Telefonica Deal with Electronic Arts Shows Strategy

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

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

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

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

For Consumers, 4G Means "Faster"

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

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

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

Will ASP Business Rise Again?

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


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

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

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

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

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

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

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

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

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

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

U.S. Fixed Network Broadband Has Declined Since 2010

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


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

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

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

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

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

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

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

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

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

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

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

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

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

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

Facebook Makes "Offers" Really Social

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

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

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

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

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

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