Amazon Sells More Kindle Books than Physical, On Christmas Day At Least

In a milestone of sorts, on Christmas day, Amazon sold more Kindle books than physical titles, the company says.
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But Kindle content sales have a problem akin to YouTube's similar problem. The device and application are popular, and getting more traction. But the company loses money on new releases and makes only a modest amount on older titles, thus losing an estimated $1 per Kindle book sale.

The old adage about losing money on a sale, but making it up in volume does, in this case, have a logic to it. If Amazon can make its appliance and service popular enough, if it starts to drive huge volumes, then content owners will have more incentives to cut Amazon better deals on wholesale access to titles.

Over time, that should allow Amazon to improve its margins. So the big issue, long term, is whether much-lower wholesale prices will drive incremental sales volume high enough to create a big new business. Some observers speculate that at retail prices are cut to $2.99 or $3.99 per copy, sales volume should soar.

Smaller gross sale amounts, but much-higher volume, could create a more-attractive business case for Amazon and its partners.

Small Businesses Challenged by Social Networking

As often is true in the communications business, tools that large enterprises find useful and helpful are not necesarily so helpful or useful for small businesses. Social networks likely fall into that category.

A survey of small business executives by Citibank, for example, found owners and managers giving short shrift to social networks as a help for their businesses.

The survey of 500 small business executives across the United States by Citibank / GfK Roper found 76 percent of respondents saying they have not found social networking sites such as Facebook, Twitter and LinkedIn to be helpful in generating business leads or for expanding their business during the last year, while 86 percent say they have not used social networking sites to get business advice or information.

The survey found that general search engine sites such as Google and Yahoo! trump small business-focused sites and the WSJ.com as destinations for small business owners to seek business advice or information. 61 percent of respondents say they rely on these search engine sites.

"Our survey suggests that small business owners are still feeling their way into social media, particularly when it comes to using these tools to grow their businesses," says Maria Veltre, Citibank EVP. "While social media can provide additional channels to network and help grow a business, many small businesses may not have the manpower or the time required take advantage of them."

That's a lesson even some mid-sized companies already have encountered. It isn't that social networking takes much capital or imposes much operating cost. What it does require is time. So the typical pattern is that a firm launches a social networking effort of some sort with time borrowed from executives and professionals who are very busy and scarcely have time to tackle the other issues on their agendas.

Over time the effort dwindles. That's one reason few small businesses have made sustained and vigorous social networking efforts.

One trend confirmed in other studies is that small businesses are making greater use of Web sites to support their business operations, marketing and sales.

About 42 percent of small business owners and managers reported that in the past year they have made greater use of their company's Web site to generate business leads and sales, though.

Among companies with 20 to 99 employees the percentage rises with 57 percent saying they have made greater use of their Web site.

Survey respondents are also using email marketing (28 percent) and online advertising (25 percent) to generate business leads and sales.

But the evidence on how well social networking works for lead generation is contradictory, so far.

A recent survey by Ad-ology found lead generation is the biggest benefit of social networking for U.S. small businesses, cited by one-half of respondents as being the case. Social networks were also considered a good way to keep up with the industry and monitor online chatter about the business.

Small businesses rated Facebook the most beneficial social networking site, with 33 percent of respondents reporting it was at least somewhat helpful. It was also the social network most likely to be used. Use of LinkedIn was less common, but the business-oriented site was claimed as beneficial by 21 percent of small businesses, compared with 19 percent that said the same of Twitter.

The biggest roadblock, however, was the perception that “our customers do not use social networks,” which 31 percent of respondents said they believed.

And as has been the case noted above, nearly 50 percent complained that they did not have the time or staff available to do a good job with social network marketing.

Vonage World Mobile Launches

Users of the iPhone, BlackBerry and iPod touch can subscribe to Vonage World Mobile, a new global calling feature available for "Vonage Mobile," Vonage's mobile calling application. Vonage World Mobile provides customers with unlimited mobile international calls to over 60 countries for one flat monthly rate when calling from their mobile device.

The service works on cellular or Wi-Fi (iPhone), just Wi-Fi for the touch and only using mobile spectrum for the BlackBerry.

Current Vonage World residential customers will receive a 40 percent per month discount on their home service when they buy Vonage World Mobile.

Vonage World Mobile costs $24.99/month and is available as a free download at www.vonage.com and the iTunes App Store.

Mobile Terminations Now Exceed Fixed

Mobile subscribers have become a powerful force in the international voice market. In 2008, mobile-originated international traffic grew 19 percent, and accounted for 36 percent of total international traffic, up from 32 percent in 2007, according to TeleGeography.

Mobile terminated traffic grew 18 percent in 2008 and accounted for 48 percent of international traffic terminated in 2008. TeleGeography projects that mobile terminated traffic will exceed traffic terminated on fixed lines in 2009.

If you want to know why Sprint is selling "no incremental cost" calling to any domestic U.S. mobile, that is one of the reasons.

That would be a first. Up to this point, more calls have been terminated on fixed phone lines. To be sure, more calls still are originated on fixed lines than mobiles, but even that gap is narrowing.

Mobile phone subscriptions overtook fixed lines in 2002, TeleGeography notes.  By 2008, there were four billion
active mobile accounts globally, accounting for 77 percent of global phone lines. In recent years, growth has shifted to developing countries. Mobile subscriber growth in Africa has led the world in recent years, growing 35 percent in 2008 after having increased 39 percent in 2007.

While growth rates in Africa are tremendous, the subscriber base remains very small—mobile penetration in Africa is still only 39 percent.

Still, India gained 112 million new mobile subscribers in 2008, a net increase that exceeds the total number of mobile subscribers in Germany, says TeleGeography.

China gained 89 million mobile subscribers in 2008, and Brazil, Indonesia and Vietnam all gained more than 30 million mobile subscribers. Conversely, mobile subscription growth in more mature markets has slowed.

Good News for VoIP, Bad News for Wired Telecom Providers

"VoIP" was the "industry of the decade," according to IBISWorld, which says the industry earned that accolade because of its 1,655 percent growth rate between 2000 and 2009. IBISWorld notes that VoIP, as a new industry, only began to earn any revenue in 2002, so it is starting from a "zero" base.

Wireless telecommunications ranked eighth for industries of the 2000 to 2009 period, posting revenue growth of 183 percent.

IBISWorld also predicts VoIP will show the most revenue growth in the coming decade as well, growing 150 percent between 2010 and 2019.

The bad news for the 2010 to 2019 period is that wired telecommunicatons carriers will show negative 52 percent revenue growth. Telecommunications resellers likewise will show negative 26 percent revenue growth over that same period.

Public Wi-Fi: Smartphones Driving Usage

Originally envisioned as a for-fee service used by users who wanted Internet access for their notebooks, public Wi-Fi hotspots increasingly are used by smartphone users.

As a percentage of total sessions, handheld access increased from 20 percent in 2008 to 35 percent in 2009, according to In-Stat.. By 2011 handhelds are anticipated to account for half of hotspot connections.

There are lots of reasons for the trend. The number of devices equipped with Wi-Fi capability is growing fast. In-Stat estimates that, from 2007 to 2008, Wi-Fi-equipped device sales inreased more than 50 percent. Service providers also are encouring users by offering Wi-Fi hotspot access as an amenity to their fixed broadband, smartphone or PC card customers.

More devices able to use Wi-Fi, plus a "no incremental cost" charging model are boosting activity. The other development is use of devices other than PCs and phones that can use Wi-Fi. The Apple iPod "touch" is perhaps the best example, but In-Stat points out that shipments of Wi-Fi-enabled entertainment devices, such as cameras, gaming devices, and personal media players, will increase from 108.8 million in 2009 to 177.3 million in 2013.

Will Mobile App Revenue Decline in 2013?

Mobile application downloads, mostly driven by mobile app stores, will reach about five billion in 2014, ABI Research predicts, up from 2.9 billion in 2009.

Despite the proliferation of apps, the firm expects sales to start declining in 2013 as free or ad-supported versions of "must-have" apps undercut the paid ones.

That is perhaps the single most intriguing prediction, as it tests, to a certain extent, both developer ability to create compelling for-fee apps as well as the much-discussed "freemium" business model, where some applications or functionality are given away for free and additional functionality is added "for fee."

In part, ABI Research expects revenue from mobile app sales to decline by 2013 due to competition, which will lead to downward pressure on application prices.

But ABI Research also believes “must-have” applications now sold in app stores will face competition from free or advertising-supported substitutes. This has already started to happen, with the launch of Google’s free turn-by-turn navigation service, says Bhavya Khanna, ABI Research research associate.

As with all such predictions, it might turn out to be partly right, partly wrong. Music, games and other entertainment apps likely will be able to charge fees. The same likely will be true of business, utility, content and productivity apps.

The analogy probably is today's software business. Widgets are free. But lots of other utility, productivity and content apps are sold.

To be sure,  GPS-maker TomTom recently cut the $100 price of its iPhone app in half as a result of Google launching its own free Android counterpart. The ways people acquire GPS capability likely will change over time, it is true. Some people will want stand-alone devices, others will buy such capability as a built-in part of their smartphone purchase. Some will pay for fully-featured apps while others might be willing to use free or low-cost apps.

Some for-fee apps will face pressure when they are confronted by companies such as Google that have some other revenue model that allows them to subsidize functionality other providers rely on as their core revenue stream.

Users who regularly download paid apps spend approximately $9 on an average of five paid downloads per month, AdMob noted in July 2009. People do not seem to mind applets that cost less than $2 each. That suggests, at least so far, an emphasis on micro apps as the revenue driver for mobile app stores. That is a different market than most "shrink wrapped" apps sold today using other channels.

Still, there is a chance of disruption. Ask any telco what happened when Skype, Google Voice and other IP-based firms were able to provide voice calling functionality because it was not their legacy business.

Some for-fee providers likewise will face pressure from competitors that have lower cost structures. But that's a generic business problem. Ask any executive from an established grocery chain what they had to do when Wal-Mart showed up in their local market.

But not every conceivable application will face those problems. Consumers will pay for valuable products, and app stores likely will prove an important way for innovators to sell valuable functionality, at relatively low prices, much of the time.

We likely will see lots of new revenue and business models develop, and app stores will allow creators to sell their products at lower prices than possible before. So some of us might not agree that app store sales revenue will decline, ever.

Among other findings, ABI Research predicts that Android's share of the market will grow from 11 percent to 23 percent over that same period. "This rapid growth is driven by the mass adoption of the Android OS by both vendors and consumers from 2009 onwards," says Bhavya Khanna, ABI Research research associate.

There are now more than 14 phones that run the Android OS, and many more will launch in 2010. This, coupled with the rollout of application stores from both smartphone vendors and network operators, will see the iPhone’s share of the total market shrink between 2010 and 2014,” says Khanna.