Smart Phones Influence 6% of Retail Sales?

Almost half of U.K. smart phone owners have used their device to research product information before or during a shopping trip, according to new research from Deloitte Digital.

Those results might suggest that six percent of in-store retail sales are being influenced by smart phone use. That would be almost double the value of direct purchases made through mobiles, which are estimated at about £8 billion in 2012.

By 2016, more than 80 percent of consumers are expected to own a smart phone and Deloitte estimates that between 15 percent and 18 percent of in-store sales will be smart phone-influenced, equivalent to £35 billion to  £ 43 billion.

Smart phone usage also appears to increase the conversion rates for retailers. Some 74 percent of shoppers that visited a retailer’s mobile website or app during their most recent shopping trip made a purchase.

Some might suggest that the results are "soft," since any number of shopping influences contribute to any retail purchase, and it always is wrong to attribute 100 percent of the influence to just the final input, or most visible input, or most easily measured possible input to any decision.

Mobile is particularly popular in the electronics sector, influencing 10 percent of U.K. store sales and is predicted to increase to 30 percent of sales by 2016.  

Convenience stores and supermarkets are less affected, with only 2.9 percent and 3.8 percent of sales influenced, respectively.  

There is a dramatic difference between use of mobile for bill payments, though, compared to retail, in-store payments, as you might suspect would be the case at an early stage of mobile payments development in retail settings.

Some 64 percent of smart phone owners have used their device to make a bank payment or pay a bill, but just one percent have used their phone to make an in-store payment, Deloitte Digital says.

These figures are mirrored by similar conducted by Deloitte’s retail practice in the United States.  The Deloitte U.S. data suggests that mobiles influence about five percent of retail sales. Deloitte forecasts that by 2016, smart phones are likely to influence between 17 percent and 21 percent of U.S. retail purchases, equating to $628 billion to $782 billion in sales.

Europe Cloud Adoption Not Following Classic Pattern

Technology diffusion often follows a pattern. In the past, innovations were born in university computer labs, then commercialized for large enterprises, before migrating into the mid-market, and finally small business.

At some point innovations would move into the consumer market. 

That pattern has been upended. These days, innovations still tend to be born in universities, but then tend to be commercialized first in the consumer market, before being adopted by business users. 

There also are geography patterns in technology diffusion, as well.  In the past, early tech adopters in Europe tended to cluster in the United Kingdom and the Scandinavian countries, with innovations then moving to other countries. 

But cloud computing seems not to be following that pattern. “Normally the path leads from the UK to the Nordic countries and then goes south to the Mediterranean countries,” said IDC Research Director Mette Ahorlu. “That’s not clear in cloud."

Southern Europe is struggling economically but we see some indication that they see cloud as a way to catch up,” she said. 

In other cases, the lower investment hurdles might be driving the interest. Given the financial and economic troubles in Spain, Greece and Italy, for example, users might prefer the lower  cost profile for cloud solutions that obviate the need for capital investments. Geographically, the United States will remain the largest public cloud services market, followed by Western Europe and Asia/Pacific (excluding Japan),IDCsays.

But the fastest growth in public IT services spending will be in the emerging markets, which will see its collective share nearly double by 2016 when it will account for almost 30 percent of net new public IT cloud services spending growth.

Perhaps something of the same trend is at work in those regions, where access to high-end computing services, without the need to invest capital, is proving attractive. 

Tablet Shipments Up 56% by End of 2012

Booming tablet shipments of devices in several form factors will drive a robust 56 percent annual increase in shipments for the tablet display market in 2012, according to  IHS iSuppli.

Shipments of tablet displays in 2012 are projected to reach 126.6 million units, up from 82.1 million units in 2011. 

U.S. Fixed Network Broadband Adoption is 90%

New consumer research from Leichtman Research Group suggests that nearly 90 percent of U.S. households that use a laptop or desktop computer at home currently subscribe to a broadband Internet service.

Five years ago, 65 percent of households with a computer subscribed to a broadband service. That is a functionally reasonable indication that the fixed network broadband access business is saturated.

Some 91 percent of all households with annual incomes over $50,000 subscribe to a broadband service at home, compared to 68 percent of households with incomes of $30,000-$50,000, and 47 percent of households with incomes under $30,000.

The obvious implication for many will be that lower-income households want, but cannot afford, fixed network broadband. That is only partially true.

Keep in mind that 41 percent of households with annual incomes under $30,000 do not have use computer at home, compared to just three percent of households with incomes over $50,000. In other words, many lower income households simply do not use computers, so naturally demand for fixed network broadband is lower than it is for higher-income households. 

Annual Household Income	Use a Computer at Home	Internet at Home	Broadband at Home
Under $30,000	59%	52%	47%
$30,000-$50,000	84%	78%	68%
Over $50,000	97%	97%	91%

Is Mobile Payment Window of Opportunity Closing? If so, Where?

Some might argue that mobile service providers in emerging markets could relatively easily capture much of the the $120 billion to $130 billion mobile payments opportunity.

There is legitimate reason to believe the potential is there. In many emerging markets, where the banking infrastructure is undeveloped, the ability to use a mobile device as a virtual “branch bank” location is a winning and obvious proposition.

According to Gartner, the total value of mobile payments transactions will reach $600 billion by 2016, up from $170 billion in 2012.

Delta Partners argues that the market potential is about $12 trillion. Total fee revenue, some believe, could reach $250 billion, but banks and payment networks will capture most of it, Delta Partners argues.

“We estimate the global revenue that all mobile payments service providers can achieve is approximately $120-130 billion,” Delta Partners argues.

But 90 percent of this revenue will be generated in sophisticated and developed markets. That implies a developing market opportunity for mobile operatorsof about $40 billion to 50 billion, which is equivalent to four percent to five percent of total mobile operators’ revenues.

The point is that the window of opportunity for most mobile service providers is either closed or closing fast. Banks, Visa and MasterCard now are driving electronic payments growth across the world, Delta Partners argues.

While emerging markets operators may consider bypassing the banks, the developed and sophisticated markets operators need to build partnerships with financial-sector players in order to offer the full value proposition and to comply with commercial banking regulatory requirements.

“Sophisticated markets”  account for close to one billion people, Delta Partners says. The key value in such markets is replacing the traditional wallet.

“Developed markets” have a population of around four billion. Cash is still the main means of payment although payment card penetration is increasing. There the opportunity to drive electronic payments becomes a key objective for M-Payments providers. This cluster is represented by sizeable nations such as Brazil, Russia, India, China, South Africa, South Korea, Turkey, Poland, Malaysia, Indonesia, Thailand, Kazakhstan, Colombia and Saudi Arabia. These countries have 1.4 billion adults with bank accounts, 0.25 billion credit card owners and more than 1 billion Internet users.

“Emerging markets” have a population of around two billion. In these markets, less than 40 percent of adults have bank accounts. There are 0.4 billion people with bank accounts, less than 0.1 billion with credit cards and 0.4 billion Internet users.

Actual cash transfers are the big oportunity is markets such as Mozambique, Tanzania, Kenya, Uganda, Ghana, Nigeria, Angola, DRC, Pakistan, Ethiopia, Sudan, Syria, Iraq, Iran, Bangladesh, Mexico and Philippines.

Small, Medium Business Remains a Fragmented Opportunity

Telcos are not the top choice of small and medium businesses for information technology solutions in Western Europe, but as always, no single supplier segment dominates. That means the SMB market will continue to be contested, with any number of logical suppliers. 

Granted, communications service suppliers are viewed as more logical suppliers for "communications" services, but with the shift to cloud, mobile and managed services, it is logical to argue that the potential for access providers is growing, not decreasing. 

 

AT&T Still Has to Do Something About its Rural Fixed Line Assets

AT&T senior executive VP and CFO John Stephens says AT&T could have a solution for what to do with its rural wireline assets by the end of the year.

The T-Mobile USA acquisition presumably would have helped AT&T "fix" its rural broadband problem by allowing greater use of wireless broadband access to augment fixed network access. 

Fundamentally, the two options are to upgrade the rural lines, probably using new digital subscriber line technology, or divest the lines. Some might argue AT&T would rather divest, but the issue is what entity could be a willing buyer, with the desire and the cash to do so. 

Some might argue that AT&T would be better off simply divesting, if that can be done. 

Google and Apple Might Have 98% Market Share This Year

Equity analyst Trip Chowdhry of Global  Equities Research predicts that Google and Apple will capture 98 percent of the worldwide mobile market by the end of 2012. As for who is in third place, Chowdhry is blunt: "There will not be any third spot left."

The forecast is not a "wild" prediction, by any means. IDC's  figures for worldwide smart phone unit sales and market share in the second quarter of 2012 show that Android had 68.1 percent share, while iOS (Apple Inc.’s iPhone) had 16.9 percent share, for a total of 85 percent share between the two firms.

BlackBerry (Research in Motion Ltd.) had 4.8 percent share. Symbian (mostly used by Nokia Corp.) had 4.4 percent share. 

Windows had 3.5 percent share while Linux had 2.3 percent share.

Big New Markets, Such as Mobile Advertising, are Tough to Crack

Big new markets do not automatically translate into big profits for ecosystem participants in those new markets. That’s just one of the problems application and service providers face in new businesses such as mobile advertising, which just about any observer would say represents a huge growth opportunity.

Publishers have seen what happened to display advertising on the web: As more and more ad space was controlled by auction-based marketplaces, the excess supply drove down prices. So it has become hard for publishers to make profits selling web ads.

It might be reasonable to suggest that large publishers likewise will not want to subject their inventory to auction mechanisms, and will try to sell direct, a method that can maintain higher profit margins.

One might argue that will leave the mobile advertising networks with only the cheapest, least-demanded inventory available. At least so far, there is some evidence that mobile ad networks are not having an especially easy time.

In the first quarter of 2012, Velti had revenues of $51.8 million bur a loss of $8.8 million.
Millennial Media had revenue of $32.9 million and a loss of $5.3 million.

Augme had revenue of $5 million and a loss of $7.5 million.  Hipcricket, now owned by Augme, had revenue of $3.4 million and had a loss of $5 million.

Only Opera, which makes most of its money from browser-related ads, had revenue of $47 million and a profit of $11.4 million. Keep in mind, though, that Opera makes $7 million in mobile advertising.

Similarly, you might argue that telcos have had very mixed success with their efforts to create mobile app stores and important, widely-used over the top apps, as big as “apps” have become.
Most really successful apps generally are created by third parties these days. But that doesn’t mean all telcos will stop trying to move up the value chain.

Telefónica Digital is perhaps the best example of a tier-one global telco trying very hard to create important new apps, something Telefónica hinted at when it acquired Jajah.

Telefónica Digital  already has launched a VoIP platform called “TuMe,” constructed out of the JahJah acquisition, which provides free calls and messaging between members. Tu Me has no direct revenue model, at the moment, but is envisioned as a possibly important out of market growth platform.

“TuGo” is coming next. ,TuGo users will be able to move their mobile number into the cloud, using a service that routes incoming calls to whatever device they happen to be using as well as supporting outgoing calls from that device to any phone, but billed to the customer’s own account.

TuGo redefines the customer: they are no longer subscribing to a mobile telephone service, they're subscribing to a phone number which will drift between mobile and fixed networks as best suits them. In coming iterations of the service, Telefónica envisions the abilty to create entirely new 
personalities and functions for any smart phone using HTML5 capabilities.




No matter, the search for new business models and revenue streams will continue as an urgent priority, as voice revenues are declining.

Square Raises $200 Million in New Funding

Square has raised $200 million in new funding from Citi Ventures, Rizvi Traverse Management, and Starbucks Coffee Company.

One year ago, Square had approximately 150 employees and processed over $1 billion in payments on an annualized basis. Today, Square has over 400 employees and is processing over $8 billion in payments on an annualized basis.

The funding round values Square at $3.25 billion. In an indirect way, the valuation and Square's success shows why mobile service providers believe "payments" could be a large and substantial business.


The issue is whether it can become a large and substantial business for service providers. 

By 2014, 10-15% of Social Media Reviews to Be Fake

Consumer use of social media ratings and reviews will see enterprise spending on paid social media ratings and reviews increase, making up 10 to 15 percent of all reviews by 2014, according to Gartner. In other words, brands will create "fake" positive reviews. Lawsuits will follow.

Southeast Asia Mobile Phone Sales Up 24%

In the last twelve months, 118 million mobile phones were sold across the seven key markets in the Southeast Asia region (Singapore, Malaysia, Thailand, Indonesia, Vietnam, Cambodia and the Philippines), representing $13.7 billion in device revenue, according to GfK Asia.

Some 10 million feature phones were purchased, about 12 percent more than a year ago.

The rate of smart phone purchases increased by 78 percent across the seven countries.

Though feature phones still are prevalent, smart phone sales are growing at rates between 42 percent and 326 percent, ” said Gerard Tan, GfK Asia account director.

Indonesia is the region’s largest smart phone market, with smart phone sales growing 56 percent. In the Philippines, smart phone sales grew 326 percent.

"Unlike the more developed countries like Singapore and Malaysia, smart phone sales in Thailand and Vietnam are still relatively low at 19 and 11 percent respectively.

AT&T Sets Sales Record For iPhone 5

AT&T says it set a sales record with iPhone 5 over the weekend of Sept. 15 and 16, 2012, making it the fastest-selling iPhone the company has ever offered. Customers ordered more iPhones from AT&T than any previous model both on its first day of pre-orders and over the weekend.

That probably won't surprise very many people. But at least some observers have argued that the iPhone 5 would not break sales records in the U.S. market, however well it might do elsewhere. 

"The iPhone 5," NPD Group analyst Stephen Baker has argued, will launch into a U.S. smart phone market that is increasingly mature. A recent analysis by NPD estimated total growth in the U.S. market was just nine percent in the second quarter, and all that growth was the result of the increased prevalence of prepaid devices in the market.

Others might note that the NPD Group measures only U.S. retail sales, while Apple sells all over the world. In fact, of the 37 million iPhones it sold in the December quarter last year -- the first that included the iPhone 4S -- nearly half (17 million) were purchased outside the United States. 

In other words, NPD might be right about U.S. sales, but wrong globally. 

Service Providers Becoming "Irrelevant?"

Matthew Key, CEO of Telefónica’s Digital division, has argued that mobile operators must invest in innovation, because they are becoming “commoditized” and their relevance to customers is “decreasing.” That is an uncontroversial statement, these days. 

Still, it is more unusual to hear an industry executive argue that service providers face becoming "irrelevant" to consumers. 

Key said mobile operators must “change the business model” otherwise they will soon become “irrelevant” as customers increasingly use services such as Skype, BlackBerry Messenger and WhatsApp, which allow them to communicate without spending money on texts or voice calls.

“The ecosystem is changing, our relevance to customers is decreasing, we have to admit that," he said. 

Of course, that's precisely why Telefónica, which owns mobile operator O2, set up the new "Digital" division in September 2011, to develop new products and services that create new customer value.

That is not to say access providers are becoming "unnecessary." To the contrary, access to the Internet now has become a virtual requirement. 

The danger is that one access provider's service is indistinguishable from any other access provider's service. Virtually everybody needs access, but it doesn't make very much difference which specific service is purchased or used. 

So almost all the thinking has to be about other ways to create value, around applications and services that include a need for network features and services. But big questions remain, namely which opportunities are big enough, and realistic enough, to be grasped by service providers. 

When starting a new business, a good bit of advice is to choose a business that offers a large opportunity, rather than a small opportunity. All other things being equal, a similar investment of effort will produce larger returns if the market opportunity is larger. 

That is one reason tier-one service providers around the world, taking a look at growth opportunities, are looking at advertising, banking and machine-to-machine initiatives. Some might include cloud computing businesses among the top possible new areas as well. 

The small list results because there are relatively few new lines of business a large service provider can enter that will provide sufficiently-large revenues to justify the effort. You might also note that all those efforts rely extensively on mobile networks and devices, with the possible and partial exception of cloud computing. 

One reason there now is growing activity around retail payments, loyalty, advertising and marketing is that the opportunity is so large. 

John Donahoe, eBay CEO,  points out that e-commerce is a $325 billion market, while retail is a $10 trillion business. That means virtually every function and business that supports retail commerce is an order of magnitude bigger than the e-commerce equivalent. 

The key these days is that the line between shopping online and shopping in-store is blurring, with the mobile device at the center of the change. 

Some customers will begin their shopping experience online by researching a product, while other customers will simply enter the store and look up products on the spot via their mobile phones, but these two separate actions are merely pieces of the shopping experience, Donahoe argues. 

“In over half of all retail transactions today, the consumer accesses the web at some point in the shopping cycle," either to conduct product research, buy it or pay for it," says John Donahoe, eBay CEO.

“What we see happening in the world of shopping and payments is someone analgous to what has happened to digital media,” said Donahoe. “Consumers are driving enormous change in how they shop and pay.”

eBay chief executive John Donahoe said that the line is blurring between offline and online shopping and his company plans to serve consumers as they move back and forth between them.

Donahoe said his company has set up an open commerce platform so that eBay can essentially become the operating system for commerce

Smart Phone Data Consumption is an Issue, Not a Crisis

At a global level, Analysys Mason predicts that mobile data will grow at a 41 percent compound annual growth rate. That would be quite a slower rate than had been the case in 2011, for example, when growth was about 90 percent, on average, in the U.S. market. 

According to a 2011 Nielsen monthly analysis of cellphone bills for 65,000 lines, smart phone owners, especially those with iPhones and Android devices, were consuming about 435 megabytes in the first quarter of 2011, up from about 230 Mbytes in the first quarter of 2010. 

Data usage for the top 10 percent of smartphone users was up 109 percent, as you would expect. The top one percent of users increased their usage by 155 percent from 1.8 GBytes in the first quarter of 2010 to over 4.6 GBytes in the first quarter of 2011, Nielsen said. 

Still, though growth is occurring across the board, at the 80th percentile and below, users consumed 500 Mbytes or less each month. In the 60th percentile, users consumed 250 Mbytes or less each month.

The point is that bandwidth consumption on mobile networks remains a key issue, but maybe is not a crisis. It is no simple matter to cope with 40 percent annual bandwidth consumption increases. 

The good news is that most users don't really consume all that much data, and users already are learning to offload most of their consumption, especially the bandwidth-intensive video viewing operations, to home Wi-Fi networks. 

One would assume that trend could become even more important in the future. The other issue is the matter of sheer spectrum availability, though. Many observers say there are many ways to make more intensive use of existing spectrum, so that new allotments are unnecessary.

"Squatting" is the main problem with spectrum, not a looming shortage, say a pair of analysts at Citigroup. 

“Too much spectrum is controlled by companies that are not planning on rolling out services or face business and financial challenges,” wrote Jason Bazinet and Michael Rollins. “We do not believe the U.S. faces a spectrum shortage.”

Of course, by that assertion, they mean that spectrum now being used by 2G and 3G networks that would be more efficient if converted to 4G networks. 

Also, much of the fallow currently licensed spectrum the analysts cite is held by Clearwire, which is having trouble getting customers for the spectrum it has activated, and which is still building its network. The so-called unused spectrum is unused for reason: customers cannot be found, yet. 

The Federal Communications Commission is using the specter of a looming shortage to push through the re-designation of 120 MHz of broadcast spectrum for wireless broadband, the analysts. Even so, existing spectrum remains undeveloped, Bazinet and Rollins said. 

“Today, U.S. carriers have 538 MHz of spectrum, and an additional 300 MHz of additional spectrum waiting in the wings. But only 192 MHz is in use today,” they said.

A majority of that spectrum is devoted to legacy service not likely to deliver more than 1 Mbps during usage peaks, compared to 5 Mbps for 4G, the latest data network technology, they argue.

Bazinet and Rollins said if the full 538 MHz was converted to  4G, it could support 5 Mbps at 10 percent simultaneous usage.