Amazon About to Overtake Best Buy Revenue

You might argue that Amazon's Kindle launch was an inflection point for Amazon e-commerce. The other observation is that Amazon is about to pass Best Buy in sales volume. Think Best Buy needs to hone its online strategy? Yup. the "big box" format no longer seems to be working so well for Best Buy. 


For some of us, though, the key point illustrated in this chart is not the sales volume, but the revenue inflection point. Whether there is only a correlation, or some "causation" is at work, the Kindle launch looks like a classic inflection point. 

Will Global Telecom Revenue in 2019 be Higher or Lower than in 2011?

Historically, global telecom revenue, with a few minor and temporary dips, has gone in just one direction: up. Given growth in developing regions such as India and China, a reasonable person might argue that the trend will remain in place, despite potential stresses in some regions.


Many observers still believe that is the most likely outcome, between now and 2020. Still, 
we are entering a period of unprecedented revenue uncertainty in regulated services, argues Alan Quayle. 


And that uncertainty seems to be causing a divergence of views about overall industry revenue. 


Surveying industry participants about what they expected, in terms of revenue sources and volumes between now and  2019, optimists expected revenue growth between one percent and 1.75 percent, with mobile and fixed data driving the bulk of the growth, while mobile voice remaining flat and fixed voice declining. That easily would pass for today's conventional wisdom. 


Optimists expect total regulated revenue of $1.6 trillion in 2019, a relatively sanguine outcome in a business with lots of challenges. 
                                                            
But there are pessimists who expect a flat revenue environment through about 2014, while others think revenues could decline by 2019 by about two percent, yielding annual global revenue of about $1.4 trillion. 


In either scenario, though, new and unregulated services are critical for future revenue growth. 


Unregulated revenue, in either the optimistic or pessimistic scenario, could be key. Quayle estimates that unregulated businesses will have three percent to six percent annual growth rates over the near term. 


On the other hand, mobile data will grow faster, at a six percent to nine percent range. Fixed network data revenues will grow at three to four percent annual rates in the near term. 


Mobile voice will be flat to up by about two percent annually, while landline voice will continue to contract at negative five percent annually to seven percent annually, over the next couple of years. 

Though the possibility of recessions in some regions is one source of uncertainty, there are structural trends of more importance. Over the top messaging will create revenue pressure for mobile service providers. 

For fixed network providers, mobile broadband increasingly will become a viable alternative to fixed network broadband, especially in market segments such as young singles, Quayle argues.

Long Term Evolution and family data plans are expected to accelerate this trend.

Market saturation and aggressive price competition from non-incumbent service providers will create pressure as well, especially in the mobile segments of the business. For fixed network providers, facing losses of voice accounts, the issue is not so much competition as shrinking demand. 

On the other hand, even in regions such as Western Europe that seem to face more pressure in mobile voice and messaging, much could hinge on service provider moves in the retail packaging area. One should not discount packaging innovations that boost revenue, though it might be reasonable to worry about profit margin on that higher gross revenue.

U.S. States Moving to End Universal Service

There are important regulatory developments regulatory developments occurring at the state level in the United States these days. 


In a significant development for the U.S. landline telecommunications business, states are passing or considering laws to end the requirement that phone companies provide "universal service" to every potential customer in competitive markets.


For anybody who has been in the telecom business for a while, that is a startling notion, though the practical implications, in an immediate sense, could vary, based on how each of the statutes are worded, and what service providers believe they can do in their local marketplaces.


Definitions might vary, but the Indiana version of the law defines what we might call effective competition as situations "where at least two other companies provide voice service, whether it's wired phone, Internet services such as Skype, or mobile access."


Indiana and Wisconsin are the two most recent states to end the requirement, and many others, including Alabama, Kentucky and Ohio, are considering it, USA Today reports.

European Mobile Operators are Retrenching

Deutsche Telekom is considering exiting its ventures in the UK and The Netherlands next year, according to sources who spoke to Financial Times Deutschland Deutsche Telekom is not alone. 


Other European mobile service providers, including KPN, for example, are looking to divest assets that now have become "non-core" holdings, though cross-border expansion has been an important growth strategy over the last couple of decades.


The "grow through acquisition" and "grow outside the footprint" strategies have been important for fixed network telcos and cable companies as well, for obvious reasons. The fastest way to gain revenue often is to "do what we do, in more places," or "buy an asset to get bigger." 


What has happened, though, is that it makes less sense to invest in highly competitive Western European mobile markets, and much more sense to invest in faster-growing markets in Eastern Europe and Central Europe, as well as other regions. 


DT originally had hoped to parlay its sale of T-Mobile USA into investment in Central Europe and Eastern Europe, for example. Having failed to do so, DT now must reinvest in the U.S. market where it trails AT&T, Verizon Wireless and Sprint, in precisely the sort of market it now wishes to avoid, namely highly-saturated developed markets. 


Though many believe DT still would eventually prefer to divest the U.S. assets, that seems unlikely in the near term. Regulators seem to have signaled that the U.S. mobile market already is not competitive enough, so none of the three larger national operators likely would be allowed to buy T-Mobile USA. 


Cable companies, in theory, might have been considered buyers, but a few key leading firms, including Comcast, Time Warner Cable and Cox Communications, seem to have decided to partner with Verizon Wireless, which takes them out of consideration as buyers. 


The larger point, though, is that a growth strategy that made sense a decade ago has ceased to make as much sense, given higher growth opportunities elsewhere. 

Telefonica Deal with Electronic Arts Shows Strategy

Telefonica Digital, the application development unit of the Spanish telco, has signed a content deal with Electronic Arts that will allow Telefonica to create application and service bundles Telefonica hopes will prove "stickier" with its customers than a strategy of relying on connectivity.

The contract allows Telefonica Digital to create promotions based around EA games including The Sims, FIFA and Monopoly, with the intention of turning the brand into a purchasing destination for any mobile customer, rather than a portal for those on the O2 network. Telefonica illustrates one way connectivity providers are looking at strategy.

Some service providers lean more towards emphasizing connectivity, while others want to embed more application content. The strategies are not mutually exclusive, but a metro Ethernet specialist, for example, will emphasize its "access" value almost exclusively. Retail telcos almost necessarily must emphasize applications.

Perhaps few telcos are as active as Telefonica in creating business units focused on content and apps, though.

For Consumers, 4G Means "Faster"

Consumers seem to understand the fourth generation network value proposition: speed. It is faster. They get that. What still is unclear is whether 4G some day might also mean "differentiated experience."

What 4G doesn't mean, at least not yet, is "new applications." That might not change for a while.

It took, by some reckoning, about a decade for 3G to enable an entirely new application, namely mobile broadband, though its backers consistently argued that 3G would be a platform for new apps.

Will ASP Business Rise Again?

The "application service provider" market crashed and burned between 1995 and 2000. But many expect ASPs could achieve success in a second iteration, based on "cloud computing and software and computing resources provided "as a service."


GIA predicts the global market for "application service provider hosting services" will reach $129.4 billion by 2017. It isn't immediately clear what portion of that revenue might potentially be captured by telecom or cable service providers, though "cloud computing" has clear and positive implications for service providers, in large part because cloud computing requires high-bandwidth Internet connections, both fixed and mobile. 

GIA defines the application service provider (ASP) as a third party business that hosts, organizes and deploys application software from centrally located servers through internet on a lease or rental contracts. 

The big issue, for would-be providers of cloud services, is how much traction any new provider can get, since, by most estimates, most of the revenue will be earned by retail "renting" of business and consumer apps that in past years would have been counted as revenue for the packaged software providers. 

Customer Relationship Management (CRM) and industry specific applications are expected to be the main ASP applications, for example.  Industry specific applications, also known as vertical applications, are expected to be key applications for ASPs. It is not clear whether the overwhelming bulk of that revenue will continue to be earned by independent software vendors (some believe that will continue to be the case), or whether new distributors can grab significant market share. 

Has All App Development Now Gone "Mobile First?" Must it?

Application development over the past decade has largely been a story of developing apps for the Web. In the recent past, developers would create "Web" apps first, then later, if there is traction, create a version for mobile devices, one might note.

These days, the process seems often to be reversed. Most of the activity is devoted to mobile apps, with Web versions following, if there is traction in the mobility arena first.

That might be more important in the coming decade, as fixed network broadband itself has stalled.

The "next billion" users primarily will interact with mobile apps and services, one might argue. And the first two billion users will continue to engage more with mobile apps than "Web" or fixed network apps and sites, as time passes, one might also argue.

In fact, researchers at the Pew Internet and American Life Project say fixed network broadband access has dropped, for the first time ever, since 2010.

U.S. Fixed Network Broadband Has Declined Since 2010

The U.S. broadband access adoption rate appears to have gone into reverse for the first time ever, starting in 2010, according to the Pew Internet & American Life Project.


Some 20 percent of U.S. adults do not buy Internet access services or use the Internet, according to the  Pew Internet and American Life Project.

Senior citizens, Spanish speakers, adults with less than a high school education, and those living in households earning less than $30,000 per year are the least likely adults to have Internet access.

The main reason they don’t go online is because they don’t think the Internet is relevant to them. Most have never used the Internet before, and don’t have anyone in their household who does use the Internet.

About 10 percent of the non-users indicated they were interested in using the Internet or email in the future.

But there have been big changes over the last decade. Internet access is no longer synonymous with going online with a desktop computer. About 63 percent of U.S. adults use wireless Internet access from a mobile device, notebook PC, tablet or e-book reader.

Perhaps more significantly, mobile Internet access has been a key enabler of Internet usage by users who traditionally have used the Internet less than average, Pew researchers say.

Among smartphone owners, young adults, minorities, those with no college experience, and those with lower household income levels are more likely than other groups to say that their phone is their main source of Internet access. Nor is there a racial divide, Pew reports. Both African Americans and English-speaking Latinos are as likely as “white” American adults  to own any sort of mobile phone, and are more likely to use their phones for a wider range of activities.

For some, the key finding is that broadband adoption, at least using fixed line facilities, has peaked. In fact, buying of fixed network broadband connections has gone negative since 2010. The reasons why that might have happened aren’t completely clear, though most observers might suggest people now are substituting wireless service for fixed network service, or disconnecting for financial reasons.

Mobile Marketing "Need" Higher for Consumer-Facing Businesses, Less So for B2B Firms

Why is mobile marketing so important to some businesses in 2012?

"After conducting many audits on our client’s websites, the biggest growth we have seen, without fail, for every single client, is the growth in mobile traffic," says Maya Mendoza of MilagroMobileMarketing.com.

But "mobile" depends on context. Many business-to-business sites still get the overwhelming amount of their traffic from PCs, even when a mobile website is available, suggesting that B2B users are working from desktops or notebooks, in a purposeful way, making a mobile site an asset that could represent only about two percent or so of total page views. B2B marketers might conclude that a mobile site is not absolutely necessary, for that reason.

Business-to-consumer retailers, on the other hand, especially in some segments, such as food, beverage or retail, might find they get a substantial amount of mobile traffic, especially of the location-based sort. That stands to reason. People frequently are out and about, and frequently buy coffee, soft drinks, snacks and meals. They frequently meet people in social settings. All of those activities mean a B2C business can find much of its traffic, and much of its "conversion" activity, coming from mobiles, compared to PCs.

The answer to the question "what should I do"? is not obvious, though. For restaurants and bars, it might be most important to focus on a presence on location-based services such as Yelp, not a mobile version of a standard website. In other cases, exposure on social networks might be a reasonable approach. The "start a mobile website" tactic might not produce as much "conversion" activity.

Facebook Makes "Offers" Really Social

Facebook's "Offers" illustrates one more way offers can become more "viral," in ways that many of the competitors will not be able to match.

"Offers" are a free new way for businesses to share discounts and promotions directly from a Facebook Page. They can be distributed through the news feed or promoted as sponsored stories. People can redeem offers using email or on a mobile device.

In many ways, the Facebook approach presents discounts and inducements the same way Groupon and others do, but in a format that makes more likely a "viral" spread of the offers, as all users stay "inside the Facebook context." Users do not have to leave Facebook to redeem or share offers.

But "redemption" also are automatically added to a user's "timeline." In other words, the redemption action itself becomes a data point or "story" on a user's timeline display. That is a major "social" element Groupon right now has no easy way of replicating.

The significance for Facebook is a better platform for its "offer" customers. Some users might like the easier ability to actively share an offer. For some observers, there now is a risk that Facebook, which has claimed to want to protect user experience, will start to populate feeds with "somebody took an offer" that might have low to negative value.

That isn't to say Facebook can avoid monetizing its data; it has to, to create sustaining revenue. But it's a trade-off. Offers will be potentially highly viral in new ways. But offer redemption also is going to start further cluttering feeds with content some users might find is just clutter.

How Fast is Long Term Evolution 4G in "Normal" Use

Mobile broadband as provided by AT&T and Verizon Wireless might be fast enough to suite the needs of some users, an analysis by RootMetrics suggests. Tests show typical downstream speeds between 13 Mbps and 14 Mbps, with upstream speeds in the 6 Mbps to 7.4 Mbps range, fast enough for lighter users to consider using mobile broadband as their only connection, Rootmetrics says.

The current usage caps will make mobile broadband supplied by LTE a likely poor choice as an exclusive access method for many multi-user households, or households watching lots of video, though.  Rootmetrics coverage maps 

What's an "App?" What's a "Platform?"

Facebook knows something about the difference between an app and a platform. You might say a platform is an app with monster traction. And that, apparently, was what Facebook saw in Instagram, a "viral" app that would amass an audience and user base so large it would become a platform.

Instagram raised $50 million at a $500 million valuation in the days after the app launched on Android, after first gaining attention as an iPhone app. Daily average users exploded at that point.

The Android adoption curve and the fundraising apparently suggested  to Mark Zuckerberg and Facebook that Instagram was going to be a well-funded, fast-growing competitor as a mobile platform.

Instagram's ability to become a new platform suggests why mobile apps now have similar business dynamics to traditional media, namely that the business opportunity occurs when content creates a big and engaged audience.

Also, an additional 30 million users, at a time when Facebook is about to become a public company, means placing a valuation on each additional user. At $30 per user, that's a serious bump in value.

Apple iPad Accounts for 90% of All Mobile Shopping in March 2012

In March 2012, Apple iPad users represented a whopping 68 percent of mobile shoppers, according to RichRelevance. Perhaps more important, the iPad accounts for 90 percent of all mobile revenue (and four percent of total retail revenue).

According to the study , iPad users spent significantly more time and money on retail sites than other mobile users. Apple iPad users spend dramatically more, on fewer items, than other mobile shoppers. When compared to online shoppers, iPad users spend approximately the same amount on an average order, but buy much more expensive products.

The iPad had the highest average order value (AOV) of any mobile device: $158 for iPad, compared to $105 for other mobile devices, and $104 for iPhone and other iOS devices.

AOV for iPad shopping also is higher than desktop shopping of $153. Overall, iPad shoppers averaged $52.66 per item, compared to $21.86 per item for desktop users and $23.80 for other mobile users.

Tablet OS Forecasts Overstate "Competition" with iPad

If Gartner forecasts are correct, one could argue that Android devices will be key contenders for Apple in the tablet market. That might not be the best way to characterize matters in 2016. If you look at tablet devices by manufacturers, Android suppliers likely will be highly fragmented.

If 2016 trends are anything like early 2012 figures, the Kindle Fire might be the only brand that actually has significant share, and it is positioned in a distinctly different part of the tablet market than the Apple iPad.


In 2011, there were about 7.7 million Android tablets sold, but 47 percent of those sales came in the fourth quarter of 2011, and 61 percent of all Android sales in that quarter were Kindle Fire devices.