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[part 4 of the series on five traits of open source and its impact in the mobile industry. See also part 1, part 2 and part 3.] Open source in mobile goes far beyond the confines of Linux-based operating systems for mobile phones. Examples are Sun s Java, Motorola s MIDP3 project, Microsoft s Shared Source Initiative, Symbian s use of open source, Adobe s project Tamarin, Nokia s S60 web browser, Funambol s MDM server, the Eclipse Foundation s open source development tools and the rising interest in open source hardware. One of the biggest disruptions created by open source is in the case of mobile browsers. Since 2003, the mobile browser market had been dominated by three heavyweights, Openwave, Teleca (Obigo) and ACCESS (in addition to in-house browsers used by major OEMs). These companies had been responsible for the majority of mobile browsers shipped, while few manufacturers most notably Nokia had not only been sourcing browsers from third parties but also developing their own browser software in-house. However, in the last few years, the browser market has been facing a number of challenges, namely: – mobile browser per-unit royalties have been continually dropping, following the trend of software commoditisation. It is believed that browsers for mass-market phones today sell at a few pence per device. – mobile browsers are inherently complex software, which have to cope with rendering malformed HTML (often called street HTML ), the numerous evolving W3C standards around HTML, CSS and ECMAScript and the proprietary vendor extensions (e.g. rendering pages designed for Internet Explorer). – as operator walled gardens are opening mobile devices are being exposed to the wilderness of billions web (HTML) pages, as opposed to thousands of simplified WAP pages that we previously the norm. The complexity and diversity of these web pages have called for advanced browsers, which typically take years to iteratively mature, as browser vendor Opera attests. – the differentiating features of mobile browsers lie not in the HTML parsing and the rendering engine, but in the value-added features, such as intelligent zoom and navigation. As these pressures were mounting, a critical point was reached in May 2007; within the space of one week, mobile browser vendor Teleca announced that it halted investments into renewal of Obigo product , while Openwave announced it was up for sale following a 50% tumble of its share price in 12 months. The industry impact has been significant, given that the Openwave and Obigo browser families have claimed the lion s share of the mobile browser market. Behind the scenes, this blow to the mobile browser business was struck primarily by Nokia s S60 WebKit, Nokia s newest browser based on an open source rendering and scripting engine for web pages. While business execution errors may have affected the demise of Obigo and Openwave s business, it is the availability of WebKit, a reliable, open source, core browser engine that essentially drove browser pricing down. Nokia s move towards WebKit also displaced some of its previous browser suppliers who lost a major customer. Furthermore, the open source WebKit has been developed into a first-class browser engine, under the auspices of Nokia, Apple and KDE. The corporate and community backing of WebKit implies that any further efforts to develop proprietary browsers is unlikely to be viable (although Opera and Access are still maintaining their proprietary browser products at the time of writing). For deeper insights on what went wrong with the browser business see Bye Bye Browser. – Andreas [Want to learn more about open source and its impact on the mobile industry? Register for the pre-workshop ‘A Crash Course in Mobile Open Source: Economics, Licensing, Linux, Java and Beyond’ (see here for workshop agenda) delivered by VisionMobile as part of Informa’s Open Source In Mobile conference taking place in Madrid on 17-20 September. Next on this series: Sun s open source Java policy will mean very little for the mobile industry.]

[part 3 of the series on five traits of open source and its impact in the mobile industry. See also part 1 and part 2.] Linux is by far the software most commonly associated with (and often mis-identified with) open source and free software, where free refers to liberty, not costs. However the access to source code, ability to modify or redistribute, or the royalty-free nature of Linux are hardly the reasons why four out of five handset OEMs have adopted Linux. In other words, mobile Linux has not been adopted because of its free software qualities. In 2007, handset OEMs have adopted Linux to varying degrees, from Motorola s portfolio-wide Linux strategy to Nokia s Internet Tablets segment-specific strategic experiment with Linux. The reasons behind the almost-unanimous OEM turn towards Linux are as follows: – Reduced cost and time-to-market. The availability of a stable, high portable Linux kernel, hundreds of supporting royalty-free middleware components, thousands of Linux developer enthusiasts and a growing number of commercial mobile Linux software and service providers mean that mobile Linux is an effective operating system for mobile handsets, both in terms of time-to-market and cost of development. According to Nokia, one of the most successful corporate entities in working with open source, “Linux is the launching pad you need to stand on to be productive .. we have never managed to bring out a product in such a short time, with so few resources . – Wider choice: handset manufacturers have considerable freedom in selecting the middleware components of choice whether from open source communities, or in some cases from closed-source commercial components. A healthy exists in Linux-based software components such as graphics frameworks (e.g GTK+, Qt Core, FluffyPants), application environments (e.g. Qtopia, Hiker, Hildon, OpenMoko, SKY-MAP), multimedia frameworks, PIM middleware, file systems and telephony APIs. – Strategic control: Linux-based operating systems afford manufacturers almost as much control of the platform roadmap as their in-house OSes. Manufacturers are much less dependent on a single software supplier, effectively lowering the cost of switching suppliers, an important strategic consideration. Furthermore, manufacturers are able to steer platform development of their own Linux OS variant in any direction they wish. – Scalability: The Linux kernel has evolved over the years, to one of the most scalable and reliable operating systems, powering commercial mobile devices from low-end single-core feature phones to high-end smartphones. Manufacturers may easily trim unnecessary features or add high-end features such as USB support and VoIP protocols which are widely available for Linux distributions for PCs. – Quality: Peer-review of popular Linux-based open source software provides for fewer software defects ( bugs ). Both Nokia and Panasonic report that Linux-based software for mobile handsets has a high quality and very few bugs, compared to typical in-house software – Innovation: The open, decentralised nature of Linux backed by strong developer communities, makes Linux-based operating systems a good choice for cultivating innovation. Chances are, a component will be already available somewhere in the Linux community ecosystem and can be adapted to a mobile Linux OS. – Andreas [Want to learn more about open source and its impact on the mobile industry? Register for the pre-workshop ‘A Crash Course in Mobile Open Source: Economics, Licensing, Linux, Java and Beyond’ (see here for workshop agenda) delivered by VisionMobile as part of Informa’s Open Source In Mobile conference taking place in Madrid on 17-20 September. Next on this series: How open source is shaking up the mobile browser market.] #opensource

[The Msearchgroove mobile advertising podcast series and close collaboration with VisionMobile continues with a look at ad-funded content and the impact of interactive advertising. And what better senior executive to speak out on this than Patrick Parodi, Amobee Media Systems CMO and head of European operations. His company got in on the ground-floor and has consistently argued that only user-centric (translated: opt-in) services will cover all the bases and boost everyone’s revenues in the end. Next week we pick up with ScreenTonic and keep up the momentum with a top-notch line-up including Hyperfactory, Enpocket, 4INFO, and MoPhat so check back regularly.] alt=”ingameadvertising.jpg” align=”right” /> Take the recent tie-up between Amobee and Anam Mobile, a provider of messaging infrastructure technologies, to deliver a joint solution for ad-funding subscriber originated SMS messages. The solution effectively pays off for both parties: operators can boost their revenues through opt-in advertising, and users have access to a lower cost SMS package (since ads help subsidize the messaging service). It reminds me of the ads and messages that appear at the bottom of email messages, and which we automatically pass around. In a word, that’s the value prop here: a peer-to-peer communication and advertising model that enables viral marketing. (It’s quite unobtrusive, but relevancy is another story.) At the other end of the content spectrum, Amobee sealed a deal with PacketVideo to serve targeted and relevant opt-in advertising impressions within that company’s media platform. Amobee also sharpened its focus on mobile music, teaming up with SDC, a provider of mobile music solutions, to serve opt-in advertising impressions. (The partnership provides SDC s white label music players the ability to serve contextual and targeted opt-in advertising impressions without affecting the mobile music listening experience.) But the real news is deployment and operator interest in ad-funding. Amobee tells me both are on the upswing, so we can expect some operators to reveal their trials and learnings soon. In the meantime, I caught up with Patrick Parodi, Amobee Media Systems CMO and head of European operations, to find out how operators are thinking about this model and hoping to protect their turf at a time when strength as a gatekeeper in this scenario is waning. Patrick, who is also Chairman of the Mobile Entertainment Forum, the leading global trade association representing both the mobile and entertainment industries, believes the “user-paid” model is THE key barrier to the growth of mobile data consumption and revenues. His warning: Adapt or die. Listen to the podcast here. [21:02] [display_podcast] Don’t get fooled again: As the mobile phone is fast becoming a media channel, bringing advertisers on board in a way that creates value for all stakeholders will lead to a better and bigger market for all. Patrick says signs are good so far that mobile operators have learned the lessons of the fixed Internet and finally figured out that giving it all up to Google & Co. is a short-term solution that’s bad for business long-term. “We ve been excited about seeing some operators take charge – taking a more active role in the ad model as opposed to just saying: Well, you know, at this point we re getting commoditized so we should let some of the Web guys come in and figure out how to monetize the audience.’ We re very much on the operators’ side of the fence in this particular battle that is beginning in this space and we feel that they re in a much better position to provide relevancy and to provide an environment that is going to be positive for the user, positive for the media company, positive for the advertiser and of course positive for themselves as they grow their own brand and their relationship with users.” Social media hype: Sure, there’s a lot of excitement about the Facebooks, Bebos, MySpaces and other social networking destinations that we can rattle off. But Patrick thinks there’s also a lot more mileage in SMS, which he regards as the mother of all social networks. “I think our implementation of SMS is probably different than some of the others in the sense that it s not application to person, it s really person-to-person.” This approach underlines the importance of the operator, which sits at the center and makes sure ads are inserted in a way that benefits everyone. By utilizing the unused part of the SMS payload, which is what Amobee enables, an SMS exchange between users can be a vehicle that delivers “an ad impression in a relevant manner.” The operator could sweeten the offer by providing users “some type of benefit to be part of a loyalty program, some type of ability to get an upgrade on their handsets or even a reduced cost for the SMS bundle.” Mobile search matters?: Not until the industry gets it right. “To look at the web and say Well, you know, search is now garnering 50 percent of the online advertising revenue’ and then therefore to assume the same thing is going to happen on mobile is a bit simplistic.” Patrick is lukewarm on search and convinced that when it does finally arrive the user experience needs a rethink. “Clearly, what I ll be searching for on a mobile phone is going to be different. It s going to be much more tied to location and to immediacy.” Don’t get too excited about the tie-up between mobile search and mobile advertising just yet. “I don t see that as being the highest incidences of impressions being served on a mobile phone in the short-term. I think there s much more that s going to happen .The notion of using the unused part of the peer-to-peer SMS payload as a way to deliver an ad impression [is] going to lead to much higher volumes of inventory in the short-term.” [Well, Patrick may believe this play on P2P communications will drive more advertising. However, I would contend that ads in connection with search results conveniently placed when we are in buy-mode, not chat-mode will pay bigger dividends.] Skin in the game:Ad-funded can be a particular boost in the case of mobile games, a market that hasn’t “been able to break beyond the 5 percent of mobile users downloading a game over the air for two years now.” If you figure it’s still managed to chalk up impressive growth, then you can imagine the hockey stick in usage when the price can come down as part of an ad-funded content pitch. “It’s exciting for us to be able to be part of a new business model that is going to boost the number of users by reducing, potentially, the price of a game by 25 – 30 percent.” He adds: “It means that the developer and the aggregator and the publisher are getting paid more based on game plays as opposed to downloads. It s going to have an inherent [knock on] effect, producing better games for the industry. I think a lot of people have complained about the poor quality of mobile games. Well, if the model shifts from a pay-per-download to a pay-per-game play for the developer and the IP owners of these games, you could see how that would have a positive effect overall on the mobile games business.” Look for Amobee to “launch some key video trials” to gather the metrics that will tell us more about the right price point for these types of services and how much the brands and the agencies are prepared to pay for those impressions. More to come: So far only Orange in France has come out of stealth mode, admitting it has launched a mobile ad-funded trial with Amobee. (Brands include Coke and Saab, and the ads are served interstitially during idle time in between levels or while a mobile game is loading.) In Asia, Amobee has tied up with Hungama Mobile, a provider of mobile marketing applications and the largest aggregator of Bollywood and South Asian content globally, to raise the profile of ad-funded content in the South Asian market. (Hungama has already implemented more than 600 mobile advertising campaigns for its portfolio of over 100 leading brands, such as McDonald s, Coca-Cola, Citibank, Apple etc.) What’s next? Patrick expects more of Amobee’s operator customers to go on the record with their trials and results to date. BTW: Patrick can’t share stats, but I did report on this during the 16 months I covered the space (and specifically mobile search) for MoCoNews. Based on aggregated data from multiple trials with tier 1 operators in multiple markets, Amobee reported (last November) that for every user who paid to download mobile content, up to 50 users went for the ad-funded offer. The advertising revenues can be worth as much as four times the equivalent download value. Patrick later told me that, when given the choice, over 90 percent of users opted for the ad-funded version rather than pay full price for ad-free content. Special thanks to the Amobee team and Cristina Whittington @ Nelson Bostock for arranging this interview and my invitation to other companies to keep the pitches coming. If you’re not keen to participate in a podcast, contact me directly to be included in my strategic white paper, a research project I have undertaken for a client to show off the best& brightest in the mobile ad space and weigh their relative strengths and weaknesses.

[part 2 of the series on five traits of open source and its impact in the mobile industry. See also part 1] Open source is in many ways the antithesis of corporate software development. The culture and dynamics of OSS development are defined by the nuances of a software community collaborating over the Internet. A community is typically formed by a combination of paid-for, pro-bono and hobbyist software developers with the same motivation towards solving a particular problem ( scratching an itch in open source lingo). Community members are motivated by personal needs, peer recognition and last (and often least) financial reward. Communities are formed and organised ad-hoc around opinion leaders who are recognised based on the merit of their contributions to the community. This environment defies most rules of corporate software development: – Processes and roadmaps: The mobile industry is accustomed to 100% specified and controlled development environments. However, thousands of open source software projects thrive despite a lack of project requirements and feature roadmaps. Open source development addresses features on an ad hoc basis; OSS projects are thereby evolved, not designed, driven by the needs and wants of individual developers or commercial participants into Linux development. – Partner selection and management: Corporate software development projects rely on warrantees, indemnity clauses, non-disclosure agreements and service-level and marketing agreements. Each agreement is unique to the customer-supplier relationship and takes months to set up, adding up to an expensive relationship management. Moreover, software suppliers are chosen based on RFIs and RFPs which often consume extensive resources and time. On the contrary, open source software comes under oft-used licenses such as the GPL, LGPL and BSD, irrespective of the entities using or developing the software. Use of a few well-understood licenses in open source projects results in significantly reduced product time-to-development and time-to-market precluding customer-supplier negotiations. Moreover, the qualities of a software supplier are often evident through their OSS works, which are open to the community for inspection. – Reversed customer-supplier relationship: In corporate software projects, the customer dictates conditions to the supplier and has control over project requirements, deliverables and roadmap. In open source projects, even if these are sponsored by a commercial entity, the community is the one who owns the project, not the sponsor. It is the norm for the sponsor s corporate agenda to be in antithesis with the incentives of the community members; in these cases the community may take the project in a direction well beyond the control and the desire of the sponsor. As such, the customer-supplier relationship is reversed in open source projects. The community, which may be likened to the supplier, becomes the customer who must be appeased. Managing open source projects can be likened to walking on a tightrope, finely balancing the corporate agenda with community incentives. To win the community s heart, sponsors must dedicate efforts, creativity and resources to the community. – Innovation: Innovation in the software industry is almost always driven top-down; market segmentation and customer requirements filter all the way down to floor-level product decisions. Open source software is completely different. Innovation is entirely anarchic and ad hoc, often resulting in genuinely fresh concepts and product usage scenarios. – Andreas [Want to learn more about open source and its impact on the mobile industry? Register for the pre-workshop ‘A Crash Course in Mobile Open Source: Economics, Licensing, Linux, Java and Beyond’ (see here for workshop agenda) delivered by VisionMobile as part of Informa’s Open Source In Mobile conference taking place in Madrid on 17-20 September. Next on this blog series: ‘Mobile Linux is not about free software’]

[Over the next two weeks leading to the Informa’s open source conference, I ‘ll be looking at five traits which characterise open source software and its impact in the mobile industry, ranging from community culture, to what open source means for mobile Linux, browsers and Java.]Open source software is one of the most hyped, misunderstood, feared and high impact phenomena in the software industry today. The success of Linux, from a pet project to Microsoft s arch-rival operating system has fostered hype for the success of the open source model. The unconventional business models where open source is employed, offer plenty of opportunity for misconceptions. Open source has also given rise to fear of IP contamination due to the copyleft properties of the GPL license. At the same time, open source software has created tidal waves within many facets of the PC and mobile industries, from operating systems to browsers.So what on earth is open source? A Google search produces more than 25 distinct definitions of open source, each one from a different perspective. In practice, there are three distinct contexts in which open source is used today:- Software that comes with an OSI-certified license.The Open Source Initiative (OSI) is a non-profit organisation tasked with maintaining and promoting the definition of open source. The OSI defines 10 criteria for open source software, including that open source software must be freely distributable, access to source code and redistribution of modifications. Hundreds of open source-like licenses exist, of which the OSI has approved nearly 60. The vast majority of open source projects have been licensed under the GPL, the LGPL, the Mozilla Public License (MPL), the BSD License, the Apache Software License, and the MIT License.- A social movement for making source code freely available.For many, open source represents a social movement among software development communities. This movement supports that software should be freely available to anyone interested in using it, modifying it or redistributing it. Community-based development and viral distribution are important characteristics of this movement. The very term open source was coined to avoid misunderstandings arising from the earlier term free software .– Open source as a collaborative development methodology.From a business perspective, open source is a collaborative software development methodology whereby a community of entities and individuals (commercial, non-profit or entirely voluntary) develop software through a transparent, distributed peer review process. Open source development can pool community efforts towards development of a software base that is of common interest to all participating parties, while allowing differentiation through derivatives built upon this software base. In this sense, open source as a business model is the polar opposite to commercial forums, which foster collaboration through exclusive or paid-for membership. Yet in some cases open source development may be equally or more effective at achieving the same goal. An example of a successful open-source based collaborative software development effort is the Eclipse non-profit foundation which is backed by over 150 industry players, including heayvyweights Google, HP, IBM, Intel, Motorola, Nokia and Wind River Systems.Open source started in the early 90s as a social movement in favour of maintaining software freedom; the development of the Linux kernel as a free Unix alternative and the creation of the GPL license were the two defining milestones of that movement. Yet 15 years on, open source has evolved gradually and perhaps unexpectedly into one of of the most succesful methodologies for commercial, collaborative software development.- Andreas[Want to learn more about open source and its impact on the mobile industry? Register for the pre-workshop ‘A Crash Course in Mobile Open Source: Economics, Licensing, Linux, Java and Beyond’ (see here for workshop agenda) delivered by VisionMobile as part of Informa’s Open Source In Mobile conference taking place in Madrid on 17-20 September. Next on this blog series: how open source turns corporate software development on its head]

[The Msearchgroove exclusive mobile advertising podcast series in close cooperation with VisionMobile continues with AdMob CEO & Founder Omar Hamoui. Special thanks to Paul Nash, creative director at fifty50, for designing the cheat sheet for mobile publishers based on input from AdMob’s best & brightest. Paul, together with his colleague matt Harper, is also driving our new design, and a long list of innovations in navigation and site usability that really rock!] AdMob has gained some serious traction since it broke on the scene just two years ago, building up the scale and the clout to take on major league players including Google, Microsoft and Yahoo. In fact, AdMob effectively enables the world’s largest mobile advertising marketplace, having just reached its mega-milestone of delivering over 5 billion ads in the last 20 months one billion of those in the last month. (We covered it here and calculated AdMob generally serves more than 370 ads per second.) Since then the company has quietly and cleverly launched a new advertising unit focused on the iPhone. In plain text, AdMob ad servers will recognize iPhone users and serve up iPhone-specific advertisements, paving the way for the company’s network of 2,000+ publishers to monetize their iPhone traffic and develop iPhone-specific content. And speaking of reach, AdMob has sewn up a slew of deals most notably a tie-up with CBS Mobile, which made AdMob one of its “gang of four” advertising-enabling companies to provide clients ad options ranging from text and banner ads to video interstitials. More recently, AdMob struck a deal with Contec Innovations to deliver ads via Contec’s BUZmob mobile publishing service. Of course, enabling mobile advertisers to place more ads with more publishers creates inventory for all and solves the bottleneck of having more ads to serve than sites to show them on I caught up with Omar Hamoui, AdMob CEO & Founder, to talk about the stellar stats, the competitive landscape and pose the all-important question: When are you going to be acquired and by whom?! The answer: AdMob will stay an independent company for now, but would consider the option more seriously if and when it runs out of steam. (Not likely to happen any time soon since Omar told me off-line that he predicts “on a revenue basis [by next year] we’ll make 6x what we did this year. If I annualize our revenue last year, the year was probably 10x of what we did last year.”) Listen to the podcast here. [23:51] [display_podcast] And a special feature for novice mobile publishers: AdMob agreed to share the secrets of site optimization with our readers. It’s free and fact-packed and you can download it here. Numbers that matter: First, AdMob has hit a new high, serving up 1.5 billion ads per month, and AdMob does not deal in adult period. What are the stats beyond ads served? “Anywhere from 1 to 3 percent are clicking on the ads. There are ads that perform less than that, and there are ads that perform better than that. But I would say that’s a good middle-ground in terms of what click-through rates are.” Beyond that “anywhere from 5 to 10 percent engage with the advertiser or make a phone call In many cases, if the content is free or you’re signing up [users] for free services, then it’s higher than that.” AdMob also collects reams of information on usage, everything from the user’s geography to the device type. It’s great stuff, and Omar is mulling over how to dice and slice it for us all to peruse. In the meantime, here are a few surprises: The U.S. accounts for 40 percent of AdMob’s network; South Africa is also upbeat on mobile advertising a phenomenon that likely benefits from flat rate data plans and aggressive mobile operator mobile data promotions U.S. carriers that pack them in are Boost and Metro PCS – as Omar puts it: They “highly over-index in terms of the percent of users that we re seeing from them.” 40-60 percent of devices on the AdMob network can do mobile video and could therefore receive video ads (probably one reason delivering them is high on AdMob’s agenda ) Partners that pay off: Granted, AdMob’s model doesn’t give operators a cut of the action (or revenues), but Omar can imagine how the shift to off-portal could change all that. “Operators have a unique advantage over anybody. They have data, and that data for demographic information, as well as just user behavior, can be used by advertisers. Even if it s not uniquely identifiable, it can be used by an advertising company such as ourselves to better target our ads. We could increase our CPMs, we could increase our CPCs, and they would rightfully, or should rightfully, be able to charge us for that. If there was some sort of cross-operator standard for providing non-uniquely verifiable data to trusted partners, we would absolutely participate in that and we d be willing to provide a significant amount of the uptick in revenue to the parties that are providing the data. I think that s a really easy example of how we might be able to work with them.” Mobile search that delivers: AdMob bumps up against Yahoo so they are competition for ad dollars. But all mobile search companies could be a boost to AdMob it’s a mechanism that points people to new and interesting sites. Nothing specific at this time, but interest is high. “We don t really have any sort of explorations going at this point but there s certainly an opportunity there for us.” Content discovery is a different matter. AdMob will likely announce a tie-up with an on-device portal company in “the next 3 to 6 months.” Inventory that counts: “We ve gotten to the point where there s a lot of traffic, a lot of page using and more than you can fill with brand advertisers at this point, but what s important to the brand advertisers is not just the volume but the actual content, and I would agree that if you re looking at sort of the high-end sites like the CNN s or ESPN s, or anything like that, then there is certainly not yet a viable amount of content for advertisers to spend a huge amount of money.” He continues: “It s not the fact that it s not available for them to run decent sized campaigns, but what everybody s interested in is just much more content and a lot more standardization so that they know that if they really want to turn up the dials and go up to a huge spend, they d be able to do that without encountering some sort of ceiling on inventory. I wouldn t say we re at the point where demand for advertisers for inventory is so high that their bidding price is up to crazy levels or anything like that. I think it s at a decent point where pricing is still reasonable and advertisers are getting most of what they want, although everybody would want it to be more, if possible.” R&D that rocks (!): So what’s the deal behind the cryptic iPhone announcement? The new AdMob unit “definitely falls more into the R&D category for us.” He adds: “It also allows us to do some really interesting data analysis and we ll probably be talking about that more in the next month or two, but there s a little bit of an ‘AdLab’ going on with the iPhone right now for us and so it s more than just kind of the overall reach because there s a number of devices out there relative to everything else that s still small. It s not a huge revenue driving issue right now; it s more of a learning as well as a R&D issue for us.” The bottomline: Omar can’t go into detail right now but basically it’s about “learning things that are going to help our ads on all the other phones.” Count on Andreas and me to keep a close watch Next week we continue the series with Marc Henri Magdelenat, Screentonic CEO, who will discuss the mix that makes for a successful mobile advertising campaign, the tie-up with Microsoft and the role of mobile advertising.

Continuing with our mobile advertising podcast series, we take a look at Millennial Media, the cross-platform mobile advertising company that covers all the bases and then some. I’m thinking here of its broad offer that includes Millennial Motion (encompassing animation and allowing brands to combine audio, video and interactivity) and Decktrade, a performance-based auction service and marketplace for advertisers and publishers. The company has been on my radar since it raised a $6.3 million first round from Bessemer Venture Partners, Columbia Capital, and Acta Wireless in January. Another eye-opener was the partnership with CBS which we covered here. (The four-way tie-up also involves AdMob, Rhythm NewMedia and Third Screen Media.) I caught up with Eric Eller, Senior Vice President of Products and Marketing, to talk about Millennial’s roadmap, as well as the roadblocks that have so far kept spending and conversions down to such modest levels. Sure, Informa Telecoms & Media forecasts worldwide spending on mobile advertising could reach more than $11 billion annually by 2011 but a lot has to happen first. Eric identified three things that have to change fast. Reach More people have to use the mobile Internet. “It s about forty million uniques in the world today, versus 180 to 190 million online, so we re still 20 to 25% of online reach and that has to increase.” Standardization “The mobile experience varies greatly from carrier to carrier, from platform to platform, and even though companies like ours address that layer for the brand and agencies, there still is a huge difference in the consumer s experience.” Metrics – “The more data that we can get, the better .And more effective programs can be developed to really achieve the targeting and the results that the brands want.” Listen to the podcast here. [20:42] [display_podcast] The dream team: It’s all about CPM but without the proper measurement it’s an empty victory. Against this backdrop, it’s the measurement companies so the likes of M:Metrics and Telephia that can fill the gap and deliver the analytics that can move the market forward. “Clicks are a good metric but, you know, what people in the online space have found is that clicks aren t necessarily indicative of brand impact or of conversion response so we ll have to learn in the mobile space what the correlations are between those different metrics .But I think they re all measurable and they ll become more measurable over time.” Beyond our reach: The ability to target ads is a few years off but that’s no reason to neglect undertaking the detailed research that is a prerequisite for successful campaigns. “We [as an industry] need to aggregate reach; we need to definitely partner with the companies that are going to ask those questions to that broad reach of people and start building that dataset and understanding what the audience makeup is of the different types of publisher inventory, of the different types of carrier subscribers, of the different types of people that have common behaviours. Then we ll get much closer to being able to offer the different levels of targeting that most advertisers want to buy. The numbers game: Conversion is always a sticky issue, but Eric offered more detail than most. His insights: “We certainly have seen campaigns where the click through rate is 5 percent and then 50 percent of those convert to buy and that might be for a promotional type conversion right. So, if you need to sign up for a chance to win something, those conversion rates are always very high because the consumer in some cases is incentivized to get those low level conversions so that they can be marketed to in the future. I think it s reasonable to expect that s a relatively low value conversion and it s easy to obtain. A higher value conversion, having someone subscribe to a $10 a month subscription, is a little bit more difficult and then, kind of at the higher end kind of following at the mobile commerce side, if you want someone to download an $80 smartphone application, that s a bigger conversion yet. I think the range of click-through rates is anywhere from 0.5 percent to 5 or 6 percent, depending on how well targeted the campaign is to the audience and the conversion rates can vary from 2 to 10 percent, or up to 50 percent for a promotional type conversion.” Coming together: Mobile search and mobile advertising are a perfect match, but Eric doesn’t just state the obvious; he gives us a blueprint for how this might work in practical terms. As he sees it, the industry is in a testing phase and search isn’t really about search, it’s about tracking. “Since we re crossing multiple advertising mediums already through applications, through SMS, the search space can be considered a different medium, a different way to reach an audience.” In this context, “we may have a service or solution that allows an agency to buy through us and reach audiences in applications, audiences on search traffic, so in some ways you might look at that as a search engine marketing company in the online space. But there might also be some more automated hooks that allow us to deliver a combined campaign across as multi-medium including search.” (BTW: Yes, I asked. No mobile search company is a suitor for Millennial yet and so far the company is unaffected by the run on mobile ad companies and inventory.) Motion matters: It’s all about banner and text links now, but Millennial’s Motion product, which enables advertisers to deliver animation, is gaining traction. It’s all about engaging audiences and vector animation is rising up to be part of the marketing mix. “We’ve had a lot of positive feedback from agencies on the richness of the environment that can be achieved when a user clicks on a [graphic] and goes to a motion environment where it s very similar to a web-based animation . Advertising becomes entertainment that can be interactive menus, a virtual showroom, streaming video .It’s almost like having DVD extras [in the content bundle], so that s very exciting.” What’s next?: Predictably, Eric skirted around the specifics, but he did outline the areas that figure most prominently in Millennial’s roadmap. The focus for the rest of this year is “growth and scale.” So we can expect to see more publisher partnerships like CBS. The other objective: “An aggressive role out of the Millennial Motion product because it s primarily geared towards application inventory. We ve had a number of developers that are kind of in the process with that today and expect to see that inventory growing rapidly towards the end of the year.” Peggy Anne Salz VisionMobile teams up with Peggy at Msearchgroove – the premiere thinking-space at the intersection of content and context – to present this in-depth series of exclusive audio interviews. TOMORROW: The mobile advertising podcast series continues with Omar Hamoui, CEO of AdMob, a company that serves a whopping one billion ads per month. More on the company’s future plans and a fact-packed cheat sheet for mobile publishers – so watch this space!

i-mode, once the mobile industry’s role model for data services has been dealt with three swift blows in July from O2, KPN and Telstra. The implications of these announcements have been much debated, some industry pundits arguing that i-mode is fading in Europe, some hinting at the end of the i-mode alliance and some arguing that i-mode isn’t dead yet. Lack of economies of scale in handset development and purchasing has been the root cause for the gradual demise of DoCoMo’s i-mode global expansion plans. But even if this is the beginning of the end, I suspect DoCoMo has new expansion plans. Let’s take things from the top. Made in Japan i-mode is perhaps the most succesful data services model, a success which many operators have tried to mimic over the years. i-mode was launched in February 1999 by DoCoMo and reached more than 47 million subscribers (an impressive 90% of the subs base) as of March 2007, based on DoCoMo’s financial report (.PDF). Since 2002 i-mode has been gradually exported to 17 EMEA countries reaching 7.2 million subscribers according to DoCoMo’s website. The next table summarises the countries where i-mode has been deployed (source: DoCoMo). The beginning of the end for the i-mode alliance Despite the success of i-mode in Japan, the i-mode alliance has not done done as well as DoCoMo would have liked. While in Japan service penetration exceeds 90% of the subscriber base, in the remaining 17 countries service penetration is typically less than 5% (an average of 3% in 2005 according to i-mode business strategy). The only exception is Bougues Telecom who had 1.6 million subs or just under 20% penetration as the operator reported in September 2006. In July three operators announced separately that they would be discontinuing their i-mode service, dealing a blow to the success of the i-mode alliance. KPN announced it would not source any more i-mode handsets. Australian operator Telstra said on its website it would stop the i-mode service on December 2007. O2 UK said it would phase out its i-mode service by mid-2009. Interestingly, O2’s i-mode was reportedly used by only 250,000 subsribers in the UK, or less than 1.5% of the subs base. This is particularly bad for O2 UK since the operator had reported that i-mode users consume twice as much data per month as they do on comparable WAP services. Note that O2 in 2004 had abandoned plans to rollout i-mode services in Germany. A year earlier, Russian operator MTS and Israeli operator Cellcom had also announced they would discontinue investments in i-mode, according to Informa (here and here – subscription required). The failings of the i-mode alliance The reasons that have led to the demise of the i-mode global expansion plans are several: 1. Firstly, the gamut of handsets supporting i-mode is extremely limited. In the case of O2 UK, according to David Nicholas, the head of communications for O2 in Europe, the operator offers only 12 phone models with i-mode but more than 240 with conventional Internet browsers. The case of Cosmote Greece is very similar; on the operator’s website there are currently 13 i-mode devices on offer (from LG, Motorola, Sagem, Samsung and Sony Ericsson) from a total of 203 devices available on contract (a tiny 6%). These examples are the rule in i-mode alliance deployments. The reason for this lack of handsets is that i-mode operators have each produced different specifications for their handsets, breaking the economies of scale that could have been reaped (as the alliance had tried with a procurement agreement with LG according to Informa – sub required). Furthermore, i-mode handsets released in Japan carry more advanced software – DoJa 4.0 specification instead of the DoJa 2.5 used in i-mode handsets outside Japan – meaning that i-mode handsets cannot be simply exported. Perhaps more importantly, handset OEMs have resisted releasing handsets where they have no control over service delivery (and monetisation) – the reason for Nokia’s absense from the list of i-mode handset OEMs. 2. The development and release of an i-mode handset takes anywhere from 6-18 months according to a presentation by Bouygues Telecom in September 2006 at the MAPOS conference. Due to the small ordering quantities, handset OEMs cannot prioritise handsets which are i-mode variants, thereby creating an agonising delay in bringing i-mode handsets to market. The first weeks of a handset launch are absolutely critical to sales performance – handsets sell mostly when they are new and cool, after which sales rapidly decline – thereby hurting i-mode subscription growth. Lack of economies of scale is therefore to blaim again. 3. The rev share has deterred some operators (particularly US operators) from deploying i-mode services. O2 offered a 86/14 revenue split while Telstra offered an 85/15 split – both close to DoCoMo s 91/9 split in Japan, but much less interesting for operators compared to premium SMS revenue splits (typically 40/60 in favour of the operator). 4. The investments in the i-mode portal compete with operator investments in other service portals, including SMS, WAP, HTML and HTML transcoding portals. Given that i-mode content provider deals have been local and not pooled within the i-mode alliance, the lack of economies of scale are again to blaim. This is even more so given that supporting third parties with cHTML content development and non-WAP portals require operator investment. i-mode 2.0 ? The i-mode alliance is bound to fail eventually without economies of scale, particularly at a time when operator strategies are geared towards opening the mobile phone to the entire internet and not to a ‘sticky’ garden. So what are DoCoMo’s plans for global expansion now ? In June 2006 DoCoMo established the LiMo foundation with co-founders Vodafone, Motorola, Samsung, NEC and Panasonic – since August more software and equipment vendors have joined, including LG. The purpose of LiMo is to define a complete handset software stack which will support advanced data services. The Linux-based stack will be co-owned and co-developed by LiMo members and will launch in phones towards the end of 2008 (or more likely early 2009). I believe that in LiMo DoCoMo sees a new export strategy for mobile data services, based on a common data services enabling software. Given that Motorola and Samsung are on board, economies of scale will be easier to achieve in most markets. Moreover, the base software stack and over-the-air software management will allow easier development and launch of i-mode variant handsets by major OEMs. Is this part of the plans for an i-mode 2.0 ? I believe so. [update: Informa s Mobile Communications Europe magazine reported in early August that there were just 5.2 million i-mode subscribers outside Japan at the end of Q1 2007, more than five years after operators began launching in early 2002; these figures are 2m subscribers less than the figure reported by DoCoMo at its i-mode alliance website. Informa s figures put i-mode subs to just 3.5% of customers of operators offering the service. Bouygues Telecom has by far been the main exception to the rule, having the highest penetration of customers with an i-mode handset (20.6% of 8.7 million users). However, Informa reports that only half of these subscribers (about 10% of the subs base) are active users of the i-mode service.] – Andreas

GPLv3 is the latest incarnation of the Free Software Foundation s (FSF) GNU General Public License (GPL), published in June 2007. Its predecessor, GPLv2, was published in 1991 and has since become the most widely used FSF software License ever with estimates of between 50% and 70% of all open source and free software being licensed under GPLv2. A lot has happened in the software world since 1991, to the extent that the FSF announced in January 2006 that they were going to create a new GPL license. The purpose of this new license would be to address some of the areas identified for improvement and clarification in GPLv2 such as lack of clarity on patent indemnity, better understanding of what is understood to be derivative works (now classed as covered works), improved internationalisation and better remedies for inadvertent License infringement (rather than the previous immediate Termination effect). Indeed the new GPLv3 license is nearly double the length of the GPLv2; such has been the fortitude to write a license which is more precise, clearer in language and ideally more consistently interpreted. But is the GPL v3 future proof ? The GPLv3 was written by Richard Stallman of the FSF and Eben Moglen of the Software Freedom Law Centre. There was by all appearances a very broad, consensus-driven process to arrive at GPLv3. This process was informed by 4 separate Committees and broad public comment: – Committee A comprised mostly Free Software supporters and Projects such as Debian, Google, Samba, SleepyCat, Red Hat and others. – Committee B included the erstwhile giants of the IT and software world such as IBM, HP, Sun Microsystems, Apple, Nokia, Intel and so on. – Committee C constituted various academics, lawyers and activists in the public domain with an interest in the GPL. Last but not least -Committee D comprised interested onlookers, programmers and licensing enthusiasts such as myself. I do not intend on providing a summary of GPLv3 there are already a number of good summaries available here and here, but I will deal with one specific part of GPLv3 and that is the Tivoisation aspect. Tivoisation potentially a counter-intuitive move? My background is in commercial software licensing and development (but I am not a lawyer!) – as such I am particularly interested in the extent to which for-profit entities and businesses will wish to use software that is licensed under GPLv3 for their products and so I have a particular interest in the impact of the anti-Tivoisation clauses in GPLv3. Firstly let s understand what is meant by the term Tivoisation and more importantly how it has been construed and interpreted by the Free Software Foundation. Briefly, Tivoisation is named after the Tivo product, a digital video recorder and consumer device which allows users to capture television programming to an internal hard disk storage for viewing later basically you can record many TV channels at once and watch them later (so called time-shifting). Tivo contains a small Linux OS and so under GPLv2 this requires the manufacturer to make the source code available to users which it does. Users can modify the source code and then compile it – but it won t run because Tivo contains a special mechanism which notices that there have been changes to the code and just shuts down. Therefore whilst Tivo is fulfilling its obligations as required under GPLv2 it is actually inhibiting the four freedoms as set-out by the FSF and that is to preserve the users freedom to run, copy, distribute, study, change and improve the software . As the software no longer works post-modification, due to the special mechanism that forces Tivo to shut down post source-code modification, the user is prevented from running the software. So what does the new GPLv3 add in order to preserve these freedoms? Firstly GPLv3 contains some new terms and requirements under Section 6 of the License, titled Conveying Non-Source Forms . The first new term is User Product and is defined as per the below. As far as I can ascertain, the purpose of including this definition is to ensure as broad as coverage as possible for any products that make use of software using GPLv3 licensed software. “A ‘User Product’ is either (1) a consumer product , which means any tangible personal property which is normally used for personal, family, or household purposes, or (2) anything designed or sold for incorporation into a dwelling.” So User Products can be digital recorders (such as Tivo), mobile phones, CD players, Televisions and the like but could also be fixtures and fittings, furniture and alarm systems etc. Personally I believe that this definition is extremely important as it could be interpreted to mean anything in a dwelling including potential new consumer or household devices as yet uninvented. The implications of applying such anti-Tivoisation clause to these as yet uninvented intentions we cannot either envisage or quantify. Therefore we do not know what the impact of this broadened scope could ultimately entail. The second new term introduced in this section is the term Installation Information described as Installation Information for a User Product means any methods, procedures, authorization keys, or other information required to install and execute modified versions of a covered work in that User Product from a modified version of its Corresponding Source. The information must suffice to ensure that the continued functioning of the modified object code is in no case prevented or interfered with solely because modification has been made. This is a new requirement that was not in GPLv2 and is intended to ensure that entities using GPLv3 licensed software also provide any and all additional information necessary to ensure installation and running of said software. This is a very interesting concept in that there is more often than not valuable IP and software know-how contained in installation methods that may actually provide unique value to the entity using GPLv3 licensed software. Whilst it is clear that the quid-pro-quo for accessing GPLv2 licensed software is to provide that same freedom to others, we cannot quantify or easily assess at this early stage what special processes or unique knowledge may be contained in installation methods . Indeed I would guess that this new term installation methods will create as much confusion to the GPLv3 as the term derivative works generated in GPLv2. The next most interesting aspect of this new anti-Tivoisation tenet is in the paragraph following the above definitions, quoted in full below (note that the bold markup is my own):- “If you convey an object code work under this section in, or with, or specifically for use in, a User Product, and the conveying occurs as part of a transaction in which the right of possession and use of the User Product is transferred to the recipient in perpetuity or for a fixed term (regardless of how the transaction is characterized), the Corresponding Source conveyed under this section must be accompanied by the Installation Information. But this requirement does not apply if neither you nor any third party retains the ability to install modified object code on the User Product (for example, the work has been installed in ROM).” It is clear from our discussion above that the entity using the GPLv3 software must provide the source code and the installation details of a User Product when conveying the code. This does not apply if the entity using the GPLv3 software or any other 3rd party cannot install modified object code on the User Product. So if you don t have that freedom i.e. the freedom to modify the object code in the ROM, then you cannot pass that freedom on to future Licensees or users of the software. I suspect as I was not party to the GPLv3 license discussions that this final sentence was added in order to allow those entities that distribute User Products containing GPL code installed in the ROM (such as mobile handset manufacturers, amongst others) a get-out clause to avoid having to provide source code or to provide installation information. This also makes sense from a FSF perspective in that they are still adhering to their freedom aims as generally software contained in the ROM is not modifiable or generally modified by users. On first reading this appears to be sufficient for the commercialisation of GPLv3 covered code in mobile devices and other User Devices. However on closer examination of this paragraph there appears to be a number of implications that may not have been foreseen and were probably not intended. Although with as many brains in all those Committees overseeing the new GPL I feel sure that this point must have either been brought up and ignored or alternatively deemed not sufficiently important by the FSF. Anti-Tivoisation clause potential (unplanned?) impacts Firstly the presumption under this clause is that you, the entity using the software licensed under GPLv3 terms, will only store software that may be modified in the RAM memory of a device. This get-out clause works only up-to-a-point and presumes that a mobile handset manufacturer using GPL v3 code will never want to or need to modify software in the ROM, as they would otherwise trigger the obligation to provide source code and installation files. However, this is already technological history and has been surpassed by the introduction of FOTA. FOTA i.e. Firmware-over-the-air upgrades are used by most of the major handset device manufacturers and this is remote modification of the ROM image on the device. We could perhaps argue that this is a change to or of the whole ROM image and as such is not really modifying at all but replacement . Or perhaps the exception here is that the FOTA generated binaries that are stored in the ROM are not a change of source code but a change of binary code? And perhaps it doesn t actually matter that a mobile device manufacturer would have to provide the installation files as well as the source code as perhaps it is unlikely that there is valuable proprietary IP contained within installation files (although I doubt this). I am not sure that such an argument would hold water and even if it did, the same argument would be less effective in relation on new technologies designed to provide advanced mobile device management capabilities, such as the soon-to-be-completed OMA SCOMO specification. SCOMO (Software Component Management Object) is the successor to FOTA and is being introduced by the Open Mobile Alliance (OMA). It is intended to enable remote software component management to allow network operators and mobile device manufacturers to deploy, install and execute discrete software components in both the RAM and more importantly the ROM memory post-device sale (note that VisionMobile have recently published a research paper on Mobile Software Management where we discuss SCOMO in detail see our white paper for more info). Whilst FOTA has been very successful in allowing ROM upgrades remotely to the complete ROM image, SCOMO allows discrete component-based updates to the ROM. The killer application of SCOMO is being touted as the ability to update those particularly important and more intrinsic middleware applications resident on a mobile device that are stored in the ROM such as Java and Flash libraries, graphics codecs and libraries and so on. So what does this mean? I strongly believe that this is a classic instance of technology transcending business models and licensing frameworks. Whilst it may have been originally envisaged that mobile device manufacturers would only ever need to update source code resident on the RAM and not ROM this is and will not be the case in the future. Of course there are some mitigations to this issue. For example those User Products that are licensed via the Dual Licensing mechanism will not be subject to these obligations, to the extent that they are licensed under GPLv3 and also under a more commercially friendly license and will of course be precluded from this obligation under the commercial license regime. But not all User Products are dual-licensed. All in all the moral of this story may be that by legislating to exclude very specific use-cases, you could actually end up precluding technological advancements and improvements on specific sets of software licensed under GPLv3. However perhaps this is considered a small sacrifice in return for adhering to the freedoms that are demanded, and also passed on to others, under the GPLv3, but it remains to be seen if commercial entities deploying free and open source software will be prepared to move to GPLv3 and accept these obligations. – Liz

Adobe’s Flash Lite has a enviable history of market penetration. Starting from DoCoMo handsets in May 2003, Flash Lite is quickly spreading to Europe as a feature of Nokia’s S60 and recently Series 40 platforms. As an application environment, Flash Lite is second only to Java ME in terms of market penetration, yet is controlled by a single vendor. Adobe projects to have shipped 1 billion Flash Lite -enabled devices by 2010; So how will Adobe manage to penetrate the mobile device market so agressively ? Flash Lite penetration As an application environment, Flash Lite’s installed base is second only to Java ME, which has been around since 1999. Yet Flash is controlled by a single vendor (Adobe), while Java ME’s roadmap is controlled by Sun and the consortium of vendors participating in the Java Community Process (JCP). How does Flash Lite’s penetration compare to other application environments ? – Java ME is embedded on approximately 50% of devices shipping in 2007 (over 500 million) according to Informa and approx. 80% of devices shipping in 2007 according to Ovum. – Adobe estimates 220 million Flash Lite -enabled devices (mobile and consumer electronics) to have shipped by the end of 2006; given that the ratio of mobile to CE device models is 2 to 1, we can guestimate the number of devices with Flash Lite to 145 million. – SVG-T implementations are embedded in more than 225 million handsets to date according to Ikivo. Given that SVG-T is only a graphics rendering engine (without any scripting element prior to version 1.2) it doesn’t really compare with Flash Lite which combines both declarative and scripting elements. Version 1.2 of SVG-T implementations started shipping only recently, so there market penetration is really lower than versions 1.1 and earlier. – Symbian OS has been shipped in 126 million devices (as of March 07) according to Symbian. This puts S60 at 60-70% of that figure. – Other application environments (.NET Compact Framework, App Forge, Python, etc) have much lower market penetration. So how has Adobe/Macromedia accomplished such a market penetration and how will the company manage to reach the 1 billion phones mark by 2010 ? Aggressive subsidising A closer inspection of Al Ramadan’s presentation during Adobe s financial analyst meeting in March 2007 reveals the following per-unit royalties for Flash Lite installations; Average royalties dropped from $0.37 in Q4 2004 to $0.31 in Q4 2005 to $0.20 in Q4 2006 (note that prices are approximate as I had to extract them from visual bar charts.). This is aggressive underpricing, far beyond the trend of price erosion for embedded mobile software today. As a $2.5 billion-a-year company, Adobe can afford to subsidise the Flash Lite product in order to stimulate sales of its tools (tools account for the majority of Adobe’s revenues). This is a classic platform->tools strategy practiced by Qualcomm (BREW sales drive chipset sales + IP royalties), Microsoft (Windows sales -> drive Windows, Office and Visual Studio sales) and Intel (new hardware architectures driven new chip sales). The right technology Adobe’s acquisition of French company Actimagine in October 2006 gives Adobe very fast rendering technology (by some accounts 4 times faster and 4 times smaller memory footprint in rendering Flash animations). I believe that the introduction of Actimagine rendering technology in the Flash Lite codebase in Q4 2007 will allow Flash Lite to penetrate lower-end devices (and could also explain the inclusion of Flash Lite in the Series 40 platform). Adobe estimates the target addressable market for Flash Lite to jump from 51% in 2006 to 72% in 2007 (again numbers are extrapolated from Adobe’s financial analyst presentation). The right tools Adobe has without doubt the best-in-class tools for mobile content development. Particularly Device Central released recently is a role model for how to best help developers take their applications to a highly diverse and fragmented market (Sun should take note). More importantly, the UI strategy teams inside handset OEMs are people who ‘ve grown up with Flash and Macromedia’s tools. Designing mobile applications with Flash (Lite) is familiar to handset OEMs. This is despite the fact that developing core applications based on Flash UI (see the LG Prada) takes more C++ glue than meets the eye. A ghost platform strategy I previously argued that handset manufacturers will not buy platforms. Platforms are expensive to integrate and more importantly engender single vendor lock-in. So how has Adobe managed to embed Flash Lite on more than 200 handset models from 16 manufacturers and how will it sustain this growth ? Adobe is merging its Flash Home, Flash Cast, Flash Lite and Flash UI products into a single codebase, which will be released towards the end of this year. Adobe is pitching the Flash family as software that will cater to any manufacturer need; whether an OEM needs to implement a vector graphics library, a UI framework, an application environment, a content-driven application (on-device portal), or an active idle screen, Flash is the tool for the job. Flash is therefore solving a short-term problem for the OEM. And while Flash is a tactical solution, it is establishing itself as strategic platform within a large and diverse range of handset models. This is what I would call a ghost platform. It reminds me of MS-DOS and IBM. Little did IBM know that the operating system would be crucial to value generation and sustainability. But today’s handset OEM know better, right ? I ‘m sure they do, but I believe that by adopting Flash as a tactical solution, Flash might emerge as tomorrow’s Windows. Flash-inside, anyone ? – Andreas

As an analyst working inside the mobile industry I ‘ve witnessed to hubbub of cheering, admiration and idolatry for the iPhone in the last week since its release. However, I do not think that the real impact of the iPhone is in the sleekness of its curves, the intuitiveness of its interaction design or its cool-looking widgets. I believe the iPhone is creating a much deeper impact in the mobile industry, along the following three lines: 1. The phone as a premium consumer good. Status quo: Operator efforts to attract and retain subscribers have resulted into considerable phone subsidies in most markets, primarily Europe and the US. A handset is typically subsidised by several hundred dollars in order to attract a customer purchase. As a consequence, mobile handsets have become commodity items in the eyes, where the price is the primary differentiator. Consumers therefore have come to not respect the value of the mobile phone, which they see as reflected on its price. iPhone impact: the iPhone has not been subsidised – at $500-$600 this is a premium-priced phone (with a 55% margin according to iSuppli). Yet consumers have been flogging to buy it, realising implicitely that there is a brand premium that the iPhone can command. If more phone manufacturers follow iPhone’s example of denying any operator or channel subsidy, that would foster a more healthy market, where the value of phones is more reflective of its price, allowing operators can reduce tariffs in response to lowering subsidies. 2. ODMs gain back market share Status quo: The top-5 OEMs (Nokia, Motorola, Sony Ericsson, Samsung, LG) have over 82% of the market (Q1 2007 figures from Informa T&M). This figure has been growing in the last years and is showing signs of stability. As a result, smaller OEMs and ODMs have seen their market share dwindle. iPhone impact: Apple expects to sell about 10 million iPhones next year, or 1 percent of the 1-billion-a-year mobile phone market. This goal seems easily achievable since the iPhone is reported to have sold more than half a million handsets in its opening weekend. the iPhone is made by Quanta and Foxconn, two Asian ODMs. ODMs have produced highly customised phones like the O2 ICE and O2 Cocoon before, but not in volumes of this scale. iPhone will undoubtedly shake the ground of top-5 OEM dominance by increasing the credibility of Asian ODMs and their ability to execute not only me-too, but daring industrial designs. this comes at a time when brands and operators are increasingly looking at cheap routes to market for uniquely customised handsets. 3. UI technology coming to the forefront Status quo: software vendors have been challenged to sell products on the basis of improving the user experience; whereas this is a common ‘sales pitch’, software sourcing deals are signed on the basis of added features, functionality or post-sales revenue. An improved UI is an intangible premium, and therefore undervalued. iPhone impact: the iPhone introduces an intuitive user interface (to be more specific, an innovative interaction design, including use of orientation, light and proximity sensors) which are not to be found on any other phone available today. The appeal and sexiness of the iPhone user interface is actually leading to the appreciation of the value of the UI as a tangible premium (tangible as in ‘see how much premium the iPhone can command!’). The effect this has had is that already at least a couple of mobile operators / handset manufacturers have started projects aiming at producing iPhone killer phones. At the forefront of these projects are UI technology companies who can now pitch their wares as not just nice-to-have but as software solving short-term problems for the manufacturers/operators, that is allowing them to favourably compete in the post-iPhone age. Naturally, image/video hardware acceleration vendors are also seeing the market change in their favour. – Andreas

Mobile software vendors (ISVs) who develop software for mobile handsets are competing in an increasingly crowded market; on-device software is being increasingly commoditised, channels to market and mobile operators are a challenge to deal with, and middlemen are always there to take a respectable revenue share. So what are the options for a mobile ISV who’s keen to upsell the value of their software assets ? Here I present a framework of five strategies that mobile ISVs can use. Each strategy is presented in one slide, from one to five. You can download the entire presentation here. Thoughts, comments or suggestions are welcome as always. Andreas.

We recently researched and authored an extensive research paper on the subject of active idle screens; that is, the technology that turns the ‘front page’ of the phone into an ‘active’ real-estate for discovering, searching, promoting and advertising services. I expect the market value of this real-estate to rise very quickly. Why ? Put simply, the idle screen is the start and end of each and every user journey and as such is the prime inventory in the phone. This is uncharted and relatively virgin territory for mobile operators, manufacturers, content providers and newcomer advertisers who are keen to exploit the 1-billion-a-year piece of a real-estate that is more personal than most other consumer electronics toys. Active idle screens (AIS) is a busy market, too. Some 15 vendors are now offering AIS solutions, deployed by over 10 mobile operators to date, with Alltel, Orange, T-Mobile US and Vimpelcom being behind the most innovative and aggressive deployments. The research paper, Activating the Idle Screen: Uncharted Territory was commissioned and published by Informa Telecoms & Media at last month’s Handsets World conference. Before I dig into the findings of the research, here’s some more teasers. Over 1.5 months, George Voulgaris and I interviewed nearly 20 companies: Abaxia, Acrodea, Aditon, Adobe, Amobee, Celltick, Ikivo, IntroMobile, Motorola, Nokia, Onskreen, Openwave, Orange, Qualcomm, Tegic, Webwag, and Zi Corp. Our favourites? Finding out about Nokia’s Ad Connector (Nokia’s big push into advertising) as well as Alltel’s Celltop, and T-Mobile’s MyFaves (the most innovative uses of handset customisation by operators today). Next are some excerpts from this research paper – you can download the full paper here. Why the Idle Screen ? “The idle screen is the starting and finishing point for all tasks associated with a mobile phone; whether making a call, sending a text, checking to see if a voicemail has arrived or downloading a ringtone, the idle screen precedes and concludes the user journey involved in performing each task. As a result, the idle screen has two important properties. Firstly, it is the application within the handset that is visible most often or that is active for the vast majority of the handset s lifetime. Secondly, the idle screen is the least intrusive medium on the handset for presenting informational or promotional messages. As a result, the idle screen has been widely used by mobile operators and handset manufacturers to provide branding elements and static links to mobile services, such as a WAP portal. However, the idle screen need not necessarily be static; In fact, adding interactivity elements into idle screen makes it anything but idle. Indeed, active idle screen solutions can address three real challenges that mobile services and handsets are currently facing, namely: – Handset complexity and featuritis which impacts the ease of use of handsets – Poor access and discovery of mobile services, due to the long click-distances associated with the location of these services. – Inadequate means for service promotion and advertisement” Some history: the idle screen past and present “The active idle screen market has come a long way in the last few years. The market has been led by Abaxia in 2002 and IntroMobile in 2004 who deployed handset-based AIS with operators Orange and SKT respectively. Zi s Qix and Qualcomm s uiOne products were announced in 2005, but only achieved customer wins with idle screen products in 2007. In early 2006, SCREEN3 was first shipped as part of Motorola handsets and later in the year Onskreen secured a deployment with operator Airtel in India. In the SIM-based active idle screen market, Celltick first launched its LiveScreen Media solution with Hutch India in 2002. 2007 is clearly the year when a wave of vendor announcements have hallmarked the establishment of the active idle screen market. Aditon U-Daily, Adobe Flash Home, Nokia Advertising Connector, MobiComp s ActiveTicker, Openwave Mobile Widgets, Tegic T9 Discovery Tool and Webwag s Mobifindit and Mobidgets were all announced in early 2007.” The vendor shoot-out “There are nearly 15 software vendors today who specialise in active idle screen solutions; Abaxia Mobile Desktop, Aditon U-Daily, Adobe Flash Home, Celltick LiveScreen Media, IntroMobile IntroPad, Nokia Ad Connector, Onskreen Fusion, Openwave Mobile Widgets, Qualcomm uiOne (on idle screen), Tegic T9 Discovery Tool, Webwag Mobifindit / Mobidgets and Zi Qix. Access Netfront Dynamic Menu and MobiComp s Active Ticker are further AIS solutions. Last but not least, Amobee produces the Handset API (HAPI) SDK for insertion of interstitial and banner advertisements into handset applications, including the idle screen.” The next table taken from the report compares AIS solutions in terms of deployment track record and features (platform, access method, and promotion capabilities). Each one of these vendors is reviewed in detail in the paper. In this environment it is important to understand the boundaries of the AIS solution space, i.e. which purposes it is best suited for and which it does not address. To accomplish this, it is important to establish a frame of reference across other customisation solutions, namely on-device portals, AIS and skinning solutions, and ascertain what are the defining traits and distinguishing characteristics of each solution space, and last but not least, the points of parity between them.Very few software vendors cover more than one solution space. For example, uiOne can be used to implement deep skinning, on-device store-fronts or idle screen-based promotion solutions. A few on-device portal vendors offer idle screen replacement capabilities, most notably mPortal, whose Springboard ODP client sits on the idle screen of Disney Mobile handsets and Cibenix who had launched an idle screen-based dashboard on some handsets launched by operator ONE in Austria.” The next table compares and contrasts the use cases, revenue sources, technology and other distinguishing characteristics of three approaches: Active Idle Screens vs On-Device Portals vs Themes & Skins. The deployments “To date, Alltel, Vodafone Germany, Orange UK, SKT, T-Mobile US, TMN Portugal and Vimpelcom have deployed some form of AIS products. Of these deployments, it is worth crediting Orange with the highest number of handset shipments with embedded clients, Vimpelcom with the highest number of deployed on-SIM clients, Alltel with the most personalisable active idle screen product and T-Mobile US with the first AIS product designed to boost voice ARPU.” See the research paper for case studies of seven active idle screen product deployments, namely Alltel Celltop, Motorola SCREEN3, Orange Homescreen, S60 Active Idle, SKT 1mm, T-Mobile MyFaves and Vodafone Live! Cast. These case studies cover both manufacturer and operator led AIS deployments, spanning North American, European and Korean markets. The challenges ahead “Despite the flurry of announcements, AIS products are still part of a nascent market, both in terms of technology maturity and the commercial route to market. There are four fundamental challenges all AIS products will have to address: – Idle screen replacement requires integration of the AIS software with tens of relatively inaccessible APIs (application programming interfaces) which are only available to third parties subject to manufacturer approval. This implies that the AIS technology is mostly accessible to companies with strong relationships with handset and operating system vendors. – Deployment remains a challenge for all handset applications. As such AIS solutions will rely on operator backing or manufacturer consent in order to secure distribution volumes. – Any form of pre-sales handset customisation can easily impact the time-to-market. Since active idle screen products imply significant modifications to handset software, AIS solutions have to constantly trade-off the scope of customisation against the time-to-customise. – The idle screen represents the cardinal touch point of the end user with the handset manufacturer brand. As such, handset OEMs are particularly wary of the risk of brand dilution and third party control points that can devalue their business proposition.” Opportunities “As for the future, there is no doubt that the idle screen represents the primary real-estate for service search and promotion. It lies at the confluence of mobile operators, handset manufacturers and media publishers. Within such highly prized territory, it is clear that plenty of opportunities exist, but execution will be challenged by many turf wars. The commercial solutions that will be most successful will be those that reconcile manufacturer interests with those of operators and extend into service providers and media publishers for lucrative revenue share agreements. Moreover, unlike on-device portals, the idle screen will also be used to increase voice ARPU, rather than pure data or advertising revenue.”

The history book of the mobile handset industry has gone through two turbulent chapters to date; the first na ve years of manufacturer rule ended abruptly in late 2002 with the launch on Vodafone Live! and the Orange SPV. In the second chapter, mobile operators in Europe and later in the US seized the upped hand in their dealings with handset suppliers. Without exception, OEMs and ODMs have been willing to produce customised handsets given a minimum purchase volume commitment. Operators had to develop new skills, adapt their organizations, foster multi-year relationships with OEMs and master complex processes of 6-month handset development. To overcome the many challenges existing today, the history book is entering a new chapter; that of container projects. The status quo To date, tier-1 operators have been issuing handset manufacturers with long lists of requirements specifying not only the branding and device settings, but also custom applications that ship with each handset model. For example Vodafone group have been issuing terminal requirements every six months that comprise 4,000+ lines of requirements. The operators motivation for handset customisation has been threefold: – brand devices with the operators’ favourite red, orange, yellow, blue or magenta to (hopefully) increase customer loyalty. – build-in support for operator services such as T-Mobile’s Web ‘n Walk or Verizon’s Get It Now to increase ARPU. – bring services to the ‘front page’ of the user’s attention as with Orange’s Home Screen or Alltel’s Celltop, in order to increase discoverability and accessibility of services, and thereby ARPU. So how has handset customisation been achieved ? Operators have been using three approaches to specifying the handset features and behaviour to handset manufacturers: – use-case-based specification, as with T-Mobile UK’s list of websites that must be rendered and the time-to-render, for compliance with the operator’s Web-n-Walk service. – technology-based specification, as with T-Mobile US’s MyFaves list of technical feature specs that have been reportedly passed to manufacturers for creating the MyFaves experience – vendor-based specification, as with Orange’s preference of the Abaxia Mobile Portal client software on all of its Signature handsets based on Windows and Symbian. Application-based customisation has been becoming a popular among operators – at the Handsets World conference in May Vodafone’s Patrick Chomet presented Vodafone’s new strategy for handset customisation, which includes provisioning four types of applications on handsets: a) a small number of core applications with a ‘deeper’ user experience, b) a full internet browser, c) an on-device portal for browsing and buying content and d) an application launcher and store-front for service discovery. These methodologies have been practiced by tier-1 operators who have had the purchasing power to commit to handset volumes required by handset OEMs in turn for the copious efforts needed to implement the hefty operator specifications. Tier-1 manufacturers have typically demanded 100,000+ volume commitments which are achievable for operators with $7B handset investments per year like Vodafone, but not so for tier-2 operators with one or two millions subscribers. Consider the following two examples: Orange in early 2006 reported that it had convinced five out of its top-10 handset suppliers to support a controversial high-capacity SIM feature, leading the market one year before a similar standard was even adopted in the market, and four years before the (USB) standard is expected to reach mass-market penetration. On the other hand consider the example of a tier-2 Austrian operator who in early 2006 had to discontinue the on-device portal application which had been featuring on the operator’s open OS handsets for almost a year, because of the 4-6 weeks time-to-market delay that was caused by the acceptance testing for each new handset model featuring the software client. This approach to handset specification has been partially succesful. It has taken tier-1 operators 5 years to develop the manufacturer relationships, the technology know-how, the organisational maturity and to master the process that allows them to bundle all their product and service wish-lists into a list of several thousand lines of requirements which is updated every six months. The challenges and the stories of trial and error have been so many that are impossible to list in a single post. We can however summarise the four key issues that are leading to a change of operator strategy: 1. Ensuring that the the time to market remains unchanged for operator-specified handsets vs those that are distributed via independent distributors and retailers (e.g. Carphone Warehouse). According to a Vodafone presentation at Handsets World, it used to take us two years to move from concept to mass-market availability for a Live service . 2. Limiting the costs of interoperability testing (IoT). Typically a handset will require three months of IoT and tens of DHL’ed packages exchanged between the OEM and the operator before the binary image is finalised. The set of several thousand requirements will have to be tested (usually manually) against each handset that is part of the season’s portfolio. 3. Ceasing control of the software suppliers that form part of the operator’s suite of preferred applications that feature on the handset – such as the Opera browser for T-Mobile, Cibenix or SurfKitchen for on-device portal functionality, and PacketVideo for video-streaming functionality. With tier-1 operators across the globe, including Vodafone, Orange, T-Mobile US/UK, Alltel, Verizon, Telstra and Optus who are mandating specific apps to be featured on their ‘signature’ handsets, management of ISV suppliers is of critical importance to operators. This includes not only app specification, but also control of licensing, marketing arrangements and network integration. 4. Platform fragmentation; Vodafone group report that is has to support around 20 software platforms across its handsets today. Container programs: the new chapter As of late 2006, a number of operators globally have embarked on what essentially constitutes the next chapter in the history book of handset customisation: container projects. Containers are platform approach to handset customization; a reference software platform which acts as the container for applications and customization elements and is then retro-fitted onto the operator’s handset portfolio. There is no formal announcements and no common definition of what constitutes a container program for example Microsoft refers to the same concept as the operator defined software image . I believe container programs consist of two pillars: 1. A choice of specific software platforms. Orange, Vodafone, Telefonica, T-Mobile and TIM have all publicly endorsed Nokia s S60 platform as a preferred platform. Vodafone and Orange have gone further to also list Windows Mobile and. Naturally these advanced OSes may constitute only 15% of the operator s user base for 2007. Selecting specific platforms means operators can pre-integrate their preferred applications and settings onto these platforms, which are then ported onto devices. Endorsing a specific platform means that the operator wants to reduce the platform fragmentation across the device sales base, but it does not alone imply a container program. Indeed a second fundamental pillar of a container program is: 2. A fundamental change in the process of managing partners . Up to now, the handset OEM has integrated operator-specified applications into the platform and managed all integration, licensing and testing. With container programs, the operator undertakes licensing of partner applications, integration on its short-listed reference platforms, testing and certification. Simply put the container model is an operator-specific integration layer which sits on the device operating system; the intent of which is to decouple the service deployment lifecycle from the device delivery lifecycle. To better appreciate what this means in the handset value chain, consider the following ‘before’ and ‘after’ diagrams, adapted from Microsoft’s insightful presentation at the recent Handsets World conference in Amsterdam. Presently I m aware of at least two European operators who have embarked on container projects, with one operator planning to launch devices based on this new model in H2 2007. According to Microsoft, there are a total of 5-6 operators working on container projects today. In Korea, this model has been practiced since 2004 with the WiPI layer (originally intended to replace BREW), moving to Japan in 2005 with DoCoMo s MOAP layer (on top of Linux and Symbian), in 2006 with KDDI s BREW-based layer and in 2007 with Softbank s Aplix-based layer. There are a number of advantages to operators in this approach, as mentioned in Microsoft s presentation at the Handsets World conference: – reduced interoperability testing, and therefore reduced time-to-market – lower costs by bringing new ODMs to market without huge investments – higher revenues by faster rollout of new services across the platforms – lower per unit royalties due to aggregate application licensing or buy-out arrangements – better control of OTA updates – better knowledge of software elements Naturally, the challenges are equally noteworthy. Operators have to burden the responsibilities of the system integrator s role, i.e – security and system integrity assurances, – testing and certification of applications – warranties and related liabilities – software license management – manage business failures of partners What next ? Is this new strategy in handset customization going to survive ? I would argue not. Firstly, operators have extremely limited know-how in software (in the same way that handset OEMs don t know how to run networks). Secondly operators are high-inertia organizations where sales cycles are extremely long (typically 12+ months) it s like try to steer a speeding truck without slowing down. Thirdly, operators will find it too costly to run partner application licensing, integration, validation and in-life support and will be feeling the pressure when the OEMs won’t be accepting liability for software-related business failures. In Korea where WIPI has been used as a service layer on handsets for the last 3 years, the challenges are becoming obvious even to the consumers; the general concensus in Korea is that WIPI adds a cost of $30-$40 to the retail price, and delays handset launch. Due to these challenges WIPI is no longer mandatory in the market. The challenges faced by operator container projects is an opportunity for what I call a handset system integrator (HSI): an organization which combines professional services with software know-how (see Teleca, SysOpenDigia and Sasken) and is able to execute container programs on behalf of the operator. I would argue that operators should start outsourcing container projects to HSIs sooner than later. In the meantime, handset OEMs are finding new ways to fight back in the never ending power game for customer control. Here s two: firstly, OEMs are already back into the service business (see Nokia Content Discoverer and Nokia Catalogs who sell post-sales inventory to partner service and application providers). Secondly, Nokia has been known to use a pre-inserted removable card to install its own applications on the handset when the user switches it on for the first time (now that s ingenious!). The mobile industry never seizes to amaze.. Andreas