Cellcos have opened up more than they get credit for, as interlopers rush in
06 December 2007
Lately it seems that no week goes by without a big market player announcing a service launch or acquisition in the mobile content and applications space. Everybody seems to be getting in on the act: Internet and computer brands, handset makers and infrastructure vendors.
There's nothing new about these kinds of companies making such investments. But the pace of events, and their magnitude, has increased.
Not content with seeing its search engine take center stage on many of the big operator portals, last month Google unveiled ambitious plans to forge a new standard for the software and apps running on phones, dubbed Android. It is also gearing up for a big push on the mobile-community-services front, with the recent acquisitions of mobile-based social-networking site Zingku and presence-sharing service Jaiku. Furthermore, the Internet giant is reportedly thinking of treading on sacred carrier territory by bidding for wireless spectrum in an upcoming auction in the US
Nokia, meanwhile, is eager to extend its position as the world's biggest handset maker into the content sphere. In August, it unveiled a revamped content offering, Ovi, which includes a music store, its portfolio of N-Gage games, location-based services and social-networking services. It also wowed the telecoms world with the phenomenally extravagant purchase in September of navigation-services provider Navteq for $8.1 billion.
In the past six months, Nokia has also acquired mobile advertising agency Enpocket and social-networking-platform provider Twango. And earlier this month, it launched a social-networking site in China, N-Cool, that enables users to exchange links and photos.
Not to be outdone, rival handset maker Sony Ericsson unveiled plans this month to beef up its mobile content offering on the PlayNow portal, offering millions of music tracks, thousands of true tones and hundreds of games, themes and wallpapers.
Meanwhile, Microsoft, which has a long track record of acquisitions in the mobile-data-applications space, announced the purchase of mobile-music-platform provider Musiwave from Openwave for $46 million this month.
A much bigger splash was made by Microsoft's PC archrival, Apple, which in June launched the much anticipated iPhone, which in only a few months has acquired an iconic status among wireless media devices.
There has also been much activity recently on the mobile payment front. In the space of a few days, Motorola's venture-capital arm, Motorola Ventures, announced that it had invested in contactless-payment-technology company VivoTech; Qualcomm announced that it had acquired mobile-banking-software group Firethorn Holdings for $210 million in cash; and Sony revealed plans to team up with NXP, a Dutch semiconductor company, to create a joint venture focused on mobile payments.
It would seem that mobile content and apps are hot. But even though the infrastructure to deliver data services to mobile phones has improved markedly in the past few years, the perennial question of how to squeeze revenue out of them remains as relevant today as it was seven years ago. There are few companies making money out of such services. Most have yet to break even.
The players that are jumping into this sector are doing so more in pursuit of a long-term opportunity than to tap into an instant source of wealth. That opportunity is to position themselves in key points of the value chain for the delivery of digital services to what are fast becoming the most common computers on earth: mobile phones. And that opportunity is likely to be greater in the developing world, where fixed-line Internet infrastructure is limited and mobiles are well positioned to fill the gap.
But what about the mobile operators? The "interlopers" are jumping into territories that cellcos have traditionally earmarked for themselves. When Nokia made its Ovi announcement, many analysts predicted that the big operators might try to boycott the off-portal service, which competes directly with their content decks.
But since then, both Telefonica Moviles and Vodafone have announced that they will offer access to Ovi alongside their content services - further evidence of the radical shift in mindset that has taken place among operators in the past year or so. Many observers are still reporting on the conflict between cellcos and interlopers, such as Google and Nokia, but it seems that cellcos have moved on.
They're tearing down their walled gardens and are no longer expecting to fill their data pipes with just their own services. They have failed to do that on their own and realize that they need the help of others and that it's better to get a small slice of a large cake than keep a small cake to themselves.
Guillermo Escofet is editor of telecoms.com sister publications Mobile Media and Mobile Messaging Analyst
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