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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

Welcome to the 75th Carnival of the Mobilists ! This week’s edition is brought to you by Hampus Jakobsson and Andreas Constantinou at the VisionMobile Forum. Lots of good reading this week and some tough choices: as hosts, we ‘ve tried to raise the bar and limit the ‘best of mobile blogging on the web’ to just 10 entries. We shortlisted our favourite posts based on originality of thought and depth of content. Ready to jump on the carrousel of mobile blogging? Here we go! WapReview‘s Dennis has conducted a Local Search Shootout where he extensively tests six local search engines, from Windows Live to Local.com. We were impressed by Dennis’ thorough and sensible methodology for search engine evaluation, where his scoring system awards points for query results, click-distance, features, click-to-call distance, driving or walking directions, saved locations and saved queries. Rightfully wins the Post of the Week title! Our secondrunner is David Beers at Software Everywhere who talks about OSGi and the real Mobile 2.0. David argues that developers shouldn’t have to wait for the Java Community Process, the device makers, and the carriers to get powerful new APIs onto handsets. Instead they should be able to use a component technology like OSGi that allows them to deploy new Java APIs to the handsets themselves and to write applications that discover and use these components immediately. This reminds us of component-based frameworks such as BREW extensions, Open-Plug’s proposed FlexibleWare component framework, and the emerging OMA SCoMo framework. And he is right that OSGi needs a cooler name. David’s post links also to several very good thought pieces on the future of OSGi and Java. The rest of our top-10 picks in no particular order: C. Enrique Ortiz in his article Standardizing location-based services (LBS) has a detailed list of specifications which aim to standardise Geographic information or Geomatics. CEO’s article includes a long list of spatial data infrastructure standards published by the ISO organisation. Looks like a must-read for companies active in mobile LBS services. Ricky Cadden of Symbian Guru asks Why Are Fakes Always Better ? Why can the Noklas and Nokirs crunch out higher-spec’ed phones than Nokia? How can the Meizu MiniOne be so similar yet higher-spec’ed and cheaper than the iPhone ? Perhaps the knock-offs don’t include localisation, distribution, warranty and support as the famed originals ? Or can the Nokias and iPhones command high margins do to their brand? Mobile diva Darla Mack, asks Has Gizmo Project Become The New Skype for S60 Devices? As Darla says, we ‘ve been waiting for the Symbian version of Skype for over a year, while the Gizmo project is already available on the N800, N95, N80ie and E61i. Is Skype on mobile losing out to Gizmo and Fring ? Jason Devitt at SkyDeck talks about the xPhone concept, the dream of being able to roam across the 90+ US operators and the alphabet soup of network technologies. Jason exposes the locked-down world of US operators Sprint and Verizon. He further argues that the wireless industry should adopt Carterfone rules, the series of decisions by the FCC and the courts that allows anyone to launch a landline phone. Let the market be free ! Malcolm Lithgow of Smart Dreaming posts the beginning of his Smart Phone or Mobile Browser thesis, talking about whether smart phones will actually become thin browsers. Malcolm traces the early web history and analyses the bubble of the network computer concept and why it failed. He also looks at the success of the advanced Japan market and its geographical character to explain why it is a singularity to the rest of the mobile world. Ajit Jaokar of Open Gardens fame, presents a conceptual diagram for Mobile 2.0. Ajit introduces some clarity and distinguishes Mobile 2.0 (the evolution of mobile networks where services are network-independent) from Mobile Web 2.0 (which brings Web 2.0 to Mobile devices). A good frame of reference for discussing and building on these previously overused terms. Judy Breck writing at iCommons talks about the future of learning. Judy looks at how quickly young kids learn and rightly argues that in the future learning must use the Internet and mobile connectivity as a platform. Hopefully an area where we ‘ll see lots of innovation coming in. Finally, Ted Wugofski of OJO Mobile asks whether On-Device Portals are about Demand Creation or Demand Drive. Ted argues that ODPs today are about demand creation (consumer’s don’t know ODPs even exist!), whereas in the the next 18 months ODPs will be about demand drive; services like Sprint s On Demand, Handmark s Pocket Express, and Alltel s Celltop will build awareness among users. ODPs are a subject close to heart and we would agree with Ted, provided someone in the industry is brave enough to market ODPs as aggressively as 3G and MMS were marketed. This concludes our roundup of top-10 blog posts at the Carnival of the Mobilists 75. Sorry for those that were missed out, but we tried our best to be fair and objective in our top-10. Couple of final notes: Judy Breck and Russell Buckley of the Carnival are bringing forward a fab idea: Mobilist T-Shirts! Judy and Russell are looking for a volunteer to make the project happen, a good cause and not too onerous a task. So if you enjoy the Carnival, as either a contributor or as a reader, it’s a nice way that you could give something back to the movement. Contact Russell at MobHappy.com if interested. Last but not least, Troy Norcross has set up a simplified submission mechanism for Carnival entries. Use this link when submitting an entry and the article will go directly to the Carnival host of each week, making it easy to both post and review Mobilist entries. Next week, tune in to Greg Clayman at Twofones for the next edition of the Carnival of the Mobilists. Until then, keep blogging and enjoy the ride ! Andreas & Hampus

Adobe s Flash Lite is widely recognized as one of the most pervasive software platforms in the mobile market. It s fast penetrating the market of high-end phones and moving into mass-market phones in 2007 thanks to the Actimagine acquisition. Adobe is also expanding the mobile product line with Flash Home and winning important contracts with 3 Flash Cast operator deployments which were announced in 2007. Here are the facts and figures that provide more detailed peek into the Flash Lite phenomenon. These have been pulled together from Adobe s financial analyst meeting, several briefings with Adobe and other public sources. Adobe $2,58B: Adobe revenue for FY2006, growing at 15% annually 37%: target non-GAAP operating margin for 2007 1.46%: proportion of Mobile & Devices contribution to total revenue for FY2006, which grew to 2.11% in1Q07 16: The number of products launched in March 2007 as part of the CS3 Suite, making this the biggest product launch in Adobe s 25 year history ( InDesign, Photoshop, Illustrator, Acrobat, Flash, Dreamweaver, Fireworks, Contribute, After Effects, Premiere Pro, Soundbooth, Encore, OnLocation, Ultra, Bridge and Device Central) Flash Lite 220M: total Flash-Lite-enabled devices shipped by end of 2006 (includes mobile handsets, PDAs and consumer electronics) 194%: year-on-year growth for Flash-Lite-enabled devices shipped in 2005 and 2006. 200+: mobile handset models with Flash Lite embedded 100+: other embedded device models with Flash Lite embedded 16: Number of handset OEMs who have launched handsets supporting Flash Lite (Fujitsu, Hitachi, Kyocera, LG, Mitsubishi, Motorola, NEC, Nokia, Panasonic, Samsung, Sanyo, Sendo, Sharp, Siemens, Sony Ericsson and Toshiba) 2010: year when Adobe projects that Flash-Lite-enabled cumulative devices shipped with have reached the 1 billion mark 51%: target addressable market for Flash Lite in 2006 (approximate) 72%: target addressable market for Flash Lite in 2007 (approximate, Adobe forecast), based largely on technology acquired from Actimagine $0.20: average Flash Lite per-device royalty fee for 2006 paid by device manufacturers in 4Q06 $0: cost to download Flash Lite player for Symbian and Windows Mobile platforms (although re-distribution is forbidden) Flash Lite in Japan 40%: proportion of Flash Lite-enabled device shipments in Japan for 2006 25%: penetration of Flash Lite handsets in the installed base 70%: penetration of Flash Lite handsets in the sales base Flash Lite Commercial Traction 4: mobile operators actively supporting Flash Lite enabled devices (NTT DoCoMo, KDDI, Softbank, Verizon Wireless) 33: Nokia models shipping with Flash Lite embedded according to Adobe’s website 10-15: approximate number of S40 device models embedding Flash Lite 12: the number of Verizon handsets supporting Flash Lite (from manufacturers LG, Motorola, Samsung) China Mobile and Airtel: mobile operators who are launching Flash Lite content through their WAP portals. Lightmaker: the company who designed the idle screen, dialler and menu applications for the Samsung D900 based on Flash Lite. LG Prada: a designed phone which uses Flash Lite extensively throughout the user interface Flash Lite Technology 1.5MB: size of Flash player for PCs [updated: this is dependent on product packaging – see here for size of Flash player versions 2 through 9] 400K: size of Flash Lite 2 for mobile devices 300K: the target size for Flash Home product, built on Flash Lite (based on the technology acquired from ActImagine) ARM 9 with 32/32MB ROM/RAM running at 150MHz: lowest-spec phone embedding Flash Lite, according to Adobe. BREW extensions: the technology Verizon uses to automatically download and install the Flash Lite player on 12 supporting handsets. Flash Lite 3 Video: the main feature of the next release of Flash Lite 3 May 2007: when Flash Lite 3 is due to be released to handset manufacturers Christmas 2007: when Flash Lite 3 enabled devices will hit the stores. Flash Cast :an on-device portal, client-server product based on Flash Lite. 2005: when Flash Cast was launched DoCoMo i-channel: the only deployment of Flash Cast in the first two years 10 million: the paying subscribers for DoCoMo s i-channel (reached in March 2007, 18 months after service launch) $5: approximate price per user per month for i-channel service $600 million: annualised NTT DoCoMo i-channel subscription revenues 3: The number of mobile operators who announced Flash Cast deployments in 2007 – Chungwa Telecom (Taiwan), Verizon Wireless (US) and Telenor (Sweden) Flash Home :active idle screen product based on Flash Lite Feb 2007: when Flash Home was announced 2H07: when Flash Home code will be released to manufacturers 1H08: when supporting devices are expected to appear in the market 300KB: expected Flash Home code footprint (compared to 400K for Flash Lite 2.0). [updates] Nokia recently announced that its Series 40 5th edition platform will ‘support’ Flash Lite 2.1. Although ‘support’ doesn’t mean ’embed’, Nokia’s announcement marks a transition from embedding Flash Lite on select Series 40 handsets only to platform-wide technology integration across Series 40. It also implies that Adobe trusts that Flash Lite can scale down to mass-market Series 40 handsets, probably thanks to Actimagine’s IP. It will be interesting to observe how Adobe’s per-unit revenues fare over the next year. Comments/suggestions/improvements ? Let me know and I ‘ll add them in. Andreas

SIM cards, the tiny chips that authenticate the subscriber to the network, are a market of 2 billion unit sales per year. A market which is threatened by commoditisation with prices declining by 30-40% year-on-year. And perhaps surprisingly, a market where technology and politics are in continual turmoil. This past week, two identical conferences on the subject of SIM cards revealed the uncertainty that divides the SIM industry during the last 10 years. SIM technology has followed the same path; one where industry participants are divided over standards, control points and overhyped technologies. But with SIM card economics in a dire state, the industry needs alignment, not controversy. SIMpolitics Prague or Berlin ? In the past month, this was the question in the mind of most vendors forming part of the SIM industry. Prague was the location for Informa s SIM Summit, which took place on 24-26 April. Berlin was the location for SIM Alliance s SIMposium, which took place on 24-25 April. Two conferences on identical subjects in different countries, allegedly due to differences of opinion between Informa, the incumbent telecoms conference organiser and the alliance of SIM card OEMs. Dan Balaban of Card Technology Magazine has a detailed write-up of the conference politics at play. The result ? The Prague-Berlin flight route was unusually busy and most companies had to send delegates to both conferences (except for the major SIM card manufacturers who did not attend Informa s event). I attended the SIM Summit, where I chaired two days of the event, and most delegates I spoke to had correspondants on the other conference, not to miss out on any of the important developments. This unfortunate nature of affairs will undoubtedly be remembered as the schism of the SIM industry, one which I would hope is quickly sewn up. The SIM industry, already suffering from rapidly declining profit margins and lack of technological evolution does not need more turf fitting. The divide over conferences this past week is only the tip of the iceberg; technological evolution in the SIM industry has also been hampered by a long-term power struggle. The power struggle behind SIM technology Since the inception of digital mobile telephony, SIMs have been used as a physical token that authenticates the subscriber to the mobile network. The SIM toolkit interface was adopted in 1997 as a standard technology for allowing the SIM to interact with the handset, store contacts in the SIM, present a menu of operator services to the user, and show low-fi text and image popups to the users. A number of technology innovations followed, such as a Javacard application environment, secure SIM storage, more memory (up to 128KB) for storing more contacts, the BIP protocol for SIM communication over TCP/IP channels (GPRS/3G) and the JSR177 protocol for communication between handset Java apps and SIM Javacard apps. This might sound like a lot of technology, and one which opens the door to a range of usage scenarios and value-added applications. It is. The SIM has enabled many innovative applications to date such as m-banking introduced by T-Mobile Czech Republic in 1998, automatic device detection as used by ONE Austria, SIM contacts backup on the network a launched by SFR France, and text promotions as exemplified by Celltick s LiveScreen Media solution. So where s the catch ? The problem is that SIM technologies must be implemented by both the SIM vendors and the handset manufacturer in an interoperable fashion. Mis-alignment of incentives Here lies the problem that s been plaguing the SIM industry since the beginning of the decade: the mis-alignment of incentives between SIM card OEMs and handset manufacturers. On one hand, SIM manufacturers have been keen to promote the technological evolution of their SIM cards (and therefore the price tag). On the other hand handset manufacturer have always been wary of the establishment of the SIM card as a control point of value-added services delivered on the handset. As a result, despite operator pressure in favour of SIM standards, handset OEMs have been producing handsets with poor or inconsistent implementations of the SIM toolkit, and the other SIM technologies. This power struggle has been particularly evident to operators and has nurtured the demand for SIM test houses. This state of affairs was not aided by mobile network operators, even though MNOs would be primary beneficiaries of the SIM s evolution in the technology value chain. The reason is primarily down to organisational psychology. Tier-1 network operators are large, high-inertia and risk averse organisations with a poor track record for commercialising innovations. GSM operators lacked the vision and leadership to invest in new SIM technology, or even publically declare their support for particular SIM technologies. This led to a standstill in terms of the evolution of the role of the SIM. Reviving SIM card technology Consequently up, until 2006 SIM technology seemed stale in comparison to handset technology; 128KB SIM storage compared to several GB of handset storage. 10s of kbits/s for SIM-network communications vs 1000s of kbits/s for handset-network communication. 5MHz SIM smartcard processors vs 200MHz handset processors.Text-only interface for SIM applications vs Flash-like interface for handset applications. This was of particular concern to SIM card OEMs who were keen to upsell the value of the SIM card. The inflexion point came in 2006. SIM card OEMs, faced with declining profit margins pulled together to increase the valuation of the SIM card with a technology breakthrough. In February 2006, virtually all major vendors announced a next-generation SIM card product including Gemplus with .SIM, Axalto with U2 SIM, Oberthur with its GIGantIC card, Giesecke & Devrient with GalaxSIM and Sagem Orga with SIMply XXL. All next-generation SIM cards featured up to 512MB of storage (thanks to replacing NOR with higher-density NAND memory) and high-speed protocols. This evolution would allow a number of promising scenarions, such as storage of multimedia files, DRM tokens and encrypted corporate files, and distribution of operator-customised handset applications through the SIM. Informa’s white paper on High Capacity SIM cards which I wrote last year, provides an extensive analysis of the commercial status of next-generation SIM cards. This was all too good on paper, but again a technology evolution that had to be supported by handset manufacturers. Repeating history, network operators, with the exception of Orange, did not show leadership or invest in this evolution. The ETSI organisation was where the discussion of the standardisation of this high-speed protocol between SIMs and handsets took place. Following a multitude of candidate proposals, patent disputes, continual controversies and uncertainty, the participants agreed to standardise on one protocol; the USB. Two years had passed before this consensus was reached in November 2006, but the worst was yet to come. The choice of USB protocol meant that a significant rengineering effort of the part of handset OEMs (Orange had convinced 5 OEMs in 2006 to implement the MMC protocol, but the choice of USB meant that the momentum was stalled). Coupled with the continuing widespread lack of operator support, most industry observers concede that compliant handsets will not be appearing in the market before 2009, at least in any sufficient volume. So what does this means for the SIM industry ? Faced with declining sales, SIM card OEMs went back to the drawing board. The 3GSM 2007 congress saw two new efforts to revive the value of the SIM card: the use of the BIP protocol to deliver new applications and the use of the SIM within NFC technologies for contactless transaction applications. New SIM technologies in 2007: The quest for the holy grail After several generations of the mobile industry, the quest for enhancing the role of the SIM seems like the quest for the holy grail. Long, uncertain and without a firm goal in sight. At 3GSM this year, marketing around high capacity SIM cards was significantly toned down. Instead, Gemalto (the largest SIM OEM) introduced its line of multimedia-ready SIMs, essentially cards using the same memory capacity, but supporting the BIP (bearer independent protocol), which forms part of the ETSI 11.14 standard. The BIP protocol comes in two flavours: – The BIP client protocol allows the SIM to communicate with the network over 2.5G and 3G data channels, which allows for SIM-resident data to be updated at significantly higher speeds than previously possible. The BIP client protocol is widely implemented (all top-5 OEMs except Samsung support it), but it is a point-to-point protocol (unlike cell broadcast), which cannot be used for mass updates. – The BIP server protocol allows handset applications to communicate with the SIM and access objects stored in the SIM file-system directly. Unfortunately, the BIP server protocol has seen (unsurprisingly) poor support from the part of handset OEMs, with the exception of Sagem, Vitelcom and HTC. The BIP server implementation allows a handset application to load files from the SIM card and enable handset personalisation on SIM insertion (as demonstrated by Abaxia at this year s 3GSM). On-SIM portals can also be realised in this fashion. However the BIP server protocol is not bidirectional and therefore cannot support scenarios where an application stored in the SIM card is auto-installed onto the handset operating system. Hooking the SIM onto NFC applications Perhaps the most talked about future application for the SIM card is as a control point for handset-based NFC applications, such as contactless payments. NFC (near field communications) is a wireless standard launched by NXP (formerly called Philips Semiconductors) and Sony in 2002. There are already several commercial pilots of NFC-enabled handsets around the world and ABI research predicts that around 20% of handsets in 2012 will ship with NFC capabilities. NFC technology can be used to make payments, unlock doors and download content, by simply waving the handset in front of the reader. Clearly, establishing a role within NFC-based applications means big money for mobile operators and SIM card vendors. The GSMA (association of 700+ operators globally) recently mandated the use of the single wire protocol (SWP) for linking the SIM card to the NFC circuitry within the phone. However, there is no agreed technical framework for determining the role of the SIM in NFC applications. At the same time there are far too many players claiming a piece of the lucrative pie of contactless payments, namely card issuers, contactless ticketing providers, mobile operators, handset manufacturers and SIM card OEMs. Undoubtedly, the NFC-related hype that surrounds the SIM industry has a long way to go, given that it will take another five years for NFC-enabled handsets to reach critical mass. Perhaps it s wiser to reflect on the many uses that the SIM can be put to, utilising not tomorrow s, but today s technology, such as T-Mobile s use of the SIM for m-banking applications supported by 80% of banks in the Czech Republic. But not for an industry whose survival depends on demand-creation for next-generation technologies. Andreas

Some things remain true: Markets always shift and the lord giveth and the lord taketh. In the mobile handset industry we have seen Ericsson with 30%+ share of the market and then fall into oblivion before creating a joint venture with Sony and rising like the bird Phoenix. Does anyone remember the impact of the Vodafone terminal specifications to OEMs less than half a decade ago, for which even Nokia bent over backwards in the end? How come this changed so rapidly? Well, consumers change their minds. The industry too shifts between vertical and horizontal structures in a helical pattern. There is always a search for the next killer feature that will lead into a new shift powering market dynamics, but seldom is it a feature that creates that shift in balance but something completely different. Consider first an example from another industry the automotive market. The last few years that market has undergone a feature renaissance , the killer features being environmental impact (look at the success of the Toyota Prius) and localization (i.e. with built in GPS). The previous killer feature was segmenting the car products into clear value propositions like SUVs, family cars, sports cars, etc. Before that it was hardware being able to build cars and ship them over the planet. The shift of the millennium: from hardware to software In the mobile handset industry we saw the shift in market differentiation, from hardware to software some years ago; until the end of 1999 all the big OEMs were more or less focusing on hardware. Technology differentiation was determined by how small you could make the phone, how good network reception you could achieve, and so on. In the beginning of this millennium a shift began; software became much more important. In 1998 Symbian was formed as a partnership between Ericsson, Nokia, Motorola and Psion. In 1999 J2ME was announced. The demand for software engineers surged. It wasn t that hardware didn t matter or that it was commoditized. It wasn t that software hadn t mattered earlier either just that gradually software became more important than hardware. It takes years until we notice the difference, as it takes years to build a good software platform. The next shift: from software to segmentation We saw a similar shift last year, in 2006. In the third quarter of 2006 the average selling price (ASP) for several handset OEMs decreased considerably. Except one; Sony Ericsson who instead increased not only its handset ASP but also its market share. As argued earlier, increasing market share often leads to decreasing ASP, so why was Sony Ericsson an exception? I would argue that Sony Ericsson found the new differentiator: vertical segments. A vertical segment is really just a product proposition that occupies a niche segment of the market. The more niche and targeted you can make any product, the more valuable the target consumer will find it and is thus willing to pay more for it. The core handset differentiation shifts over time and eventually sinks under the value line . The complexity of creating vertical segments Designing a product to appeal to a target customer group as well as possible is important as long as that group is big enough to provide a return on investment. Today mobile handset tailoring and customizing is not an easy task and investments are substantial. There are three essential elements to creating a vertical handset proposition: User Research: finding out what the customer segments want and to translate this into requirements Supply-Demand Prediction and Logistics Handling: balancing supply and demand in a cost efficient and operationally responsive way Product Flexing: to cost efficiently create multiple products according to requirement with minimal impact to time to market, development cost, and bill of material The first two elements are competences taught in most marketing classes, but the third is specific to each (non-commoditized) industry. In the case of the mobile handset industry, this is the hardest part as it takes years to platformize handset software and hardware. Nokia has mastered the top two elements, but for some reason the inside of their phones look the same independently if it is game, business or multimedia that drives the phone. Sony Ericsson on the other hand was able to balance all three to a level which was in part responsible for their increase in handset ASP last year. The next wave of differentiation? Of course there will be a new differentiator when the art of segmentation has been mastered. We are already seeing open source as a threat to the ones that relied on the traditional model of software development. In markets where no new features can be added to the product the value lies in design, brand and product marketing, as is the case in eye-wear and watches. But surely there must be more features to add in mobile handsets, right?! So where should we look for the next wave of differentiation? Undoubtedly OEMs will continue improving handset segmentation and user-centered design. However, I would argue that the next differentiating characteristics in mobile handsets will be delivery of True Personalization and the ability to cater to Multi-Sided Markets. True Personalization True Personalization is really about making the target segment so small that it becomes more or less one person (and I am not talking about ringtones, themes, mobile charms, and stickers). When Japan introduced number portability, many believed that the churn would grow immensely. It didn t, and I think one of the reasons is that DoCoMo had introduced soft walled gardens like personal email and i-mode services that users had attached themselves to earlier. Think about it: If you had to change your email address to move to a Dell, HP or Mac instead of your current IBM/Lenovo, would you change? The OEM that is able to create an identity that resides within your mobile that is easily personalizable by the user and moved to new devices within the same brand, will definitely see less churn. I know a lot of people who don t change phones (even within the brand) because it is such an hassle to configure and move bookmarks, contacts, rss-feeds, contacts, settings, etc, and that some things like sms and email is not even transferable. When the user is able to micro segment and truly personalize her own device she will never switch! Why do you think Nokia created the Nokia LifeBlog? Catering to Multi-Sided Markets Mobile phones will increasingly resemble platforms, but no one in the manufacturing part of the value chain will want a new Wintel, i.e. a singular platform. The manufacturer-operator battle is clear and a dividing line exists between the two the players above this line (operators and service providers) want all handsets to be the same for their applications, services, advertisements, etc. The players below (the handset OEM) don t want to become too platformized and end up like set-top-box manufacturers (I love asking people what the brand or even manufacturer of their set-top box is. Many answer TiVo or some other non-manufacturer; little knowing or caring about that it is built in Taiwan or China. The way forward: handset OEMs are either building services or service platforms of their own, or are creating a flexible white label solution for third parties. Look at Nokia Ad Service, Content Discoverer as well as Motorola s Screen3. Rumors say that Google is having close talks with LG and Samsung, two hardware centric manufacturers, who should watch out for platformization. Why would Motorola not just use uiOne and why does Three remove the Nokia Active Standby? Because being able to enable third parties to monetize the mobile platform, but keeping control of the user experience will be a promising post sales revenue stream. Thoughts? Hampus, TAT

The mobile browser business has been dealt with a swift blow within the space of a week: Teleca announced that it halts investments into renewal of Obigo product , while Openwave is up for sale and is failing at licensing its v7 browser to handset manufacturers. The winner? Open-source browser derivatives based on Web Kit (adapted by Apple and Nokia), which should show up on handsets from the likes of Sony Ericsson within 2007. Browsers beset with challenges Cumulatively, the Openwave and Obigo browser families have to date claimed over 70% of the mobile browser market, with Access browser claiming another 20% of the market. Considering that the mobile industry sees one billion phones ship per year, this is a lot of browsers. Yet, these products have been facing multiple challenges: – mobile handset middleware commands extremely low prices these days; the lower down the software stack you go, the lower the per-device licensing fees. For example, a single ringtone can command a retail price of $3, the same per-device pricing as the Symbian operating system. Browsers and Java virtual machines can only command perhaps one hundredth of that. – Mobile browsers continue to be inherently complex software. Browsers that render street HTML (i.e. malformed web pages, which are pretty common on the Internet) are notoriously difficult to develop and maintain. Yet software for interpreting and rendering web (HTML) pages is becoming decisively commoditised. – The innovation and value-add in mobile browsers lies in add-on features such as zoom and intelligent navigation – for example see Microsoft s Deepfish concept browser and the specs of Nokia s S60 open source-based browser. – There are several open source alternatives to commercial browsers, first and foremost the S60 WebKit, which replaces Nokia s previous closed source efforts and is embedded on all S60 3rd edition handsets. What went wrong with the browser business ? Openwave, Obigo and Acces, the three main mobile browser vendors, had in the last two years tried to reposition their browsers as application environments, but with limited success. Openwave has been the market-leading vendor for mobile browsers with over one billion deployments claimed to date, on handsets from BenQ Siemens, Sanyo, Sharp, Sagem, Motorola, LG, and TCL Alcatel. Openwave was the first and most vocal vendor to reposition its browser product into an application environment. In April 2006 the company announced MIDAS, a software platform combining a rendering (ECMAscript) engine with underlying browser and messaging components to deliver customizable applications to mobile operators. What went wrong ? While Openwave was banking on the purchasing power of mobile operators to demand inclusion of its browser by manufacturers, it chose to sideline its real customers, the handset manufacturers at its own peril. Handset OEMs who previously were disinfatuated with Openwave due to the lack of flexibility in Openwave s bundled browser and messaging components were disincentivised to upgrade to Openwave s v7 browser framework (codenamed Mercury), the basis for MIDAS. Openwave s strategy led to a welcome response from mobile operators; KDDI endorsed Openwave s Mercury browser for its EZweb services in October 2006, while O2 trialled MIDAS as the basis for a unified messaging client in mid 2006. However, MIDAS saw poor reception from the all-important handset OEMs, with only 5 out of 288 phone models embedding the Openwave v7 browser according to Openwave’s website (last updated in September 2006). This is a disappointing track record considering that v7 was announced in February 2003 from the world s leading mobile browser company. With the MIDAS platform strategy failing, Openwave repositioned its portfolio into a product strategy, with 13 product announcements at the recent 3GSM conference in Barcelona. The announcements of the Openwave Mobile Widget, MediaCast and the Openwave Personalization and Profiling System are characteristic of the company s turn towards content delivery services. However, this turn came too late; with OpenWave’s NASDAQ-listed stocks having fallen 50% in the past 12 months, the CEO resigned in late March and the company announced it was putting itself up for sale. For a publically traded company employing 1,300 people across 26 countries, this a major shake-up. Even more so, if you consider that Openwave s decline is a far cry from the year 2000 when the company co-founded the WAP Forum and was instrumental in drafting the WAP specification which spawned the mobile browser business. Openwave’s fortunes bare a similar fate to Obigo. In early April, Teleca announced that it would not be making further investments into the renewal of its Obigo software suite. Obigo includes not only a browser but a media player (SVG, video, audio), messaging (SMS, MMS, EMS, email), content manager, download manager and digital rights management. According to the company, Obigo software has shipped on more than 400 handset models and more than 300 million mobile phones as of July 2006, from manufacturers including BenQ Siemens, Panasonic, Pantech, Samsung, SonyEricsson and Toshiba. Teleca said that the source code associated with Obigo would be opened up to customers “in order to drive the change from a product to a services model.”, according to CBR Online. More than 200 Teleca staff making up the Obigo product unit in Malm and Lund, have been offered voluntary transfer to Sony Ericsson. For in-depth reviews of Openwave s MIDAS and Teleca s Obigo see the free research paper titled Mobile Operating Systems: The New Generation, published in September 2006. The Winner: Open Source The demise of the mobile browser business marks concurrently the first sign of the disruptive power of collaborative software development models based on open source. The most vocal advocate of open source browsers has been Nokia. The Finnish OEM had in the past been developing a proprietary browser for S60. However, with the cost of street HTML browser development rising, Nokia tried three options: – licensing Opera s web browser for its S60-based devices – investing in the Minimo project, a Mozilla browser branch optimised for mobile devices (which turned out to be too resource-hungry and was abandoned) – re-developing its own S60 browser based on the the WebCore and JavaScriptCore components from on Apple s Safari browser (which in turn have been based on KDE’s Konqueror open source browser project). In early 2006 Nokia steered towards the third option and announced the S60WebKit, the engine for Nokia s new S60 web browser, which today ships on all S60 3rd edition handsets. The S60WebKit browser offers advanced features such as mouse-based navigation, page miniatures , visual browser history and AJAX support. Furthermore, Nokia s browser additions are available under the permissive BSD open source license, which allows third parties to use these components for either open or closed source project with very few limitations. What next ? The discontinuation of Obigo and the financial troubles of Openwave should see Nokia s WebKit become adopted by other tier-1 OEMs such as SonyEricsson, who should acquire much of Obigo s browser know-how. The browser business should gradually shift into a professional services model, i.e. optimising and developing value-added features on top of an open source browser core, with Teleca best-placed to capitalise on this trend. I doubt that Access and Opera will be able to sustain their licensing agreements at current levels, given the popularity of low-cost open-source-based alternatives. At the same time, this may be a lesson for the PC industry, too; had Internet Explorer not been bundled within Windows and offered to PC OEMs for free, it would no doubt have been sidestepped by Firefox. Comments, as always, are welcome.

The mobile software industry is never short of challenges. Manufacturers and software vendors are constantly riddled with the question of build vs. buy; should they invest in in-house development of a software component, or license it from a supplier? Ultimately build vs. buy is an investment decision, as it requires investment of either resources or money and so is determined by a multitude of factors. A complex ecosystem of customers and stakeholders affected by software decisions, combined with the many software components in a mobile phone can make the build vs. buy decision a difficult call. Additionally this decision is increasingly complicated by patent and intellectual property rights considerations. It is not coincidental that over half of the top 20 patent filing applicants in 2006 are major mobile handset or equipment manufacturers, according to WIPO (see below). These immensely successful companies obviously see the link between successful intellectual property and patent strategy – so is there a lesson here for software providers? 3. Siemens 4. Nokia 10. Motorola 11. Mitsubishi 12. Qualcomm 13. Huawei 14. Ericsson 15. Fujitsu 16. LG Electronics 18. HP 20. Samsung Unlike the top-20 patent players, most technology companies lack dedicated IP and patent teams. However, tomorrow s successful companies will be those that pay due attention to the increasing importance of these key strategic build vs buy and patent decisions Build vs Buy: decision criteria At the most basic level, the decision whether to build or buy a piece of software comprises some basic factors: 1. Stick to standards? It generally makes sense to implement an industry standard, if one exists, particularly if the standard is accepted and widely used. Differentiation can be achieved by exemplary implementation of a standard, providing you with a means of excelling against your competition. However it should be noted that there are IP risks with implementation of even de-facto industry standards, as with the recent claim successfully brought by Alcatel against Microsoft for infringement of their patents in the MP3 standard. 2. In-house development? Considerations here are your in-house development expertise, prioritisation of the requirement given limited resources and budget availability. If you are developing in a new technology area the decision about whether to build or buy has additional complexities. Assuming that there is no standard industry agreement regarding a new technology (and this is usually the case) it is likely that you will need to either develop your own solution or alternatively look to procure a solution from specific technology experts. Investment in new technologies is increasingly expensive and so you will necessarily be looking for a solution that has the potential to become the dominant solution in the market and ideally reap you profitable revenue returns. The following diagram illustrates the build vs buy trade-offs depending on whether the technology is standardised or new. 3. The complexities of intellectual property rights Not withstanding the generally well acknowledged technical and developmental challenges of new technology areas, there is an additional factor that is generally less well understood by software companies but one that is no less important. It is Intellectual Property Rights (IPR) and patents how these can play out in a new technology development lifecycle. I ‘ll next try to analyse the key IPR issues (although I ‘m not a laywer, so seek advise before acting!). Assuming that a build decision is reached, then there are a number of IPR factors to consider. If you are a mobile software company it would appear prudent to carry out some initial investigations in the technology area to ascertain if others already have essential patents (essential meaning that you cannot implement the technology without them). However this apparently logical decision is not without its own risks. In the US, for example, knowledge that a third party has patents in a technology area that you wish to develop in can potentially give rise to punitive damages (up to three times the normal damages) this is if the courts determine that you wilfully ignored this fact, having had prior knowledge of the fact in the technology development stage. The alternative, to fastidiously ignore what others have done to create and patent your own solution is not without risks either. If you are found to have infringed others patents after having developed the technology, you still run the risk of being litigated against for patent infringement. It may feel as though you are damned if you do infringe patents and damned if you don t! Thorough investigation is definitely preferable to blind ignorance. Assuming that you successfully navigate your way around the patent minefield, there is then the all important objective of achieving adoption of your technology to ensure your investment is successful whilst also ensuring that you retain some exclusivity to the technology to benefit from your first-to-market position. Patenting your solution can give you the security of exclusivity and makes sense in order to protect your investment, but how do you then achieve successful adoption of your technology knowing that others may be put off by your having patents in this area? These objectives, which may initially appear mutually exclusive, can be managed provided you have planned your patent strategy in advance. For example, you could setup (or join) an industry standards body and contribute the essential technology patents thus ensuring a level playing field, at least for the basic implementation. Additionally you may provide additional patents under FRAND terms (fair, reasonable and non-discriminatory terms). Companies who wish to implement technologies in this area, may prefer to license your patents knowing that this then gives them some indemnity regarding their risk of potential infringement. However, at what point in the technology development lifecycle is it appropriate to take this decision and to allow others to either contribute or license your essential patents? Unfortunately there is no one-size-fits-all solution; each decision should be taken with a good understanding of the likely outcomes, benefits and drawbacks. Decisions regarding build vs buy and to patent or not to patent are bread and butter issues for mobile software companies. Whether the importance of these issues registers is another matter. Strategic gains, in the form of revenues and technology leadership (or even domination) can be achieved by either forcing others to acknowledge your patent as an essential one or by preventing competitors from innovating in a specific technology space by virtue of your patents. Nevertheless, there is always the risk that third parties will find an alternative technology implementation that does not require your essential patents, which may prove more successful or, even more worryingly that your technology could be found to be infringing others patents. So whilst build vs. buy decisions may be perceived as generally straight-forward, they are actually complex, strategic product decisions. The technology company that leaves these decisions only to their development or engineering teams may be jeopardising their success more than they are aware. As reiterated by Ikka Rahnasto, Nokia s Vice President for Intellectual Property Rights in a recent WIPO magazine article Our IP strategy is deeply integrated into Nokia s business strategy. the focus has increasingly been on understanding the role of IP in each Nokia business and on improving the return on our technology and IP investmen…IP assets are managed by a centralized IP department reporting to the Chief Strategy Officer, with very close links to Nokia business groups and technology groups to enable full strategic alignment . [updated: Thanks to WapReview for mentioning this post at the Carnival of the Mobilists!]