon, for example, plans a major initiative centered around Android to battle the Apple iPhone. Verizon apparently has been mulling the value of getting the Apple iPhone, but might have decided to push Android devices and applications instead.

T-Mobile executives have to be wondering what they will do now that Verizon has positioned itself as a major proponent of Android, as T-Mobile had been touting Android early on as a differentiator.

But if all the top-four providers are selling Android devices, using the software to differentiate user experience might become key. Apple prefers to maintain a uniform interface. Android actually enables differentiated user interfaces. So the issue is whether Android supporters will be able to create end user experiences pitched to particular end user segments that are compelling enough to create viable device segments.

Twitter, social networking, Web browsing, email, voice and texting are examples of lead end user applications that have, or can be, the center of "application specific" device sales and usage modes.

Google expects to win by growing its ad business, no matter how many distinct new niches can be created.

4% of Users Account for 67% of Display Click Throughs

About eight percent of Internet users account for 85 percent of all clicks on Web ads, comScore reports. Just as significantly, just four percent of clickers account for 67 percent of all click through activity.

Predictably, there will be two major ways to look at the findings. The first is that online display ads "don't work." The second is that value is not captured by simple click through statistics.

The number of people who click on display ads in a month has fell from 32 percent of Internet users in July 2007 to16 percent in March 2009.

When first studied two years ago, about 3 percent of Internet users clicked on at least one display ad during the month. These clickers were segmented into heavy, moderate and light clicking segments.

In 2007 comScore, Starcom and Tacoda found that heavy clickers, representing six percent of U.S. Internet users, accounted for the top 50 percent of clicks. Moderate users, representing about 10 percent of Internet users, accounted for 30 percent of the clicks.

Light clickers, representing 20 percent of users, accounted for 16 percent of the clicks. By March 2009, those numbers had dropped substantially.

About four percent of Internet users in the most-recent survey would be considered "heavy" clickers. About four percent are moderate clickers. Some eight percent are light clickers.

The issue is what to make of the value of the 84 percent of Internet viewers who do not actually click on ads.

The results, comScore says, underscore the notion that, for most display ad campaigns, the click-through is not the most appropriate metric for evaluating campaign performance. Rather, advertisers should consider evaluating campaigns based on their view-through impact.

Other comScore research has shown that online display ads generate significant lift in trademark search, online and offline sales, and brand-site visitation across all verticals, among those internet users who were exposed to the online ad campaigns, whether they clicked on the ad or not.

“A click means nothing, earns no revenue and creates no brand equity," says John Lowell, Starcom USA SVP. “You want people to visit your website, seek more information, purchase a product, become a lead, keep your brand top of mind, learn something new, feel differently."

Regardless of whether the consumer clicked on an ad or not, the key is to determine how that ad unit influenced them to think, feel or do something they wouldn’t have done otherwise,” says Lowell.

Facebook, Twitter Growth Flattens

No tree grows to the sky, financial analysts are fond of saying, in predicting growth rates for popular new services, applications and device. Twitter and Facebook are no exceptions, it appears.

Somewhere in June 2009 Twitter stopped growing, according to data gathered by Compete. The same thing appears to have happened to Facebook at the same time.

The findings might be more significant for Twitter than Facebook, simply because Facebook has the larger user base, and therefore would have been expected to flatten out before Twitter. Twitter is several orders of magnitude smaller than Facebook.

In September, Twitter unique visitors fell by 0.17 percent, to 23,538,791, according to Compete. Facebook appears to gotten a bump in visits, but Twitter arguably dropped.

MySpace use dropped 11 percent while Bebo dropped 15 percent over the same peiod, so there possibly are some background changes. People might be switching social networks while others might be tiring of using them.

ShoZu Launches App Store

ShoZu Ltd has launched its App Store, where smartphone owners can purchase the ShoZu social media app for most major mobile operating systems. The store complements ShoZu’s availability at Apple’s App Store, Nokia’s OVI store and Research in Motion’s BlackBerry App World.

The ShoZu App Store currently offers the ShoZu app for BlackBerry, Windows Mobile and Nokia smartphones, as well as iPhones, with support for additional models and operating systems to be announced. The ShoZu App Store sells the app for the same price as the third-party app stores.

ShoZu describes itself as an intelligent social media hub allowing people to easily exchange video, pictures and commentary between mobile devices and favorite social networks, photo sharing sites and information resources.

The company’s technology provides fast, easy, one-click uploads of photos and video clips from the mobile to the Web, full-resolution photo and video delivery without compression. It also can push content to the phone and work in the background even if a connection is dropped.

Which User Segments are Most Likely to Switch to Prepaid?

Prepaid wireless has been on a tear of late, growing to 55 million U.S. users and about 17 percent of all U.S. wireless accounts in service. And though prepaid traditionally has been centered on "banking challenged," "low income" or "youth" market segments, that is starting to change as consumers from a wider range of segments seem to be opting for

Often thought of as a "consumer" option, one also has to wonder whether at least some business users might consider switching to prepaid, for at least some employee segments.

That, at least, is what Compass Intelligence thinks could be happening at smaller firms, for example. A recent change that could be driving such interest are new "unlimited" talk and texting plans from firms such as AT&T.

In a recent survey, Compass Intelligence found that a high percentage of respondents indicate plans to give new prepaid devices to one or more employees.

Another segment Compass Intelligence found was interested in prepaid plans are "larger families."  The larger the family, the more mobiles they currently use and the more likely they will replace postpaid wireless devices with prepaid options, Compass Intelligence says.

Users with multiple mobile devices also are more likely to indicate they plan to replace a postpaid wireless account with a prepaid option as compared to other segments.

About 11 percent of the respondents with three or more mobiles are willing to replace one or more of their postpaid mobiles with prepaid, while only three percent of the respondents with only one mobile device indicated plans to do so.

When adding a new device, 22 percent of respondents indicate they will add prepaid mobile.

The apparent relationship between prepaid demand and family size and number of devices is likely the result of U.S. consumers and businesses seeing wireless devices as "nice-to-have" items that are useful for more members of families and employees, along with the ability to limit financial exposure.

One of the advantages of prepaid service is that it can be terminated easily, allowing parents and business managers to quickly cut back on such service if necessary.

AT&T Launches New $60 Unlimited Prepay Plan

 AT&T has launched a new $60-a-month unlimited talk and text plan. AT&T's "Unlimited Talk and Text" plan for GoPhone is available October 12, 2009 and offers unlimited nationwide calling and unlimited texting to anyone in the United States, plus texting to Mexico, Canada and more than 100 other countries worldwide, for an additional fee.

“We recognize GoPhone customers have a need for unlimited calling or texting without the commitment of an annual contract,” says Judy Cavalieri, vice president of Prepaid Products for AT&T Mobility and Consumer Markets.

The prepaid offer comes without contract, and can be paid for completely "as you go" or as a monthly rate plan, without a contract, credit check or deposit.

The offer is evidence of a new level of competiton in the wireless prepaid business, which now is starting to compete more directly with postpaid offers. Handset limitations are emerging as the key difference between postpaid and prepaid offers, to an extent, not usage charges or even form of payment.

Lots of Changes in Mobile Business

"In our conversations over the past month, we noticed a potential shift in the relationships and economics between wireless carriers and video content providers," says Rajeev Chand, Rutberg & Co. managing director. And that might be the least of the changes of interest to end users.

"For example, several executives noted to us that certain U.S. carriers reduced or decoupled video content bundles from basic or unlimited data plans," he says. "The result has been a short-term reset in the video content provider economics: rather than carriers pay licensing fees for proprietary or bundled content, to assist in subscriber marketing and growth, carriers are paying licensing fees associated with separate video packages which have different consumer buying processes and patterns."

In other words, instead of using video content as a carrot to drive mobile broadband adoption, it is being marketed as a stand-alone application for which addtional fees are required. Oddly enough, at least some mobile operators might be concluding that it doesn't pay to encourage packaged video consumption, at least at lowish prices, especially when the additional load on networks is considered.

“The threat from over-the-top is now and has never been greater,” says Chand. For wireless carriers, the risk is greatest from the incumbent Internet firms, rather than the startup mobile Internet firms, as consumers know the incumbent brands and navigate directly to them.

In that regard, recent movement in the partnership area between Google and Verizon, and Google and Sprint, is interesting.

Though the potential trend will clarify only when a few more moves are made, it appears that AT&T and Verizon are moving in different directions in terms of mobile Web strategy. Sprint, meanwhile, seems to be taking an approach akin to that of Verizon.

The changes could reshape operating system market shares, strategic role of browsers and the ways "open" network platforms can lead to differentiated service experiences.

The potential shift of strategies has been brewing for some time, and perhaps the most-visible sign has been the debate about whether Verizon would embrace the Apple iPhone once AT&T exclusivity ends.

The equally important, but less visible piece of the puzzle is the development relationship Google already has struck up with Sprint Nextel and Clearwire. As part of those efforts, the Android operating system has gotten a boost.

But AT&T might be distancing itself from Google and turning to a range of partners usually more associated with European operators, from Opera to Nokia. That would explain the rather cryptic remarks overheard at the CTIA Wireless I.T. and Entertainment about Symbian "having a resurgence in the U.S. market."

That belief would be hard to explain in the absence of some major push by one of the major U.S. carriers to support Symbian-based devices and applications. Right now, the thinking seems to be that AT&T is considering such a move.

But it would likely be a mistake to characterize the shifts as merely instrumental or confined to market shares for various ecosystem participants.  The more important change is the differentiated end user experiences that would be possible.

Though details are sketchy at the moment, the new Google-Verizon collaboration might lead to a distinctive set of user interfaces, applications and devices optimized for the mobile Web, and for users with different key interests.

In the new scenario, carriers would be able to compete on differentiated experience, not just unique handsets, payment models, package elements or device features.

Though one line of thinking is that "open" networks will lead to service providers becoming "dumb pipes," the new approaches aim to create differentiated and packaged experiences that have service providers acting in a more traditional role.

As Verizon seems to be positioning its Google collaboration, the service provider would create Android devices carrying the operator's brand and software portfolio, though other Android devices with less integration also would be available.

What is intriguing here is the use of third party and open development, in conjunction with carrier packaging, to produce a flourishing of end user options. Instead of commodity-like devices with a a set look, feel and function, one might see devices optimized for particular end user verticals.

FCC Opens Inquiry into Google Voice Blocking

The Federal Communications Commission has opened an inquiry into Google Voice's call blocking of traffic to some high-cost numbers used by free conference calling services.

Google does not deny blocking access to those numbers, but argues it is a Web service offering an optional call connection service, and does not have a common carrier obligation to deliver calls to virtually any phone number.

AT&T obviously believes Google Voice has to terminate those calls, even though it is an application, not a common carrier provider of voice services.

Google says its phone management service isn't subject to common carrier telephone rules because it is free and consumers can use it only if they have a traditional telephone line.

AT&T and other carriers say they don't want to pay high access charges either, and do not believe any providers of termination services should be able to selectively block calls.

It isn't yet clear where the inquiry might lead, but it is another reminder that the regulatory framework that treats common carriers differently from application providers is intellectually incoherent.

The only issue is whether we are yet at a regulatory tipping point where some drastic revision is needed.

For at least three years, regulators have debated--without clear conclusion--where voice services over the Web fit in. Web services, which can include Skype, maybe Google Voice, and Comcast Digital Voice, are for now viewed as information services and not subject to the more heavily regulated treatment "service providers" are subjected to.

What is clear is that the old distinctions are becoming unworkable.

"Much as the FCC wishes there was still a clear distinction between 'the Internet' and 'the telephone network,' technology has obliterated that difference," Larry Downes, a non-resident fellow at the Stanford Law School Center of Internet and Society, notes.

He proposed the FCC wipe the slate clean: "Hold everyone to the same rules regardless of what information they are transporting-whether voice, video, television, data. Because regardless of who's doing what, these days it's all bits."

Such a sweeping reform necessarily would mean ending the way the nation now regulates cable TV, telephony and the Internet. That will ruffle lots of feathers, but it has been clear for some time that the differing regulatory frameworks increasingly are old of step with market realties.

To wit, we use one set of rules for "telcos," a different set of rules for "cable companies" and a third set for application providers, even when they offer similar, iidentical, overlapping or functionally similar services and applications.

"If it walks like a duck, talks like a duck, it's a duck" is a non-technical way of dscribing how the FCC traditionally has looked at resolving questions within the common carrier world. As more providers enter that business, but with different regulatory treatment, there has to be pressure to treat all ducks as ducks.

3% Consume 40% of Mobile Bandwidth, AT&T Says

The top three percent of smartphone users consume 40 percent of all mobile data bandwidth, says AT&T Mobility and Consumer Markets president Ralph de la Vega. Those three percent of users also consume 13 times the data of the average smart phone user, he adds. Another way of quantifying such usage is to note that users who consume 40 percent of AT&T's mobile data bandwidth constitutute just 0.9 percent of all AT&T postpaid mobile subscribers.

The point was clear enough: Without adequate management of network access, most customers will find their experience damaged because of a small number of other users.

There are legitimate public policy concerns about anti-competitive behavior in the wireless and wireline businesses where it comes to gatekeepers of any sort using that power to impair competition. But that is a different and distinct matter from the obvious need to manage shared network resources in ways that actually preserve reasonable access for all other users.

De la Vega used the word "crowd out" to describe such contention, and it is a legitimate issue. Anti-competitive actions certainly are to be protected against. But there are valid network resource managment issues that obviously have to be addressed as well, especially in the wireless domain.

Beyond that, there are valid reasons for wanting competition protected, but without stifling consumer access to new products that offer mass market customers features enterprise users take for granted, such as the ability to prioritize their own use of bandwidth to perserve performance of mission-critical applications. If any consumer end user wants to prioritize their own video, voice or other bits, they ought to be able to do so.

There is nothing anti-competitive about this, so long as any applications in the class can receive such prioritization. Consumer advocates are right to note that issues can arise if voice bits sold by the ISP can be prioritized, but not voice bits sold by other competing service providers.

Some approaches will work better than others, and that is an issue one would hope policymakers take seriously into account as new "neutrality" rules are crafted.

Telemedicine Spending to Approach $3.6 Billion Annually by 2014

Wireless service providers likely will be key beneficiaries of increased spending on tele-medicine services and devices will generate nearly $3.6 billion in annual revenue within the next five years, says Pike & Fischer Senior Analyst Tim Deal.

The need to control health care costs, along with the development and expansion of faster wireless broadband networks, smartphones, and data compression solutions, will drive the market growth, Deal says.

Wireless applications, devices, and services solutions will account for more than 70 percent of the total market spend within five years.

Driving that spending is the economic stimulus law that President Obama signed earlier this year. That initiative includes $20 billion for health information technology, with a specific focus on electronic medical records and telemedicine, Deal says.

"We project that at least 25 percent of the $20 billion in stimulus funds earmarked for health information technology will be applied toward broadband-enabled telemedicine services such as remote patient monitoring and mobile access to medical records, and consumer applications such as interactive fitness guides and mobile health-related videos," says Deal.

AT&T will have the largest presence in this market, followed closely by Verizon and Sprint Nextel, Deal projects.

AT&T Chief Warns About Heavy Users

The top three percent of smartphone users consume 40 percent of all mobile data bandwidth, says AT&T Mobility and Consumer Markets president Ralph de la Vega. Those three percent of users also consume 13 times the data of the average smart phone user, he adds. Another way of quantifying such usage is to note that users who consume 40 percent of AT&T's mobile data bandwidth constitutute just 0.9 percent of all AT&T postpaid mobile subscribers.

The point was clear enough: Without adequate management of network access, most customers will find their experience damaged because of a small number of other users.

There are legitimate public policy concerns about anti-competitive behavior in the wireless and wireline businesses where it comes to gatekeepers of any sort using that power to impair competition. But that is a different and distinct matter from the obvious need to manage shared network resources in ways that actually preserve reasonable access for all other users.

De la Vega used the word "crowd out" to describe such contention, and it is a legitimate issue. Anti-competitive actions certainly are to be protected against. But there are valid network resource managment issues that obviously have to be addressed as well, especially in the wireless domain.

Beyond that, there are valid reasons for wanting competition protected, but without stifling consumer access to new products that offer mass market customers features enterprise users take for granted, such as the ability to prioritize their own use of bandwidth to perserve performance of mission-critical applications. If any consumer end user wants to prioritize their own video, voice or other bits, they ought to be able to do so.

There is nothing anti-competitive about this, so long as any applications in the class can receive such prioritization. Consumer advocates are right to note that issues can arise if voice bits sold by the ISP can be prioritized, but not voice bits sold by other competing service providers.

Some approaches will work better than others, and that is an issue one would hope policymakers take seriously into account as new "neutrality" rules are crafted.

FCC Chair Promises More Mobile Spectrum

"What happens when every mobile user has an iPhone, a Palm Pre, a Blackberry Tour or whatever the next device is?" asks Federal Communications Commission Chairman Julius Genachowski."What happens when we quadruple the number of subscribers with mobile broadband on their laptops or netbooks?"

"The short answer: we will need a lot more spectrum," he says. So look for the FCC to explore ways to promote spectrum efficiency and use of Wi-Fi, for example.
 
"Wi-Fi allows carriers to offload to fixed broadband as much as 40 percent of traffic in the home, freeing up capacity of licensed spectrum," he says.

But even efficiency measures do not alleviate the need for more spectrum. So the FCC chairman says he will work on reallocating spectrum currently being used for other purposes.

U.S. Wireless Data Hits New High

Wireless data service revenues climbed to more than $19.4 billion for the first half of 2009, CTIA-The Wireless Association says. This represents a 31 percent increase over the first half of 2008. In addition, wireless data revenues were more than 25 percent of all wireless service revenues.

The survey also found that more than 246 million data-capable devices are in use, while more than 40 million of these devices are Ssmartphones or wireless-enabled PDAs. More than 10 million are wireless-enabled laptops, notebooks or aircards.

More than 740 billion text messages carried on carriers’ networks during the first half of 2009, roughly 4.1 billion messages per day. That’s nearly double the number from last year, when only 385 billion text messages were reported for the first half of 2008.

Wireless subscribers are also sending more pictures and other multi-media messages with their mobile devices—more than 10.3 billion MMS messages were reported for the first half of 2009, up from 4.7 billion in mid-year 2008.

As of June 2009, the industry survey recorded more than 276 million wireless users. This represents a year-over-year increase of nearly 14 million subscribers.

Wireless customers used more than 1.1 trillion minutes in the first half of 2009—breaking down to 6.4 billion minutes-of-use per day—and six-month wireless service revenues of nearly $76 billion.

Study Finds Consumers Do Not Want Targeted Ads

“Contrary to what many marketers claim, most adult Americans (66 percent) do not want marketers to tailor advertisements to their interests, s new study from the Annenberg School for Communication, University of California Berkeley School of Law and the Annenberg Public Policy Center suggests.

“Moreover, when Americans are informed of three common ways that marketers gather data about people in order to tailor ads, even higher percentages— between 73 percent and 86 percent—say they would not want such advertising,” the Annenberg study says.

Respondents showed somewhat more interest in receiving personalized discounts and news, but still, less than one-half of Americans wanted any tailored Web content at all.

That was true of consumers in every age group—even young adults ages 18 to 24 were more likely to say no to behavioral targeting than to accept it, except for discounts.

More than two thirds of respondents to the Annenberg/Berkeley study felt they had lost control over their personal information. At the same time, however, they believed businesses handled their data well and that they were already protected by current regulations.

One suspects the responses might be different if consumers are asked whether they would be willing to receive tailored messages in exchange for some other tangible benefit, such as lower Internet access costs, free text or lower-cost voice, discounts or other tangible benefits.

The precedent is TV commercials. Just about everybody says they do not like commercials. But if asked whether they would rather watch TV without commercials, if the cost were higher, most people then say they will choose an ad-supported service.

New AT&T Mobile Browser

AT&T has developed its own mobile browser, providing customers three windows to the Web. From the homepage, users can easily browse the global Internet as well as assign bookmarks and shortcuts or set other preferences so they have quick access to their favorite content.

A second window gives users location-aware local news and weather; one-click results for nearby restaurants, nightlife venues, ATMs and other points of interest; and access to maps, driving directions and traffic information.

A third window delivers the latest headlines from popular news, sports and entertainment sites.

Additionally, customers accessing att.net from their PC can customize their mobile att.net page by sending shortcuts to popular Web sites through a "Send to Mobile" feature.

"The new browser powering the att.net service brings the best of the open Web to consumer feature phones while making the mainstay of the mobile Web easy to find and also delivering local tools and bookmarking management," says Ted Woodbery, vice president of Wireless Data, Voice and Ancillary Products for AT&T Mobility and Consumer Markets.

The custom browser suggests one way service providers can optimize mobile Web experiences for users by making navigation easier. AT&T also is introducing new phones late this fall, including the Samsung "Flight," which features both a touchscreen and a QWERTY keypad.