Smart Phones Really Are Content Consumption Devices

During the three-month average ending March 2012, 50 percent of U.S. mobile subscribers used downloaded applications on their mobile device, up about five percent from 47.6 percent during the three-month average ending December 2011, according to comScore. 


For the period, downloaded applications extended their lead in penetration over browsers, which were used by 49.3 percent of subscribers (up from 47.5 percent, quarter over quarter). 


Texting remained the most common activity, used by 74.3 percent of U.S. mobile subscribers, unchanged from the previous three-month period. 


In addition to apps, users also made significant use of music, gaming, social networking and browser interactions. 

Over the Tip is Like "Showrooming;" Best Buy and Target Responses are Like "Retail" and "Wholesale" in Telecom

Target is not happy about "showrooming," the practice whereby many consumers take a look at products, but then wind up buying that same merchandise online. Target now appears to be concerned enough about lost sales to Amazon that it will stop selling Kindles in May 2012.

Every firm has to decide what to do about competition, and Target seems to have no similar qualms about selling Apple tablets. In fact, Target is preparing to launch Apple Stores inside Target locations.

Since Target stores began selling Amazon's Kindle line back in 2010, and the Kindle Fire was even the retailer's best-selling tablet during Black Friday 2011.

The new deal with Apple is said to represent a "conflict of interest."  Target's move, in one sense, isn't unusual. Lots of distributors have special deals with certain suppliers, and Target might be betting it will make more money selling Apple tablets than Kindles. There might be clauses in the deal that require Target to remove Kindles. It just isn't clear.

But Target and Best Buy might be heading in opposite directions in dealing with "showrooming." Target has asked its suppliers for special "Target only" merchandise, for example, to limit "showrooming" impact. That might be likened to mobile phone "exclusives" offered by mobile service providers.

Best Buy, on the other hand, is mulling a shift in the opposite direction. Best Buy has, like Target expects to do, supported Apple mini-stores inside Best Buy locations for quite some time. But Best Buy might consider shifting even more fundamentally in that location, essentially allowing many other suppliers to rent space inside Best Buy as a primary revenue model.

In telecom terms, Target wants to remain a retail supplier, where Best Buy could move in the direction of a major reliance on a wholesale role in the value chain. Target's strategy is the more common approach in the communications business, where nearly all the money is made selling products directly to retail end users.

Best Buy might be considering a shift to a "Clearwire" style, wholesale-only strategy that is relatively uncommon in the communications business. Where the retail Target strategy rests on revenues created by end users, the wholesale strategy rests on sales of products to business partners.

Where Target is a business-to-consumer model, Best Buy might be contemplating a shift to a business-to-business model.

Is Cloud Computing Good or Bad for Telcos? "Yes" on Both Counts

It is far from easy to determine the complete impact of innovations such as PCs and tablets, broadband access and cloud computing on revenue streams of service providers. PCs obviously created demand for dial-up Internet access services, to the extent that email was a killer app for communicating PCs.

Tablets create demand for broadband connections, both fixed and mobile. But broadband-connected devices also allow enterprises and apps to create their own communications services and features.

Cloud computing likewise will create new requirements for connectivity, bandwidth and data center hosting. But cloud computing also enables the creation by people, apps and firms of cloud-based voice and messaging, in much the same way that businesses traditionally have used private branch exchanges to create their own voice services.

The point is that it is difficult to quantify all the gains and losses from cloud-based voice and messaging, from the standpoint of a communications service provider. Consider tt.One, a new platform being launched in North America by German-based mobile interaction specialist Tyntec.

The tt.One platform bridges the IP world of over-the-top apps with the telco world. The cloud-based solution gives businesses the power to integrate carrier voice, text messaging and mobile numbers into online services, applications and social networks.  

The service provides virtual mobile numbers that enable the two-way transmission of voice and SMS in multiple countries.

The tt.One service simplifies the complexities involved in integrating telecom services into a Web environment by virtualizing all of the core mobile communications capabilities into the cloud.

For example, Internet companies can provide mobile numbers to their users, enabling them to exchange SMS and voice calls, as well as making any device, such as an iPad, a mobile phone in WiFi areas.

U.S.-based Pinger uses tt.One in Germany for its free, device and carrier-independent voice and text service, and tyntec expects other OTT players with a desire to expand into Europe will follow.

So cloud-based voice and texting both grows usage while competing with established service provider offerings. Voice and text communications gain huge network effects, making both more valuable, but also compete with mobile service provider offerings.

The point is that cloud computing holds both upside and downside for service providers.

"Hybrid" Strategies Will be Common for Mobile Commerce Contestants

Transitional or hybrid strategies are emerging as an important staple of the mobile payments business. Stickers that add near field communications features for non-NFC phones are one example.

In other cases, new features are created that make use of existing payment infrastructure. Starbucks used its existing point of sale terminals and added bar code scanning to launch its branded mobile payments venture. PayPal is piggybacking its card mechanisms at Home Depot stores.

We are likely to see many more examples of such “bridging” strategies, even though some “greenfield” efforts such as Isis, Google Wallet or Visa mobile wallet services also will attempt to gain traction.

Barclaycard, for example,  has unveiled a stick-on credit card called "PayTag," which will sit on the back of a mobile phone (or any other item you carry everywhere) and then be used to make small, contactless payments using near field communications. The move illustrates some enduring issues with technology and services adoption.

First, what Barclay's is doing is not necessarily even "mobile payments," in one real sense. It is the sticker itself which communicates and represents the store of value. The phone is just a place to put the sticker.

The idea is to open mobile payments to Barclaycard's 12 million customers, even if their mobile phone is not equipped with an NFC chip, or not set up for contactless payments, or do not even use a mobile phone.

Right now, the sticker can be used to make payments of £15 and under, and it will rise to £20 in June 2012.

Second, the PayTag is probably a transitional strategy. That is a tactic often used when one era of technology is replaced by another. What is "hybrid fiber coax" but a bridge between an all copper network and an all-optical fiber network? What is a hybrid automobile? Why were existing sailing ships outfitted with steam boilers?

The point is that a proven strategy at times of fundamental change is to graft key elements of the coming technology to the existing way of doing things. It's a process Richard Foster, of Yale University, has written and talked about for decades.  

New technologies often cannot stand on their own in the marketplace, either because they are not initially cost competitive with the existing technologies, because the full ecosystem has not developed or because there is customer or other resistance of some sort.

There is nothing at all wrong with adopting a transitional strategy; it is a common way a next generation of technology displaces the former way of doing things. In this case, it means that even if you believe NFC ultimately will replace the credit card swipe, it will take some time. Taking an interim approach is better than doing nothing.

Third, the move by Barclay's to initially limit the transaction volume serve several purposes but also illustrates the existence of natural segments within the mobile payments business. At one level, the limitation protects Barclay's from unexpected financial losses.

At a higher level, the sticker approach, with a transaction volume limit, shows where several payment methods have a role. Where traditionally carrier billing has been used for small purchases of digital goods, other payment systems, including PayPal, credit, debit and prepaid cards also have been used to buy songs, game credits, stories, videos or other digital goods.

What many now are trying to figure out is how to use newer payment systems based on mobile devices, or associated with mobile devices, can be used to extend the range of payments for virtual and physical goods in the offline payments setting.

And at least initially, many of the early payment systems have been aimed at supporting small purchases. In the near term, that might be a reasonable approach for a number of reasons, including consumer unfamiliarity with the concept. The point is that it is one thing to get consumes to change behavior about small, casual payments. It is something else to get them to change behavior about larger transactions.

Nor is it yet clear whether distinct market segments for physical shopping and online or mobile purchases will continue to exist, though they are likely to be key market segments at first. Credit and debit cards, for example, seem to be used equally for online and physical store payments. But PayPal historically has been an online payment mechanism, and only now is PayPal attempting to become something that is used more universally.

Fourth, there are functional segments of the mobile payments market. Many systems essentially try to link the phone with a specific set of payment accounts, such as credit card, debit card, bank accounts, phone accounts, prepaid instruments or other stores of value. That makes the phone the payment instrument.

Others, such as Square, Intuit and PayPal, want to turn the phone into a cash register, allowing a standard credit, debit or prepaid card to be swiped. In that case, the mobile phone supports a point of sale terminal function for the merchant, rather than a payment mechanism for the buyer.

On the other hand, mobile wallet systems will try to piggyback on mobile payments to create new businesses based on advertising, marketing and loyalty. As Square uses the mobile phone to create a POS terminal business, so mobile wallet suppliers will use mobile payments to create new marketing, advertising and loyalty businesses.

Fifth, there are new possible roles within the ecosystem. The "trusted service manager," for example, to essentially create the networks of information required to sign up customers, ensure network interoperability and security, activate and deactivate services, manage databases and provide branding, for example. Think of the TSM as a new sort of "branded" network such as Visa or MasterCard, for example.

How Long Does Microsoft Have to Prevent Apple Dominance in Consumer Computing?

Microsoft Corp is investing $605 million over five years in Barnes & Noble new Nook e-reader and college book  business, in an effort to better compete with Amazon.com and Apple in the tablet computer market.

The move shows how important content stores have become in driving tablet sales, which clearly match the increasing role of computing devices as platforms for content. Beyond that important consideration, one might wonder whether Apple's growing strength in consumer electronics threatens to displace Microsoft's position in computing, at least in the consumer space.

The new touch-enabled Windows 8 operating system, and the inclusion of a Nook app on Windows tablets should allow them to compete with Apple's iPad and Amazon's Kindle Fire, some believe.

But the larger question is how much time Microsoft has before Apple's growing market share in a variety of consumer electronics categories threatens to relegate Microsoft to the sidelines in mobile phones, tablets, e-reading, music and other areas Apple hasn't attacked yet.

Though some will disagree, you can argue that Apple now leads the consumer electronics business, not only the computing business, while Microsoft has become more of an enterprise technology supplier.

Five years ago, in 2007, Microsoft reported quarterly revenue of $14.398 billion and  profit of $6.589 billion. In 2012, Microsoft’s revenue was $17.4 billion, while profit was $6.374 billion. The company is still growing, but not fast, and is less profitable.

The bigger story, though, is likely Apple.

Five years ago, in its first quarter of 2007, Apple revenue was $7.1 billion and profit was $1 billion,  the first quarter with a billion dollar profit in company history. In 2012, for the same quarter, Apple had $47 billion in revenue and $13 billion in profit.

The shift into different customer segments is not, in some ways, a surprise. Apple never has chased the enterprise market, preferring to sell directly to end users, and then watch enterprise sales grow as those users demanded the right to use their devices at work. You can say Apple has been the biggest beneficiary of "bring your own device" or "consumerization of IT" trends.

Workers now report using an average of four consumer devices and multiple third-party applications, such as social networking sites, in the course of their day, according to a study sponsored by Unisys.

Also, workers in the survey reported that they are using their own smartphones, laptops and mobile phones in the workplace at nearly twice the rate reported by employers.

In fact, 95 percent of respondents reported that they use at least one self-purchased device for work. Another big change is that where enterprise IT staffs used to assume they were responsible for training and supporting users on enterprise technology, these days many users simply will go ahead and train themselves to use tools they prefer. That also is a big change.

That "consumerization" of technology is quite a big shift. Decades ago, the pattern of technology diffusion was fairly straightforward. The latest new technology was purchased by large enterprises and large government entities.

Over time medium-sized businesses and organizations started to buy the same technology. Later, small businesses and organizations adopted the tools. Finally, some consumers 'brought the technology home' and used it as well.

All of that has changed over the last two decades. These days, many enterprise tools actually were brought into the enterprise by consumers who already had adopted the technology for home use.

The problem for Microsoft, and others, is that Apple increasingly is becoming a whole ecosystem in consumer electronics related to computing. And there is reason for all the others to worry. Apple's share in MP3 players, tablets and to some extent smart phones shows how hard it is to compete effectively with Apple, once a market is defined.

Some of us would argue that there is an iPod market, and then a smaller MP3 player market, an iPad market and then a separate tablet market, for example.

Samsung Takes Global Lead in Mobile Phone Share

Samsung displaced longtime mobile device market share leader Nokia as the world's top mobile phone vendor. According to International Data Corporation, vendors shipped 398.4 million units in the first quarter of 2012 compared to 404.3 million units in the first quarter of 2011.

Nokia has been the global market leader in total mobile phone shipments since the inception of IDC's Mobile Phone Tracker in 2004.

Samsung's ascension to the market's top spot is largely a reflection of its gains in the smart phone market over the past two years, said Kevin Restivo,  IDC senior research analyst.

Meanwhile, the worldwide smartphone market grew 42.5 percent year over year in the first quarter of 2012.

Top Five Worldwide Smartphone Vendors, Shipments, and Market Share, Q1 2012 (Units in Millions) 

Vendor	1Q12 Unit Shipments	1Q12 Market Share	1Q11 Unit Shipments	1Q11 Market Share	Year-over-year Change
Samsung	42.2	29.1%	11.5	11.3%	267.0%
Apple	35.1	24.2%	18.6	18.3%	88.7%
Nokia	11.9	8.2%	24.2	23.8%	-50.8%
Research In Motion	9.7	6.7%	13.8	13.6%	-29.7%
HTC	6.9	4.8%	9.0	8.9%	-23.3%
Others	39.1	27.0%	24.5	24.1%	59.6%
Total	144.9	100.0%	101.7	100.0%	42.5%

Apple Churn Impact: 6 to 8 Times the Normal Rate Around 4S Launch

A study by Consumer Intelligence Research Partners over the three-month period between December 2011 and February 2012 suggests that the Apple iPhone does play a role in churn.

About 18 percent of iPhone buyers over that period report they had an iPhone already, and switched carriers. The obvious flip side of that story is that 82 percent of iPhone buyers stuck with the same carrier and only switched devices.

Some 24 percent of new buyers said they switched from another type of device to an iPhone, and also switched carriers. That means 76 percent switched devices, but stayed with their original service providers.

Those statistics cover a three-month period during the launch of the 4S, so likely will not be so pronounced for latter periods.

That suggests the iPhone was a significant driver of churn away from carriers that do not sell the iPhone, if you assume that the 24 percent of new iPhone buyers switched carriers just to get the iPhone.

But 18 percent of new iPhone buyers already had an iPhone, but still switched carriers. Some would suggest that represents AT&T customers switching to Verizon Wireless.

Either set of statistics--18 percent or 24 percent churn--are significant. If you assume monthly churn of about one percent a month, then either rate represents monthly churn of perhaps six percent to eight percent. That is six to eight times higher than either firm typically experiences.

Also, Wal-Mart has emerged as an important sales channel for Apple iPads, a survey by Consumer Intelligence Research Partners has found. In the month of February 2012, Wal-Mart represented about 11 percent of sales. Best Buy sold 24 percent, Apple sold 26 percent.

As you might guess, retail stores operated by mobile service providers were a bigger channel for iPhones. Over a three-month period, from December 2011 to the end of February 2012,retail stores accounted for 76 percent of iPhone sales; online stores, 24 percent. When the iPhone 4S first launched, retail stores and online outlets accounted for 67 percent and 33 percent of sales, respectively, largely due to online orders.

How Much Further Could U.S. Mobile Market Consolidate?

Is the share of market now characteristic of the U.S. market sustainable? Most would say "no." Among the common observations is that two of the top four national providers have market share two to three times greater than two of the others.


Many observers would say a market with four national providers is about one too many for a sustainable and stable market.


Could one of the top four U.S. mobile service providers get 50-percent market share. In principle, "yes." But regulatory intervention cannot be discounted. Some observers think the U.S. mobile market already has become substantially non-competitive.


The Department of Justice, for example, recently opposed the acquisition of T-Mobile USA by AT&T, citing a standard methodology for determining the competitiveness of markets.

One of the ways to measure market concentration is the Heffindahl-Hirshman Index or HHI, often used as a measure of market concentration. The HHI is the square of the percentage market share of each firm summed over the largest 50 firms in a market. Here is the pre-merger market HHI which already suggests that the market is uncompetitive. HHI is the problem

For some of us who just want a quick rule of thumb that tells you when there is potential antitrust concern, 30 percent market share tends to work.That has been the figure cable TV executives in the United States have worried about, and which the Federal Communication Commission at one point set as the limit of subscriber market share for any U.S. cable operator. Both AT&T and Verizon Wireless already have market share that exceeds that figure.

 

The Justice Department will generally investigate any merger of firms in a market where the HHI exceeds 1,000 and will very likely challenge any merger if the HHI is greater than 1,800. With a HHI over 2,300 any deal will be heavily scrutinized and most likely rejected. Even a merger between T-Mobile USA and Sprint, with a resulting 28 percent market share, would probably not be allowed on the same antitrust grounds.

The competitive equilibrium point in the mobile industry seems to when the market shares of the top three providers are 46 percent, 29 percent and 18 percent, argues Chetan Sharma says. In any country, that "rule of three" seems to hold.

That roughly corresponds with a rule of thumb some of us learned about stable markets. The rule is that the top provider has twice the market share of the contestant in second place, while the number-two provider has about twice the market share of the number-three provider.

That suggests the U.S. mobile market still has room to change. At the moment, Verizon Wireless has perhaps 34 percent share, while AT&T has about 31 percent share. Classic theory would suggest the ultimate market share could approach a market with the top-three providers having a market share relationship something like 50:25:12.

That would have highly-significant implications for the four current providers that today represent 93 percent of all subscribers. One of the leading contestants reasonably could hope to grab half of the available market, while two of the contestants could face significant losses.


All that assumes regulatory action did not occur before that market structure was obtained, though.

Only 5% of iPads Used Outdoors; 90% of iPhone 4 Traffic is Generated Indoors as Well

The vast majority of mobile traffic from smart phones and tablets comes from indoor usage, a study from Actix has found found. Even most casual observers, reflecting on their own usage, might not be surprised by either finding.

By analyzing data from a live 3G network in a major city, Actix found that just five percent of Apple iPads are used outdoors. About 90 percent of iPhone 4 traffic and 80 percent of BlackBerry traffic likewise is produced indoors.

While iPads account for just one percent of data sessions, they use four times more data than an average 3G device. That would not surprise observers who know the usage patterns for mobile dongle-using devices such as PCs, compared to smart phones. An order of magnitude more usage is not unexpected for a dongle-connected PC, for example.

Why Mobile Commerce Will be Big

That mobile commerce is expected to grow so much is not too surprising, in context. Keep in mind that more people now have mobile subscriptions than electricity, safe drinking water, bank accounts, credit cards, TVs or PCs.

Looked at on a household basis, mobile spending now represents nearly half of household spending on communications and entertainment services.

 Since 2001, when fixed-line phone service was more than 65 percent of total subscription spending on communications and video services, fixed-line spending now has fallen to a bit over 25 percent. The percentage of video entertainment and broadband access spending also has been growing, Sharma says.

Annual state of_global_mobile_industry_2012_chetan_sharma_consulting

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Why Fiber to the Home Costs So Much

Up to 80 percent of the total broadband investment cost is related to civil infrastructure works, the European Commission says. Another way of putting matters is to say that as much of 80 percent of the cost of building fiber-to-customer networks is not affected in a positive way by Moore's Law.

The fact that computing power and storage keep getting more powerful and cheaper is helpful for application providers. But those improvements don't affect the cost of digging trenches, stringing cable and undertaking other forms of construction.

But that's only part of the problem. The other issue is that the financial return from any FTTH project is becoming more challenging in a competitive environment.

Is the investment case for fiber to the home networks getting more challenging? Yes, Rupert Wood, Analysys Mason principal analyst, has argued  A shift of revenue, attention and innovation to wireless networks is part of the reason. But the core business case for triple-play services also is becoming more challenging as well.

All of that suggests service providers will have to look outside the traditional end-user services area for sustainable growth. Many believe that will have to come in the form of services provided to business partners who can use network-provided information to support their own commerce and marketing efforts. Those partners might be application developers, content sites, ad networks, ad aggregators or other entities that can partner with service providers to add value to their existing business operations.

Current location, type of device, billing capabilities, payment systems, application programming interfaces and communication services, storage services, profile and presence information might be valuable in that regard.
 
Fiber to the home long has been touted by many as the "best," most "future proof" medium for fixed access networks, at least of the telco variety. But not by all. Investment analysts, virtually all cable and many telco excutives also have argued that "fiber to the home" costs too much.

Over the last decade or so, though, something new has happened. Innovation, access, usage and growth have shifted to wireless networks. None of that is helpful for the FTTH business case. That is not to say broadband access is anything but the foundation service of the future for a fixed-network service providers. Fixed networks in all likelihood always will provide orders of magnitude more usable bandwith than wireless networks.

The issue, though, is the cost of building new fiber networks, balanced against the expected financial returns.

“FTTH is often said to be ‘future-proof’, but the future appears to have veered off in a different direction,” says  Rupert Wood, Analysys Mason principal analyst. Regulatory uncertainty, the state of capital markets and executive decisions play a part in shaping the pace of fiber deployment. But saturation of end user demand now is becoming an issue as well.

The basic financial problems include competition from other contestants, which lowers the maximum penetration an operator can expect. FTTH has to be deployed, per location. But services will be sold to only some percentage of those locations. There is a stranded investment problem, in other words.

The other issue is that the triple-play services bundle is itself unstable. FTTH networks are not required to provide legacy voice services. In fact, the existing networks work fine for that purpose. One can argue that broadband is needed to provide the next generation of voice (VoIP or IP telephony), but demand for fixed-line voice has been dropping for a decade. So far, there is scant evidence that VoIP services offered in place of legacy voice have raised average revenue per user. Most observers would note the trend goes the other way: in the direction of lower prices.

And though entertainment video services offer a clear chance for telcos to gain market share at the expense of cable operators, there is at least some evidence that overall growth is stalling, limiting gains to market share wins.

Broadband access also is nearing saturation, though operators are offering higher-priced new tiers of service that could affect ARPU at some point. So the issue is that the business case for FTTH has to be carried by a declining service (voice), a possibly-mature service (video) and a nearly-mature service (broadband access).

And then there is wireless substitution. Fixed-line voice already is being cannibalized by mobile voice. Some observers now expect the same thing to start happening in broadband access, and many note new forms of video could displace some amount of entertainment video spending as well.

The fundamental contradiction is that continued investment in fixed-line networks, which is necessary over time, occurs in a context of essentially zero growth.

Atlantic-ACM, for example, now forecasts that U.S. wireline network revenue, overall, between now and 2015, will be flat at best. Compound annual growth rates, in fact, are forecast to be slightly negative, at about 0.3 percent. Where total industry revenue was about $345 billion in 2009. By 2015, revenue will be $337 billion, Atlantic-ACM predicts.

That is not to argue against replacement of aging networks; in fact that is a necessary and normal part of any network deployment. The issue is the declining amount of revenue any such network can generate.

"Overall consumer spend on telecoms has long since ceased to grow in developed economies," says Wood.

And though FTTH promises dramatically-higher bandwidth, demand is a bit uncertain at the moment. "Even though many cable operators have been offering superfast fixed broadband connectivity for some time in Europe and North America, take-up of such services remains troublingly low."

Aside from some early adopters, Wood argues, new services that uniquely take advantage of FTTH are needed. Industry executives are aware of that need, and have been for quite some time.

The issue is that the scale and pace of innovation in wireless now outstrips what is happening on the fixed line network. That makes the revenue upside for FTTH a tougher challenge. In some markets, cheaper copper-based alternatives might continue to make more sense, Wood argues.

That is particularly true in Europe, says Wood, where consumer willingness to pay a premium for additional bandwidth is low and where broadband prices are already significantly lower than in North America.

"This level of commitment to FTTH looks unsustainable and fundamentally unreasonable, especially when VDSL networks will pass far more households," says Wood. "We therefore expect telcos that have opted for FTTH roll-out beyond proof-of-concept trials and greenfield sites to back away from further commitment and, in some cases, reduce the scale of their FTTH roll-out plans."

So the strategic issue now would seem to be whether continued FTTH momentum can be sustained. It would be an unexpected turn of events, if it turns out Wood is correct.

What "Showrooming" Could Mean for Service Provider Strategy

Telcos facing steadily declining voice revenues, the historic driver of the largest part of their business, now face challenges similar to what Best Buy faces with online competition. As consumers switch to use of mobile phones as the primary way they "use" voice, their need to buy landline voice keeps dropping.

Likewise, consumers looking for the latest in gadgets increasingly buy from Amazon.com, though using Best Buy as a place to check out those products. That "showrooming" problem is not going away.

Some analysts think Best Buy's long-term future might rely on turning its business model upside-down and embracing showrooming, and there are glimmers of insight for telecom service providers as well.

The radical notion is that, Instead of selling electronics gear, Best Buy could gradually become a supplier of  instruction, service, support, connections, returns and pickup. All those things are tricky or less satisfying operations online, some argue.

In a communications service provider context, the analogy might be a shift to greater reliance on providing "big data mining" and support for third-party partners who want access to huge service provider audiences.

As Best Buy shifts to third-party services for consumer electronics manufacturers, becoming physical support locations for those partners, and de-emphasizing product sales, so telcos and mobile service providers could grow their "big data" service businesses.

Best Buy could embrace being a showroom, welcoming price-checking shoppers into the store to play with the latest electronic gadgets, then helping them buy online, even from another seller. As crazy as that might sound, Best Buy executives say they make more profit from electronics product supplier payments than from the sales of gear.

In a similar way, communications service providers might someday find they make more money from services sold to business partners than to end users. That isn't to say it would be easy. But there are precedents.

Retailers can lease space to third parties. Think Apple Stores that already are inside Best Buy. Telcos know about wholesale. It's the same concept.

ROI is Good, Measuring it Often is Quite Hard

Return on investment is an important measure. In marketing, though, it is notoriously difficult. Among the reasons is that most larger brands use multiple channels and touch points, but tend to measure and attribute returns based on a single channel. 

Many, for example, attribute sales to the "last-click" by a buyer, while some might atribute an ultimate sale to the "first click." Others, with channel partners at work, will recognize a sale as coming from that channel, essentially ignoring all the work done by all the other channels, or the touch points that might have contributed to a sale.

First-click and last-click attribution models are easiest to measure, but their use can over- or under-credit an ad format’s influence on conversion activity. 

For instance, February 2012 data from Adobe measuring revenue per visitor to US websites, broken down by attribution model, showed that search generated 38 percent more revenue when measured via first-click attribution than last-click. 

Social’s first-click slant was even more dramatic: 88 percent. 

Additional Q1 2012 findings from digital marketing firm RKG showed similar differences.

The point is that a "one-touchpoint experience" is atypical for internet users and not a good measure of digital effectiveness. Nor is that common for complex products sold to business customers, either. 

Questions About Prepaid Growth in U.S. Market

MetroPCS Communications and Leap Wireless International reported an abrupt slowdown in customer growth during what is traditionally their strongest quarter, raising concerns the sputtering U.S. economy is forcing more consumers to eschew prepaid wireless service or seek even cheaper options, the Wall Street Journal reports.

The trend also follows a more aggressive push by larger carriers, such as Sprint Nextel Corp.  and T-Mobile USA, to capture users at the lowest end of the market. It isn't yet entirely clear what combination of forces is at work. Perhaps T-Mobile USA and Sprint, or other prepaid providers, simply are taking more market share.

Tablet Ownership Will Grow 200% Next 2 Years

In the consumer market, tablet ownership will increase by 200 percent across the U.S. and Western European markets over the next two years, predicts Futuresource Consulting. The obvious question device suppliers will ask is "what does that mean for sales of other devices?"

Futuresource predicts that sales netbooks will be harmed, but some would argue that netbooks have been a declining product category for some years. Most consumers seem to see tablets as an addition to conventional PCs or Macs rather than a replacement. What might be less clear is the impact of tablet sales on notebooks, which many users now use as their "PC."

An installed base of nearly 52 million was achieved in 2011 across the two regions, with the market on track to exceed 153 million units in 2013. Ownership will be highest in the USA, with Western European markets showing significant opportunities for growth.