How Often Do Start-Ups Get a "Billion Dollar Valuation?"

With the impending Facebook initial public offering in the headlines, and an application merger and acquisition market that some would say it at least frothy, if not an actual "bubble," a bit of perspective probably is worth keeping.

Over the history of the institutional venture capital business (the past 40 years) the number of companies started every year that turn out to be worth billions sustainably is in the tens not the hundreds, according to venture capitalist Fred Wilson, of Union Square Ventures.

The phrase one sometimes hears is that many start-ups have "features," not potentially important "companies." Also the odds of great success when a firm is the fourth company in a space is arguably quite small.

It's hard to provide an order of magnitude better user experience or value in any market. It might be almost impossible in a new segment with multiple contestants. But soemthing like an order of magnitude "better" user experience is probably what wild success requires.

Intuit Expects $5.5 Trillion in Retail Mobile Payments Volume by about 2017

According to Intuit, the percentage of people who use mobile payments are expected to grow from 6.8 percent in 2009 to 21.3 percent in 2012. By 2016 or 2017, Intuit believes retail mobile payment volume could rise to about $5.5 trillion.

But it isn't at all clear who the provider "winners" will be. Mobile service providers, banks, payment networks, retailers, application providers and handset manufacturers are among the potential suppliers.


Intuit

Is Text Messaging Revenue About to Fall Off a Cliff?

Over the top messaging alternatives have been a growing concern in most European markets for some time. The issue is whether 2012 might now prove to be a watershed year, when use of text messaging went into a permanent reversal.

Consider that Telefonica's revenue from European operations during the first quarter of 2012 was down 6.6 percent, following a dip of seven percent in the fourth quarter of 2011.

The bright spots came in Telefonica's Latin American operations and mobile data services. But there are indicators of trouble, even there.

Telefonica’s first quarter 2012 report might indicate that even mobile services are not immune from economic troubles, and might also indicate a significant current impact from over the top messaging alternatives,  according to a report in Forbes.

Spain’s economy is contracting sharply, with consumer spending falling by double digits. That seems to be putting pressure on uptake of mobile broadband services and could be leading consumers to abandon carrier-provided text messaging services as well.

WhatsApp Messenger, for example, is the number-one paid app downloaded by consumers in scores of countries. In fact, some might speculate that 2012 will be a watershed year, an inflection point for consumer use of carrier-provided messaging in many countries.

Spanish mobile revenue declined by -10.7 percent year over year. That might be a signal as well. To be sure, the severe and apparently growing economic and financial crisis in Spain arguably is a huge driver of consumer behavior, but the shift in text messaging behavior might be something more.


To be sure, it is a virtual certainty that mobile voice and mobile messaging revenues are products like any other. That is to say, they will have a product life cycle featuring growth, maturity and then decline. 


The only issue is when the decline might begin. In Europe, we might find out soon. 

Search Goes "Mobile First"

Mobile local search volume will surpass desktop local search for the first time in 2015, according to BIA/Kelsey.

By 2016, the firm expects mobile local search to exceed desktop local search by more than 27 billion annual queries.

That matters for companies including Google whose business models rely on search advertising revenue.

Canadian Mobile Ops Plan Summer 2012 Mobile Payments Launch

Rogers, Bell Canada and Telus Corp. are reported to be in final talks to adopt a mobile payment platform, using the moniker EnStream, working with banks, by about mid-2012. The payment platform will ensure that retailers and banks have one unified system to work with, not three separate mobile systems.  

Canada’s banking industry seems poised to adopt new voluntary guidelines agreed upon by the banking industry, to work with Enstream. Those standards were agreed upon by the country’s largest banks at a meeting of the Canadian Bankers Association, and will set out rules for “how banks will operate in this new world,” The Globe and Mail reports. 


The voluntary guidelines, technically known as the "Mobile Reference Model," will serve as a blueprint for how mobile payment capabilities can be offered in the Canadian market, including guidelines around how information is exchanged among various parties to a transaction including financial institutions, payment card companies, telecommunications companies and merchants. 


While voluntary, the financial institutions that developed the guidelines are committed to these principles in the mobile market, and these guidelines are intended to create a path to help all market participants move forward in developing mobile payment solutions. 



Canada already has more mobile-ready contactless readers per capita than anywhere else in the world, with this type of reader installed in between 12 and 15 percent of all retail outlets, according to Almis Ledas, chief operating officer of EnStream.



The proposed business model will entail payment of flat annual fees to banks, allowing them to load a consumer's financial credentials on the subscriber information module inside a device enabled with near field communications.



That would allow the phone to replace a debit or credit card, but would not offer the phone company a cut of any transaction made using smart phones.

Is Apple TV Yet Ready to Revolutionize the Category?

Some doubt Apple is yet ready to create a revolutionary TV experience, as most observers think significant amounts of high-value bundled content would be necessary to recast and reshape the consumer television experience as much as Apple tends to prefer, whenever it enters a market.

One can tinker with the user interface, add cameras, make streaming content easier to integrate with other content sources (over the air, cable, satellite or telco TV). Perhaps Apple also can change the visual appeal of the device itself, as by turning the display into something that looks quite different.

A transparent screen would look very different. Still, many believe a truly-big change would have to involve content, the way iTunes drove the appeal of the iPod, or the App Store helps drive the appeal of the iPhone and iPad.

In the case of the iPad, one might argue Apple was able to see the changed nature of an untethered  computing device, optimized for content consumption and building on the touch interface. Earlier thinking about tablets had focused on "work" applications.

"Gesture" operations analogous to that used for video games also would be helpful. But all that taken together might not constitute the sort of breakthrough Apple typically seeks. That would require a new way to purchase content, not simply a new way to navigate or integrate sources.

LTE User Experience Depends on How Often You Default to 3G, if Only Episodically

Tests by Root Metrics illustrate potential end user experience of their Long Term Evolution device and network, and the real-world experience when accounting for the times the 4G network will default back to the 3G network. In a pure LTE comparison between AT&T and Verizon Wireless, AT&T had a slight edge in LTE throughput.

After including defaults back to 3G, Verizon Wireless had the better average performance.



Measured performance, when both LTE and default back to 3G was measured, gave an edge to Verizon Wireless in the 15 cities studied, Root Metrics Root Metrics reports.

3% of App Buyers Represent 20% of Spending

About 66 percent of app users have spent money on an application, but just three percent of buyers represent 20 percent of total spending, according to a U.S. consumer survey conducted by ABI Research. About 70 percent spend nothing or very little, the study suggests.

Among these paying users, the mean spend was $14 per month. But "averages" don't always represent the best and most accurate way to represent the data.

“The median amount among the consumers who spend money on apps is much lower than the average, just $7.50 per month," says ABI Research Senior Analyst Aapo Markkanen.

The obvious implication might be that most apps will not make money.

Showrooming a Bigger Problem for Best Buy than Target, Grocery and Department Stores

Consumers use their smart phones for shopping in different ways, depending on the type of store they are in, a Nielsen survey suggests. 

Mobile couponing (either using or requesting a coupon) is most popular at grocery stores (41 percent of mobile shoppers reported using coupons there), department stores (41 percent), and clothing stores (39 percent). 

Larger purchases, or more complex products additionally tend to drive research and comparison pricing behavior. 

At electronics stores, the vast majority of smartphone shoppers read reviews (73 percent), compare prices with other retail outlets (71 percent) and scan QR codes to get more product details (57 percent).

That might suggest that Target's concern about "showrooming," where consumers investigate products inside a retail store, but then compare prices and buy online, is less a concern for Target than for Best Buy, for example. 

The survey suggests that consumers will do a bit of work to get a coupon for an item that is easy to understand, probably has a lower retail price and might be a repeat or frequent purchase. Consumers are likely to do much more research, and compare prices, for more-expensive, more-complex and higher-priced items. 

Samsung Galaxy S III Battery Life Could be a Major Attraction

Battery life might be a major attraction for the new Samsungt Galaxy S III. In at least one recent battery test, the Samsung Galaxy S III worked for just over 10 hours for video and voice, rivaling some tablets.

Web browsing provided battery life a bit over five hours. Many claim an iPhone 4S can work for seven hours in a Web surfing mode.

Why Facebook Also has to go "Mobile First"

BTIG analyst Rich Greenfield notes that the biggest problem with Facebook is uncertainty about Facebook prospects in the area of mobile advertising, where Facebook has virtually zero market share at the moment.

To keep matters in perspective, the U.S. mobile advertising market is growing far faster than expected, but remains a smallish part of overall online advertising, or advertising in general. 

eMarketer estimates mobile advertising spending in the United States reached $1.45 billion in 2011, up 89 percent from $769.6 million in 2010. U.S. mobile ad spending probably will grow on the order of 80 percent to $2.61 billion in 2012.

But that remains a smallish number, compared to total U.S. advertising spend.

V.Me and PayPass Value, According to Visa and MasterCard

You can debate the different approaches now being taken by MasterCard and Visa in the mobile wallet area. What is less unclear is how each company sees value being delivered. A key emerging new factor is the role of the tablet, even though the smart phone will continue to be viewed as the primary retail payment device.

Is There a Mobile Broadband "Divide" That Cannot be Fixed Rapidly by the Market?

Policymakers, it might be argued, should try to solve real problems, not imagined problems.

Likewise, policymakers and regulators sometimes should be encouraged to avoid mucking about when key problems already are being resolved.

Sometimes, "doing nothing," or perhaps "not getting in the way" is the right course of action. That would seem to be the case for global mobile broadband services, despite the
contention of some International Telecommunication Union researchers that a big problem exists.

“As the broadband revolution unfolds, large segments of the world’s population are being left
behind,” the International Telecommunications Union argues. 


Oddly, other ITU data suggests that mobile broadband adoption is growing rapidly.



The ITU rightly suggests that “over five billion people have never experienced the Internet or have only experienced it through public or shared access, let alone experienced the Internet through broadband access.”



But the ITU also has said that a third of the world’s seven billion people now use the Internet. Over the last five years (2006 to 2011), developing countries have increased their share of the world’s total number of Internet users from 44 percent in 2006 to 62 percent in 2011.


The logical and natural implication is that as Internet usage gradually shifts to broadband modes, users in all markets also will shift their usage in the same direction.


In fact, mobile voice adoption accomplished in less than a decade what policymakers had fretted over for many decades, namely the issue of how to provide phone service to human beings in the developed world. That no longer is a significant issue, and the problem was solved with minimal action by global regulators.



The ITU notes that there are 5.9 billion mobile subscriptions now in use, representing mobile penetration of 87 percent overall and 79 percent in the developing world. The next issue will be broadband service, but the previous success with voice suggests the broadband problem is anything but insurmountable.



Mobile broadband subscriptions have grown 45 percent annually over the last four years and today there are twice as many mobile broadband as fixed broadband subscriptions. Though much of that activity occurs in the developed world, there is no particular reason to believe broadband will not be adopted rapidly in developing regions as well.



So the notion that people anywhere in the world “are being left behind” completely misses the rapid adoption of mobile services by all users, everywhere, at a pace regulators might have found “impossible.”



To be sure, broadband adoption has not yet reached the levels of mobile use. But few believe there is any fundamental reason why that will not continue to evolve at a rapid rate, everywhere.



It is one matter to note that, at the moment, “there is a wide disparity in broadband access around the world, both within countries and between countries.” It is quite another matter to make the argument that structural barriers are so significant that consumer demand and supplier cleverness cannot fill the gap quickly.


Without diminishing some important role for regulators in the telecommunications business, once again it seems regulators are far behind the curve.

How Strong is Demand for Mobile Wallets?

According to March 2012 panel-based research by marketing solutions agency Catapult, just one-quarter of U.S. consumers were at least somewhat interested in using a mobile wallet for in-store purchases.

A clear majority of 58 percent were not interested, including 41percent who reported a complete lack of interest, according to eMarketer.

None of that might mean too much. Interest as high as 25 percent, for a service few consumers actually an use, might be considered "strong" demand, early in a new product's emergence.

More important, people cannot evaluate any new product they have no experience with, one might argue. Only after a clear value proposition is understood can consumers "buy," which validates the market.

Many of us would argue early surveys do not tell us much of anything about the ultimate level of interest.

Why Service Providers, Like Other Marketers, Want "Younger" Customers

It long has been a staple of consumer marketing that it is important to gain young consumers because those purchasing habits will carry over as each demographic group naturally ages. Auto manufacturers, for example, have tried to work with a sort of transmission belt, where initial purchase of an affordable brand naturally progresses to more-profitable brands as those buyers grow older.

Whether or not the tactic works as well as it once did, there remain reasons why marketers still orient their campaigns and products around younger users. In the important global markets, the average age of a human being is lower than in developed regions.

That means the critical mass of current customers are younger, so it makes sense to focus on products that appeal to  younger consumers.  Outside of North America and Western Europe, the average population age is under 30 and in some cases under 25.