I AM MWJ

Has Draw Something’s bubble burst already?

One of my guilty secrets is that I’ve been playing Draw Something for the latter part of 2011 and all 2012. I enjoyed it, it was fun, a little repetitive maybe but was different and a nice way to spend a few minutes exchanging drawings with friends. 

But then it became more and more popular gaining 50 million users in 50 days and I had Draw Something notifications coming out of my ears and long queues of pending moves waiting. And anyone who’s played the game will know it needs at least a little attention as drawing a decent Darth Vader with your finger on an iPhone requires a bit of concentration, as you’ll see.

And that’s where my use of Draw Something started to slow down. The list of pending moves got longer and longer, other people must have been having the same problems as they were slower to reply until in the last few weeks no-one is playing anymore. As I write I’ve got fourteen games waiting for moves and no game active. 

There’s not too much involved in Draw Something - it’s played for it’s own merits - the drawing. It’s not a competition as there’s little scoring and you don’t ‘win’ or ‘lose’, just amass coins earned when both you and your other player both successfully guess each others moves.  As such there’s a slight lack of incentive for heavy players to keep going.

There’s also a few product problems - there’s not enough words and they keep getting repeated which is frustrating, new words can be acquired by closing the app and re-opening it so you’re not forced to work on the harder drawings and you can guess the words again by closing and re-opening as the app changes the letters to select he answer from on each opening.

Now none of this is a problem for OMGPOP who sold to Zynga for $180 million. They’ve made their bucks but it looks like my personal experience is being repeated and that is a problem for Zynga if Draw Something proves to be a flash in the pan. 

First hand account of the Mexico Earthquake

This is not a post that the average Brit writes everyday.

Early this afternoon at about 12.10pm Mexico time (18.10 UK time) I was sat having a cup of coffee in the lounge of the Sheraton hotel in downtown Mexico City when the room started shaking. Having lived in the UK all my life the first thing that you think of isn’t an earthquake.

When the quake happened I was working at my laptop, looking at the screen wondering why I couldn’t see straight and why things were going blurry. My immediate response was that I was feeling dizzy and must have some sort of migraine - but I never get migraines so that didn’t make sense. I lent back into the chair, took a deep breadth and noticed the rattling of the windows, the furniture and the bottles behind the bar.

One thing that was very clear was that the room was shaking. And is wasn’t shaking a little, it was properly shaking - the light fitting that I was sat under was a big glass thing on chains and it was wildly swinging backwards and forwards.

Pictures were falling off of the walls, chairs were moving by themselves and the rattle just kept going. Later on made me think it was obviously an earthquake as it sounded exactly like the rattle that you’re familiar with of YouTube clips of earthquakes.

So having sat there for an indeterminate amount of time, it couldn’t have been long, I stood up. That wasnt that successful as the floor was moving in waves - again not a tiny tremor but what felt like waves rippling through the building - so I sat back down keeping an eye on whether the walls and ceiling were falling in. Then came an amusing moment as a waiter from the hotel came charging through the lounge wobbling all over the place, with bendy legs looking like someone from Fawlty Towers.

The waiter urged the people in the lounge to follow him but that wasn’t really happening so we pretty much stayed rooted to the spot and waited for the tremors to stop. Whether that would have been the case if there was obvious damage happening or it the quake was more severe I don’t know but it wasn’t easy to move, even if my brain had caught up that this was a proper earthquake.

When it stopped everyone moved calmly out. As ever some people stayed to finish their coffee (not me I legged it). By then I’d worked out it was an earthquake and was wondering about whether the building had been damaged. Fortunately not.

We filed outside with loads of other downtown workers and congregated in the square and streets outside. A few people were running fast to escape but mostly it was people ambling to safety.

The dude from the Sheraton got to get his megaphone out and shout some orders at people, none of which I understood.

Thousands of people were gathered by this point, only a few minutes after the quake struck.

TV crews were on hand immediately as they’d been filming some protests across the street. It was more a case of finding people to look worried - it felt under control now.

Fifteen minutes later we’re allowed back inside. Follow that chef (unbelievable how many chefs the Sheraton have).

Straight back into the bar to watch the TV news filming live pictures of the square where we’d just been standing.

Fortunately the upshot of this was something like a 7.5 on the Richter scale quake. Big but not enormous. There was some damage and minor injuries but no-one was killed. I’m not sure how these things work but an 8.2 quake in 1985 in Mexico City killed thousands.

Overall it feels unlucky to be involved in an earthquake but really lucky that it wasn’t worse.

SHOCK: Mobile operator charging extra for VoIP

This weeks absurd idea comes to you from TeliaSonera: If you want to use OTT VoIP apps on the TeliaSonera network then you need to pay extra. If you don’t then your bandwidth will be throttled.

I’ve not verified this first hand but taken from Light Reading TV:

“Tommy Ljunggren, TeliaSonera’s VP of system development, explained the operator’s new strategy and pricing policy for OTT VoIP services. TeliaSonera’s message is clear: If you want to use those services on our network, you have to pay; if you don’t, those services won’t work.”

It’s a perfectly reasonable thing for an operator to want to protect itself and to earn new revenues but you do have to wonder if the TeliaSonera Exec’s have really though this one through as there’s a number of likely end results, none of them particularly palatable:

1. Users stop using OTT VoIP apps on TeliaSonera. It’s unlikely that they’ll stop completely, just on TeliaSonera - so they’ll go elsewhere and TeliaSonera will lose customers
2. Users want to use these services and TeliaSonera are essentially blocking them - not a great route to customer satisfaction
3. Even if users do pay the extra requested they’re unlikely to be happy about it - the impacts of this will only be felt in the medium term

Overall this move is a bit of an admission of defeat. TeliaSonera give up on meeting their user needs and creating compelling communication services that users want to use and are happy to pay for and they rely on trying to block more innovative, in demand services. Not sounding like an ideal recipe for long term success. 

Behind the launch of Orange Fun Finder

Way back in October 2009 I stood in front of 150 people at NESTA and introduced an Orange competition that was looking for the next ‘big idea’. The competition was a search for innovative services and business models that would increase customer loyalty and create in excess of €20 million revenue over three years. 

My presentation talked about finding a product or service that could improve our customers lives by offering them a brilliant customer experience, great value for money and that helped them to ‘do more’. The idea would have a positive impact on the Orange brand, reinforcing why the customer chose Orange and would drive a sense of “intrigue” and “desire” in non-customers.

I remember saying that we we looking for an Orange Wednesdays for the smartphone generation.

Fun Finder launches

25 months later Orange Fun Finder has launched.

Powered by Last Second Tickets Fun Finder offers discounted tickets to music, comedy, theatre, film, sport and other events. Orange customers tell Fun Finder what they like doing by selecting from twenty event genres, where they like going out and then receive alerts when matching events become available. A typical discount would be between 30% and 50% off.

Fun Finder will be available nationwide in towns and cities large and small and will cover many different entertainment genres in hundreds, if not thousands, of venues. With nice chunky discounts Fun Finder is designed to be inclusive, enabling any Orange customers to go out with friends or family wherever they are, whatever they’re into.

Trying to assess Fun Finder objectively I like its straightforwardness. Sometimes big brands can over complicate things but it’s clearly about erm, finding fun. Straplines like “Tickets to things you’ll love” or ”helping you discover events around you” are also simple and compelling.

Rationale

Clearly Fun Finder is all about customer loyalty and giving customers more reasons to stay with Orange. It’s builds on Orange’s other properties including 241 cinema tickets with Orange Wednesdays and free iTunes movie downloads with Film To Go but it also offers an interesting route into the market for SoMoLoCoVo services; that is social, mobile, location, coupons and vouchers.

The Big Idea

In the last eighteen months, maybe a little more, there’s been a revolution in the way that we access, create and consume information. Fuelled by the rise in smartphones the internet is now mobile.

Mobile devices have become the primary way that people access the internet, replacing PC’s. The mobile is the digital hub of our lives - it’s the one device that never leaves our side and is personal to us. It knows who we are, where we are, what we’re up to and we use it to power our professional, family and social lives.

Our mobiles are the remote control for our lives

Against this background Fun Finder enables Orange customers to discover what’s on around them, get recommendations, invite their friends and book and pay for tickets. Fun Finder is proverbially mobile, social and location aware.

It could easily extend to other things to do on a day or night out such as restaurants or bars and could power the recommendations with vouchers or coupons to nearby or recommended venues. In the future using NFC and contactless technology people could ‘tap’ themselves into venues using paperless tickets or pay for things using mobile payments.

And think of the amount of ‘big data’ that this generates.

At the moment the service has launched in the Midlands but it will go nationwide over the next couple of months.

[DISCLOSURE: As you might be able to tell I worked for Orange on the launch of Fun Finder]

WhatsApp up, SMS down

For the first time a carrier publicly acknowledges that smartphone adoption leads to declining SMS.

In my recent post on iMessage I included some information from KPN that showed cannibalisation of SMS by WhatsApp. I’ve been asked several questions about this so here’s a more detailed look at the KPN information.

This information is taken from the KPN Investor Day overall strategy. It’s based on based on postpaid customers of KPN’s youth brand ‘Hi’ who are considered to be early adopters.

1. So firstly some not-very-surprising information, namely smartphone penetration on this brand is rising

2. Also not surprising is that as smartphone penetration increases so does demand for data packages

3. Now the next slide is based on Android users on the Hi base and how WhatsApp usage has spread within this group of customers.

It shows WhatsApp having a negligible market share in September and then some extremely fast growth as network effects take hold until seven months later 85% of Android users are WhatsApp users.

4. And guess what? If loads of your customer base are using WhatsApp then there’s less need for SMS and outgoing SMS volumes fall, which is what happens here

So what’s the story?

Well this is of interest as it’s the first time that a carrier has publicly acknowledged a causal relationship between the higher use of smartphone apps and declining SMS.

And for KPN and mobile operators generally this is really significant as it says:

• Customer behaviour is changing with the availability of smartphones and apps 
• Smartphones, apps and inclusive data packages promote SMS to data substitution - and are likely to lead to voice to data substitution
• Out of bundle revenues are under stress - for KPN out of bundle revenues are 22% of the total

At the moment for KPN these losses are sustainable as Hi is a niche brand and the mainstream KPN consumers are tracking behind Hi in their adoption of smartphones and data but the trend is there for all to see as, to their credit, KPN have acknowledged.

The risk is really quite significant and it’s as fundamental as the future of the mobile operators. If customers with smartphones have lower demand for both messaging and voice then this not only adversely affects huge revenues but also calls into question the whole model of mobile operators as brands, rather than just commoditised providers of telco access. The services themselves can easily be, as demonstrated above, be provided by WhatsApp, Skype or any other over the top provider so the operators really need to work out what they’re going to do, and fast. 

iMessage significant threat to future SMS revenues

After the sad passing of Steve Jobs the launch of iMessage in iOS 5 has had limited attention but it’s likely to have quite an impact over the coming months and years.  

What is iMessage?

iMessage is Apples instant messaging service for any iOS 5 device. It’s natively integrated into ‘Messages’ so there’s no need to download an extra app and users only have to type their message and iOS works out whether to send it as an SMS or, if the recipient has a connected iOS 5 device, an iMessage.

iMessage works over both wireless or mobile networks and provides all the features expected of a smartphone messaging app including:

• Sending text, photos, video, locations and contacts
  
•  Group messaging 
• Delivery receipts 
• Optional read receipts 
• Typing indication  
• Carry on conversations on multiple devices     

 Impact on BBM

All of this will sound very familiar to RIM’s Blackberry Messenger (BBM) users. iMessage, like BBM, provides users with an attractive, feature rich messaging experience and saves them costs on SMS. For RIM and Apple they lock users into the hardware.

In the near future the direct impact on BBM is likely to be limited as BBM retain their large installed user base and continue to benefit from the network effects of users inviting their friends to join.

However iMessage’s native implementation into the OS removes BBM’s feature advantage and over time reduces the need for users to move to RIM to gain access to BBM.

Impact on WhatsApp

Integration into the OS is really the great benefit of iMessage - it works seamlessly and automatically and at a stroke is both competitive to BBM and overcomes several of the barriers associated with using over-the-top (OTT) messaging apps like WhatsApp, Kik or PingChat.

 There’s no need to download and install a new app, no requirement to verify your mobile number, add or search for contacts or wait for the app to connect. These ‘barriers’ may not be significant for many users but the automation of iMessage reduces the incentive for users to find alternatives.

The downside of iMessage is that it’s proprietary and this is where apps like WhatsApp compete by working across iOS, Android, BlackBerry and Symbian.

That said their feature and cost advantage has also been removed and to survive they’ll need to convince users to continue to adopt their apps when there are native alternatives readily available. And once iMessage evolves in future iterations of iOS and other players respond this may prove a step too far.

Impact on SMS

 What we do know is that smartphone users have lower demand for SMS. 

 The evidence of this was provided by KPN in May 2011 in their strategy update which showed that for their youth brand Hi as penetration of WhatsApp increased, outbound SMS declined.

Mobile operators finances are impacted by this in a number of different ways:

1.  Reduced SMS revenue as users go ‘out of bundle’ less
2. ‘Trading down’ in tariffs as customers don’t need as many inclusive SMS
   
3. Increased acquisition and retention costs as customers upgrade to smartphones
   
4. Increasing demand for data bundles

The net result for KPN is that increased demand for smartphones led to an increase in demand for data bundles that resulted in decreased SMS usage and lower average spend per user.

All in all not great news for mobile operator revenues or costs and don’t forget that this was before the arrival of iMessage.

Threats to SMS 

Perhaps of more concern is that iMessage is likely to lead to further structural threats to SMS such as:

1. iMessage establishes customer awareness and demand for native messaging reducing future demand for SMS
   
2. Native messaging is implemented in Android, Windows Phone and Bada in copy cat responses
   
3. Android and other OS implement interoperable native messaging to differentiate from iMessage
4. In future iOS releases Apple integrates Facetime and iChat or opens up iMessage to other OS 
5. iMessage could be a first step towards a voice service - iVOIP!
6. Mobile operators have less ability to monetise their knowledge of their customers and their behaviour as native messages are encrypted and carried over third party servers

On the upside for SMS

That all said SMS is pretty much ubiquitous and works for anyone, anywhere on any device. And don’t forget that not everyone has got a smartphone, particularly in emerging but even in mature markets.

As such despite the significant and structural threats SMS will continue to be widely used for many years to come but it just may not earn as much revenue as it did. 

Google MVNO fake but MVNO’s remain one of mobile operators big fears

Google’s MVNO in Spain turned out to be fake but one of the big tech players launching an MVNO remains one of the mobile operators great fears.

 Last weeks news that Google were issuing their Spanish staff with branded SIM cards which, when inserted into a mobile, would allow them to choose a network of their choice wasn’t true. It did however draw attention to the huge potential for Google to disrupt the mobile market and enable customers to choose their own network.

As Google have almost certainly considered an MVNO and such a move is open to many other brands, both tech and non-tech, lets have a look at MVNO’s and whether they’re important?

What is an ‘MVNO’ ?

MVNO’s are Mobile Virtual Network Operators. They lease network access and space from mobile operators and resell it direct to customers under their own brands. They can use the operators billing and services or develop their own.  

In recent years in the UK MVNO brands like Virgin, Tesco, Lyca, Lebara, Ikea and GiffGaff have made significant inroads into the mobile market using different approaches. Tesco Mobile have gone for the mainstream and acquired over a million mobile customers through the use of their huge marketing assets like Clubcard;  Lyca and Lebara have targeted niche customer segments in ethnic and international calling markets;  GiffGaff are SIM-only and focussed on a low cost offering to customers who can support themselves.

What do mobile operators think?

MVNO’s give mobile operators something of a quandary - they’re good for volume and can be profitable if you can negotiate a good price for call, SMS or data traffic but if you don’t get the business one of your competitors will and the mobile operator is by definition reduced to the role of a pipe - they provide access and capacity to another company who brand, price, sell and support their own services.

And this is a problem because the MVNO provider will own the customer relationship and be able to offer additional premium services and earn new revenue streams from advertising, mobile payments or whatever.

What stops Google, Apple, Facebook or other tech players from launching an MVNO?

1. Regulation
The tech players, in particular the hardware and OS manufacturers like Apple, Google and Microsoft, might like to but they already have a lot of control over the mobile ecosystem through the phone hardware, operating system and apps. If they added in controlling network access this would almost certainly lead to unwanted regulatory authorities.

And…

2. They can achieve what they want with needing an MVNO
Google, Apple or Microaoft can create value from the hardware, the OS and the services that they offer through the use of their app stores, billing relationships and payment wallets without having to resort to leasing the actual network and all the complexity that this implies. They can simply go ‘over-the-top’.

Similarly with LTE networks already available in the US and soon to arrive in Europe over-the-top services will soon be easier to provision with improved quality of service, faster networks and access to richer features than are possible today. 

3. The mobile operators might not do a deal?
Another consideration would be that the mobile operators might not cut a deal with companies that are so clearly trying to kill them? There might be regulatory disapproval of such an approach but operators can drag their heels, not make the best commercial offer or make it harder in so many ways. 

But…

4. There is always the option to do a ‘full’ integration deal with a mobile operator
Any of the players do a deal direct with a mobile operator like Sprint did with Google Voice rather than launching their own MVNO. They then get the best of both worlds - a deep integration into the operators business and access to their customers but none of the costs of running the network.

For consumers…

MVNO’s from new entrants and non-tech brands like Tesco and Ikea have certainly kept the market on its toes and added in genuinely new competition.

But with a tech MVNO you solve the problem that the mobile operators have all the control and replace it with the problem that Google, Apple or Microsoft have all the control. Choosing which of these is preferable is probably Hobson’s choice.
  

Nokia getting hammered by Android

Here’s a recap from Enders that confirms that we already know - Android sales are leading the market at the expense of Nokia and RIM. But there’s some other really interesting stuff in here.

Firstly the growth in iPhone and Android isn’t wholly offset by declines in Nokia and RIM indicating that smartphones are growing the whole market.

Secondly both iPhone and Android maintain their growth trend suggesting, albeit not definitively, that Android isn’t competing directly with iPhone. It’s likely that the iPhone is successfully maintaining its high end positioning with Android dominating the middle of the market.

To mainstream consumers Android mobiles now have a clear positioning - they’re available at great prices with good hardware specifications, are widely recognised as being easier to use and have a strong story about apps. This is important because all (almost all?) Android consumers want apps and lots of them, even if they don’t really know what they are for.

From this position of strength Android is forcing Nokia and other featurephones out of their traditional heartlands and this is reflected in UK consumers intended brand for their next handset which for Nokia tracks well below their declining market share.

Basically Nokia are losing the battle for consumer preference. They’ve always made great hardware at a reasonable cost but having taken so long to first recognise and then respond to the threat of iPhone and Android they’ve comprehensively lost the high end to Apple and are being hammered in the mid-market of £100-£150 devices by Android devices from HTC, Samsung, LG and Sony Ericsson who, with the exception of HTC, have their own problems in maintaining market share in non-Android devices.

Whether killing Symbian and choosing Windows Phone was the right thing to do or not it took far too long to take such a strategic decision. Nokia have now got huge problems in getting Windows Phone OS devices to market quickly enough to slow the declining sentiment towards their brand and in retaining whatever market share they can. They also need to rapidly drive down the cost of Windows Phone devices to compete with OEMs who have two years experience in deploying Android and optimising their costs.

And as for developers and the app eco-system the jury is out as to whether the market needs another ecosystem in addition to iOS and Android, let alone whether  Windows Phone can become the developer of choice.  

Nokia have plenty of strengths of course - they’re still massive, have huge market shares in emerging markets, Windows Phone looks good for consumers and they’ve great distribution and operator deals.

But the longer it takes to get Windows Phone devices into the market the harder it will be to survive, let alone grow. And at the moment there’s no sign of any such devices and whilst there’s no devices the Android manufacturers can make hay.

Don’t base your business case on extra revenue. Here’s why.

Any product pitching to mobile operators with a business case based solely on increasing revenues is likely to have a tough time. You might ask why as surely increasing revenue would be welcomed but genuinely doing so is extremely hard to do in practice. 

The reason for this is simple - people only have a finite disposable income and if they spend more on their mobile bill then they need to spend less elsewhere. In the current poor economic climate with rising inflation and low confidence it’s a difficult time to increase or even maintain margins and that’s before taking into account highly competitive markets with downward price pressure. 
  
 What the operators are really interested in is growing overall revenues and margins. There’s usually little benefit in increasing revenue in one area if it falls in another. Margin (revenue less cost) is also important as it’s the real measure of financial value. As such the key questions that the business case asks for new products is not ‘Can this product increase revenue?’ but ‘Can this product increase total margin?’.

Here’s a few ways that the operators think about their business cases and how they evaluate the potential for increasing margin:

Is the revenue substitutional? If Product A’s revenue is achieved because the customer stops paying for Product B then the net effect is neutral and the overall position hasn’t changed. That said substituting one product for another may be a good strategy when a product is coming to the end of it’s life or where there are other benefits. 
  
Does the revenue dilute other more significant revenues? One of the great fears of mobile operators is that one revenue dilutes more significant revenues elsewhere. A good example of this could be the customer paying for a VOIP app. Both the revenue and the margin might be good but if the end result is that the customer doesn’t spend as much on their monthly tariff then it’s counter productive and will lead to a much larger decline.  

If we do nothing would we earn the same margin? There are so many things that the operator could do that even if they do nothing they end up in the same position as they’ll benefit from somewhere. So if you’re claiming that you’ll increase revenue or margin then make sure that it is clear why and how you’re different to a ‘do nothing’ case.   

Is the revenue stream new? Genuinely new revenue streams are hard to come by and difficult to achieve but are valuable because they’re new. Examples could include mobile advertising (when it was new), a share of mobile payment transactions, machine to machine, automotive or health

If the revenue results from usage then the usage needs to be worthwhile. If a customer has an unlimited data bundle then increasing usage of that bundle doesn’t result in additional value! As such the value needs to come from a customer paying a premium for higher speed, better features or a better experience rather than the usage itself.

What is the opportunity cost? Assuming that a business can’t do everything that it wants to then there’s always an opportunity cost - this is the cost of not doing something else. If doing product A means not doing product B but product B has potentially higher margins then this may not be the best decison. 

What are the costs and the resulting margin? Revenue is good but the real measure of financial value is margin. For a product with the same revenue high costs result in a low margin, low costs result in a high margin. For example a streaming video app might incur large network transmission or content costs so the headline revenue might appear attractiive but the resulting margin will be low reducing its appeal. 

Can the revenue be directly linked to the action taken? If it’s not clear that the revenue directly results from whatever the product is doing then the business case is unlikely to be able to claim all of the revenue. 

Is the revenue sustainable? If the revenue is only earned for a few months or if there are high levels of customer churn then the business case will be less attractive. Business cases are usually valued over three or more years so good average usage is key in providing ongoing revenue and margin. 

Is the revenue material? If the revenues are negligible then why bother? The value of ‘material’ varies by many factors including the position of the product in the lifecycyle and the future value of the opportunity but in general for a decent sized carrier the margin has got to be in the £’millions to bother doing. The counter to this of course is that the business case should be realistic. Artifically inflating the target to £’hundreds of millions is also not a great idea.

New talk plan idea: calls + text + data + teabags

Shopping in Tesco’s I noticed a Tesco petrol promotion - buy a box of 280 PG Tips tea bags and get a voucher for 5p off per litre of petrol. Not bad I think. Cheaper petrol and ‘free’ teabags.

But mainly I notice the flexibility of the Tesco systems and how they can take seemingly unrelated products and offers and stick them together to make something quite cool for all concerned. The customer gets cheaper petrol and teabags, PG Tips get the might of Tesco’s promotions behind their product and Tesco almost certainly get great commercial terms on the product and probably charge extra to the supplier for creating and marketing the promotion - over 12 months a significant revenue stream.

Being able to create promotions, attach it to individual products and get it to market quickly is a bit of a holy grail for any retailer but is particularly important in highly competitive markets like mobile where differentiation and promotions focused on small groups of customers is key in creating value. This is particularly true in markets where the core service is commoditised or largely undifferentiated like mobile and where the ‘extras’ become increasingly important in why customers choose one brand over another.

With capabilities like Tesco’s the offer is only limited by creatively and being able to execute them quickly in different channels whilst offering a seamless customer experience sounds like an awesome world. In telco’s though we’re often hamstrung by legacy systems and massive complications in the billing, customer authentication and tarrifing system.

But overall though I’d just like inclusive tea bags in my talk plan in addition to unlimited calls, texts and data!