OPERATORS AND THE MOBILE CONTENT WORLD
Episode 1. Vodafone 360
The operator's content activities have always been heavily discussed; first talking about the walled-garden vs. the open-garden strategy; and then came the iPhone with its revolutionary App Store. Then everyone, from operators to manufacturers thought: "hum, I can do that too".
Vodafone had then a very good story and a quite successful portal: Vodafone Live! I still remember today that advertisement for French operator SFR showling movie start Milla Jovovich (for which SFR had some issues with Luc Besson for copying the look of the same star featuring in the 5th element movie).
As any internal system run by a Telco giant and implemented over countless countries, it soon reached its limits in terms of evolution (not counting on internal management of the site; either run globally, then locally, then glocally...). It's indeed very difficult for a company who's core business is still voice, SMS and data to think like a a media company and most of all, as an early innovator on that side; that's inherent to its structure.
That's why many operators included features from specialists to their store, like search powered by Google, Facebook or music (MTV or Rotana in Middle East / North Africa), etc. But surprisingly, they still wanted to run the show on most contents, and apps; or outsource it to some companies with very low margins (if not negative) providing basic services and leading to huge technological gap in just couple years and an offer with low quality (higher margin for provider) contents, if not illegal sometimes for the least regarding opcos (yes, that still exists). Well, saving on CAPEX is one thing, killing your offering is another one.
But as wap fades out and web is taking over on smart phones; well some operator are letting themselves beeing kicked out of the game, either willingly or by lack of vision, reality caught them too fast, unprepared. They never took it seriously to develop their portals, but find out that, hey, there's a business in content / apps on mobile. Now from a marketer point of view, why would you do that? It simply comes down to 2 things: a) they want to control everything that happens on their portal (walled-garden) and b) they never wanted to invest significantly in building an environnent letting their partners do what they are best at. It's like if Vodafone was to run its own News services (with Journalists, etc.)... They don't. The fact is that they are now all looking at doing their own App Store, but without too much surprises, 3 years after the launch of the iPhone and the App Store; well... can't say there's much success being spreadout over the internet (income wise!!), most stores are still in beta modes (at least when it comes to making money instead of distributing free apps).
The operator's content activities have always been heavily discussed; first talking about the walled-garden vs. the open-garden strategy; and then came the iPhone with its revolutionary App Store. Then everyone, from operators to manufacturers thought: "hum, I can do that too". Vodafone had then a very good story and a quite successful portal: Vodafone Live! I still remember today that advertisement for French operator SFR showling movie start Milla Jovovich (for which SFR had some issues with Luc Besson for copying the look of the same star featuring in the 5th element movie).
As any internal system run by a Telco giant and implemented over countless countries, it soon reached its limits in terms of evolution (not counting on internal management of the site; either run globally, then locally, then glocally...). It's indeed very difficult for a company who's core business is still voice, SMS and data to think like a a media company and most of all, as an early innovator on that side; that's inherent to its structure.
That's why many operators included features from specialists to their store, like search powered by Google, Facebook or music (MTV or Rotana in Middle East / North Africa), etc. But surprisingly, they still wanted to run the show on most contents, and apps; or outsource it to some companies with very low margins (if not negative) providing basic services and leading to huge technological gap in just couple years and an offer with low quality (higher margin for provider) contents, if not illegal sometimes for the least regarding opcos (yes, that still exists). Well, saving on CAPEX is one thing, killing your offering is another one.
But as wap fades out and web is taking over on smart phones; well some operator are letting themselves beeing kicked out of the game, either willingly or by lack of vision, reality caught them too fast, unprepared. They never took it seriously to develop their portals, but find out that, hey, there's a business in content / apps on mobile. Now from a marketer point of view, why would you do that? It simply comes down to 2 things: a) they want to control everything that happens on their portal (walled-garden) and b) they never wanted to invest significantly in building an environnent letting their partners do what they are best at. It's like if Vodafone was to run its own News services (with Journalists, etc.)... They don't. The fact is that they are now all looking at doing their own App Store, but without too much surprises, 3 years after the launch of the iPhone and the App Store; well... can't say there's much success being spreadout over the internet (income wise!!), most stores are still in beta modes (at least when it comes to making money instead of distributing free apps).
Here's the first illustration with Vodafone 360, their version of App Store. www.vodafone360.com announced end Sept 2009. For the fun of it, here's a little slideshare about the Making of of 360.
While in principle, the idea was quite interesting, binding both phones to a whole environment with Apps and integration of Social networking, synchronized contact infos, as some said "Getting a 360 degree view on my actual social network"; well the realization has becoming much bumpier.
It started with first reviews like this one of consumer's / journalist experience on it. The best is by far this article, astonishing, where a former Vodafone employee would have said "360 will be an absolute and total failure, and then in 5 years they’ll try again".
Then, Tim Green, Chief Editor of online mag "Mobile Entertainment" wrote a nice post back in February "Operator's faith of their ability to be media companies never fails to touch me. [...] Operators can't make it work"
February 2010 - In the same time Vodafone published first figures at the Mobile World Congress about its sales of the 2 Vodafone 360 handsets (300 000 units); planning to ship over 2 million devices capable of running 360 service. So back then, they still had very nice ambitions.
End April 2010 - Vodafone releases the Vodafone 845, the first Android Vodafone phone for the mass market (positionned as low cost). While it is not a "Vodafone 360" phone, it's already loaded with icons leading to Vodafone 360 store. But the Android Market is still there...
May 18th 2010 - Vodafone published really good data revenues, up 19.3% from 2009; mostly thanks to increase of smartphone penetration (with data plans) and update ok PC connectivity Services.
Now at this stage, you could really think as an outsider, that Vodafone 360 could have a bright future; because after all, it's a nice concept and its pushed well on new devices. But 2 main questions still remain: is it done well, and is it really what consumers want?
During a conference in London (June 22nd), Vodafone's content service director Lee Epting suggested that Vodafone is seeing the apps world shift from an a la carte model to subscriptions, bundles and all-you-can-eat models (source).
That's a hell of a shift in terms of business model, but I'm not really sure where does she see that happening in the App World? Was it the first premise of a downturn in the 360 adventure? Now I say why not, but to do that, you must have built consumer's trust in your service. And we're really far from it. The last news (see August, below), confirms it.
In that same interview, Eptin mentioned that "Epting also said that current revenue splits in app stores - which tend to be 70-30 in favour of developers - may need to shift.", which is totally contradicting what she said a month later.
That's a second breaking news, a first shockwave in the Telco industry where the rule (at least in Europe) was the traditional 50/50. But it took them 3 years to realize that, hey, to get quality games and motivated developpers and in the end a good environement with a good value offer to consumers, the 70/30 offered by Apple which made (among other things), its success was not such a bad idea after all. Operators, who were earning on both data charging (data plans, etc) and content purchases but only sharing income on the latest, start to realize (but it's only starting to) that they might have to be less gready if they don't want to see the content purchases go away from them.
- June 14th, Vodafone releases Android version of 360 app store to compete head to head with Android Market on 2 devices; saying it can compete thanks to richer retaiilng experience and simplified operator buying process. - The strangest thing to me is that they are offering 70/30 revenue share to developpers (see article), while on the same phone, through Android Market, developpers can get a 80/20. That's 12,5% less revenues for developers. Well of course you can argue about the chances of making a sale on Android as of today compared to a store with operator billing.
In addition, in an interview of the print copy of July 2010's edition of Mobile entertainment (page 17), Epting said "Android Market stays because it's where users get their software updates from. But we'd remove it if we could". In other words, Android is a clear competitor but they have no choice but leaving it on the phone!! Same story about Nokia's Ovi. This is going to be really, really interesting as ALL manufacturers (major ones) have the same strategy.
- July 20th, Juniper research released a study predicting a huge growth in app store downloads (from 2,6b in 2009 to 25b annually in 2015), mostly due to growth of operators launching their own app stores along those already in the market from various handset vendors; Vodafone 360 among them. Personally, I have always found those researches quite hilarious and extravaguant in the numbers. Downloads, probably yes, but paid downloads?
Best illustration of this is another research, published by ABI research just 2 months before, predicting indeed the downloads to jump from 2.4b in 2009 (hum, different number already) to 6b in 2010 but to stagnate around 7b by 2013 to decrease to 6.5b by 2015. They do not mention Vodafone 360 at all. From 15b to 7b, that's quite a huge gap in predictions to me.
- July 22nd: A month after, Vodafone's content service director admits "that Vodafone has not executed as "flawlessly" with its Vodafone 360 service as Apple has with its App Store", and now envisions a 70/30 type revenue share for its app store (vodafone 360).
So let me think, 3 years to think, plan and develop, and 9 months after launch, they publicly admit that well, they didn't work enough on it to be what he was meant to be. Took them quite some time also to admit that as criticism arose early after launch (problems of lost contact info through synchronization, etc).
- July 27th, 2010: Breaking news, Vodafone cancells its 360-optimised handsets strategy starting with H2 dropped, focusing on the 360 service itself. Is that already the end of the LiMo OS in Europe (see http://www.limofoundation.org/). That's another switch in strategy; which probably makes sense but still, another switch.
It's true that the H1, second of its devices, didn't get the best reviews, with comments like "Unfortunately, we suffered many of the same problems with the M1 as we did with the H1. The phone was sometimes unresponsive, didn’t always sync properly with our email accounts and Facebook updates weren’t reliably shown in the 360 view. Also, as with the H1 the M1 is also lacking support for Twitter, which is annoying on a social networking focused handset. However, Vodafone does plan to add it to the 360 service later this year. " (Trustedreviews)
- August 5th, News comes out in many sites (like this one), that Vodafone pushed an updated of the Android HTC desire to its consumers who where hopping for OS 2.2 and instead just got pushed an update with all Vodafone 360 components. This rose numerous complains from consumers about them not being able to remove those components, or realizing they've been pushed unwanted bookmarks like Match.com and Flirtomatic , etc.
This obviously goes against the principles of smartphones and especially Android, which is an open environment where consumers can choose all the apps according to their preferences, and not according to what the operator wants to sell them. Now whether they did fix this or not, the harm is done and has been brought to the public.
Even further, interviewed by Zdnet, "Vodafone's spokesman confirmed that the Android 2.2 update will automatically include the branding and 360 updates", meaning that "even if people choose to reject the Vodafone app update, they will be presented with the same changes again when the operator issues its eagerly anticipated Android Froyo upgrade". This method goes beyond my understanding. (image credit: thinkcrack.com)
Closing comment
In an interview given to the Financial times in November 2007, as reported by ME, Vodafone's CEO said "He said: "The simple fact that we have the customer and billing relationship is a hugely powerful thing that nobody can take away from us. Whoever comes into the marketplace is going to have to work through us." The title of the article "Voda chief: we're no dumb pipe".
That, by itself, sums it all up: operators have become a bit too arrogant and fail to remember what gives them such a competitive edge. Their core competency is to sell voice through subscription plans (or pre-paid plans), SMS and data access.
In that same June 2010 interview about the launch of 360 on Android, ME Editor said "The operator also believes the simplified operator billed buying process and the bringing together of music, graphics, ringtones, ebooks, video and other 'entertainment' products on the store will make it a stickier site for end-users.
What they do have right is that yes, they still do have a huge asset: the possibility to charge consumers in a seamless manner; which neither Android Market nor Nokia Ovi or any other store can, so far. You have to pull out your credit card, and we're definitely not there yet!
Knowledge of the consumer. Now who's going to make me believe that Vodafone 360 adapts its content according to your gender, age, social status, etc...? In terms adapting your offering according to consumer's preferences, you do not need to be an operator to know that. iPhone showed it very well, and Amazone.com before it.
Personally I think that Vodafone should work with the major trend setters to allow usage of the services consumers want to use (and they don't need Vodafone to tell them), in the easiest manner and with transparent pricing schemes for data, where they make most of the money anyway! And this instead of trying to re-invent the wheel. Vodafone is not an application developper, nor a social network specialist, nor a handset maker, you are a mobile telecommunication operator. We often forget to use that world "telecommunication".
Android market is to become one of the leading app store on android devices, same for Ovi, fine, so help them sell contents using your billing systems. Help independant businesses sell physical goods or content for their phones using your unique relationship with your customer, instead of trying to sell a one stop shopping point. Doing that, you could overcome Apple's AppStore but this requires revolutionary thinking from your part; which most analyst do not predict so far (see the two forecast mentioned above).
Provide billing services and charge what visa charges retailers, a very small fee. You'll get overall much more income (on the massive volumes), still get your money on the data usage and avoid spending energy and money on developments which in turn, do not help your brand image.
Think also as a consumer. When I think "Vodafone" service, I want to know about my credit consumption, data usage, etc"; when I want social network I think "Facebook", not Vodafone. So build such applications (a Saudi operator, Mobily, did such app for the iPhone; don't know if it works well, but the idea is definitely here).
For some reason that goes also beyond my understanding, operators very soon understood the benefits of the iPhone; yes they have peanuts revenues from the contents, but what a huge boost in data consumption!!! So operators fought to get it, to break agreed exclusivities, and launch packages around all new devices coming up (iPad, and all the new tablets coming up). Not to mention high monthly subscription plans, etc. Now why do you still want to do the opposite with other handsets while the trends are going in same direction as the iPhone (with more or less success so far)?
Finally, an opportunity but also a threat, data consumption is to explode along with higher penetration of smartphones. Opportunity for operators as a revenue generator (and relay to decreasing ARPU on traditional phones), threat in terms of capacity (techcrunch).
But in the end, should we blame Vodafone for tyring? Definitely not. Intentions where definitely good in an industry where most operators are still waiting for a miracle to happen. But one shall learn from its mistakes.
While in principle, the idea was quite interesting, binding both phones to a whole environment with Apps and integration of Social networking, synchronized contact infos, as some said "Getting a 360 degree view on my actual social network"; well the realization has becoming much bumpier.It started with first reviews like this one of consumer's / journalist experience on it. The best is by far this article, astonishing, where a former Vodafone employee would have said "360 will be an absolute and total failure, and then in 5 years they’ll try again".
Then, Tim Green, Chief Editor of online mag "Mobile Entertainment" wrote a nice post back in February "Operator's faith of their ability to be media companies never fails to touch me. [...] Operators can't make it work"
February 2010 - In the same time Vodafone published first figures at the Mobile World Congress about its sales of the 2 Vodafone 360 handsets (300 000 units); planning to ship over 2 million devices capable of running 360 service. So back then, they still had very nice ambitions.
End April 2010 - Vodafone releases the Vodafone 845, the first Android Vodafone phone for the mass market (positionned as low cost). While it is not a "Vodafone 360" phone, it's already loaded with icons leading to Vodafone 360 store. But the Android Market is still there...
May 18th 2010 - Vodafone published really good data revenues, up 19.3% from 2009; mostly thanks to increase of smartphone penetration (with data plans) and update ok PC connectivity Services.
Now at this stage, you could really think as an outsider, that Vodafone 360 could have a bright future; because after all, it's a nice concept and its pushed well on new devices. But 2 main questions still remain: is it done well, and is it really what consumers want?
During a conference in London (June 22nd), Vodafone's content service director Lee Epting suggested that Vodafone is seeing the apps world shift from an a la carte model to subscriptions, bundles and all-you-can-eat models (source).
That's a hell of a shift in terms of business model, but I'm not really sure where does she see that happening in the App World? Was it the first premise of a downturn in the 360 adventure? Now I say why not, but to do that, you must have built consumer's trust in your service. And we're really far from it. The last news (see August, below), confirms it.
In that same interview, Eptin mentioned that "Epting also said that current revenue splits in app stores - which tend to be 70-30 in favour of developers - may need to shift.", which is totally contradicting what she said a month later.
That's a second breaking news, a first shockwave in the Telco industry where the rule (at least in Europe) was the traditional 50/50. But it took them 3 years to realize that, hey, to get quality games and motivated developpers and in the end a good environement with a good value offer to consumers, the 70/30 offered by Apple which made (among other things), its success was not such a bad idea after all. Operators, who were earning on both data charging (data plans, etc) and content purchases but only sharing income on the latest, start to realize (but it's only starting to) that they might have to be less gready if they don't want to see the content purchases go away from them.
- June 14th, Vodafone releases Android version of 360 app store to compete head to head with Android Market on 2 devices; saying it can compete thanks to richer retaiilng experience and simplified operator buying process. - The strangest thing to me is that they are offering 70/30 revenue share to developpers (see article), while on the same phone, through Android Market, developpers can get a 80/20. That's 12,5% less revenues for developers. Well of course you can argue about the chances of making a sale on Android as of today compared to a store with operator billing.
In addition, in an interview of the print copy of July 2010's edition of Mobile entertainment (page 17), Epting said "Android Market stays because it's where users get their software updates from. But we'd remove it if we could". In other words, Android is a clear competitor but they have no choice but leaving it on the phone!! Same story about Nokia's Ovi. This is going to be really, really interesting as ALL manufacturers (major ones) have the same strategy.
- July 20th, Juniper research released a study predicting a huge growth in app store downloads (from 2,6b in 2009 to 25b annually in 2015), mostly due to growth of operators launching their own app stores along those already in the market from various handset vendors; Vodafone 360 among them. Personally, I have always found those researches quite hilarious and extravaguant in the numbers. Downloads, probably yes, but paid downloads?
Best illustration of this is another research, published by ABI research just 2 months before, predicting indeed the downloads to jump from 2.4b in 2009 (hum, different number already) to 6b in 2010 but to stagnate around 7b by 2013 to decrease to 6.5b by 2015. They do not mention Vodafone 360 at all. From 15b to 7b, that's quite a huge gap in predictions to me.
- July 22nd: A month after, Vodafone's content service director admits "that Vodafone has not executed as "flawlessly" with its Vodafone 360 service as Apple has with its App Store", and now envisions a 70/30 type revenue share for its app store (vodafone 360).
So let me think, 3 years to think, plan and develop, and 9 months after launch, they publicly admit that well, they didn't work enough on it to be what he was meant to be. Took them quite some time also to admit that as criticism arose early after launch (problems of lost contact info through synchronization, etc).
- July 27th, 2010: Breaking news, Vodafone cancells its 360-optimised handsets strategy starting with H2 dropped, focusing on the 360 service itself. Is that already the end of the LiMo OS in Europe (see http://www.limofoundation.org/). That's another switch in strategy; which probably makes sense but still, another switch.
It's true that the H1, second of its devices, didn't get the best reviews, with comments like "Unfortunately, we suffered many of the same problems with the M1 as we did with the H1. The phone was sometimes unresponsive, didn’t always sync properly with our email accounts and Facebook updates weren’t reliably shown in the 360 view. Also, as with the H1 the M1 is also lacking support for Twitter, which is annoying on a social networking focused handset. However, Vodafone does plan to add it to the 360 service later this year. " (Trustedreviews)
- August 5th, News comes out in many sites (like this one), that Vodafone pushed an updated of the Android HTC desire to its consumers who where hopping for OS 2.2 and instead just got pushed an update with all Vodafone 360 components. This rose numerous complains from consumers about them not being able to remove those components, or realizing they've been pushed unwanted bookmarks like Match.com and Flirtomatic , etc.
This obviously goes against the principles of smartphones and especially Android, which is an open environment where consumers can choose all the apps according to their preferences, and not according to what the operator wants to sell them. Now whether they did fix this or not, the harm is done and has been brought to the public.Even further, interviewed by Zdnet, "Vodafone's spokesman confirmed that the Android 2.2 update will automatically include the branding and 360 updates", meaning that "even if people choose to reject the Vodafone app update, they will be presented with the same changes again when the operator issues its eagerly anticipated Android Froyo upgrade". This method goes beyond my understanding. (image credit: thinkcrack.com)
Closing comment
In an interview given to the Financial times in November 2007, as reported by ME, Vodafone's CEO said "He said: "The simple fact that we have the customer and billing relationship is a hugely powerful thing that nobody can take away from us. Whoever comes into the marketplace is going to have to work through us." The title of the article "Voda chief: we're no dumb pipe".
That, by itself, sums it all up: operators have become a bit too arrogant and fail to remember what gives them such a competitive edge. Their core competency is to sell voice through subscription plans (or pre-paid plans), SMS and data access.
In that same June 2010 interview about the launch of 360 on Android, ME Editor said "The operator also believes the simplified operator billed buying process and the bringing together of music, graphics, ringtones, ebooks, video and other 'entertainment' products on the store will make it a stickier site for end-users.
What they do have right is that yes, they still do have a huge asset: the possibility to charge consumers in a seamless manner; which neither Android Market nor Nokia Ovi or any other store can, so far. You have to pull out your credit card, and we're definitely not there yet!
Knowledge of the consumer. Now who's going to make me believe that Vodafone 360 adapts its content according to your gender, age, social status, etc...? In terms adapting your offering according to consumer's preferences, you do not need to be an operator to know that. iPhone showed it very well, and Amazone.com before it.
Personally I think that Vodafone should work with the major trend setters to allow usage of the services consumers want to use (and they don't need Vodafone to tell them), in the easiest manner and with transparent pricing schemes for data, where they make most of the money anyway! And this instead of trying to re-invent the wheel. Vodafone is not an application developper, nor a social network specialist, nor a handset maker, you are a mobile telecommunication operator. We often forget to use that world "telecommunication".
Android market is to become one of the leading app store on android devices, same for Ovi, fine, so help them sell contents using your billing systems. Help independant businesses sell physical goods or content for their phones using your unique relationship with your customer, instead of trying to sell a one stop shopping point. Doing that, you could overcome Apple's AppStore but this requires revolutionary thinking from your part; which most analyst do not predict so far (see the two forecast mentioned above).
Provide billing services and charge what visa charges retailers, a very small fee. You'll get overall much more income (on the massive volumes), still get your money on the data usage and avoid spending energy and money on developments which in turn, do not help your brand image.
Think also as a consumer. When I think "Vodafone" service, I want to know about my credit consumption, data usage, etc"; when I want social network I think "Facebook", not Vodafone. So build such applications (a Saudi operator, Mobily, did such app for the iPhone; don't know if it works well, but the idea is definitely here).
For some reason that goes also beyond my understanding, operators very soon understood the benefits of the iPhone; yes they have peanuts revenues from the contents, but what a huge boost in data consumption!!! So operators fought to get it, to break agreed exclusivities, and launch packages around all new devices coming up (iPad, and all the new tablets coming up). Not to mention high monthly subscription plans, etc. Now why do you still want to do the opposite with other handsets while the trends are going in same direction as the iPhone (with more or less success so far)?
Finally, an opportunity but also a threat, data consumption is to explode along with higher penetration of smartphones. Opportunity for operators as a revenue generator (and relay to decreasing ARPU on traditional phones), threat in terms of capacity (techcrunch).
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