Communities Dominate Brands

Why Location-based spam ads will fail, but also LBS-based event ads will succeed

We are having a good discussion at Twitter about location-based services (LBS) and location-based ads and location-based search. Regular readers of the blog or my books know that I consider it a myth and have written also here extensively with tons of evidence to illustrate how futile it is to launch LBS-based services. But it is a widely loved myth, so it keeps coming back. This time I won't write a new blog, let me take two excerpts from my 7th book, Tomi Ahonen Pearls Vol 1: Mobile Advertising (2009).

First, let me show why location-based spam ads will fail. In the book I am referring to the world's first ever conference on mobile advertising, which I chaired in 2001 in London. Excerpt from the book Tomi Ahonen Pearls Vol 1: Mobile Advertising:

This is perhaps the most important discovery to me, from the February 2001 London conference. Note that this was only a conceptual idea from my Consulting Department, but an idea not invented by us, and one which was to appear for years in just about every presentation and study and report about mobile advertising.

 

The (underlying) idea is similar to what Tom Cruise experiences in the movie Minority Report, that you walk into a shopping mall, the network detects your location (that you have entered the mall) and knows you by your phone, so now fully-personalized ads can be served to you. If Tomi likes whisky, well, there is a whisky shop with Glenlivet, Tomintoul and Cragganmore on sale, here is the map, come over and get a 10% discount.

 

We've all heard that idea a hundred times. But it is totally a myth. That idea will not deliver significant advertising revenues in any format, ever. The unsolicited, location-based spam ad, was a standard part of the Nokia 3G story (with the slide in the above, without the yellow part) since the middle of 2000, and I had promised hundreds of audiences that this idea was wonderful. For example I'd say "A florist had suddenly a cancelled wedding and now lots of flowers about to go bad. So use location-based ads, spam the neighborhood and sell them at half price rather than see them expire."

 

Yeah, technically this is a nice "solution" and the engineering geeks loved it, and the store-owners would like it too. But at the London Wireless Advertising conference in February 2001 we discussed this idea with the other early experts of the industry, and I learned that this was totally a myth. It would not fly.

 

Why? Because the end-user would still see it as spam. We would hate it. We had already shown a love and affection to incoming SMS text messages. We would not tolerate abuse of random spam just because we happened to walk by a given space. Most of the time we were not in the mood for that kind of shopping. We did internal calculations at Nokia and the economic case very rapidly proved that this was a dead duck. Totally a myth.

 

So in my internal workshops from the end of February, and in the public domain since June 2001, I went on record saying that this LBS Spam idea was totally busted. And I would usually add the WAA (Wireless Advertising Association, one of the fore-fathers of the current Mobile Marketing Association) Code of Conduct for mobile advertising. All ads, all of them, on mobile had to be on the basis of opt-in. And now the florist could no longer spam the neighborhood to try to find Tomi Ahonen in the mood to pick up a dozen flowers at the cost of 6 to surprise his girlfriend. I would not opt in for the random florist; and this technically elegant, but practically non-viable business idea would start its slow death-spiral.

 

Still it would take years for the idea to be accepted as dead. I would see many companies attempt to launch location-based unsolicited ads. But I also put this warning into all of my books from M-Profits on in 2002, whenever or wherever I would discuss mobile advertising. Yes, you could do location-based ads, perhaps, in certain situations, but not just to spam random walkers-by, no matter how accurately we figured out their profiles, etc. However, at the February London conference, this concept was killed by a wide consensus of the industry leaders, and from that point whenever advertising was discussed in private workshops, I pointed out that this model is dead. The first public conference that gave me the chance to show this Pearl was in June 2001 in London at the M-Commerce conference.

Now, I have also said that location-based advertising can be big, but not in this above form, but rather as events-based campaigns. We are now starting to see many emerging. Here is how I wrote about events-based LBS ads, also in Pearls Vol 1:

As I had been explaining to people that the Location-Based Spam ad was not viable, I also had come up with a variant, which was viable. I called it the "Madonna Plays at Wembley Stadium" story and included it in my second book M-Profits in 2002, and the story has been very widely referenced since.

 

The story has evolved since 2002 and in my latest book Mobile as 7th of the Mass Media I devote two pages to the idea, so I'll just summarize it here.

 

Madonna sets up a service to locate all mobile phones when they enter the concert stadium area, like Wembley Stadium in London or Yankee Stadium in New York City etc. When a fan enters the stadium, the network will send a free ad message to the fan, like the one I show in the slide in the above. Originally this would have been an SMS message, today it would be an MMS message. She gives a free ringing tone to the fan as a gift, as a custom ringing tone, only given to those who attended her concert. She also sends a screen saver, of Madonna posing in front of the stadium, so it is clearly a unique picture only from this tour.

 

Then Madonna asks the fan to join her fan club (and thus asks permission to contact the fan later). Anyone who attends a paid rock concert will understand that the artist would like to communicate with the fans, there won't be hostility against this kind of one-time greeting. 95% of the recipients will agree to the fan club and sign up (the remainder being perhaps corporate hosts or janitors and other venue staff, who will also understand that this is part of working at the venue).

 

Madonna's benefit is that now she has the mobile phone numbers of her most passionate fans, 20,000 at this major stadium. She repeats this across her global concert tour of 50 cities and she will have the cellphone numbers of approximately one million of her best fans worldwide. If the fans were willing to pay 50 dollars for the concert ticket, then these fans will be wanting to buy Madonna's next album.

 

So when Madonna releases her next album, she can send a message to her fans to pre-order the album or even buy the songs directly downloaded to her phone as is reality in South Korea today. The costs of promoting her next album will be slashed to 100,000 dollars by which her new album is snatched up by her most loyal fans on the first week of its release, and hits number one on most national charts. This will be the future of music promotion. And the same is true of her next world tour. "Would you like the same seat at my new tour?" This kind of SMS message will sell out her next world tour, with a 20,000 seat stadium sold out with 20,000 messages sent at a cost of 2,000 dollars. Obviously there are a multitude of other benefits out of this interaction with her fan club.

 

Where the location based spam is a dead concept, this kind of location-based venue advertising is a very viable way forward for mobile advertising and marketing.

 

Moreover, it does not stop with pop and rock music. How about all other events arranged at stadiums. Football. Baseball. Hockey. Basketball. Golf. Tennis. Motor racing. The Kentucky Derby, etc etc etc. Anywhere that people gather in the thousands to one venue for one purpose, for, which there is a charge for attending, these are all ripe for location-based ads. In addition, the fans will love the advertising, not hate it.

 

We are now approaching these kinds of events-based marketing activities, and I'll show you a few Pearls towards the back of the book with the Virgin rock concert in Australia and the Shanghai Formula One race in China.

So there. Location-based spam ads will fail. Location-based events ads will succeed. If you want to read more, please pick up a copy of my eBook Tomi Ahonen Pearls Vol 1: Mobile Advertising. It has 50 case studies into successful mobile ad campaigns and concepts from aroudn the world, and has a foreword by Russell Buckley from Admob, the Chairman of the Mobile Marketing Asscociation. You can read many sample pages including several of hte cases at Tomi Ahonen Pearls Vol 1: Mobile Advertising.

Godzilla vs Reptilicus? Clash of titans: Netbooks vs Smartphones, the preview

Pick your gigarivals of choice. Godzilla vs Reptilicus? Alien vs Predator? Spiderman vs Batman? Kirk vs Picard? Venus vs Serena? Coke vs Pepsi? We will be witnessing a classic clash of true titans over the next few years, between the shrinking personal computer and the ever-smarter mobile phone. Lets handicap that contest.

IN THIS CORNER HEAVYWEIGHT CHAMP

The undefeated heavy-weight champion, the Personal ''PC" Computer. At 33 years of age, the PC comes in after decades of a steady diet and weight-loss regimen and features superfast processors, enough of a hard drive to fit the text from all the books in the Library of Congress, and so much memory to run even Windows Vista. With a full QWERTY keyboard and a mouse, and big 10 inch TFT display the PC is fast at its inputs and outputs. Taking lessons from the mobile phone, the netbook has wireless and mobile connectivity from WiFi and WiMax to 3G and 3.5G for broadband speeds. The heavyweight champion has been dieting and enters the fight weighing only 2.6 pounds (1.4 kg)

The PC has an undefeated record and in its illustrious career the heavy-weight champion has crushed the stand-alone typewriter, the desktop calculator, the filing cabinet, the encyclopedia, the desktop calendar, the yellow pages, the atlas; and in a tag-team doubles match, with the scanner and printer, has also crushed the stand-alone photocopier and fax machine. In its latest bouts it met up with the television and newspaper, and at the time of this edition going to print, the two were out for the count, no doubt the PC will emerge victorious against also the TV and newspaper.

IN THIS CORNER FEATHERWEIGHT CHAMP

The undefeated featherweight champion, the Cellular "Mobile Phone" Phone. At 30 years of age the mobile phone steps into the ring slightly younger but also weathered veteran of bruising battles in the digital space. The mobile phone has been bulking up with abilities and capabilities to exceed the wildest dreams of superspies and joins the clash in full smartphone form, with not just one inbuilt camera but two, for that special someone, one person in a million, who actually makes 3G video calls. The mobile phone has studied the laptop and bulked up from a puny keypad to full QWERTY keyboard and then adding a touch-screen. To compensate for no mouse, the smartphone has learned to take inputs via 2D barcodes. The smartphone has picked up abilities recently to gather contextual data from the networks, in location-based data. While never having a huge display for its featherweight size, the mobile has grown its screen and new measures a full 3 inches. To add versatility, the phone offers real time screen orientation and augmented reality overlays as well as live camera feeds for megapixel microscopy (what in layman's terms could be called a magnifying glass). Also dieting a lot over the past three decades, the mobile phone now enters the the match at 4.5 ounces (130 grams).

The mobile phone brings an undefeated record against the stand-alone PDA, the digital camera, the wristwatch, the pocket calculator, the landline phone, the alarm clock, the pocket calendar, the MP3 player, the address book and the white pages and portable maps. Its latest bout was with the compass, which according to all early reports was also decided by knock-out.

PREVIOUS MATCHUP

The amazing thing is that in their full professional fighting careers, the two world champions have never met up face-to-face before in a championship bout. In some junior series they have met, briefly, when a Blackberry took on emailing use of tethered laptops early in this decade, and more recently when an iPhone took on web surfing on WiFi enabled notebooks but neither contest was decisive. This no-holds barred death-match between undefeated world champions PC and mobile phone has been anticipated with great excitement for many years already.

MATCH

The battle between the netbook and the smartphone is about to commence and will last the full 12 rounds in other words up to the end of 2020, unless ended by knock-out by either contender prior to that.

ODDSMAKERS

Vegas oddsmakers in America feel the PC is the front-runner and give the netbook the odds to win. Meanwhile Monaco betting in Europe is firmly on the side of the smartphone, and European betting is heavily in favor of the mobile phone. Macau betting in Asia is almost even. The match will be an epic battle and could go either way.

TOMI AHONEN HANDICAPPING

We have received exclusive handicapping of the upcoming bout by famed author in digital convergence, Tomi T Ahonen, who has previously followed closely the careers of both champions and written extensively about them. Mr Ahonen gives us his inside scoop on the upcoming bout.

The PC has to come out swinging. It will take the fight directly to the smartphone, and attempt to approach the compactness of the smartphone, and achieve the same level of mobility in a small portable and dare I say it, sexy casing of the most desirable smartphones, while adding the richness of the PC applications and web surfing experiences. With a 3G dongle in addition to WiFi, the netbook will become a formidable opponent in its broadband connectivity. By adding Skype, the netbook has neutralized much of the mobile phone's inherent advantage of voice communications. And with a comfortable large keyboard and mouse, the netbook can deliver volleys of Twitter updates in an attempt to overwhelm the smartphone.

The mobile phone will rely on its mobility and pocketability to go where the netbook cannot go, from the bathroom to the disco, cinema and even climb right into the bed, to deliver that last SMS text message of the night. The mobile will use innovation and creativity and compact features to match the sheer power of the netbook, such as the camera also used as 2D barcode reader, to bypass some keyboard entry in web surfing, and adding real-time context based information in augmented reality. Its recent addition of money-payment skills will come in handy to conjure up new virtual money plans to use revenue streams to pick up points from the judging.

These are top top-notch, disciplined, highly trained and prepared contestants, with an illustrious legacy of defeating long-standing champions. The office typewriter and desktop calculator (PC) and the landline phone and the wristwatch (mobile phone) have been iconic champions ruling their domains for more than a hundred years each, yet defeated easily by these two champions. Do not under-estimate either one of them. They are formidable.

HOW IS YOUR REACH?

But I do think it does come down to one decisive item in the smartphone's arsenal that the netbook simply cannot match, and it is something we've coined the term "Reachability" (from the Finnish "tavoitettavuus"). The most powerful need for humans is not to be entertained, nor to be informed. It is not either to compute, The most powerful need for us humans is to communicate. That is why we carry the phone with us every day, 24 hours a day, literally taking it to the bathroom with us, and we do sleep with the phone in bed with us, but not with the laptop. To communicate.

With netbooks there are ever more powerful means to initiate communications. We can skype, we can email, we can Twitter, and depending on the 3G contract on the netbook, we can also send SMS text messages straight from the netbook. In the netbook format, the PC is catching up to the abilities of the mobile phone and may well be as good or perhaps in some cases even better at initiating communciations. Initiating communications.

But the PC falls completely in the ability to receive communcations by others in real time. Even in a netbook format, the PC will need to be on, connected, and physically open, to receive Skype calls or Facebook updates or to view a picture sent by a friend. It cannot deliver our calls and messages while we walk on the sidewalk, stand in line at the Starbucks, rush on the platform from one train to the other to make our connection. The phone can always deliver in real time, because it features reachability.

That is why the original Blackberry email was so addictive in America they called the device the "Crackberry". And then for exactly the same reasons, reachability, the rest of the world did not fall for email on the Blackberry, because by then the rest of the world had discovered SMS text messaging, something even more rapid and addictive, the "hard drug" if you will, as SMS is even more dependent on the element of reachability. Once Blackberry adjusted to become the texting-phone of choice, it found even bigger success among SMS users. Reachability is why mobile phones replace the fixed landline. We don't answer the family landline phone, because we know the call is not for me. My friends know to call me on my mobile phone. Reachability.

SERIOUSLY

Ok, enough with the supermatch. I'll take Godzilla. The netbook market is a vitally important market for the existing PC industry. It is the big frontier where the next generation of PC winners and losers will be made. There will be a long-lasting major market for the personal computer and it will have many uses where it totally trumps the best of smartphones. The PC is not going away. I have created a metaphor of 30 minutes/30 secondsto explain the different market needs, the PC serves a "30 minute" need while the mobile phone serves a "30 second" need. These two have very little overlap.

Understand what I wrote about in Reachability. While a netbook can do much the same as a smartphone, the netbook cannot replicate reachability. That means, that the netbook is a 'nice to have' device while a mobile phone is clearly today a 'must have' device. The more the smartphone can cram abilities into it, the more it will also own those activities.

All economically viable people on the planet have a mobile phone (4.2 billion subscriptions today). Many of them, but not all, will want some kind of "computing ability", which more today than ever, means some form of "internet access" which can be very basic WAP access. Some may use a netbook, laptop or other PC to do their web surfing, but increasingly as smartphones get better, many will be happy with their smartphones to do the web surfing ("computing") they want.

POCKET TEST

Remember McGuire's Law, the utility of any activity increases with its mobility. A laptop PC is more portable (more "mobile") than a desktop. A notebook fits a smaller briefcase and weighs less, is more portable than a laptop. Now ultra-tiny netbooks are even more portable. But a phone is more portable still. All modern mobile phones, even the "near-brick sized" E90 Communciator from Nokia, fit the pocket. The netbooks do not.

So if you have the ultimate greatest perfect does-absolutely-everything you ever wanted, in a netbook, but it does not fit the pocket, it won't replace the mobile phone. When you go clubbing or to the restaurant or to the sporting event or wherever, the phone must fit the pocket. If it is too big to fit into your pocket, it won't replace the phone. It is an additional gadget, inherently, not a replacement gadget.

Now bring back reachability. If we are limited to only one device that we'll take along, it will be the phone, and any additional functionality that happens to be built-into the phone. Because of reachability, if its only one thing we pocket, it will be the phone.

RINGING IN POCKET TEST

So what if it truly merges into the exact same device? A laptop-notebook-netbook-ultra-ultra-compact tiny keys pocketbook? ie the next generation "pocket PC" or any such "palmtop" form factor full-functioning PC first explored successfully by Hewlett-Packard about 20 years ago with their classic LX-100 series? This is of course quite possible.

Then I'd say the ultimate test of "is it really a phone or is it only a tiny PC" is "does it ring in the pocket". So when it is in its closed state (perhaps in sleep mode), will it still be able to receive calls (and incoming SMS messages) and ring the alarm. If  the tiny PC in your pocket really rings when someone calls you, and you then are able to take it from your pocket and take that call (or not); then yes, its a phone. Else it is a pocket-sized PC, and we've had those for more than 20 years now to tiny market success. They are now called stand-alone PDAs and their annual sales linger in the 4 million units per year when.

What is then the impact? I say the smartphone "wins". In the longer run, during the next decade, the pocketable super-smart convergence device will succeed in mass markets if it is based on a phone metaphor (ringing in pocket test) and not succeed in anywhere near that scale if it is merely a tiny PC (non-phone) netbook. It has to pass the ringing in the pocket test. If it does that, it is a phone. It not, it is a tiny PC. Lets examine these two.

REGARDLESS, NETBOOKS WILL DO WELL

The Tiny PC type of netbook is an attractive option for many reasons. It is more portable (remember McGuire's Law) so we can take it with us more often than larger PCs. The netbook is lighter, fits better, because its screen is smaller, it needs far less battery power (biggest power hog of the laptop is the screen) and with scale, it can be mass-produced to large numbers, helping push down the price. Many of the installed base of 1.2 Billion PCs in the world need to be replaced.

Don't think it will be total shift to netbooks. The laptop PC was introduced by Toshiba in 1985. It took the laptop and all portable PC types (netbooks and notebooks too) a turtle-crawling speed of 23 years, to reach just slightly greater sales annually than desktop PCs. Yes, 2008 was the first year when more laptop format PCs were sold than desktop PCs, and it took all portable PCs to achieve that for laptops, counting laptops, notebooks and netbooks to just edge out the desktop PC format. 23 years of chasing the desktop PC.

Some existing desktop PCs will never go mobile. Imagine a corporate user, with a calling center with 500 agents at a cubicle farm, with desktop PCs with flat screen monitors, reading their customer-service scripts on their PCs, and speaking on Skype-enabled headsets serving customers. That calling center operator will want absolute max optimized costs, and has zero added value from mobility of the computer. The calling center operator would not want to let workers roam around the town supposedly working, from smartphones with tiny screens. The desktop metaphor is perfectly suited for the calling center operator, and no matter how wonderful the next E-Series or Samsung or LG or Blackberry of iPhone 4G might be, they will not replace their desktops, not even with laptops or ultra-super-cheap netbooks.

In rough numbers the world sells about 150 million desktop PCs annually and the installed base is in very rough terms about 750 million desktop PCs in use today. Maybe half of them might migrate to portable computers? and perhaps a majority of those portable computers will go to netbooks eventually?

Not all. Many laptops need to be big. The netbook evolved partly from the ideas of an ultra-cheap laptop for the developing world. But many who have laptops for work needs, for example travelling salesmen who make customer presentations daily to small audiences in conference rooms using the 14" screen of their laptop, will not want a 10" or smaller screen of a subnotebook sized netbook. Others want the laptop as a multi-purpose multimedia device, to edit photographs and videos, to watch DVDs and play videogames. For them too, a larger screen is desirable. So not all will go to netbooks.

Very roughly speaking, about 150 million laptop PCs will be sold and this year about 20 million of them will be netbooks. The installed base of laptop PCs globally is about 450 million (netbooks under 25 million end of last year).

SHIFTS TO AND FROM SMARTPHONE

There is a growing shift of existing PC users shifting to smarphones. We first saw it with the Blackberry and early Nokia Communciator models at the start of the decade with a trickle of email users abandoning laptops; and its now been a more pronounced stream of converts with the iPhone recently. Obviously nowhere near even a majority of their users, there nonetheless is an undeniable trend of some existing laptop users shifting to high-end smartphones for all their "computing needs" (usually that means internet access needs) This trend will accelerate as the distinctions between a "real PC" ie netbook and "very smart" smartphone (think next year's iPhone or Blackberry, or Nokia's follower to N97 and E90). As the devices become ever more similar, the shift-over becomes ever more appealing.

Mostly those who would consider this choice - you reading this blog for example - are the wealthy part of the industrialized world, where we are lucky enough to be one of the 1.2 billion people who have a PC. For PC users in the industrialized world this is a question of choice, and also needs to consider the old PC, is it "good enough" for web surfing for another year. Would I need to re-install (perhaps re-purchase) the various software apps we've installed onto the existing PC, from Windows to the office suite to the anti-virus software etc. The phone is replaced about every year and gets ever more powerful. Maybe I'll make do with the existing PC if the new smartphone is "just good enough" to do my Twitter updates and check on CNN news and watch YouTube..

We are in the minority of the digital divide. There are 3 billion more people out there who do have a mobile phone subscription, but who do not own a PC of any kind. Most in the developing world do not even have this choice.

But please understand, it is not the only shift. There is an opposing shift too from phones to PCs. These users will not stop using their phones (for browsing etc) but may want to expand their web or computing use to a "real" PC. There are current mobile phone owners, of feature-phones or smartphones, who don't own any kind of PC, who wish to have a real PC (notebook or netbook). They currently are doing their surfing on their phone, and they perhaps also use a PC at an internet cafe or at school or with friends, and they aspire to own a netbook sometime soon. And among the middle-class in the developing world, this is a significant new market niche. So there is a reverse trend as well. Very roughly speaking, these two will cancel each other out, but my gut says the PC-to-smartphone trend will become bigger. However, considering the math involved, in the big picture, it really won't matter which off-setting trend is marginally bigger than the other. These two roughly cancel each other out.

NETBOOK MARKET SIZE

The total market for PCs may grow somewhat from the 1.2 billion in use today, to maybe 1.5 billion by the middle of the next decade. It won't reach 2 billion. And the replacement cycles for PCs have been relatively stable at 3.5 years on average so we can expect a top end annual market size of at best 400-450 million PCs sold annually, at the end of the decade.

Still, of those personal computers under perfect conditions by 2020. perhaps 300 million netbooks can be sold annually, towards the end of the new decade. That is the rosy scenario, remembering they sell about 20 million netbooks this year says Gartner. Netbooks may well never sell more than 100 million units per year. The 300 million is very very optimistic, but it is plausible. (for those more econometrically inclined, note that this means sustained annual growth rates of 28% per annum, for 11 years in a row. Reality is most likely only half this rate, sustained over more than a decade, for an industry as mature as the PC industry)

But again, I want to be clear, I do believe in a strong robust market growth opportunity for netbooks to reach into quite possibly hundreds of millions of netbooks sold per year, towards the end of the upcoming decade.

SMARTPHONE MARKET

Meanwhile, the smartphone market last year was also very roughly speaking about 150 million units sold. This year smartphone sales are growing strongly inspite of the economic downturn, will be near 200 million (but very unlikely to pass 200 M this year.). The mobile phone industry has a long history of migration patterns as the phones have picked up new abilities. These  show a perfect S-Curve, just like the shift from 1G (analog early cellphones) to 2G (GSM/CDMA etc) digital mobile phones did in the 1980s (a shift that has reached  100%).

Then we saw the S-curve pattern for SMS capable phones (up to 100% already), then in this decade several early innovations: WAP capable phones (already past 90%), then color screen capable phones (past 80%), then MMS capable phones (past 70%) then cameraphones (past 70%). All follow the same adoption pattern. Smartphones are on a similar pattern and will eventually form the majority of all phones sold in the world, the pattern is obvious and undeniable. We cannot say for certainty, if all phones will become smartphones; but certainly more than half will be, that much is clear from the numbers so far. So, roughly speaking, we'll pass 250 million smartphones sold annually in 2010, 300 million in 2011 and pass 400 million sold annually no later than 2013.

Last year, 2008, was the first year that more smartphones were sold than laptop PCs. In less than four years from now, more smartphones will be sold than all PCs sold, including all desktops, laptops, notebooks and netbooks.

Understand the scale. Netbooks are far smaller in size, their total addressable market is smaller, their adoption ceiling is far lower and they will never ever ever catch up with smartphones. Smartphones are bigger already, growing faster and with a far far far greater accessable market size.

WHO NEEDS WHOM

Lets think a bit. The PC industry has to go where their customers want them to go, to ever more mobile devices. The netbook is a natural evolution for the computer, ever smaller, ever lighter, ever more portable, ever more compact, ever more stuffed with abilities, and ever cheaper.

The phone makers have many options. Go the smartphone route is one option, which is currently very popular, or the featurephone route (SonyEricsson has been taking a beating at that option recently, with Walkman musicphones and Cybershot cameraphones) or the low-cost phones option (you need scale, so this is only for the big 5) or up the value chain to services and apps (think Apps Store). The phone makers don't need to bother with netbooks, their smartphones are close enough and have that key competitive advantage, Reachability, guaranteeing them the victory in the long run vs (non-phone) netbooks.

ONE DOLLAR PC

Ok, a couple of other thoughts. Some will say, but Tomi, the PC makers now offer deals with mobile operators/carriers to sell one dollar netbooks (with 2 year annual contracts). No difference. It is the same price for the netbook, hidden in the price of a 2 year contract. The subsidised netbook is not a one dollar PC, any more than the iPhone 3GS in America is not a 200 dollar smartphone (its real unsubsidised cost is about 700 dollars which every AT&T customer ends up paying, over the life of the contract. There is no free lunch. In other countries like Italy they pay the full unsubsidied price for the iPhone).

There is absolutely no difference in the concept, to buying a gadget from an electronics store with a monthly payments plan, or to putting the full price on a credit card and paying that off in two years.

But please do not think that pattern can hold globally. It can't. The global trend is away from subsidised phones, they are illegal in many countries (like Italy and Belgium), over half of the industrialized world don't offer any subsidies and they are even more rare in the developing world. Many countries have recently studied the phenomenon of subsidied phones, found it to be very bad practise, and moved away from them, such as South Korea and Israel recently. The countries where the subsidised netbooks will mostly be offered will tend to be the wealthiest countries like the US and UK, and even then to only the wealthier segments of the customer base, those with monthly contract "post-paid" accounts, rather than prepaid (voucher) customers who often are the poorest. The one dollar subsidised netbook will not suddenly eliminate normal rules of economics, and this is not a magical way to get poor people to afford PCs. Sorry.

SOFTWARE COSTS

A point that is often missed in the netbooks discussion is that the netbook buyer will need software to the PC, which typically is pre-installed on (most) smartphones. The netbooks tend to come out of the box relatively "dumb" that can be then customized by the new owner, by installing lots of software. The smartphone, on the other hand, tends to come out of the box fully operational, and by far the vast majority of smartphone owners never install an actual application onto their new phone.

It takes a far greater level of sophistication to install apps to PCs ("computer literacy"); even more so, to do it with free software downloaded from the net, often needing to be unzipped, which can require several steps to installation. Most mobile phone apps, can be done with over-the-air download and one or two accepting verifications on the phone screen to complete the installation.

LITERACY, COMPUTER LITERACY

I want to mention literacy. An illiterate user can easily learn basic use of a mobile phone, even to the point of sending and receiving money as millions do in Kenya for example;  but illiterate people will be bewildered by a netbook (the world has 800 million illiterate people and vast more who are marginally literate, all can happily use a mobile phone). The PC is far more demanding on its users. Remember what the World Bank just said a few days ago, that it is the mobile phone which is the most powerful platform to deliver services in the developing world. Don't kid yourself, its not the PC or broadband. Mobile is.

PHONE PLUS X EQUALS PHONE

Lets end on some fun with math. I stole this idea from Glyph Lefkovitz of Divmod, when he was discussing the computer. Glyph said anything the PC wants, it gets, and gave a cool formula:

Computer + X = Computer

Thsi is very good. Think of the PC's past. Computer + modem = computer. Computer + mouse = computer. Computer + stereo speakers = computer. I liked that theory, but saw immediately that in my mind the formula is even more compeling for the mobile, that it is

Mobile Phone + X = Mobile Phone

Now think of the history of phones. Mobile phone + camera = mobile phone. Mobile phone + MP3 player = mobile phone. Mobile phone + alarm clock = mobile phone. Mobile phone + web browser = mobile phone. Now with the the crash of the netbook and smartphone, we will see what happens when:

Mobile Phone + Computer = ?

I say it is mobile phone. Mobile phone plus computer.. will equal mobile phone. Even if both devices are identical in form factor (pocketable), it comes down to Reachability. If you can receive calls while the device is in your pocket, then its a phone and will "take over" from the PC. Both will have their own markets, the smartphone "own" market far bigger than the netbook market, but when they clash, I do think the phone "wins". So thank you Glyph, but I think I will be using that revised formula in upcoming discussions.

This is obvously my view today. I have been thinking about it a lot and many hold other views, which are equally valid. Regardless, I think this question, "which form factor, netbook or smartphone, will be predominant in the next decade" has tremendous implications for not only handset makers and PC makers, but for operating systems (Chrome vs Android for example), how that OS is structured (around a PC use metaphor, lets install apps; or a smartphone metaphor, it has to work out of the box); and of course, for applications developers. I say smartphones several times larger total market in the next decade than netbooks, similar in scale to mobile phones vs PCs today (4 times bigger).

That is what I think of now, as we brace for the clash of the titans, when the netbook enters from one corner and the smartphone from the other corner. We will see this battle rage for long into the decade, but it will not take to 2020 to see the winner. I believe we'll have a winner by round 6 or 7 in this battle, near the middle of the decade. I think I can hear the rumble and roar of Godzilla approaching..

Let me know what you think...

Anatomy of a False Rumor in the Age of Twitter

We had an interesting experience yesterday on Twitter. Around 10 AM my time in Hong Kong, I spotted a story on Twitter referred by some of the early mobilists, relating to a story by the Guardian, by Richard Wray where he wrote "Nokia is understood to be developing".. without citing any sources, and making a very dramatic statement as if Nokia had been involved with a device to use the Google Android operating system (if you missed this rumor, please note, it is totally untrue. Not a single thread of evidence to the story).

Had this been true, it would have been a dramatic shift in the smartphone operating system wars, where Nokia's Symbian has about half of the worldwide market, and currently the next largest OS platforms are RIM/Blackberry, Microsoft Windows Mobile, and the Apple iPhone OS/X. Other makers like Palm and yes Android, have very small market shares today. If Nokia (and thus Symbian) which totally dominates the market, was found indeed to suddenly abandon Symbian and go with the tiny upstart Android, it would have been as if JVC had, after demolishing Betamax video recording system in the market share wars for VCRs, suddenly announced they abandon the global market giant standard they had created, VHS, and rather release recorders on the Philips VC2000 video cassette format (the "flip cassette") which while technically innovative was a miniscule share of VCRs in the early 1980s. Totally bizarre, but indeed would have been giant news.

The Twitter technologist and mobilist contributors seized upon this item of news - the Guardian is a legitimate news source and reputable UK paper usually very good with tech news - and started the speculation rumors. So these had been buzzing around for a while and started to pick up steam around 10M Hong Kong time when I posted my first comment "Rumor is gaining, I still don't buy it (Android NOK phone)". I posted some additoinal comments on Twitter why I thought it was not likely.

Then the Twitter effect part 1 kicked in. The discussion of the original story. People who understand the smartphone OS world much better than I do, started to weigh in. Those who clearly knew what they were talking about came very decisively against this rumor, how devastatingly damaging it would be for Nokia's current strategy and position, and also started to pick apart the Guardian story, having no sources etc. I thought the strange rumor would quickly die. But it didn't.

Its so easy to retweet the story and it had a lot of appeal to many who are not very close to the facts. So the rumor mill on Twitter got hold of the story. The original Guardian article, which by now the "real mobilists" had already all agreed was false, was now being circulated by those who are interested in mobile but who do not really know it deeply. It was a juicy rumor and it was based on a legitimate newspaper story. It had a lot of credibilty (for a rumor).

Several mobile related bloggers (who shall remain nameless, no need to shame them, they were only repeating what had been an erroneous story in the Guardian) started to blog about it. This Twitter effect part 2 fed the flames at Twitter and updates mentioning Nokia and Android were now coming every few minutes. So we got the first voice of sanity from Staska at Unwired View who explained clearly that this rumor was unfounded and had no merit. By my timing this was about 2 hours after the original story broke on Twitter. I (and many others obviously) started to retweet this story by Unwired View and try to bring some sanity to the rampant rumors.

About an hour later we got Stefan Constantinescu's unequivocal rebuke in his story at Into Mobile, where Stefan put it plainly into the headline: "Do not listen to the Guardian, there will be no Nokia devices running Android any time soon." Stefan wrote it would be a cold day in hell, etc. (yes, funny). This should have put an end to the story by now, but it was still morning in Europe and many were Tweeting the original story either as fact "Nokia to switch to Android" or asking about it "could it be true that Nokia.." and linking either to the Guardian original news, or some of the early bloggers who reported on the Guardian. So we also started to see the types of Tweets commenting, "yes its true, because also blogger X is reporting it" where actually all reported stories linked back to the Guardian story and its uncited sources.

I was doing a lot of replies to friends and to followers and to also some random Twitter users, linking now to Stefan's story and saying, is totally untrue, only rumor. Around this time the new Nokia Android search stories were about 70% thinking it is true, and 30% saying its not true. Then about 4 hours into the story, Nokia issued an official denial via Reuters, "Absolutely no truth whatsoever." We started now to retweet this link and put out the rumor.

You would think that would rapidly end the story. It didn't. About 6 hours into the story and 2 hours after Nokia's denial, we saw the peak of the hysteria and Twitter effect 3, as the volume of new Tweets on Nokia Android was several per minute and the mix of new tweets was still 50/50 reporting it as true, and reporting it as having been denied. It would take another 3 more hours before the main buzz would die and the clearly majority reported it as a false rumor and most who did report just the Guardian story or early bloggers on it, would receive immediate replies that this was a rumor already denied.

I don't know what to make of this little storm in a tea cup. It was fascinating to be on Twitter and to see it unfold. It was yes an experiment in how a news story (and in this case story that turned out not to be true) would spread and also how it would evolve. Later we also heard from Steve Litchfield at All About Symbian who explained it rather categorically, and David Meyer at ZD Net jumped in to explain where the likely confusion was, as Nokia does have a strategy for a Linux Open Soure OS around Maemo.

I am disappointed that today, after clearly the Guardian's story has been proven not to be true, they do not update the story online with the comment of the Nokia denial or the rather universal mobilist blogosphere consensus that this is not going to happen. Shouldn't the Guardian correct its own mistake?

I ended up sending hundreds of Twitter comments to those who posted the Guardian story either as true, or asked could it be true, or speculated about it, with links to the stories where it was exposed as not true, and obviously after Nokia issued the denial, always included that link.

Literally, hundreds. Only a handful retweeted the correction to something they had tweeted. I find that disturbing. We are as humans very willing spread a story that appeals to us, but not to follow up with a correction if it proves to be false. Its sad. Also on more a personal side, only a few of those hundreds did get back to me, with discussion, or comment or thanks. And a couple who did (only really a few) said that even after the Nokia denial, they did not believe the rumor was false (what does this tell us about how little we trust major brands anymore in this day and age? Communities dominate brands?)

From Adsense to Flirt-Words; Virtual ice cubes that melt on arrival: Flirtomatic!

We love Flirtomatic here at this blog and have chronicled its rise and rise and rise since its launch in 2006. Flirtomatic's CEO Mark Curtis is a close friend of ours and has been remarkably generous in sharing detailed information about the service. I discussed the melting ice cubes two weeks ago at my mobile-specific blog www.7thmassmedia.com but they have again innovated and also picked up some recognition. So its time to do a bigger review of perhaps the most innovative social networking service of them all, Flirtomatic.

FLIRTOMATIC IS NOT

Lets start by what it is not. You might think its a dating service. It is not. There is an 18 year age limit and some of the often-mentioned (and seen) graphics from Flirtomatic included the girl swirling the bra, and the "virtual boob job", so its easy to think Flirtomatic is sleazy sexy nudity. It is not. The content guidelines for Flirtomatic say that the user-generated content must be of the kind, that the BBC would be willing to broadcast the content over the air. All messages and pictures are monitored by real live people and when members approach or cross the line, they are gently advised of the guidelines. The members greatly appreciate it. Flirtomatic is not a place for sick, perverted "dirty-old-men" (like me, ha-ha).

So its not dating and its not porn, what is it then? Its a fun flirting service for adults. Mostly young adults. A social networking service for that age who hang around in the clubs, pubs and discos. Who are perhaps a bit tipsy and drunk, wanting to flirt a bit, not really looking for anything serious. Twitter but with the fun added. In fact, Mark Curtis said that Flirtomatic members "buy extra fun from us" that is what they do.

BIG GROWTH

Ok, weird experiment in social networking? Lets look at the numbers. Today Flirtomatic has over a million users and has spread from the UK to Germany and USA. It is available on the PC and on mobile, but far more than half of users are currently on mobile. What does it cost? Nothing. Even on mobile, Flirtomatic abandoned its subscription fee as "unnecessary" in 2007 as we reported here at Communities Dominate.

To sign up its that simple that you only need a minimum of two details and you can be up and flirting. Yes, there are profiles you can fill out (later) if you want, but Flirtomatic understands that users especially on mobile are in a hurry and don't want to go through many clicks and pages of forms to sign up to something. Its as near-instant as possible.

So how do they make their money, it has to be advertising then, eh? Banner ads? Well, yes, Flirtomatic does have advertising also, but their ad revenues are a small minority of total revenues. So small that they really would not suffer if ads disappeared. (What? no subscriptions and negligable advertiser revenues? What kind of voodoo magic financing is this based upon?). Flirtomatic is the most creative developer of real money-making opportunities from their user base, that are possible in a virtual world.

MOBILE, THE MAGICAL MONEY-MAKING MACHINE

Personalizing for premium cost. You can have your basic character and customize it, post your picture etc. But if you want to customize your character and be a bit special - and who doesn't want to be a bit special - then yes, customization. Flirtomatic created their virtual money system, flirt points. And they started off by accepting premium SMS based payments to buy flirt points. Today they accept a wide range of payments including credit cards, paypal, direct debit, and yes, mobile premium SMS payment. Obviously this was not invented by Flirtomatic, it is a direct adaptation of the idea first launched by Habbo Hotel. But its one way to make money. Latest ideas of this concept include yes, boob jobs and tummy tucks at one UK pound each. They sold 10,000 virtual boob jobs for last summer (and bear in mind, its only visible in bikini, there is no nudity..)

Then they decided to add gifting. Virtual gifts. Again, this is not an invention of Flirtomatic, it is an adaptation of the stunningly popular virtual gifts first invented by South Korea's Cyworld. The first famous Flirtomatic virtual gift was the virtual red rose, which back in 2007 (when they only had 400,000 users) sold 3.5 million units at about 23 UK pence a piece and generated 800,000 UK pounds (1.4 million dollars) in revenues. That is what I mean. Flirtomatic was proving that mobile was indeed a magical money-making machine. Not everyone of their members needed to buy these premium gifts, but as some did, the others saw them, and more bought them, and rapidly Flirtomatic made tons of money. Since then they've done wonderful stuff in the virtual gifts space, such as the sprinkled red rose and then the innovation of real world gifts sent to virtual friends (a true invention) when they launched  a set of real world gifts for Valentines's day this year. Now they carry a big inventory of real gifts you can send to your flirting partner(s). Latest in this space is the gift of the virtual ice cube, that melts upon arrival.

MELTING ON ARRIVAL?

What? What good is a virtual ice cube? You see it in the phone screen, you can't drop it into your drink. And then it melts on arrival? Who in their right mind pays to send such a gift? Not in their right mind, remember, the Flirtomatic users buy more fun from Flirtomatic. They may be a bit drunk when flirting. Ice cubes can mean many things from cooling a drink to sensual sexual fun. An ice cube is fun. You are flirting, you may be in a pub or bar. Your friend may be stuck in a meeting that is running late and is getting upset at the boss who wont' let them leave (send an ice cube! Show you care). Then your friend is in the train that is crowded and hot (send another ice cube). Your friend finally arives, orders a drink - you see her, you wink, she orders her drink, drowns it fast, and with the phone hidden behind your back, you send another ice cube.. its fun. Did it sell? They sold 5,000 melting ice cubes in the first week.

Its not just selling such gifts to the Flirtomatic members, they also can turn these into sponsored content, so its a form of advertising. Not a boring banner ad, but a sponsored "big wet kiss" for example by L'Oreal or a sponsored virtual drink like a glass of champagne or a beer. Again, Flirtomatic is blending the line between reality and virtuality, they had for example a gift of a sponsored real glass of Guinness beer, redeemable at authorized Guinness pubs. Not virtual beer but real beer from your virtual friend. Who would NOT want to give this gift to a friend? See how Flirtomatic delivers more fun to its users?

EGO SERVICES

But the really funky part of where Flirtomatic has truly shown the way for the 10 billion dollar social networking industry worldwide (over 2/3 of the revenues is generated on the mobile side, obviously, most of the Facebooks and YouTubes and Twitters are very poor at generating revenues while mobile social networking is usually very lucrative), is with what Mark Curtis labeled as "ego services". Paid premium services that deal with the users' ego. For example your ratings. All Flirtomatic members can rate each other so you get 5 stars or 3 stars or perhaps you get 1 star. Nobody wants bad scores, and it is typical of human relationships that sometimes there is unfair play, perhaps "revenge" etc. So you have mostly great scores and the one 1 star review spoiling your record. Wouldn't you want to be able to just eliminate that bad score? With Flirtomatic you can. They call it "delete your freak". But obviously you need to pay (I wish I could delete one freaky review of one of my books on Amazon ha-ha).

This also is a class of services, there are many. Another is to pay to reveal who gave you that score, whether particularly good score (really loves me) or particlarly bad score. But pay to reveal. Yes. Ego-services, a true innovation by Flirtomatic.

AUCTIONED USER ADS

And they keep on and on. So while yes, there are banner ads on Flirtomatic and yes, traditional brands as advertisers; and Flirtomatic has also pioneered virtual branded gifting; the most amazing part is how they've brought auctioned ads to the service. They started with the First Face. If you want to be the first picture all Flirtomatic users see when they log into the service, that is easy to do. Bid on it. outbid the others, and you are the First Face for the next 6 hours. You'll definitely gain new friends in the next 6 hours, fastest fingers first...

Now they've just today announced Flirt-Words, a variant on adsense type of auctioned words, rented for the next 24 hours to the member who bids the most. Want to own "cool" or "sexy" or "fun" for the next day, when Flirtomatic members search the service? If you win the bid, you get it and be prepared for incoming messages from new friends.

GRAND PRIX OF NEW MEDIA AWARDS

We love Flirtomatic. It is the most fun side of our thesis that communities dominate, and we really do appreciate it, that Flirtomatic keeps validating that you can make money on social networking (primarily on the mobile side, obviously). Last week the New Media Age, a UK publication focusing on digital media but with a strong history and focus on the internet side, had its annual awards. Flirtomatic was not only the mobile winner, but given the Grand Prix top prize of the gala event. I wish I could have been there but we joined very warmly celebrating with Flirtomatic via Twitter and Forum Oxford and now here at the CDB blog. Congratulations to all at Flirtomatic.

Now, several really important additional comments. First, Mark Curtis is of course also an author, his book Distraction: being Human in a Digital Age is very VERY warmly recommended. Its in paperback, if you want something great to read this summer, pick it up. If you like our blog, you will love the book.

Then Fjord. Mark Curtis is a founder and board member of Fjord, the digital design agency specializing in digital convergence, between mobile, web and media. Truly a world-class talent, Fjord is used by the BBC, Nokia, Yahoo, T-Mobile, etc. And yes, Fjord designed Flirtomatic originally. Certainly its own staff have evolved Flirtomatic very far, but please, in your mind, go back to 2005-2006. Four years ago, who was promising new ways to make money on social networking? on a converged service? Who was even offering mobile social networking back then, apart from some unfamiliar names from Japan and South Korea.

Yet back then, long before Twitter, when Facebook and YouTube were not known, some UK digital agency named Fjord, conceived of Flirtomatic. If you today need help with gaining success in this difficult digital convergence space that includes mobile, then please consider Fjord. They have expanded past the UK with offices in Germany, Finland and USA. They are truly world-class.

And lastly, if you want to read more about Flirtomatic and also those other services I mentioned like Habbo Hotel and Cyworld, then I am most proud that Mark Curtis wrote the foreword to my latest, my 9th book, Tomi Ahonen Pearls Vol 2: Mobile Social Networking. You can read many sample pages of the 171 page eBook, that has 50 case studies of success in mobile social networking, at this page: Tomi's Pearls Vol 2.

(Rant) Deeply Disappointed in CNN: is now Celebrity News Network: Shame!

(Yeah, this is a rant.) I'm a news junkie. Ever since I moved from my native Finland to the USA to study at the university for my undergraduate degree, I discovered US based cable TV in 1983, and the two channels I fell in love with were CNN and MTV (in that order). Ever since, I've insisted every home I ever had, to have cable TV and both a 24h news channel and a 24h music video channel. Here in Hong Kong out of 24 hour news channels, I get CNN Headline News (US feed), CNN international, BBC World News, Sky News, CNBC, Bloomberg, Euronews, and Al Jazeera English. I even get the Fake News Network (aka Fox News). My preference has always been to follow CNN International.

So Michael Jackson died on 25th of June. I mean no disrespect to Michael Jackson and his fans. He was indeed a pop icon, sold 750 million records, and his album Thriller is the best-selling music album of all time. He was on the charts over a period spanning 4 decades; he was truly one of the greats of the music industry of all time, up there with Elvis, the Beatles, Sinatra, Edith Piaff etc.

And I personally truly did like his music all over the years, with songs such as Dont' Stop (Till You've Had Enough), Billie Jean, Bad, Smooth Criminal and Scream having been among my fave songs of their time(s) and I've danced to just about every Michael Jackson song he ever released. Regular readers know I'm not really a pop music fan, my tastes go to the much more hard-edged dance music in hip-hop and rap, but I always thought that Michael's use of Vincent Price to do the rap on Thriller (and it works far better on the album version than the music video, to my taste) was pure genius.

And its not just Michael. I've enjoyed the dance tunes from all the Jacksons, and his sister, Janet more than Michael even, due to her music having more of an edge due to the production by Jimmy Jam and Terry Lewis; and even Michael Jackson's collaborations from the duets like Say Say Say with Paul McCartney to the background vocals Michael sang to Rockwell's under-appreciated song Somebody's Watching Me.

So please Michael Jackson fans, do not crucify me as being somehow "anti-Michael Jackson" with this rant. I honestly do like most of his music, some of his big hits have been among my all-time fave songs.

CELEBRTIY NEWS NETWORK

So it is the evening of the 1st of July here in Hong Kong today. I am watching CNN International and CNN Headline News. A moment ago, the top story on CNN Headline News was Michael Jackson. On CNN International Michael Jackson was the third story. Its been six days since Michael Jackson died !  Yes, we do understand that there is family who mourn him, yes. And yes, we do understand that there are tens of thousands of fans who mourn him. But now to explore gossip about how he may have died and what might be on the will etc, that is gossip about a dead celebrity. It is beneath a "24 hour news" channel to devote 6 days of continuous headline coverage, and being the main story on the network - even usually very competent Anderson Cooper 360 degree has been diminshed to Anderson Cooper AC1, its been only Michael Jackson - still this morning MJ was the main story for AC-1. Shame!

WORLD NEWS

So lets start with the world. Maybe its been a slow news cycle and international news could be forgiven to devote extra time on the big pop star and global celebrity who passed away (last week). Maybe not much is going on in the world. Lets examine the evidence, shall we.

There was another death as well. I'm not talking of other celebrities like Farrah Fawcett Majors the former Charlie's Angel. I mean ordinary people. An airplane crashed into the Indian Ocean. Jemen Airlines went down and 153 died (and miraculously a 14 year old girl survived). I would think these 153 international deaths would warrant some more attention than the follow-up gossip of one dead celebrity from last week.

Oh, you want death? Iraq reports deaths every day. 35 died in a car bombing in Kirkuk today. Are these Iraqis not worthy of remembering? A freight train killed 17 in Italy. 

Then there are non-death but "important" news from the world. Like July 1 being the day that US troops withdraw to bases, out of the cities of Iraq. This was one of the deciding issues of the past US presidential election. Is a dead celebrtiy from last week really more important than the sovreignty and the troop withdrawals of one of the USA's longest wars?

Talking about sovreignty, there was that election in Iran, a contested election with tens of thousands on the streets. But when a celebrity dies in America, suddenly the rule in Iran is no longer newsworthy.

Talking of who rules whom, Honduras had a coup. A legitimately elected President was disposed and thrown out of his country. The UN voted that he must be re-instated. But CNN tells us that Michael Jackson had some nurse who said this and that about the medications.

The European Union has a new Presidency effective today, Sweden. But a dead celebrity is more important.

In Pakistan a fragile truce between the government and rebels in Wasiristan has broken down, in part because of US spy drones. This all impacts the second-longest war the US has ever been involved in, Afghanistan. You'd think the Pakstani-US relationship and fighting rebels in the mountain regions on the border of Afghanistan would be of importance - the rebels ambushed a military convoy. But no, there apparently was a celebrity who died last week.

There is much more in a dangerous world, from North Korean nuclear ambitions to signs of possible advances in the Israel-Palestinian issue. But we hear more and more repeats of the aftermath of the death of one celebrity.

US NEWS

So we have an American major celebrity who died, it is more understandable that CNN Headline News, with its US focus, will cover this story more tha you'd expect CNN International to do. But really, Michael Jackson has been the top story virtually uninterrupted for six days. Really? Has the US been such a sleepy time in the news cycle, a really slow week for news, that a 24 hour news gathering station could not find other stuff to cover?

Iraq war pull-out. This was major theme by Republican Senator and presidential candidateJohn McCain - and for a long time was the stated position of the Bush Administration - that a timeline would invite death and chaos and failure in Iraq. Repeating President Bush and Senator McCain repeat those phrases "was news" week after week, month after month last year; but now when it actually HAPPENS, it is not top news because a celebrtiy died last week.

Same or Afghanistan and Pakistan and North Korea and Iran (see above). All items that seemed central to US foreign policy and were regularly repeated in sound-bites on CNN all last year, but now when there is action on these fronts, they are not big news, because of the death of a celebrtiy last week.

Franken. So the US senate, of 100 senators, has had only 99 senators since the US election in November 2008. Today the 100th senator election was finally decided and Al Franken becomes the last winner of the last election. Is the election result of a US senator today really less important news than the death of a celebrity six days ago.

Filibuster-proof Democratic Majority. While Franken alone is news, it is very rare for the US senate to be so lopsided, that one party controls what is called a "filibuster-proof" majority, ie 60%. The last election saw a "distant" chance, that the Democrats just might, if Barack Obama did win, gain such a "super majority" in the Senate. Now Franken's victory gives them the 60 vote majority. This is not only news, it is rare and historical shift in power in America. Yet CNN reports as its top story about a celebrity who died last week.

There was a Governor (Sanford of South Carolina) who was found to be unfaithful, but also to secretly (and apparently against government procedures of South Caolina) left the country to visit a lover in Argentina for many days. 

The state of California ran out of money and started to send IOU's to its employees. President Obama talked of health insurance. The Secretary of Defense spoke about changing the "don't ask don't tell" plicy about the gays in the military. Embezzler Madoff got a 150 year sentence in prison. But no, these are not top news to CNN, CNN feels top news is, was and continues to be the death of a celebrity six days ago.

CNN HAS CELEBRITY REPORTER 
 
There is already an established celebrity gossip reporter on CNN, Larry King Live (someone that I avoid religiously) so let Larry King do his thing with the dead celebrities. He has all the soundbites and can replay all the interviews and call up all the friends of any dead celebrity. That is what he is good at.

CNN has a global talent pool of competent journalists, who do a great job digging up the real stories even when others ignore them. CNN has a reputation to deliver balanced news. Now somehow CNN has gone from being a legitimate 24 hour news channel, to be a gossip channel of memories of one pop star.

I think it really is revealing to see how little mention Farrah Fawcett Majors got in the same time span, who died at the same time. A little before Michael Jackson's career took off, Farrah was arguably the most popular female entertainer on TV, around the world. Not nearly as prolific over a long career as Michael Jackson had been, but Farrah also did not embroil herself with sensationalist stories in her career (Neverland Ranch, elefant man remains, a pet monkey, several allegations of child abuse, two fake marriages, artificially inseminated children, etc). And lets be real, Michael Jackson has not hit a number 1 in America since 1995 with You Are Not Alone. For anyone saying Farrah is a "past star" so was very legitimately Michael Jackson as well. its not like he'd died with songs on the charts this year or indeed, essentially not even this decade, his last Top 10 hit (barely) was You Rock My World in 2001.

If CNN honestly feels that digging into the aftermath of celebrity death is worth their while, then please CNN, do limit it to your Larry King Live show, it is such bogus news that it is perfect for this. Yes, Michael Jackson's death was news, on 25 June. Not today six days later. Its a 24 hour news cycle for a reason. The world - and indeed the USA - have moved on during this period. If you want to honor the man and recognize his funeral, etc, that I can understand. But please do not waste the time of millions of viewers worldwide, who tune in not to watch a Music TV channel, or to watch a Celerity Channel, but who really want to learn what is happening in "real" news. Please give us real news on CNN. Stop with the Celebrity News Channel.

Moto-Morons! What now? Enterprise smartphones for Asia? Madness

Motorola is truly clueless. I blogged about what they should be doing to reverse the death-spiral that they are in (Moto lost half of its market share in just one year and made massive losses while industry grew). And I blogged about what to do about it, where the real growth opportunity is (SMS for consumers). Now we can see how smart the Moto strategists have been. Transport & Logistics News out of Australia reports that Motorola has been developing entepprise-oriented mobile computers (smartphones) for Asia-Pacific.

MORONS !

The enterprise smartphone market (Palm, RIM Blackberry, Nokia E-Series, many of Microsoft Windows for Mobile smartphoes etc) is heavily contested. it is growing far less rapidly than the far larger consumer market. It has recognized brands and Moto is not in that game. WHY go fight in an area of diminishing relevance, which is already the far smaller segment, where it is very costly to enter and to support, and where margins are small.

Look at the companies that already are there. RIM. It shifted from enterprise oriented Blackberries to the consumer market and DOUBLED sales in just one year (RIM will become bigger than Motorola, possibly as soon as this year). RIM also increased its average sales prices, while the economy was in trouble ! Meanwhile, Nokia had its E-Series enterprise smartphones. They released their N-Series four years ago to serve the consumer market. Guess which outsells which. N-Series outsells E-Series by an enormous margin today. Apple iPhone is not an enterprise smarthone, it is a consumer smartphone.

So I told Moto in April that SMS was the only killer app for current mass-market consumers and is fuelling RIM's growth, Nokia's loyalty (and for example Samsung's solid growth and profitablity). What do Moto do? They go to the worst-performing sector of smartphones, with strong established players, and try to enter it with high-cost devices, and worse, they don't do this globally, only in APAC, so they even dont' get scale out of this idiotic move. Total incompetents ! These are your investor dollars in use. Are you satisfied? Go read the strategy roadmap to save Moto and compare. Idiots!

Interactive bus stop billboard ad, poster changes when u turn away!

This is very cool, and for our blog, its nice to see digital uses of media that impact such old media as print (first mass media channel out of 7) and one of its more "forgotten" parts, the outdoor billboard advertising.

John Herman at Gizmodo reports of a bus stop ad in Hamburg Germany, about stopping family abuse. It uses very clever technology, so that the advertisement image changes, when you look away, and look back at the ad. When you look at it, the ad shows a couple smiling. When you look away, the man is beating up the wife. Spooky, eerie, weird, but am sure, compelling ad about a very serious subject. And very cool high-tech geeky way to generate attention - and they have built-in a slight delay, so you just have time to notice the ad changed as you turn to watch it, or turn away. I'd love to see it for real to get the full impact, but this is cool. Go see it (with before and after pictures) at Gizmodo.

Lets Examine Facts of Mobile Advertising? Why Wildly Varying Stats?

Our dear friend Jouko Ahvenainen of Xtract was on U Talk Marketing discussing a couple of studies in mobile advertising, and attempting to explain the discrepancies. (Jouko is co-author with our Alan Moore with their book Social Media Marketing, a must-read book for 2009)

HOW MANY BILLIONS?

Deloitte in its Media Predictions / TMT Trends report 2009 said that mobile advertising was worth 1.0 billion dollars in 2008 (and predicted growth to 2.0 B in 2009)

Strategy Analytics reported also that 2008 mobile ad spending (by brands) was 1.0 billion in 2008 and Strategy Analytics felt that it would grow to 2.4 billion dollars this year.

eMarketer reported in February 2009 in the Netsize Guide that mobile advertising spending globally was 4.2 billion dollars in 2008.

Juniper measured mobile advertising at about 2 billion dollars in 2009 in June 2009

Gartner in 2008 measured mobile advertising to be worth 2.7 B dollars

Meanwhile Japanese mobile advertising alone is worth about 1 billion dollars in 2008 (Seed Planning 2008). Dentsu alone reported 620 M dollars of mobile advertising just in Japan in 2007. South Korea trends most mobile internet data at about 45% of the levels of Japan and has a very similar mobile ad market and eco-system and history as Japan, so Japan and South Korea alone are about 50% bigger than the total global numbers found by Deloitte and Strategy Analytics. And then we get countries like India where 80% of mobile phone users receive advertising and Spain where 75% do. Even in the UK 51% receive ads on their phones.

Yes the real number is certainly far more than 1 billion dollars for 2008. My company TomiAhonen Consulting measured the global advertising market for mobile at 3.2 billion dollars for last year, as reported in the Tomi Ahonen Almanac.

But this is pretty meaningless squabbling on the size. The worldwide total advertising market is worth over a quarter of a Trillion dollars and whether mobile advertising is 1 billion (Deloitte) or 4.2 billion (eMarketer), it is still of the magnitude of far less than 2 percent, and possibly under one percent of the total worldwide ad spending. It really doesn't matter at this level, is it "actually" one or two or three or four billions (and yes, makes me a bit humble to write that billions don't matter..)

The relative scale is significant. Fixed internet based advertising is ten times larger than mobile advertising. Radio advertising is of that size as well. Print and TV ads are far larger still. So please do not bother to focus on how many billions it is or is not. What we need to look at are certain trends, and certain comparative findings.

TRENDS, ALL OTHERS ARE DOWN

The first important observation is what is the prevailing trend in the economy, how it impacts. We know the global ecnomy is in trouble. We've heard the dire reports of broadcast and print advertising facing severe declines. Did you notice, that also internet advertising fell in the first quarter of 2009? Yes, all other advertising is declining, even that previously "hottest" ad category, internet advertising.

Now, if mobile also fell, it would be typical of all other ad media platforms. But what is happening? Every major analyst who has reported in 2009 about the status of mobile advertising, has said that mobile advertising is growing this year (like Deloitte and Stategy Analytics here mentioned in the above). Bucking the trend. This is very significant. The overall trend is down, yet mobile advertising is growing. Wow, that has to be very powerful indeed to counter the global trend.

HOW MANY

So one way to measure the advertising platform is by how much money is spent on it. Another way to measure it, is by its reach. How many people does your advertising on the mass media reach? 480 million is the daily ciculation of newspapers inlcuding paid and free dailies. 1.1 billion is the installed base of all PCs, laptops and netbooks. 1.4 billion is the total number of internet users. 1.5 billion is the total number of TV sets in use around the world, but not all of those have advertising.

How about mobile? 4 billion mobile phone subscribers worldwide, have 3.4 billion actual mobile phones in use, by 3.1 billion unique owners of at least one mobile phone and subscription. Clearly not all of those will receive ads, but 1.55 billion people had received ads on their phones last year. Yes, more people received advertising on a phone last year, than the total number of TV sets or PCs; and more than read a newspaper or wnt onto the internet.

We do need to remember that on mobile phones we do not receive dozens of ads per advertising break like on TV or hundreds of banner ads on an hour or two of web surfing, not to mention the thousands more in newpapers, magazines, billboards etc that we see daily. Mobile is the 7th mass media channel, the newest and youngest mass media, as different from the internet as TV is different from radio. Mobile is considered very personal and we are not willing to put up with heavy bombardment of ads. But ads can be very effective in this environment. In particular if mobile ad campaigns are built using engagemnt marketing methods. Lets look more at the numbers.

RESPONSE RATES

So lets consider why. On the internet the past 16 years we ahve seen the growth and evolution of interactive advertising. The measure they use is CTR (Click Through Rates). Wikipedia tells us that an average CTR is under one percent and if you achieve 2 percent on an internet ad campaign, it is "very successful". So you have to send 50 ads, to get one to click on it, and you have success. And most ad campaigns need over 100 ads served, to achieve one to click through.

On mobile we have a better measure, "response rates". This is a better statistic, as it measures an active interest by the advertising audience to engage with the advertisement or brand. Not just to click to the site and consider possibly to be interested. And we have some very interesting response rates from several countries across thousands of completed ad campaigns. In Japan goo Research reported that response rates were at 44%. In the UK, Blyk reported after 2,000 ad campaigns that it sustained average response rates of 25%, while Croatian Tomato Plus reported response rates of 30%. Separate other recent mobile ad campaigns range from response rates of 39% in the USA by car-customizing company West Coast Customs, to 44% in South Korea with a Gillette Campaign.

An even more powerful endorsement comes from Germany, where BMW achieved not a response rate, but a "conversion rate" ie direct actual money paid by that customer who received the ad, on an MMS picture messaging campaign, that achieved yes, a 30% conversion rate. For every ten picture messaging ads sent by MBW, 3 recepients walked into an authorized BMW dealership and made a purchase. This is POWER.

So as the first mobile ad was launched in Finland 9 years ago, and today mobile advertising is no longer a "novelty" gimmick, if we achieve response rates between 25% - 44% across six countries on three continents, we are starting to have quite meaningful "rule of thumb" that about 3 out of 10 who receive mobile ads, will also respond to them. Almost one in three. That is average for mobile. Remember that a "very successful" internet campaign has to shotgun out 50 ads to grab one "click-through" which is not even yet automatically an engaged prospect.

Understand what this means first, in terms of the volume of ads. We can SHRINK the total of ads sent out, by a factor of at least 10, compared to the internet or TV or any other legacy ad media channel. And then, bear in mind the statistics, that bucking the trend, mobile advertising is growing revenues this year, possibly doubling in total value. This while mobile ad campaigns will be far less in total volume of ads.

Secondly that diminished volume means less clutter. Less noise. We can, and indeed we must, provide targeted ads that are permission-based and very strongly personalized. That means that even "generic" campaigns can seem far more relevant than mass-market ad campaigns on TV or the web.

And most importantly, on mobile when using engagement marketing methods and with a little bit of better design, the resulting campaigns are dramatically more powerful than any seen before, on any media. Like the BMW campaign (it created a virtual image of "your" car using your colour and model and the tyres and wheel rims you had bought. Even though a standardized mass-niche campaign, it seemed totally personal - that is MY car) - you can achieve enormous success. BMW was reported to sell 45 million dollars of new winter tyres and new wheel rims on a campaign with a total cost of 120,000 dollars. After such a return, who goes back to TV ad campaigns?

SECOND CLICK

Now, the above is ample reason enough for any astute CMO to shift advertising budgets to mobile. If literally thousands of achieved mobile ad campaigns only do the "worst" of those stats, at 25% response rates, then it is still more than ten times better than a "very successful" campaign online, and achieves in the process far greater level of true engagement than click-throughs. So lets get the kicker.

We have the first study of second click rates on mobile ads. This is amazing stuff. Amethon studied mobile ad campaigns and was reported somewhat "negatively" that "only" one in three mobile ad campaign achieved a second click rate. What does that mean. It means that overall for all mobile ad campaigns, the average response rate is 3 out of 10. And now, the second, truly and fully "engaged" level of involvement by the audience is one third, ie 1 out of 10. Wow. On mobile, we achieve on average, two engaged clicks, which is still five times better than any "very successful" internet campaign!

This is night-and-day, isn't it? You have to bombard 50 people to get one click for an excellent campaign on the web and more likely you have to devastate the audience with over 100 ads sent to find one willing to click on your banner.

On mobile, an average campaign you only need to send less than 4 ads to get one response, and with every 10 ads sent, you get a customer willing to make two clicks by the average campaign !

BUT IT GETS BETTER

This is measuring only the early "basic" types of mobile ad methods, like SMS ads, MMS picture messaging ads and WAP banner ads. This is barely the beginning. We have far more exciting and promising formats now being introduced to the market, on mobile. Such as advergaming, 2D barcodes,  augmented reality and idle screen advertising. As I reported on my parallel blog 7thMassmedia - I heard from my friend C Enrique Ortiz who said Telefonica is finding 82% response rates on advertising on their idle screen.

Update July 4: Since I originally posted this blog story, we discussed it with my friend Johannes Heinze on Twitter and Johannes pointed out that regular banner ads on mobile (and SMS spam) don't get these levels of response rates. So let me be clear, "generic" banner ads and spam SMS is as poor as any other interruptive ad concepts form the last century, whether on TV, radio, internet or mobile. Yes, they may achieve some response levels and click-through rates, but that is really just copying bad formats for the newest mass medium. Advertisers do need to learn, that mobile allows a far more powerful advertising method, "engagement marketing" and only by using that method, do you achieve resonse rates of 30%. Generic interruptive ads, even on mobile, will not perform at that level. I hope that was clear. (Thanks Johanes!)

The important point is that this is now the golden age of mobile advertising, when great innovations are being made and magnificent new ad concepts are being invented. We are facing a change to mobile advertising like the internet world saw with Google adwords. This is the big opportunity for advertising now in 2009. If you're in advertising, get into the mobile side of the business, here is where all the real creativity is happening.

And yes, if anyone wants to take a quick read of 50 case studies of excellence in moble advertising, then please read my eBook Tomi Ahonen Pearls Vol 1: Mobile Advertising. See the book website, there are free pags for you including many free case studies to see.

40% of iPhone Users access web more from phone than PC

Yeah, this is no surprise. comScore has surveyed 7,300 users of iPhones (and iPod Touches) and found that 40% of them now use their iPhones to access the internet more than they use personal computers. This is similar to findings earlier reported for Blackberry users with email and consistent with the ealry anecdotal evidence about the iPhone. iPhone users are also quite wealthy and relatively old (76% are over the age of 25) and seven out of ten iPhone owners are men (boys' toys, eh?).

Note this finding does not suggest an end of the PC, it only suggests an accelerating shift from PCs to smartphones. Note that even with such a powerful internet-optimized handset as the iPhone (best internet smartphone clearly out of the current lot) they do not even pass the half-point of all users shifting to mobile. But regardless, it does confirm that increasingly, as the mobile handsets get better, more and more casual mainstream PC users will find no particular utility out of the PC. Like the Japanese say, if you ask them, would they like to read emails on a PC, they will be surprised and say, they were not aware that email also was available on a PC (as almost all Japanese email users access email on a phone) - and then usually add, but why would you want to..  (Yeah, the Japanese have had the full mobile phone based access to the internet for ten years now, and very advanced phones for most of this decade).

Now factor in the replacement cycles of phones - we replace our phones more than twice as often as we replace our PCs - and we tend to get phones in many markets at severe price subsidies so they seem much cheaper than a full-price PC; the trend is strictly one-way for any existing PC owners: from PC/laptop use to smartphone use. The iPhone itself keeps improving dramatically each year, and the rest of the field is clearly taking lessons from the iPhone. So if you're currently into the second year of your laptop and start to look for a new laptop late in next year, by then there will be significantly better new smartphones in the market, than the iPhone 3GS, the Palm Pre, the Nokia N97, etc. This trend will acclerate, not slow down.

NY Times considers charging for mobile content

NY Times saying it is easier to charge on mobile content and considering doing that. Yeah, we think so too.. Also there are compelling ad concepts and mixtures of both - say idle screen news (Telefonica reporting 82% click-through rates on well-targeted ads on the idle screen)