Facebook Now the Second Big Technology Firm to Build its Business on Advertising

Google was the first major technology company to drive its revenues from advertising. Facebook is the second big tech firm to do so. But notice the rather steady contribution from payments.

Amazon, some would say, is the first big tech firm to build its revenue around commerce.

We might disagree about the threshold for calling a firm “major,” but payments is among the revenue streams that might someday support a major tech firm. Some might say Netflix is the first major technology firm to build a big business on content subscriptions.

To be sure, that somewhat relies on the adage that “every firm is a technology firm, these days.” Still, there is something to that appellation.

The point is that the discovery of business models is an important activity for would-be technology giants.

source: businessinsider.com

OTT Subscription Video Revenue Could Double in Three Years, Execs Believe

Premium over the top subscription video revenues are expected to grow from $4 billion in 2014 to between $8 billion 12 billion in 2018, a group of 45 industry entertainment industry and distributors believe.

But the eventual market is the $104 billion now spent on linear video subscriptions. But there are many uncertainties. It is unclear whether the new OTT market presents a revenue opportunity bigger, smaller or equivalent to today’s linear business.

Some would say history suggests the future market might be smaller than today’s market, while others would say logic suggests a market roughly as big as the current linear market. A few might argue for a much-bigger market over time, but that is likely the minority view.

Most likely would be happy with a near term outcome where OTT gains and linear losses result in a market that is the same size, in terms of end user buying.

The scenario where the market grows quite substantially relies on value creation and consumer perception. Since consumer budgets are limited, spending for new products tends to cannibalize current spending on other products.

So fixed network voice tends to shrink as consumers shift spending to mobile substitutes. In that instance, however, the overall market grows, in part because services “to a place” are replaced by “services for people.”

The pressure in entertainment video is that many consumers view current spending on linear products as “too high,” so OTT appeals because it costs less. Almost by definition, that tends to shrink the market, as mass adoption happens.

Netflix is expected to remain the largest single mass-market OTT provider in the United States, although participants expect its share to decline from 85 percent of the market in 2014 to around 50 percent in 2018 as other providers gain traction.

The report findings are contained in Prospects for Premium OTT in the USA and suggest executive belief that the future leaders will be found among today’s providers, though many niche providers also could flourish.

Industry participants envisage 15 to 20 specialist OTT providers acquiring 100,000 or more paying subscribers by 2018.

Opportunities for new mass-market OTT providers to challenge Netflix, Hulu and Amazon are likely limited to the leading linear video distributors Apple, Google and Facebook.

The reason is the assumed advantages of access to established subscriber bases, along with strong market share positions in an existing market (linear TV) that is expected to fuse with the emerging OTT subscription market.

In other words, if OTT is the substitute new product for linear, then linear providers are well positioned to supply OTT products as well, and have ample incentives to do so.

At the same time, OTT content providers have ample incentives to partner with big distributors to gain immediate volume, while gaining a less-expensive way to promote and bill for services. Few, if any, OTT content providers are set up to support retail billing and customer support, for example.

Industry executives believe that the underlying enablers for premium OTT services (broadband, connected devices, and payment infrastructure) are largely in place and are sufficient to support rapid growth in the next few years.

Greater availability of public WiFi, increased penetration of tablets, connected TVs and streaming media players, improved device interoperability, and standardization between heterogeneous client platforms would boost adoption.

The survey was sponsored by Vindicia and Ooyala, and conducted by MTM between May and June 2015.

Windows 10 Uses Peer-to-Peer for Software Updates: You Might Want to Tell Your OS If You Have a Metered Connection

A feature of Windows 10 designed to provide faster downloads of app and feature updates is the use of a peer-to-peer protocol that could result in one user’s bandwidth being used by the update feature to send data to other users.

“In addition to downloading updates and apps from Microsoft, Windows will get updates and apps from other PCs that already have them,” Microsoft says.

“When Windows downloads an update or app, it will look for other PCs on your local network that have already downloaded the update or app using Delivery Optimization,” Microsoft say.

Windows then downloads parts of the file from those PCs and parts of the file from Microsoft.

As do other peer-to-peer file sharing networks, Windows uses the fastest, most reliable download source for each part of the file.

Delivery Optimization uses PCs on a local network and PCs on the Internet.

When Delivery Optimization is turned on, your PC sends parts of apps or updates that you’ve downloaded using Delivery Optimization to other PCs on your local network, or on the Internet, depending on your settings, Microsoft says.

As with Windows 8.1, Windows 10 won't automatically download updates or apps if it detects that your PC is using a metered connection.

Similarly, Delivery Optimization won’t automatically download or send parts of updates or apps to other PCs on the Internet if it detects that you're using a metered connection.

But you have to manually configure the “I’m using a metered connection” status.

If you use a Wi‑Fi connection that is metered or capped, make sure you identify it as a metered connection.

Go to Start , then Settings > Network & Internet > Wi‑Fi > Advanced options. Use the toggle under Set as metered connection to set your Wi‑Fi connection as metered.

Content Consumption Now Shapes Computing

Where it comes to content, some “90 percent of the world consumes while only 10 percent creates,” according to Girish Mathrubootham Freshdesk CEO.

Many of the most-important trends in devices, applications, computing architecture and networking flow directly from that one main trend.

Despite the new trend of symmetrical Internet access connections, in perhaps 90 percent of cases, especially as bandwidth climbs towards the gigabit range, asymmetrical connections still work for most consumers, and even most organization locations.

Full-motion video is an example of one key app that does shape demand for faster uplinks, even if most of the bandwidth still is needed for downlink traffic.

The access network design economics might still, for quite some time, suggest that an asymmetrical bandwidth design, which often costs less, remains a suitable approach. As the cost of symmetrical connections drops, that will could change, however.

Since most users consume content, most of the time, rather than create it, mobile and portable devices are viable end user devices. Even the content that most people do create (messages or pictures) can be created easily on a mobile or portable device (tablet).

The other big architectural change is that most content people want to consume now resides in the cloud. So cloud computing is becoming the dominant computing architecture.

Cloud computing in turn shapes demand for global network capacity and performance, while creating a new role for mobile and untethered networks.

If the desktop PC was the signature appliance of the personal computing era, then the mobile phone is the signature appliance of the cloud era.

If computing is cloud based, then apps also must be cloud based. Cloud-based apps, in turn, are more consumable by users of mobile devices; easier to deliver and update.

But all the trends flow from the volume of tasks now required of modern computing. Where PCs might once have been used to create documents and reports by relatively few people, computing now undergirds content distribution and consumption, gaming, messaging and communications.

That is a profoundly asymmetrical process requiring large amounts of local bandwidth with more stringent latency, congestion and intruder protection requirements, in a growing number of cases.

Pervasiveness has been a trend within computing for some time, but will accelerate again as computing and messaging used by machines and embedded sensors becomes the next wave of growth for many industries related to computing and communications.

T-Mobile US Gains Phone Accounts, AT&T Gains Connected Car Accounts

The near term trend at the top of the U.S. mobile business is that T-Mobile US is taking market share from the other three big providers. Just how much, from which carriers, is a matter of some uncertainty.

Another trend is that AT&T and Verizon are focusing more attention on future markets such as Internet of Things and connected car, for example. In the most recent quarter, AT&T, for example, added many more connected car accounts than phone accounts.

In fact, half of AT&T's net adds were connected car subscriptions.

T-Mobile US, in its most recent quarter, added 760,000 branded postpaid phone net adds, about 400,000 more net adds than Verizon added.

And T-Mobile US says it topped AT&T in terms of postpaid phone net adds by almost 1.1 million in the quarter. Overall, T-Mobile US had 2.1 million total net adds in Q2 and one million branded postpaid net adds, while keeping churn down to 1.3 percent.

T-Mobile US says it has had nine quarters in a row where it took customers, on a net basis, in the postpaid area.

For  eight consecutive quarters, T-Mobile US has had a postpaid porting ratio of greater than two to one from Sprint. In other words, T-Mobile US has gained twice as many subscribers from Sprint as it lost to Sprint.

All that said, the U.S. mobile market remains unstable. Beyond what T-Mobile US might be doing in terms of market share, gaining on the other three providers, new contenders will be entering, at some point. Comcast, Dish Network and Google are among the contenders.

Nobody knows what eventually could happen to market structure, should all three, or even others in addition to those three, enter the market. The market undoubtedly cannot support seven leading operators, each with 30 percent share.

And some would argue a sustainable position in the U.S. market would require something on the order of 30 percent share.

Hard to Argue with the Results: Zero Rating Gets People Online, Sustainably, Rapidly

Zero rating plans enable mobile customers to download and upload online content without incurring data usage charges or having their usage counted against data usage limits.

Zero rating arguably is most important in developing countries, where the costs of mobile data services are higher relative to per capita incomes, where many people have not yet used the Internet.

The obvious benefits of Zero Rating include lower prices for consumers, especially those who might otherwise have difficulty affording mobile data plans, and expanding Internet adoption.

And it works. In the Philippines and elsewhere, high mobile Internet adoption rates occur within the first 30 days of use of Internet.org zero rated apps, Internet.org says.

In the Phlippines, mobile Internet adoption doubled within a year, for example.

Some argue zero rating violates net neutrality principles by discriminating in favor of some content over other content.

That is a tricky argument, if one assumes the purpose of network neutrality rules is primarily to ensure that consumers have access to all lawful applications. In that view, the importance is that no applications are blocked.

But some take a more expansive view of network neutrality, insisting that the “no blocking” rule also includes other practices, such as mandating that no quality of service mechanisms be allowed for consumer Internet access. That colloquially is expressed as barring “fast lanes” in the Internet access business (though fast lanes routinely are used by app providers and access providers in the backbone of the network).

Going farther still, some argue that no business arrangements are allowable that treat any bits, or any apps, “differently” from any others. That is where some view zero rating as problematic.

Critics of Zero Rating worry that it could harm competition in Internet access markets or interfere with consumers' unfettered access to online information.

Some regulators in a handful of countries have taken steps to limit or ban Zero Rating programs.

The government of Chile, the Netherlands, Slovenia, Canada have barred the practice. Norway and India are looking at doing so.

The U.S., Federal Communications Commission says it will evaluate zero rating programs on a case-by-case basis.

But Dr. Jeffrey A. Eisenach, NERA SVP, argues that the two primary criticisms of zero rating--the potential for anticompetitive market foreclosure and concerns about diversity of expression--are misplaced.

Eisenach argues zero rating programs in general represent an economically efficient mechanism for increasing consumer welfare. Though it is tough to measure such impact, Facebook has noted that Internet.org zero rating brings new users onto mobile networks 50 percent faster after launching free basic services.

Within thre first 30 days of use, more than half of the people who come online through Internet.org become mobile data subscribers, Facebook notes.

All zero rating plans share one characteristic: They allow mobile subscribers to access certain online content “for free” – that is, without having the associated data usage counted against their usage allowances under wireless service plans.

The plans differ in two main respects: The types of content included, and the underlying business arrangements.

Zero rating business arrangements vary mainly according to the nature of the relationship between the access provider and the content provider.

The most common form of Zero Rating plans are “carrier initiated” – that is, the mobile carrier simply chooses to zero-rate certain content as a means of attracting customers.

“Sponsored data” plans represent a different model, under which content providers pay carriers to have their content zero rated.

And then there is the Internet.org model, where app providers and carriers agree to work together to provide no-cost access to some apps, but there is no exchange of money between app provider or carrier.

It is hard to deny the value of zero rating where it comes to providing clear incentives for people to sample the Internet, and for quickly converting many non-users into users.

Why Mobile Internet Matters for Google and Facebook

There is a very simple reason why Facebook and Google are so intent on spending their own money to stimulate Internet adoption everywhere. More users means more revenue.

There also is a reason why mobile Internet access is so important to both firms: most of the new users will access the Internet on mobile devices.

During the second quarter of 2015, Facebook worldwide average revenue per user was $2.76, an increase of 23 percent from the second quarter of 2014.

Over this period, ARPU increased by 44 percent in United States and Canada, 19 percent in Asia-Pacific, 18 percent in Europe, and five percent in the rest of the world.

Google, on the other hand, is the 800 pound gorilla in the market, earning about $45 in ARPU  in the first quarter of 2014, for example, compared to Facebook’s $7.20 and Twitter’s $3.50 ARPU in the first quarter of 2014, other analyses suggest.

But those figures also explain why Facebook and Google have spent so much time and money to boost Internet usage globally. More people connected to the Internet means more revenue.

It has been said that Facebook is an app intended for use by mobile users. That might not have been quite so true at first, but is stunningly accurate now. In June 2015 Facebook had 963 million daily active users.

In the same month, Facebook had 844 million mobile active users, or about 88 percent of the volume of all active users.

Facebook had 655 million mobile-only monthly active users as of June 30, 2015, increasing 64 percent from 399 million mobile-only MAUs during the same period in 2014.

The remaining 659 million mobile MAUs accessed Facebook from both mobile devices and personal computers during June 2015.

Facebook says “we anticipate that growth in mobile users will continue to be the driver of our user growth for the foreseeable future.”