Less VC Investment, More Progress in Mobile

Though venture capitalists are investing far less money in mobile companies in 2011 than they did in 2000, most of the payoff from two decades of investments will come over the next decade.

In other words, though it is possible less money will be invested by VCs in start ups in 2010 to 2019 than was invested fromn 2000 to 2009, the economic and social impact will undoubtedly be greater in the latter period, than in the former period.

One major reason is simply that the essential background environment, including processor power, cost of memory, cost of application development and adoption of broadband is qualitatively different

In 2000, for example, the total number of U.S. broadband lines totalled 7.1 million, according to the Federal Communications Commission. In 2011, that number is about 86 million to 87 million. About 84 percent of U.S. homes using the Internet do so using broadband connections.

In 2000 there were about 97 million U.S. mobile accounts in service. In 2011 there were 323 million U.S. mobile accounts in service. More significantly, few mobile users had smart phones, or broadband data connections in 2000, and nobody had a faster 4G connection.

Those physical limitations of devices, access speeds and users mean that what was possible in 2000 was simply an order or magnitude, or two orders of magnitude, worse than what is possible in 2011.

In fact, looking only investment with only a five-year lens, investment levels are up. Over a longer 10-year period, though, investments are down sharply. So 2009 was not a turning point for venture capital in the mobile space, though it might appear so, looking only at the 2006 to 2010 period. 

 

Still, one might argue that much of the investment 10 years ago was “too early,” with much of the infrastructure required to support a huge mobile transformation of business, commerce, entertainment and content simply too undeveloped.

In 2000, the sum of equity invested in the wireless industry peaked at $3.79 billion, according to The MoneyTree Report by PwC and the National Venture Capital Association.

And 2011 investment is likely to be lower than 2010. The average amount invested between 2000 and 2010 was $1.18 billion a year. But not since 2007 has equity invested even passed $1 billion. Mobile investment up or down? 

Also, the rapid rise of the iPhone, iPad and other mobile devices has fueled a mad rush of venture funding into consumer-facing mobile companies, rather than enterprise apps.

During the 2011 first half, according to Rutberg & Co., venture capitalists invested $3 billion into 358 mobile companies, with $960 million going to the “media and applications” sector, defined as social networks, mobile games, mobile advertising, app platforms, news aggregation, photo sharing and group messaging.

VC investment in enterprise mobile companies has been more tepid. According to Rutberg, VCs invested just $254 million into “enterprise IT” mobile companies over the same span. Consumer investments more popular

Keep in mind that venture capital is only one source of investment in mobile initiatives, with arguably more investment being made by established ecosystem participants, ranging from firms such as Google and Apple to RIM, Nokia, HTC and mobile service providers.

"We are in the beginning of a 10-year cycle in which mobile computing will reshape the way consumers live and businesses operate," wrote Rutberg researchers in their July 2011 mobile report. "PC Internet is a ‘dress rehearsal' for what will come with mobile, and the unforeseen applications in mobile computing will exceed those from the Internet thus far."
Mobile decade coming

Mobile commerce will be one expression of the change, as will the subsidiary mobile payment, mobile wallet, mobile remittance, mobile shopping, mobile promotion and mobile advertising businesses.

Netflix Gains Viewership in 2011, Hulu Loses, Amazon Up

Netflix continues to lead all streaming services in viewership, and would appear to have a huge lead where it comes to "subscription streaming" revenue. Many of the sites create revenue by showing ads, or even more indirectly by "gluing" a subscriber to some other service, such as a video subscription service.

AT&T Cash Will Not Help T-Mobile USA

The $3 billion cash payment AT&T has to pay to Deutsche Telekom as part of a break-up fee for the collapse of the deal whereby AT&T was to buy T-Mobile USA will not help T-Mobile USA at all. All of that cash will be used by parent Deutsche Telekom to pay down debt. 

As part of the break-up fee, T-Mobile USA will receive a large package of  mobile spectrum in 128 “Cellular Market Areas,” including 12 of the top 20 markets (Los Angeles, Dallas, Houston, Atlanta, Washington, Boston, San Francisco, Phoenix, San Diego, Denver, Baltimore and Seattle).
 
Likely of greater immediate importance is a seven-year roaming agreement that will allow T-Mobile USA to improve its footprint significantly. Population coverage will increase from 230 million potential customers at present to 280 million.

As a result of the agreement with AT&T, coverage will be extended to many regions of the United States in which T-Mobile USA previously had neither its own high-speed mobile communications network nor the associated roaming agreements. AT&T cash won't help T-Mobile USA

The cash component of the break-up fee directly reduces Deutsche Telekom’s net debt, thereby by strengthening the financial performance indicators affecting the company’s rating.

Amazon weighed buying RIM

Research In Motion Ltd apparently has turned down takeover overtures from Amazon.com and other potential buyers because the BlackBerry maker prefers to fix its problems on its own, according to a report by Reuters. 


Amazon reportedly hired an investment bank this summer to review a potential merger with RIM, but it did not make a formal offer. It is not clear whether informal discussions between Amazon and RIM ever led to specific price talk, or who else had approached RIM about a takeover. Amazon weighed buying RIM

That such ideas were considered shows how volatile the mobile space has gotten recently, as content providers, video entertainment companies, many consumer electronics manufacturers, advertising concerns, banks, transaction processors and retailers ponder the growing, and in many cases, strategic role mobility is playing across a broad range of industries. 


For Amazon, the draw likely was a way to get its services and content onto smart phones, as Amazon now is able to leverage tablet screens to support its e-commerce and e-content initiatives. 


Some might speculate that RIM's patents could have been interesting, as well. Patents have become increasingly important in the smart phone business, and any future move by Amazon in that direction might well be on surer footing if Amazon could acquire both a patent portfolio and an existing manufacturing capability, brand awareness and customer base. 

Cable Operator Competition Puts Pressure on Other CLECs

Some years ago, I recall having a conversation with an experienced veteran executive in the competitive local exchange carrier industry, who was convinced cable operators would not prove a threat in the CLEC business, a point of view I never have agreed with. 

To be fair, the executive at the time was running a CLEC that focused more on multiple-site businesses than single-site organizations. 

You can argue that both points of view are correct, that cable companies have indeed proven successful in the small business segment (perhaps 16 voice lines or fewer), but have yet to make an assault on the mid-market or enterprise segments of the market. Cable ops have succeeded in small business market

Integra Telecom, the Portland, Ore.-based CLEC that had in the past focused primarily on smaller accounts, might agree that cable companies are indeed a threat. In fact, Integra Telecom now hopes to focus most of its attention on larger customers. 

Integra Telecom revenues, which peaked at $683 million in 2008, fell to $616 million in 2010, in part because of continuing impact of the Great Recession and in part because some smaller businesses went out of business.

But company executives would also say that new competitive threats from rivals including Comcast Corp. were a key factor.

So Integra began targeting larger customers. Integra Telecom's challenges not unique 

That same decision-making context is certain to affect other CLECs, and sales partners for CLECs, as cable operators now only continue to show they are effective in the small business market, but as they slowly gear up to tackle larger accounts as well. 

Unless you believe the deal Comcast, Cox Communications, Time Warner Cable and Bright House Networks have to resell Verizon services is somehow invalidated by regulatory authorities, those cable operators now have many of the tools they will need to succeed in sales of products to larger organizations, not limited to wireless services. 

NFC Hype About to Crash

At some point, overly-optimistic near-term expectations for near field communications payments will diminish, if Gartner is correct.


The reason is that NFC was in mid-2011 at the peak of a hype cycle, which typically means a crash of expectations.


So get ready for a change of public thinking about NFC, with a shift to other apps NFC can enable.


All of that is reasonable thinking, but also will be driven by what Gartner expects will be an inevitable (albeit temporary) collapse of expectations about what NFC can accomplish in the near term.


"When it comes to payments, NFC doesn’t yet offer sufficient convenience to persuade consumers to change their habits," says Thomas Husson, Gartner analyst. "Swiping a credit card instead of waving it is not fundamentally different: You still have to enter your PIN for security reasons."


"The real game-changer is to add value before and after the transaction, enabling consumers to discover offerings via contextualized coupons and to explore new product and service information, and enabling companies to engage with consumers by providing loyalty points and rewards after buying a product," he says.


We agree. NFC is just one of the many technologies that can be plugged into a broader digital wallet strategy.  NFC payment a part of broader wallet value

"Latency" Applies to Marketing, Not Just Communications

Marketing in the Internet age is affected at every level by dramatically lower “information latency.”

Engineers typically measure latency as a matter of time delay, such as the lag between the time a message is launched, and the time a message is received. But the concept also seems to describe the nature of marketing in an Internet age.

For information consumers, latency might be viewed as the total time elapsed for a plane trip, door to door, for example. No matter how many other passengers might be traveling on a particular route, on a particular day, there is some minimum elapsed time to get from point A to point B. That is consumer-experienced latency.

There is a different meaning for a consumer than for a producer, though. From the point of view of flight operations personnel, latency is an entirely different matter.

It is true that the amount of time spent in the air, getting from one airport to another, is affected by headwinds, flight control operations or congestion in the take off or landing patterns that are out of any producer’s control.

But many elements are within a producer’s control, to a certain extent, such as time to clean a plane once it has landed, time to refuel, passenger and cargo loading time, for example.

In a marketing context, consumer-experienced latency is the time it takes to learn enough about how to solve a particular problem to reach a firm buying decision. From a producer point of view, latency is the time it takes to provide information to such prospects at every stage of the consideration process.

Consider only the matter of getting “catalog” information to potential customers. In the past catalogs were printed and mailed at relatively high cost, with information aging every step of the way until the time a prospect actually used a catalog to check an item’s availability or price.

That had meant an information latency issue that was compounded by an accuracy issue, as prices and availability for large catalogs begin to drift out of conformity to reality for months before potential buyers were even able to view such catalogs.

In the age of the Internet, all that is outmoded. Catalogs ought to be, and often are, updated nearly in real time, with information latency a matter of hours to days when a producer decision has been made. Internet information sources now have collapsed latency, both in terms of time and cost.

From a consumer perspective, information latency likewise has compressed. Nobody has to ask for a catalog or wait for delivery. The information often is only “clicks away.”

A decade ago, we might have described the rise of “infomediaries,” agents that work on behalf of consumers to help them take control over information gathered about them for use by marketers and advertisers.

The concept of the infomediary was first suggested by McKinsey consultants and professors John Hagel III, and Marc Singer in their book  Networth.

The idea is not much heard of in 2011, but in some reasons that is because software increasingly acts as an infomediary. Real simple syndication feeds, Facebook, Google+ and LinkedIn feeds provide examples. what is an infomediary?

Price comparison apps and daily deals programs are other examples in the consumer space.

The marketing point is that software “agents” now widely assist prospects and buyers in gathering information directly related to products they buy. All of that means the fundamental change in marketing has been consistently in the direction of lower latency over time.

AT&T Emphasizes Spectrum Policy

In announcing the end of its effort to acquire T-Mobile USA, AT&T again emphasized the need for access to "additional spectrum" as a continuing issue, including AT&T's pending acquisition of spectrum from Qualcomm.

“Adding capacity to meet these needs will require policymakers to do two things," said AT&T CEO Randall Stephenson. "First, in the near term, they should allow the free markets to work so that additional spectrum is available to meet the immediate needs of the U.S. wireless industry, including expeditiously approving our acquisition of unused Qualcomm spectrum currently pending before the FCC."

"Second, policymakers should enact legislation to meet our nation’s longer-term spectrum needs," Stephenson said. AT&T abandons effort to buyT-Mobile USA 

PayPal Getting into Daily Deals Business

PayPal says it is getting into the daily deals business, competing with firms such as Groupon,  LivingSocial and Google in the daily deals space. That move should ratify thinking that such "coupon" businesses have a direct relationship to mobile wallet and payments businesses.

The company will make its first foray into mobile deals in the first quarter of 2012, partnering with some of the top 200 U.S. merchants, PayPal President Scott Thompson said.

PayPal is chasing a daily coupon market that may more than double to $4.17 billion by 2015, according to research firm BIA/Kelsey. PayPal to get into deals business

AT&T drops bid for T-Mobile

It's over: AT&T has formally abandoned its effort to buy T-Mobile USA. AT&T already had booked a $4 billion charge, representing the breakup fee to be paid to T-Mobile USA for a failed acquisition attempt. AT&T drops bid for T-Mobile

Deutsche Telekom, the parent of T-Mobile USA, now will be looking at other options to make liquid some of its U.S. operations, for the simple reason that it needs the cash to build out Long Term Evolution networks elsewhere.

We also should expect a new round of activity by firms looking to partner or invest in T-Mobile USA as well. Presumably those new suitors are investors who have complementary assets, such as spectrum assets that could help T-Mobile USA create an LTE network, while giving the new investors access to the skills a mobile service provider possesses.

T-Mobile USA's problems include lack of spectrum for a fourth-generation network, customer churn, lack of access to the Apple iPhone, and competition both from the "premium" providers AT&T and Verizon Wireless at the "top" of the market and lower-cost prepaid providers from below.

Sprint has somewhat similar problems, being much smaller than either AT&T Wireless or Verizon Wireless and less well positioned financially.

Technology Industry Faces Major Disruption

The technology industry is in the midst of a huge wave of growth, innovation and disruption, driven in large part by mobile devices and the "cloud social graph," causing huge challenges for incumbents of every sort, including Intel, Microsoft and Research in Motion, for example.

Google, Apple, Facebook, Samsung and others such as Amazon are taking over, argues Jean-Louis Gassée. Technology disruptions 

The Top 20 iPhone And iPad Apps of 2011

From social magazines to music discovery apps to console-quality games that players can hold in the palms of their hands, there are hundreds of new titles in the iTunes App Store that will inform, organize, and entertain virtually anyone who owns an iOS device.

Here are 20 of the best iOS applications of 2011, according to Techcrunch. The Top 20 iPhone And iPad Apps of 2011

Flipboard arguably has been the most-significant consumer content consumption app.

Top 10 Feed & RSS Technologies of 2011

News and activity feeds have become increasingly important ways people keep track of news, issues, products and people they care about.

Here's one list of 10 important feed tools. Top 10 Feed Technologies of 2011

"Percolate turns brands into curators," the company says. Marketers might be able to use the service to discover feeds full of content and then distribute those feeds to Percolate users. to consume.

Feedly.com is designed to run on mobiles, tablets or PCs. 

Cross motion sensing and analytics and you'd get Shopper Tracker

If you combined Kinect, the Microsoft motion-sensing device, plus Google Analytics, the dashboard for website usage statistics, you'd understand Shopper Tracker.

Shopper Tracker uses spatial recognition software, heat sensors and proprietary algorithms to analyze customer movements, such as which store shelves are most popular, which items are most touched, which taken and then put back. Spying on Your Buying



Shopper Tracker: tracking real world conversions like web analytics

Technology Reshapes Software, Marketing

One often hears it said that "content marketing" has "been around forever" in the form of newsletters, brochures and custom publishing. So what accounts for the explosion of interest in "content marketing" now?

One way or the other, though it would be a mistake to attribute everything to widespread changes in technology, that would seem to be the best answer. 


In the software business, it often is said that dramatic changes in computing technology now mean a new start-up can launch with about 10 percent of the capital investment required a decade ago. Dramatically lower startup costs


In fact, some venture capitalists say underlying computing costs, resulting from a combination of lower hardware and software tools, mean a software company can be launched for 10 percent of what would have been required in 2000. Venture capitalist Mark Suster says that when he built his first company in 1999 it cost $2.5 million in infrastructure just to get started and another $2.5 million in team costs to code, launch, manage, market and sell our software.



“So it’s not surprising that typical “A rounds” of venture capital were $5 to $10 million,” Suster says. “We had to buy Oracle database licenses, UNIX servers, a Sun Solaris operating system, Web servers, load balancers, EMC storage, disk mirrors for redundancy and had to commit to a year-long hosting agreement at places such as Exodus.”



With the introduction of open-source software, most notably what was called the “LAMP” stack, including Linux (operating system), Apache (Web server software), MySQL (instead of Oracle) and PHP.



“Suddenly infrastructure software was nearly free,” he notes. “We paid 10 percent of the normal costs for the software and that money was for software support.” The point is that a 90-percent disruption in cost spawns innovation. Infrastructure costs 90 percent lower


At the risk of oversimplifying matters, those same technology trends explain why content marketing has gained new prominence.



You may not be able to afford to buy a television network, but nothing's stopping you from creating your own YouTube channel, the argument legitimately can be made.



The cost of launching a newspaper or magazine is prohibitive, not to mention risky. But blogs can be set up for free or very affordably. And every trend in media represents a vast multiplication of channels and sources. All mass medium have been fragmenting for decades, starting with cable TV, then satellite radio, then, most importantly, Web-based media.



Consider the role of “search.” Some 90 percent or more of buying decisions begin with a Web search. Throughout the purchase cycle, users are searching for information, recommendations, research, reviews, authority and credibility.



And once they find the information they seek, they're sharing it with others involved in the purchase decision: a friend, a spouse, a colleague, or their boss, or perhaps they're throwing that information out to a trusted network to vet it, or to validate their position in the decision-making process. Why PR is Poised to Own Content Marketing


Now you can add tablets and smart phones to the list of reasons why fragmented media environments, explosive amounts of new content and always-with-you content consumption devices mean the role of content in all marketing processes has suddenly assumed such new importance.



Not only is it harder to get attention, and keep it, the cost of “going direct” to the audience, without using gatekeepers, is easier than ever. It would not be inappropriate to argue that technology platforms are the fundamental enablers for content marketing’s rise, as technology advances likewise account for new global interest in mobile payments, mobile wallets, mobile commerce and mobile banking.



Marketing, no less than telecommunications, television, audio, print media, banking and retailing are being reshaped and disrupted by fundamental technology changes.