I've been a great admirer of Tomi Ahonen for some time. Both as an author and consultant, I think he's one of the few who really understands the mobile space and he's a fun guy too. You'll find a lot of his themes and opinions uncannily similar to my own writing in this blog - which means that we must be right :-)
I managed to persuade him to give us an exclusive interview to coincide with his new book 3G Marketing. I haven't read it yet, but my copy's on order - get yours here. It'll certainly be worth reading.
Read this and learn. I did.
Russell: If you had to summarise the key message in your new book, 3G Marketing, what would it be?
To succeed in the marketplace mobile operators now need to focus, based on customer understanding and segmentation. The time for everything for everyone at the same price is over.
Russell: Who should read it?
Anyone involved in the market success of mobile telecoms. First of all the marketing, sales, service management and strategy people at mobile operators. But also the calling centre, store staff, partnership management, and account management personnel at mobile operators; all operator-facing people with the handset manufacturers and telecoms infrastructure equipment vendors; any content and application developers who intend to launch on the mobile phone, plus investors, bankers, consultancies, educators, etc.
Russell adds: err....sounds like just about everyone :-)
Russell: Video calling still seems to be regarded by some operators as a "killer app" for 3G. Any thoughts?
Actually video calls used to be thought of as a killer app for 3G, by some of the players three or four years ago. Now all operators know video calls will not be significant traffic nor revenues in major segments during this decade at least.
There is an important distinction here that I want to make. Video calls are a new feature not available on 2G. It is a differentiating service. But it is not a mass market service, and it alone in most cases will not convince users to upgrade, hence (for most market segments) it will not be a killer application.
As an analogy consider digital TV. Voting and shopping are new features on digital TV that was not possible on previous analogue TV. Yet all digital TV viewers will still spend the majority of their time watching soap operas, sitcoms, news, music videos, game shows, reality shows, talk shows, etc. All of these - the killer apps per segment - were available and still are available on analogue TV. The majority of the traffic and revenue for 3G will be voice and messaging just like on our current GPRS and WAP phones today.
Oh, and about killer apps. I write about them all the time (my first book, Services for UMTS, was subtitled "Creating Killer Applications in 3G") and the one big point to make is that there will not be a single dominant killer app for 3G, it will be a series of services.
For example the extra exclusive cameras in the Big Brother house in Sweden and Italy, were 3G killer applications, but only for die-hard Big Brother viewers. I am not a fan of the show and would never consider buying a 3G phone just to have this access.
In Korea the traffic camera and statistic service is a killer app, but only for those who have to drive in the congested Seoul traffic jams every morning and evening. If you commute by bus or train, you don't care for the service.
In Austria the deaf-person 3G service with sign-language support is the first time that deaf people can join the mobile phone connected generation - deaf people had no need whatsoever for a GSM voice based phone - but again this service bundle is irrelevant to those who do not have near loved ones who are deaf, and who don't know sign language.
Killer apps in 3G will be segment-specific. There will not be a universal 3G killer app. And video calls will not be a significant killer app, nor will video calls deliver any significant revenues at least during this decade.
Oh, but also consider this. A YOUNG user today will be comfortable with video calls just as we older people are uncomfortable. From 2006 on, every youngster's newest phone will be a 3G phone with video call as standard feature (they are not on all 3G phones today, but will be by 2006).
Imagine that generation growing up, video calls will be natural to them. Then fast-forward 20 years to 2024 and the recent launch of 5G (we will get 4G in 2012). By then we will have kids asking their parents, "is it true dad, that there once were phones that you could not see the other person?" How could you know WHO it was on the other end? You mean you had to listen to the voice and recognise them? How strange" - just like today a young child when seeing a phone booth might ask the father, "dad, why is that phone tied to the telephone booth? Is it so that people don't steal the phone"
So in the VERY long future, video calls are inevitable, but not during this decade. Maybe in 15 years.
Russell: LBS doesn't seem to have made any traction anywhere that I'm aware of. Why do you think that is? Do you see it ever happening?
LBS (Location Based Services) is a typical engineering-led technology in search of a need. The engineers involved with LBS keep refining the accuracy (there are technologies now that will pinpoint you to the exact room in a skyscraper, including the floor you are on) but the commercial success is lacking.
The main problems are around the approach to the service idea. All of the early LBS ideas are much too predictable, and with the least amount of analysis, are proven to be weak ideas at best. Take the "find me the nearest Italian restaurant" or nearest cash machine etc. Most of the time you and I are near our home or work. We know perfectly well where are the nearest restaurants (or cash machines etc).
Occasionally we visit a colleague or family friend and might need to know a restaurant, but then we are prone to ask our colleague or relative who lives or works there, who will of course know. Or we ask the hotel concierge etc. Only rarely in our daily lives do we come across the need to consider a new area and be without any guidance. This is likely to happen mostly only in traveling.
Then, apart from LBS roaming, language, technical compatibility etc concerns (ha-ha), we have the human behaviour element - if I am going to Hong Kong next month, I will tend to prepare for it BEFORE I travel. I will look at a Hong Kong map as I select my hotel, etc. I do not land in Hong Kong and find myself downtown and then think, I wonder where is a hotel, let me see if my mobile phone can locate one. It is very rare to be in those situations where a LBS service is requested by a user.
The need is to discover totally new things that were not possible before, that the mobile phone can now serve.
Two good examples. One is the hunting dog locator from Finland. For hunters there is now a service that allows the dog to be tracked on the screen of a smartphone or PDA. The service allows the hunter to listen via the microphone on the dog's collar in case the dog is barking etc. This serves a very specific niche market, but is a very powerful addition to the hunter's tools.
Another example comes from Vodafone Germany, where now LBS based allergy warnings and updates are available. So if you suffer from allergies, and the wind direction changes, or a rain spell comes in to change the pollen counts in your region, the LBS based allergy warnings will tell you how to react. These kinds of services will make sense.
In general I would say that the LBS opportunity overall has been overhyped, and the true power of the mobile phone comes much more from community and personal services. LBS is an idea pushed by the engineers, and is likely to disappoint during this decade.
Russell: How do you see user's use of 3G differing from 2G networks?
Initially almost no change, but rather more of the same. We will talk more as voice minutes will be cheaper on 3G than 2G. We will send more text messages. I think in the area of browsing (WAP and other pages) the amount of data traffic will increase dramatically.
In the case of modem access, a 3G modem is much faster, and usually cheaper per MB than a 2G modem, so heavy users will migrate fast, and then put much more traffic than they used to. In fact many 3G modem users will soon abandon their WiFi subscriptions and perhaps even their home broadband connections as they find the utility of 3G being so superior, like I have found with my Vodafone 3G modem card that I use right now when I am writing this reply at a cafe here in London.
In the longer run we need to see the service offering differentiate on 3G from what is available on 2G (or 2.5G). One early example is direct music sales. In Korea already 13% of all mobile phones have been upgraded to 3G, and the market has enough of a phone population to start to sell music directly to the mobile phones (similar to iTunes on Apple iPods via the web). In Korea last summer Ricky Martin sold 100,000 copies of full digital quality tracks from his upcoming album, a week before the album was released.
As our device populations reach such penetration levels, music will be sold directly to our phones. My current Nokia 3G phone is also an MP3 level music player.
Russell: If you had to bet on one new 3G service or application, what would it be?
Mobile blogging is perhaps the biggest new opportunity I see now.
I should say that it is impossible to guess what new can appear, until the radically new idea is deployed somewhere. That is the nature of invention.
For example my favourite new service of 2002 was Shazam the music recognition service, and my favourite new service last year was Waiting Tones/Ringback Tones from Korea. Even with 300 service ideas in my books, I could not foresee these kinds of radically new ideas. It should be noted that just last year, Waiting Tones worldwide made more revenues than the industry's favourite new service idea, MMS (just as I predicted, ha-ha).
Russell: What's your personal favourite mobile service or application - regardless of commercial success.
There are so many.
I really love the mobile phone police radar trap warning idea from Pelephone in Israel. In Switzerland the service idea even has local drivers contributing info so it is a true community service.
I very much love the Orange Netherlands idea of the bundling of handsfree kit etc for bicyclers, with the clever phone battery recharger that works when you peddle the bike. If you are socially or politically inclined to support "green" values, this idea appeals to you, saving on the energy wasting, and recharging your own phone as you bicycle.
As a traveling businessman perhaps my greatest joy was opening the Singtel welcoming message in Singapore this June, which I was expecting to say something like most networks do, "we are the best quality network bla bla bla" and just waste my time. But instead, Singtel's welcoming message started off with today's exchange rate between the Singapore Dollar and the British Pound.
I loved that. It was the first ever welcoming message that I kept (and as I am in another country every week, I get literally dozens of welcoming messages every month that I hate). There are dozens more, including Shazam and Waiting Tones and others above.
Russell: What are the main lessons operators should have learned from launching 3G services so far?
We have talked about this a lot at the Oxford University 3G courses that I lecture at, and have of course followed closely the various launches of 3G around the world.
The first customers to sign up for 3G are not mass market customers. They are early adopters. An early adopters' needs totally different marketing messages and support than a mass market customer. And most importantly, anyone who gets a 3G phone will also have a very late model GPRS (2.5G) phone on another network. The user will compare. In most cases the 3G user will be disappointed... The 3G operators must understand these realities at launch.
Russell: What do you think operators can do to encourage innovation? For instance, I recently wrote this in which I suggested operators should consider actually paying developers rather than rev share agreements.
I write a lot about partnering and revenue-sharing and working with developer communities in each of my books. My subtitle for this book, 3G Marketing, is "Communities and Strategic Partnerships" and engaging and supporting the developers is a key theme throughout the book.
I agree strongly with your thoughts in your commentary. I think mobile operators are on a very steep learning curve, to try to pick up good habits and corporate philosophies on what is the true meaning of partnering.
Again I think Nokia can provide an interesting role model. Did you notice that Nokia has started to say its key competence for winning in the future is to be a leader in "superiority in alliance networks and the ability to manage them" - think about it. Not supplier chain management or fashion design or customer insight. But superiority in alliances (partnerships) and mastering how to manage those critical relationships. Nokia as the huge player in this industry still understands they cannot do it all themselves. Of course mobile operators will be even less able to do it all themselves. Here is a good goal for them to aspire to.
Russell: Is there anything you's like to add?
Maybe two things. Churn, loyalty.. and segmentation. A couple of quick words
First on segmentation. Mobile operators all around the world are stuck in discovering that their current segmentation systems do not support modern focused marketing efforts.
They are in panic. I would say, don't worry, everybody is in the same boat. Read the segmentation chapter in my book, then do NOT hire a marketing/segmentation specialist from outside telecoms, they are like children when it comes to the richness of our data. Its like hiring a ballooning expert to design the fifth terminal at Heathrow. Bring in only segmentation specialists who really understand mobile telecoms. Companies like the Henley Centre, Xtract Ltd of Finland, SMLXL here in the UK, Compwise in Israel, and of course myself ha-ha..
Then on churn and loyalty. A few words of warning. In Finland mobile number portability and MVNOs (Mobile Virtual Network Operators) have been a reality now for a couple of years. Also in Denmark. Both countries have seen churn rates skyrocket.
The competitive environment has seen truly cut-throat price wars. In both very mature and profitable markets, all established network providers have suddenly turned unprofitable. In Denmark the situation is so bad, that Orange pulled out saying it was facing 19 national brand competitors (including network operators and MVNOs).
Like in Hong Kong earlier, it is going to get very much worse before it gets any better. The best suited players have a strong well-thought out strategy, are nimble to react, don't panic, keep focused, and fight strongest for their strategic goals, ready to abandon segments and market niches that turn unprofitable.
That's it folks. Lots to think about and nothing I can disagree with. If you have any questions for Tomi, leave a comment below and I'll ask him to respond too.
Russell
