More Europeans Using Mobiles While Shopping

Mobile retail is one of the fastest growing new uses of  smart phones, comScore reports, with more than 13.6 million smart phone owners in France, Germany, Italy, Spain and the United Kingdom using their mobiles to access a retail site in October 2011.

But that isn’t the most-significant new finding. The more important trend is growing use of mobile devices inside retail locations, while people are shopping.

In October 2011, nearly 22 percent of surveyed mobile users in In France, Germany, Italy, Spain and the United Kingdom took a picture of the product while in a retail store, making it the most popular e-commerce related activity.

A significant percentage of smart phone users in retail stores also texted or called friends or family about a product (15 percent). Some six percent scanned a QR code in-store.

A large share of smart phone owners also managed their bank account from their device (20 percent), used electronic payment services to purchase goods (12 percent), or searched through shopping guides for the best products (11 percent).

Target and Sears are taking diametrically opposed approaches to the challenge of mobile-enhanced shopping, in particular comparison shopping while potential customers are inside stores.

Target wants its suppliers to create "retail store only" versions of products that cannot be bought online, as well as helping Target match online prices. Target is particularly concerned about showrooming, the practice of consumers examining merchandise in a store, but buying online.

Sears, on the other hand, is going to make it easier for mobile shoppers to compare prices inside Sears locations, by adding Wi-Fi, at least at some of the Sears stores.

In fact, Sears is by offering in-store shoppers free Wi-Fi access at select stores, to provide customers with faster access to the merchant’s mobile commerce site and apps. That isn’t completely surprising.

What is more interesting is that Sears also will allow those users to access the sites and apps of other retailers, a move intended to show Sears comfort with its pricing.

With free Wi-Fi customers can use their smart phones to surf the web, shop online at Sears.com or compare prices before they purchase to make sure they are getting the best price on the products they want, the company says.

About 63 percent of smart phone users have visited a retailer’s website from their mobile device, up from 53 percent in 2010, and 41 percent have done so while in the retail store, according to a study by Hipcricket.

While mobile retail sites have historically served as “brochures,” lightweight versions of retailers’ full websites that provide limited information such as store locations, directions and hours, today’s mobile-specific retail sites are now providing more significant benefits to consumers as they move along their path-to-purchase.  

Fully 50 percent have checked a competitor’s mobile website while in another store.
The survey found that smart phone owners are visiting mobile retail sites to:

Research prices (46 percent);
Search for coupons and offers (36 percent);
Research products (28 percent); and
Purchase products (13 percent)

Some nine percent report that any of their favorite brands market to them using the mobile phone. At the same time, consumers continue to indicate a willingness to join mobile customer relationship management or loyalty programs for their favorite brands. Some 33 percent would be interested in joining such a program, but only 12 percent currently participate in one.
Mobile sites now a factor in retail shopping

Some 79 percent of U.S. smart phone owners relying on their phones to help with shopping, according to Google.


About 70 percent use their phones while shopping in-store and 74 percent of smart phone shoppers made a purchase as a result of using their smart phone.

Some 67 percent said they research on their smart phone and then buy in the store. Fully 95 percent of smart phone users have looked for local information, and as you might expect, such searches often are an immediate precursor to purchasing.  After looking for local information, 77 percent contacted a business, and 44 percent made a purchase. Reaching Today’s Mobile Shoppers

Majority of Social Network Interactions Now on Mobiles

Mobile devices, including smart phones and tablets, increasingly are used to consume content, a study by comScore indicates. 

Significantly, consumers spent more time on Facebook’s and Twitter’s mobile sites than they spent on web sites in October 2011. Every U.K. visitor spent an average of 33.3 minutes browsing on Facebook.com using their mobile device and 11.2 minutes on Twitter during the month.

In the case of tablets, that comes as no surprise: the whole idea behind tablets is content consumption. What might be somewhat surprising is the extent to which use of social networks has shifted to mobile modes.

Where it has been common to note that 40 percent of social network usage is from mobile devices, new comScore data from some European markets suggests that mobile devices now represent the  clear majority of social network interactions.

In October 2011, 76 percent of smart phone owners in France, Germany, Italy, Spain and the United Kingdom were mobile media users, meaning that they browsed the mobile web, accessed applications, or downloaded content.

The 62 percent growth in the total number of mobile media users in 2011 is largely attributable to the acceleration in smart phone adoption, better network quality, and the increasing ubiquity of aggressively priced data plans, all of which facilitate the consumption of mobile media.

Among the five European countries analysed, Germany stands out with the fastest growth rate of 89 percent while the United Kingdom had the largest audience with 20.4 million mobile media users via smart phones.



Different devices are used to consumer content during an average weekday, comScore has found. Tablet usage experienced the highest relative percentage of its activity in the late evening between 9 pm and 11pm.

Otherwise, mobile and tablet consumption patterns were quite similar with mobile traffic showing peaks during typical commuter travel hours (around 9am and 6pm). Computer-based traffic had its highest relative consumption during typical office hours, spiking around lunchtime.

Device usage dynamics look different on weekends, with usage patterns of all three devices aligning more closely with one another. Two spikes occurred throughout the Saturday analysed, with the first peak around 11am, followed by another uptick in usage around 6pm.

Original Content and Content Curation: Both Add Value

It is not news that media now is shaped by Internet and application trends, just as the telecom business is refashioned by Internet apps.


Consider YouTube, which is reshaping the notion of what "video entertainment" is, or video game experiences, which likewise are seen by some as the future for much of the "movie" business. 


In the communications business, the big change is the ability application providers now have to use any broadband connection to deliver an experience, application or service. 


But all rules of thumb have to be qualified. The conventional wisdom for Internet content is that, to make Google happy, content has to be original. On the other hand, according to David Karp of Tumblr, there are nine content curators for every content creator on his site. How sharing disrupts media


Reblogging, on Tumblr, is so easy that the vast majority of Tumblr sites actually create little or no original content: they just republish content from other people. 


Some might argue that "adds no value." If you think about it, that's not actually true. Busy people always can save time if somebody else is doing a good job sorting through 


Such linking, liking, re-posting, re-tweeting and so forth is a "voting" mechanism, allowing social tools to amplify and point to content people find interesting or useful.


That grows audiences for people who do create original content. The "is it better to create original content or curate it?" argument is misplaced. Both have value, and both create value. 

Tumblr had 14  billion page views in December 2011, up from three billion in 2010.

Telefonica Invests in Cloud Computing Firm Joyent

Joyent has rasied $85 million from Spanish phone company Telefonica's Telefónica Digital division. $85 million investment


Joyent provides infrastructure for customers such as LinkedIn, THQ, Gilt Groupe and Kabam. Within the cloud computing business, Joyent provides "infrastructure as a service," namely access to computing and storage resources on a rental basis. 


With the new partnership, Joyent will be able to bring its services to more countries thanks to Telefónica data centers throughout Europe and Latin America.

Two Different Responses to Mobile Shopping

Target and Sears are taking diametrically opposed approaches to the challenge of mobile-enhanced shopping, in particular comparison shopping while potential customers are inside stores. 


Target wants its suppliers to create "retail store only" versions of products that cannot be bought online, as well as helping Target match online prices. Target is particularly concerned about showrooming, the practice of consumers examining merchandise in a store, but buying online. 


Sears, on the other hand, is going to make it easier for mobile shoppers to compare prices inside Sears locations, by adding Wi-Fi, at least at some of the Sears stores. 


In fact, Sears is by offering in-store shoppers free Wi-Fi access at select stores, to provide customers with faster access to the merchant’s mobile commerce site and apps. That isn’t completely surprising.

What is more interesting is that Sears also will allow those users to access the sites and apps of other retailers, a move intended to show Sears comfort with its pricing.

With free Wi-Fi customers can use their smart phones to surf the web, shop online at Sears.com or compare prices before they purchase to make sure they are getting the best price on the products they want, the company says.

About 63 percent of smart phone users have visited a retailer’s website from their mobile device, up from 53 percent in 2010, and 41 percent have done so while in the retail store, according to a study by Hipcricket.

While mobile retail sites have historically served as “brochures,” lightweight versions of retailers’ full websites that provide limited information such as store locations, directions and hours, today’s mobile-specific retail sites are now providing more significant benefits to consumers as they move along their path-to-purchase.  

Fully 50 percent have checked a competitor’s mobile website while in another store.
The survey found that smart phone owners are visiting mobile retail sites to:

Research prices (46 percent);
Search for coupons and offers (36 percent);
Research products (28 percent); and
Purchase products (13 percent)

Some nine percent report that any of their favorite brands market to them using the mobile phone. At the same time, consumers continue to indicate a willingness to join mobile customer relationship management or loyalty programs for their favorite brands. Some 33 percent would be interested in joining such a program, but only 12 percent currently participate in one.
Mobile sites now a factor in retail shopping

Some 79 percent of U.S. smart phone owners relying on their phones to help with shopping, according to Google.


 

About 70 percent use their phones while shopping in-store and 74 percent of smart phone shoppers made a purchase as a result of using their smart phone.

Some 67 percent said they research on their smart phone and then buy in the store. Fully 95 percent of smart phone users have looked for local information, and as you might expect, such searches often are an immediate precursor to purchasing.  After looking for local information, 77 percent contacted a business, and 44 percent made a purchase. Reaching Today’s Mobile Shoppers

Text Messaging Maturing, Begins Decline

There is growing evidence that the high-margin mobile text messaging market is past its peak.

Danish SMS traffic, for example, decreased by over 20 percent in the first six months of 2011, according to Strand Consult, and the trend will continue in 2012.

Social media networks appear to be the reason people are sending fewer text messages.

Text messaging volumes and revenue are not declining in all markets, but is slowing in most developed markets. The most-recent data from the CTIA suggests slowing growth in the U.S. text messaging market of about nine percent.

In the Danish market,  three out of four mobile operators have been experiencing a steady decrease in their test messaging (short message service, or SMS) traffic month after month.

From 2010 to 2011, TDC experienced an SMS traffic drop of 17 percent, Telia lost 18 percent and Telenor 26 percent, while the fourth operator 3 was the only operator that had growth in their SMS traffic.

That 3 saw text messaging growth is largely attributable to the fact that 3 is gaining customers and share in the market. SMS traffic on the 3 network grew by 29 percent.

But, overall, the number of Danish SMS messages fell during the first half of 2010 to 6.4 billion and to 6.2 billion during the first half of  2011. That is a drop of about seven percent from 2010 to 2011.

Facebook messaging is the reason for the drop, Strand Consult argues. We often forget that all products have a life cycle. Fixed line voice is past its peak, and now text messaging likewise seems to be nearing or past the peak of its product cycle in some markets, though it will continue to grow in other younger markets.

So what are Danish operators doing? They are bundling mobile broadband with SMS and MMS packages as part of a smart phone purchase. That means service providers get paid even as the volume of text messages declines. 

There is

Finland's largest carrier, Sonera, for example, recorded a 22 percent decline in texting on Christmas Eve in 2011, versus the same night in 2010.

It isn't that people are communicating less. They are just using different methods of communicating. Text Messaging Declines  

Hong Kong also apparently saw a similar decrease on Christmas, dropping 14% from the same day in 2010. Netherlands service provider KPN provided an early warning when it announced significant declines in messaging volume earlier in 2010. KPN text message declines

Dutch telecoms regulator, OPTA, which shows a significant decline in the number of SMS sent in the Netherlands in first half of  2011 compared to the previous six-month period.

The country's largest operator, KPN, has also reported declining year-on-year messaging volumes over the last few quarters due to what it calls "changing customer behavior."

Wireless Intelligence says text messaging volumes are falling in France, Ireland, Spain and Portugal as well.

According to OPTA, the total number of SMS sent in the Netherlands stood at 5.7 billion for the first six months of the year, down 2.5 percent from 5.9 billion in the second half of  2010, even though total text messaging revenue rose slightly (0.6 percent) to EUR378 million during the period.

That should not come as a surprise. The number of over the top and social messaging alternatives has been growing for years. But there is a "network effect" for messaging, as there is for any other communications tool. Until a user is fairly sure that nearly everybody he or she wants to communicate with can be reached by a particular tool, adoption is slower.

But there always is a tipping point, where the expectation changes from "I doubt this person uses this tool" to "there is a good chance they use this tool." Finally, there is the point of ubiquity, when the assumption simply is that "everybody" uses the tool.

Also, the history of text messaging and email are instructive. Though most cannot remember a time when it was so, email and messaging services once upon a time ere not federated. In other words, you could not send messages across domains.

History also tells us what happens after federation: usage explodes. With alternative messaging platforms, we still are not in a "full federation" mode, where anybody can send messages to any other user, irrespective of what device, operating system, service provider or application they prefer to use. That day will come, though.

The.maturing market seems now to be a growing factor in the text messaging part of the mobile business.

Are Device Subsidies Bad for Consumers?

Some would argue that mobile device subsidies, which require end user contracts, represent unfair competition in a market where some larger providers can afford to make the offers, while others cannot. Those subsidies are substantial. In some cases, the subsidy can run as high as $500 on some devices.

Others would argue that contracts and subsidies also are anti-competitive to the extent that use of contracts hinders consumer choice, as the contracts lock users into relationships with specific carriers.

Others would argue that device subsidies are one reason so many consumers can afford to buy and use advanced smart phones that often cost as much, if not more than a PC.

In fact, some would argue that the net present value is better, for a consumer, when choosing not to sign a contract. Yell now if you know any consumer that ever has conducted an NPV exercise before buying a device or service.

One can argue that consumers essentially are “dumb” when they choose to buy subsidized phones and sign contracts. Others would argue the behavior not only is quite rational, but provides more value.

The argument for not buying a subsidized device that comes with a contract is that there is a risk of having to pay an early termination fee, or that the recurring fees of a contract plan are higher than otherwise would be the case.

Those assumptions do not generally apply, would might argue. Not every consumer ever pays an early termination fee. Perhaps few do. For a consumer that never pays an ETF, it is not part of the value equation at all.

Nor is it the case that a month-to-month recurring fee is lower than would be the case under contract. As often as not, it will cost just the the same, either way, and could cost more, in the non-contract case.

Consumers do have the choice to buy a prepaid plan that will offer lower recurring fees. But they generally will lose access to the full range of handsets, and will have to pay the full retail price for their handsets. Figuring out the actual NPV of such deals is complex. Users pay more cash up front, but lower recurring fees

So one major variable is the cost of the device and the length of time that device is used. That generally means a tougher business case for a younger consumer than an older consumer, as younger users break or lose their phones more often than older consumers do, and younger consumers are more apt to buy a new phone for fashion or application reasons unrelated to whether the device still works.

That said, in cases where a consumer has to pay an early termination fee early in a contract (the fee is pro-rated), an argument can be made that the NPV would have been better if the contract had not been signed.

Contracts, some argue, also are “unfair” to consumers, which might not be the same thing as a less-favorable NPV. The reason is that the actual value of a handset subsidy is rarely clear to a consumer.

The device “retail” price, which is typically compared to the subsidized price, might or might not capture the actual value of the discount, since a consumer doesn’t know what a particular service provider actually paid for the devices.

The same objection can be made about early termination fees that might be likened, when imposed, to a consumer making a loan to the service provider. Some would argue that the pro-rated ETF fees are levied at rates above the simple amortization rate of the ETF over the two-year contract term.

In other words, if a consumer has to pay even the pro-rated ETF, a simple amortization rate might imply reducing the rate about $14 a month for each additional month of service. Instead, service providers reduce the rate about $10 a month for each month of contract service. That $4 a month “excess” is essentially an “interest” payment, some would argue.

Likewise, the handset subsidy might be likened to a  is a loan that is repaid over the life of the subscriber contract.


Are subsidies loans? Some might argue a handset subsidy is a loan made to a consumer that is repaid over the length of the contract term. The logic there is that the ETF should reflect the actual value of the handset subsidy.

“If the actual cash subsidy is equal to or less than the initial ETF, then the way in which ETFs are administered today produces punitive results for subscribers who terminate their subscriber contracts early,” argues Dave Selzer , JSI Capital analyst.

Some of us would argue that, in most cases, the device subsidies, with contracts, actually are positive for end users, service providers and device innovation. That is not to ignore the growing cost to service providers of providing the subsidies, the potential ETF exposure for consumers or potential danger to device suppliers if the subsidies were to go away.

The simple argument is that device subsidies allow consumers to buy advanced devices they would otherwise not be able to afford, or not want to buy. Service providers sell more data services when they sell the subsidized smart phones and reduce churn. Device manufacturers have larger markets, since consumers replace their phones at a higher rate than they would if the subsidies were not available.

All application providers win because device replacement is the primary way new app behaviors are stimulated.

Nevertheless, the subsidies cause cash flow drag for service providers, and seem to be a growing burden, in that regard.

On the other hand, subsidies and contracts do minimize churn and do support average revenue per user. Those effects are important for public companies.

Would carriers offer the subsidies without some assurance they could earn back the cost of the subsidies over time? Would carriers rather sell devices at twice current prices, or higher? Would they prefer to raise rates? You can make your own guesses in that regard.

That is not to say different packaging is inconceivable. If you assume the subsidy represents $300 to $400 of real costs to a carrier, it might be possible to offer a plan with full-price device purchase, with free service for a period of time or perhaps lower recurring prices.

The details might vary, but a revenue-neutral solution could be imagined. The downside is that predictability of revenue would decrease, since consumers could desert, without financial harm, at any point after the promotion ended

The potential changes in how service providers compete, in a regime where there are no device subsidies, is likewise unclear. All service providers prefer device exclusivity when they can afford to pay for it. That might not change.

But higher device prices would encourage more buyers to shift to prepaid plans that are far less lucrative for service providers. Fewer might buy advanced devices. So innovation would slow. That isn’t helpful for anybody in the ecosystem, as it is the promise of new services and applications that could allow service providers to keep growing revenues as demand for basic voice and messaging declines.

Device subsidies are an issue that contracts address. Contracts smooth out revenue, raise average revenue per user and reduce churn. Whether there is a way to preserve those advantages some other way is an interesting question.

So far, the largest mobile service providers, who live mostly on the strength of postpaid accounts, have been unwilling to rock the boat by switching to some packaging method that does away with the subsidies.

Whether they ought to do so also is a key question. Many business models are built on subsidizing one element of service to make money elsewhere. Amazon seems to be subsidizing devices to sell content, while Apple subsidizes content to sell devices.

Mobile service providers subsidize devices to sell recurring service. In principle, mobile service providers could offer inducements other than cheaper hardware, ranging from free domestic calling or messaging to lower recurring prices.

Whether the value of those inducements to consumers is higher than "cheaper devices" is hard to determine. Also, any other inducement would involve a revenue exposure of some size. Right now, messaging is the service with the highest profit margin and voice is the product with highest revenue contribution, though matters will change over time.

Whether prices and packaging for recurring services matter as much as cheaper phones is the issue. Also, there is no question but that devices increasingly are the value that provides the greatest demand "pull" in markets where "everybody" buys mobile service.

Nobody really "loves" their service provider, much less the ability to communicate, as much as they love their devices. Price is never unimportant. But price differentiation can only go so far, one might argue, as key competitors in each market segment pay close attention to competitor prices and offers.