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« Whose laughing now? | Main | Nothing like a little bit of advocacy »

October 23, 2006

Comments

Juhani Polkko

$3.45B as in valuation from a entrepreneurs' perspective - yes! But as revenue figure... Heh heh :)

Unless, Informa figured out that in Japan and South Korea all the carriers have some kind of community twist in their SMS services. And I wouldn't be surprised if they did. Then, ok - but then the figure is only meant to sell their report.

If you do find out more about the contents of that report and where the figure comes from, it would be nice to know.

Cheers,
Juhani

Tomi T Ahonen

Hi Juhani

Thanks for the comment. Actually Informa (ie IDC) is one of the top most respected researchers in the IT/telecoms space, and their numbers are accepted pretty much as the industry standard (with Ovum and Gartner/Dataquest). I have great confidence in their numbers, Informa tend to err on the side of being conservative.

Actually these are quite in line with dramatic rise of Cyworld, its expansion, and similar services like Mixi in Japan. Cyworld is already used by 38% of all South Koreans - and has over 30,000 business enterprises selling over 500,000 items of digital content within it. Music alone sell 200,000 songs per day for consumption inside Cyworld.

And Cyworld has now launched in China, Japan, Taiwan (as well as America, Germany etc). So yes, this number is actually reasonable when analysed, while even to me, was surprisingly large.

Oh, the Herald Tribune article did break it down by geography, that out of the 3.45 Billion, 1.8 Billion is in Asia, with Europe second, with 721 Million of revenues.

The two biggest reasons for this incredible number - are the interest for the mobile telecoms industry to capture the "MySpace and YouTube" type of experience - so very many operators have launched social networking services. But differing from the online world, EVERY mobile digital community delivers actual user revenues from day one - totally differing from most online (ie internet based) services which mostly depend on building a large community and then selling advertising to them.

The second key is of course the sheer size of the mobile telecoms world. We're twice as large as the total internet world, and already more people have mobile phones than own cars, have credit cards, or TV sets. So in the economic scale, even if only 5% of mobile phone users are activated to consume digital content on a social networking site, that is already 125 million people - note more than twice the size of all shipped iPods over the past five years for example - and again, differing from web services like say a Skype - these mobile phone users are all accustomed to paying for every time they consume digital content (or participate in a service) on their phones.

Yes, surprising number, but honestly Juhani, I don't think there is hype behind these Informa numbers. That company is totally not known for hyping its reports; quite on the contrary, they tend to release some of the most conservative numbers in the industry.

But thanks for writing and please visit us again

Tomi :-)

David Cushman

Tomi, thanks for posting. The more of this I can gather the better the case for publishers to force themselves to understand and invest in social mobile networks!
I think there is huge potential for growth in what have been regarded as mature markets - by working to understand how those markets intersect with Generation C.
Can you say who is making all the money at the moment - and who is getting the biggest share?
Any examples of traditional publishers trialling and winning?

OIM

Excellent post. I will comment about your findings in my blog (sorry, in spanish).

I wanted to add a little commment on:

"these mobile phone users are all accustomed to paying for every time they consume digital content (or participate in a service) on their phones"

I would take that statement very carefully because I think that users only pay when the perceived value overpass the cost and that does not equal to just be on my mobile.

My 2 cents

Tomi T Ahonen

Hi David and OIM

Thanks for the comments. I have thought about it over the past 24 hours and have prepared a major thought piece around this. I am sure you'll find it enjoyable and hopefully also enlightening. I am posting it now

Tomi :-)

Juhani Polkko

Hi Tomi,

Thanks for the clarification - now it's easier to understand what's going on. From my perspective, social networking or community services will soon disappear as a separate category - it's clear that those features will be included to ALL successful digital content and media services in the near future. The main driver I think is the huge cost savings in marketing, as the users do that for you (Haven't had chance to read your book yet, but I'm sure this is one of your theses too).

So this is basically a categorizing problem we are talking about. Let's see - eBay recently launched the MyWorld community, and as soon as they launch that on mobile, their commission/fee revenues are added to the Informa's figure, right?

I didn't mean to mock Informa specifically, but I do look at these statistics (lie, bigger lie...) very critically. One of the reasons being the one discussed above.

I need to disagree with you with the comment that every mobile community delivers actual user revenues from day one. Ad-supported mobile services are growing fast, enabled by companies like Third Screen Media and GreyStripe, so the business model itself will soon be very similar to the one on the Internet. The users will be sooner and later realize that they don't have to pay for "every" click on mobile either, even though the billing channel is right there.

Other thought I had on that, is that I believe the winners will be cross-carrier mobile communities ("off-deck"), mainly because of the same reason that SMS took off: Interoperability across carrier networks. Carriers will probably realize this too late and adhere to the pay-model until it's finally blurt out.

Best,
Juhani

Tomi T Ahonen

Hi Juhani

Good thoughts. And obviously we are in much agreement. I too am most suspicious of any forecasts five years into the future. I still haven't got my flying car...

I agree the blurring of the line. That soon most services will have a "community dimension" much like most online websites today have a Search button and a feedback e-mail address or form. Separately there will be distinct social networking applications, like a massively multiplayer online game like Worlds of Warcraft, a virtual playground like Habbo Hotel and mobile blogging site like Cyworld.

I sense from your terminology ("off deck") that you are based in North America. That is where much of the "pollution" to the mobile internet is being generated. It reflects a massive misunderstanding of the mobile internet as the seventh mass media, and projecting assumptions from the inferior sixth mass media - the fixed landline (and broadband) based internet. In that world the only really viable revenue model (except for adult entertainment and gambling) is advertising.

To bring that "pollution" to mobile will totally pervert the viable honest, economicially viable business world of the mobile internet, with healthier revenue streams today (rather than advertising, gambling and adult, the biggest revenue streams in mobile internet are messaging, music and social networking ie sharing).

I don't deny the ability to generate SOME advertising powered services onto the mobile internet. But it is economically futile to build that business model. The total worldwide advertising industry is only half the size of mobile telecoms - today! And it is an absolutely certainty, that television, radio, print, billboard, internet etc advertising is not going to lay down and give up their revenues. They will fight back.

So even if we somehow assume one half of all advertising would migrate to the mobile internet, that would only cover a quarter of the industry's CURRENT revenues, before this industry grows to its trillion dollar size by the end of this decade.

Yes, advertising can power online (fixed) internet services. Yes, advertising can power SOME mobile internet services. But advertising is not big enough to power mobile telecoms. This industry is healthy today, it should build on solid business models, not on fantasies of a future advertising stream.

I don't mean to be very critical, but Americans totally do not understand what makes cellphones tick. I run workshops all around the world all the time. The American audiences are literally like walking back five years (or more).

And since they "know the internet" the natural instinct is to project internet thinking onto mobile. That is why all the fantasies around nonsense concepts like Blackberry (after five years only 5 million users worldwide, come on, that is one FIFTHG of one PERCENT of cellphone users. What a total waste. Same with iTunes. Americans know the internet very well, they think that model will work on mobile.

So on the opportunity to "shift" the business from the current, economically viable - and scalable - model of charging for use, to one that relies on advertising - I am most sceptical. I think it is the obsolete business model of the classic internet, and its time has come and gone. I was there, literally launching one of the very first ads on the internet in 1993 for OCSNY the first internet service provider on Manhattan (if you remember, the internet was on the cover of Time magazine in 1994, which is generally seen as the starting point when the internet became a mass market proposition).

That model has been milked, saw its peak at the dot-com bubble, and is really on its last legs. Today most of the advertising is shifting to targeted offers like Google's adwords, etc.

So yes, I hear you, some will try this - not unlike those many entrepreneurs who have launched advertising-sponsored free calls on mobiles - but I remain convinced this mobile internet is a more stable and economically viable platform, its successes will be built on more robust business models.

But we'll see, won't we. Thanks for coming back, and looking forward to more discussions with you. Did you notice I wrote a follow-up blog already for this story.

Tomi :-)

Stuart Oliver

Hi Tomi,
This is a great post. My only question, perhaps challenge, is whether mobile social networking is exploding or (still) about to explode.
I think there are so many opportunities for social netoworking on mobile devices, particularly when combined with basic, i.e. not gps, location information and yet there is nothing on the market at the moment - in the UK anyway.

Also, again focussed on the UK, are we fundamentally stifling our ability to innovate and lead in this market by having prohibitive data costs compared to other countries? Perhaps instead of the old phrase "America sneezes and we get a cold", in this market it will be "Japan sneezes and we get a cold".

Stuart

Tomi T Ahonen

Hi Stuart!!

Cool thought. Maybe the real explosion hasn't happened yet. Oh boy, I am doing some quick modelling in my head - running 3G phone penetration rates, phone replacement cycles, phone hand-me-downs to kids; then think total addressable 3G (and 3.5G) phone populations with Generation-C youth, and toss in learning delays, service imperfections, early too high pricing barriers; competitive effects. Yes, this could very well grow much more rapidly in the next two years than it has so far.

Maybe am too tired today, and should consider this with a fresh mind. But you have a very good point. This could be MUCH bigger still, where the "real explosion" has yet to come.

And on Japan sneezes, yes, I'd count South Korea in that group (but so would most count Canada as part of USA in terms of global economic activity, eg Blackberry being Canadian etc). Good idea. Like Karaoke, Sushi bars, Sudoku, why not....

Thanks for stopping by!

Tomi :-)

Paschal Nee

Tomi,

Like Juhani I am very sceptical about this 3.5bn number. With all due respect to Informa I think the number may have been quoted without context. Can you cite/link to the Informa report or the IHT article? I can find neither on their websites.

That said the points you make as to why 3.5bn might not be an unrealistic number at some point are valid.

Paschal.

Tomi T Ahonen

Hi Paschal

Thanks for stopping by. I read the original article in the print version of the International Herald Tribune and blogged based on that story, which is why there was no link. The web story was entitled differently (but the text of the story was the same) which may explain why you couldn't find it. The online version was entitled "A Cellphone sideshow: YouTube is going mobile". It is at this link:

http://www.iht.com/articles/2006/10/22/business/content.php

The actual Informa study split Mobile Social Networking ("Mobile Communities and User Generated Content") into two parts. Part one - user-generated communities like blogging, chat and dating. Part two - content centric communities like music fan clubs, videogaming communities (multiplayer) and TV/videosharing etc.

I think these are very relevant categories, totally consistent with our book and this blog - in our book we devote one whole chapter just to blogging, another to multiplayer gaming etc. And if we look at the previous numbers for the invididual elements, again the aggregate community and user-generated mobile revenues seem consistent. Mobile gaming was worth over 2 billion dollars last year, the majority no doubt were downloads of games, but several hundreds of millions no doubt would have been multiplayer mobile gaming revenues - and this is generally the fastest-growing part of gaming revenues (multiplayer) as its more addictive than single player gaming, and the revenues are formed on basis of usage, not on a one-time purchase basis.

Similar comparisons to chat, blogging, music fan clubs, SeeMeTV etc.

The Informa report abstract link is here:

http://www.gii.co.jp/english/itm40199-user-gen-cont.html

Thanks for stopping by

Tomi :-)

Jeffrey

Mobile social networks are the future. A loty of people are investing into a lot of mobile networks like peekamo because the demand and use has spread.

Alan moore

Dear Jeffrey,

Both Tomi and I agree.

A new media socio-economic ecology!

Thanks for posting

Alan

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I think these are very relevant categories, totally consistent with our book and this blog - in our book we devote one whole chapter just to blogging, another to multiplayer gaming etc. And if we look at the previous numbers for the invididual elements, again the aggregate community and user-generated mobile revenues seem consistent. Mobile gaming was worth over 2 billion dollars last year, the majority no doubt were downloads of games, but several hundreds of millions no doubt would have been multiplayer mobile gaming revenues - and this is generally the fastest-growing part of gaming revenues (multiplayer) as its more addictive than single player gaming, and the revenues are formed on basis of usage, not on a one-time purchase basis. Thank you for sharing :)

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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