I have been monitoring several discussion streams on Twitter and the blogs and it hit me that many technologists are now pursuing opportunities that are fool's gold. These opportunities shine real bright, alluringly inviting investors to waste resources trying to get to them. But underneath the shine there is no gold. Now, in mobile there is tons of real gold out there, 250 Billion dollars worth of mobile data service revenues in 2009 which makes mobile bigger than radio or cinema or the gaming or music businesses globally. Mobile data is even bigger than the total internet industry. And its no secret where the real money is. But still, very bizarrely there is bewildering focus by so many 'experts' on the fool's gold.
What do I mean. Lets start with the 'locationistas'. This thought-to-be-extinct breed of technology-purists, feel that if you make it more accurate, the consumers will come. It does not matter at all to these 'alchemists' that all the evidence of more than a decade now, prove conclusively that the customers will not come. Yet they persist in peddling that tired old wives-tale, that 'there is a pot of gold in location-based services'.
Location-based services. Yet another variation of 'tell me where I am' or 'tell me where my friend is' or 'tell me where something else is'. This nearly vanished type of engineering passion suddenly re-emerged out of California when Apple put GPS onto its second edition of the iPhone in 2008. And while Nokia had quietly had GPS and maps on many N-series phones for a couple of years, suddenly the usually-very calm and smart Nokia too got the bug of location-based services.
So, today one of the hottest stories in any West Coast related tech investor and innovator groups is the collection of ever more mad ideas around location-based services, games, ads, apps etc. And tons of investment dollars and expensive developer resources are tossed at recreating fantastic precise location-based services to find out where is the nearest cash machine or toilet; where is the wife or kids; where am I; and various navigation aids, location-based games, coupons, ads etc. What a waste of effort. Futile. Totally futile.
It is true that the mobile data opportunity is experiencing dramatic growth now, and has in fact been the fastest-growing hundred-billion-dollar industry of the past decade. It grow very strongly even last year when most similar industries like television, advertising, print, personal computers and the internet industries all declined in value and tended to make enormous losses. Mobile data grew and made record profits.
So if mobile data grows, yes, even the 'dogs' ie the very poorly-performing parts will grow somewhat. Like location-based services. But think of this, excepting for a few vehicles and parcels and business assets -tracking types of business apps; essentially all location-based services have underperformed. Dramatically. For a whole decade already. Yes, its not that somehow with the iPhone 3G in June of 2008, the 'location-based opportunity' was created.
No, your clever location-based service, whatever the concept - has existed for many years before that, most have existed as commercially launhed services for more than a decade all around the planet. So all of those clever ideas of today, have actually been launched in Finland and Germany and Italy and Japan and South Korea - ten YEARS ago. Then some are tempted to say, but that was not with GPS. You are wrong. The world's most advanced mobile phone mapping and location and navigation service - EZ-Navi out of Japan - was upgraded to fully GPS-enabled ..in 2001.
EZ-Navi is so advanced today, it makes most concepts of location-based services I hear of, seem like the stone drawings of cavemen. EZ-Navi is super-science fiction, thats how far it is. EZ-Navi is so advanced, they've already created a full 3D visual mapping of all of Tokyo. This type of initiatives are 'long term plans' for most cities. EZ-Navi's precision-mapping navigation will show you any city block view from where you stand, and what you should see - where is that Tokyo copy of the Eiffel Tower? Oh, there it is, we should walk in this direction... EZ-Navi will let you pick what type of route you want to use - ie if you are walking, and want to take the route with the least number of stairs to climb (ie using escallators rather than stairs) - or equally the opposite, to get maxium 'exercise' ie walking max number of stairs. Or if you forgot your umbrella, EZ-Navi will show you the route where is most 'overhang' is through shopping malls, underground tunnels etc - as not necessarily shortest route, but the route that keeps you from getting wet, the best..
Maybe I am wrong. Yes, thats obviously possible. But if you are investing time, your team effort, resources, money, marketing and PR effort etc to any location-based service, please consider the facts. Since 2000, when major mobile service categories were first mapped out and published - location-based services have been the second-worst growing category of them all! (with only video-calling doing worse). Yes, MMS 'picture messaging' has outperformed location-based services. Yes WAP, famous for 'WAP is crap' has outperformed location-based services. Religious services outperform location based services. Cartoons and books for heaven's sake, outperform location-based services. 3G what some called the greatest economic failure in tech at one point in the past decade - has outperformed location-based services.
If for ten years, literally thousands of compaines have launched tens of thousands of services with supremely accurate technologies on fantastic handsets etc, perhaps its time to admit this is likely not the real eldorado for mobile. It is perhaps fool's gold. And like the fool's gold of the Wild West, it will draw ignorant pilgrims who will come and invest in what they do not understand and end up owning total junk. Your location-based services will mostly end up not worth owning.
Now, a great business concept may have a location-based dimension and be a big success. We can have a social networking service with location. They are not a success because of location, they are a success because of the social network. We can have augmented reality - like Layar - and it is definitely possible to do augmented reality with location-information (like Layar) - but its not the only way you can do augmented reality. You can also do augmented reality for example with special 2D barcodes as the famous Ford Ka campaign illustrated. So Augmented Reality is cool. Location is not. Location is one possible way to trigger augmented reality but its location is not what makes it awesome, it is the Augmented Reality part.
Same for coupons and discounts served via location. Why limit your coupon to the location? Coupons and discounts can be successful, they don't need location to be so. It is better to get permisson from the recepients and have them indicate what types of goods and products they prefer for which they'd like coupons and discounts. That is solid marketing work, and location is not relevant anymore. We get something better. And we don't need to limit it to GPS-enabled smartphones; and we don't need to pay mobile networks for the meaningless location-positioning data.
If you want to do great coupons for your customers, get their permission, then send them MMS coupons. No need to pay for location-information, and rather than limit your total possible audience to the 13% of all mobile phone owners on the planet who have a smartphone (and a small fraction of those who have GPS), you can send the MMS to the 80% of all phones that sit in the pockets of the economically viable part of the planet. Essentially anyone who can affford whatever it is you want to advertise, will have a phone that does MMS. And you don't need to limit it to the location. Take me. I live in Hong Kong. But my fiancee lives in Brazil. I would be very happy to take an offer of flowers sold in Brazil - and would buy them even when I am on another continent (try that for how wrong Location-based ads are), and certainly not buy them here in Hong Kong for myself..
And then we get the other even bigger hype right now, peddled by the snake-oil salesmen and miracle cure hoodlums I call the Applicationistas. A despicable breed of desperados who prey on the naive innocent pilgrims who are going west in search of fortune. Apps is fool's gold, pilgrim, stay away from apps. Especially any app store apps. That is a stacked game where you cannot win. You are like the paleface who walks into a saloon in the Wild West, fresh off your covered wagon, and you see a table of poker, and think that the game is honest. It isn't. And you are the victim.
So why all the hype. Remember where the apps fanatics came from, they came from the internet and PC apps industry. They once were told that if you build enough eye-balls, the money would miraculously appear. That size was everything, but revenues did not matter. Very respected experts and major business news fed thousands of stories that there was a 'new economics' that applied to the internet. If you built it big enough, you would be able to make money (in some imprecise way). Well. that hoax turned into a house of cards, fronted by swindlers such as Worldcom. And those who were lucky got out before the first hype cycle crashed - AOL 'bought' Time-Warner and never grew to its 'potential'. That whole era - less than a decade ago, was symptomized by 'I have millions of users of a free service, but some day we will make money out of them'. And they didn't. Google was a rare exception, not by making money out of millions of eyeballs, but by inventing a new format for relevant ads called Adwords. Yes, they were served on Google's search results, but Adwords would have been a success even if Google wasn't the biggest internet company. The same idea was adapted by Flirtomatic to its 'First Face' ads - and Flirtomatic has 2 million members. The idea is good, it didn't need the size of hundreds of millions of Google users to succeed.
Now fast forward a decade. Suddenly from 2008 we hear of Apple's App Stores having a billion downloads. Then two billion. Now its past 3 billion downloads. The big number magic potion again. "If its a billion downloads, gosh its gotta be good, I gotta gets me some of that". WAIT. Stop and wait. Where is the money? Most of these apps are free. MOST of them are free. Can you not hear the warning bells in your mind? Are we really that dumb? Its only a couple of years since we had the big dot-com bubble - an economic bubble - that burst. Free? Free apps? Come on, this is exactly the same sillly 'new economics' model from the previous dot-com crash. Hello pilgrims, didn't you learn anything from the previous generation? ("No, Mistah Ahonen, my pa, he went and bought some fool's gold and it was nice and shiny and he did go broke, but I am not afraid to go and buy me some of that fool's gold too, and get me some of that shiny stuff and it will make me rich.") How crazy are we?
What of the paid apps. The biggest category of paid apps for the iPhone are games. Duh? The Playstation Portable and the Nintendo Gameboy have had a lucrative market for games, very much of the same scale as what the iPhone gets in its games sold on the App Store. Is this now a new eldorado? No, it means that the gaming opportunity in our pocket is growing - just as the mobile and wireless and portable gaming experts (including this one) projected from before Apple said anything about an "App Store". The iPhone is a great gaming phone! So great, that Microsoft is bringing Xbox games to their mobile operating system, and SonyEricsson is now rumored to bring out a PSP-phone this year.
Every one of those 150,000 apps on the Apple App store had to be developed. I have seen estimates that it costs something like 15,000 to 50,000 dollars to develop an app for the Apple iPhone. Lets do quick math. If there are 150,000 apps in the App Store and it cost say 30,000 dollars on average to develop one, so far gullible managers have paid.. wait for it ..4.5 BILLION dollars to develop those apps. And Morgan Stanley told us that Apple iPhone Apps total revenues in 2009 were about what, 780 million dollars - of which Apple kindly took 30% as the kind store-owner to the fool at the so-called gold mine. (this is so exactly like the ignorant pilgrims who bought really expensive mining goods from the general store of the nearby town. The palefaces went to the mountains in futile attempt to find real gold, and the shopkeeper got rich)
So the total income after more than a full year of Apple App Store sales - to the total developer community (after Apple took its cut) is about 546 million dollars. So, at this level - if there was no further development costs for any of these apps - and no inflation - and no marketing costs of any kind - just from the revenue-share to the developers assuming perfect case of everybody earning equally, the current investment in the first 150,000 apps would be paid back by... the year 2018. Yes, eight more years - in the perfect case. In reality the mathematics of economics means that a few hit products will take the lion's share and in reality you will not get your money back, not even in many decades of 99 cent downloads.
That is your best case, pilgrim. In fact, the App Store is a game of roulette where the house always wins, but it has not only one zero (normal Roulette, house wins) nor a double-zero (like Roulette wheels in Las Vegas which cleverly have doubled the amount of money the house collects). No, the apps game is so stacked against you, there are more multiple-zeros than total roulette winning chances. Why. Because only hit apps will be on the bestseller list. And only bestseller list apps have any chance of a mass market success and recouping their investment. And you won't get to the popular list unless you are first, or a known global brand, or very clever and innovative to the degree of patentable creativity effort - preferrably your app should have all three and even then its no guarantee of commercial success. So yes, the chance for you has passed, not last year, but it passed way back in September 2008, and since then its become a giant pyramid scheme, feeding Apple, helping hype up the app store, selling more iPhones and iPod Touch's, driving the hysteria of tech journalists and 'experts' but which won't earn you money.
Yes, and just like in Las Vegas, there will be a few, very random, very lucky winners. They will be paraded and celebrated in the fool's game of duping more developers to try their luck in this rotten casino game they call app store apps. On that luck you have absolutely no control. You cannot influence your luck in the app store apps game. And the rules of this game are stacked so badly against you, that you won't be one of the winners. You will lose your shirt in this, the ultimate mug's game. Your money will be taken, your app listed (probably) and you will not make back the money you invested. This, long before we add the marketing efforts and your various other integration and development costs.
And its nothing against Apple. The same is equally true of Android, Nokia Ovi, Windows Mobile etc. Any app store. Currently, that is not a viable business model. It is pure hype. It is the re-birth of the free model that was so much the rage with the dot-com bubble.
By the way, an iPhone is in the pocket of 0.5% of the planet's population. In its best market, the USA, you get an 'impressive' 3.5% of the total population. Thats it. Not more. The facts are absolutely indispatable. any admob nonsense-stats will not change the picture, there were only 11 million active iPhone users last year according to AT&T and thats 3.5% of the US population. That is not a mass market in any marketing textbook. It is a tiny niche market. And if the world average for the iPhone is 0.5%, if the US is 7 times better, then obviously most of the rest of the world is even far worse than that one half of one percent penetration. Meaningless. Even if your app becomes a 'bestseller' on an iPhone.
Windows Mobile, Palm and Google Android are far smaller than that in their installed bases. RIM's Blackberry does a bit better; it can reach a whopping 1.2% of the total population of the world. And the most prevalent smartphone operating system of them all is Symbian which will get you into the pockets of an amazing 4.4% of the worldwide reach of humankind. Most of those Symbian devices would be Nokia branded smartphones. Don't kid yourself. None of the smartphones will reach anything approaching a mass market. Not for many years to come. So even should your smartphone app be popular, you are by definition limiting yourself to a target market equivalent to say, the reach of luxury sports cars like Porsche and Ferrari. Its not like you are offering a Ford or Honda to any car buyer.
The mobile data services industry was worth more than 250 Billion dollars last year. About 150 Billion was out of mobile messaging (mostly SMS and MMS messaging) and nearly 100 Billion dollars worth of 'premium data' ie non-messaging mobile data services and apps. Yes, I said apps, but the apps form a tiny percentage of this number, and those few billions are mostly business apps - sold to enterprises for their secure data access to their CRM and billing and email systems. Like say on the Blackberry. But not sold in apps stores. That is long-term corporate/enterprise app development, so yeah, if you're happy to develop with say SAP, and do a VPN secure access to an ERP solution, and then go to say the insurance giants and convince them to buy 10,000 licenses of your app - then yes, there is money in apps for you. It'll be costing you far more than the Apple iPhone app would, and the sales staff you need and sales cycles will be more like years than weeks, but yeah, sure there is some money in apps for business. A couple of billion (a couple of percent of the total opportunity). But thats like the industrial mining done in the Wild West long after the gold rush had passed. I am talking of a real eldorado here, not fool's gold and not the long hard drive for business oriented apps. I am of course talking about services.
We have a 110 Billion dollar global commerical opportunity in SMS text messaging related services. We have another 27 Billion dollar global commercial opportunity out of media services in MMS multimedia messaging - from TV videos and sounds, to newspaper pictures and stories - delivered via yes MMS. And we have a massive further opportunity on various web-style 'browser-based' services, from limited 'mobile web browser' WAP and i-Mode to 'real browser' xTML services.
These are not sexy. Its basic SMS, MMS and WAP (and voice..). Your ad agency won't like to develop them because these are not candidates to win awards. They want cool sexy apps they can show off on their iPhone. An SMS, that is so crude it would work on a ten-year old phone for godsake, where't the fun in that? The developers will hate them because these are so 'limited'. The designers will hate the lack of any modern features and sexy bits. But SMS, MMS and WAP work and are (near-)universal. And are so simple your grandparents can use them. But no, they are not sexy at all. Just that they work and they make money and they reach the mass markets in every country. Here is where 250 Billion dollars resides. iPhone apps delivered less than one billion. Do I get through to you?
SMS is used actively by 3.6 billion people and reaches the phones of 4.6 mobile phone subscribers on the planet. WAP can be used to reach 3.7 Billion phones and has an active user base of 1.3 Billion people. MMS reaches 3.1 Billion phones and has an active user base of 1.7 Billion people worldwide. These compare with 1.2 Billion total personal computers in use globally, or 1.6 Billion TV sets. (or 600 million total installed base of all brands of smartphones - which includes second hand smartphones like in Africa)
Yes, SMS, MMS and WAP are not sexy, but they make money today. You can deliver almost every major customer-service experience on mobile via SMS, from bank alerts, to mobile coupons to voting on TV shows like Big Brother and American Idol. MMS is supremely versatile, can deliver headline news services like all major Chinese newspapers do - as paid premium news alert services, sending headline news and news pictures like a small pocket-sized newspaper front page. MMS news - paid news headlines - are so big that the branded paper newspapers in China all have them, and 41% of the newspaper audience is now paying for these MMS news headline services. HERE is your real eldorado.
MMS is used for example by TV shows - soap operas sell 5 minute previews of tomorrow's episode today, right after today's episode has ended - for die-hard soap opera fans who can't wait until tomorrow. WAP is the most versatile platform of them all, and can do fully interactive web-like experiences. Most people who use Google search on their phone worldwide - in India 40% of mobile phone owners have used Google search (as the legacy PC based internet is so tiny by installed base of PCs obviously) - have done it using WAP. If you ask them 'have you used WAP' they would say no. But if you ask them 'have you used Google search' on their phone - they will say yes. And they don't have smartphones. WAP is designed for small screen mobile use. Design on it presents its own problems and issues, obviously. "Real internet' developers hate WAP for being so restrictive, but well designed WAP services can deliver great customer satisfaction, loyalty, heavy usage, revenues, profits - and win global mobile service innovator awards - like Flirtomatic did last year all over the globe.
SMS, MMS and WAP (and voice) - four very simple, basic platforms. But they reach most phones on the planet and services on them have to be easy and simple to use - meaning even your grandparents can use them. That is what we need on mobile. Not location-based services. Not app store apps. But good solid mobile services. If you develop on SMS, MMS and WAP, you can find real gold. Billions of dollars worth of it already today. The next Googles, eBays, Amazons; and the next Bill Gates's and Steve Ballmers and Steve Jobses will come out of companies that deploy global mobile solutions on SMS, MMS, WAP and voice, not those who develop LBS services or app store apps. Just like today, when Carlos Slim was announced to have become the world's richest person. His company, America Movil, does basic voice and SMS for 95% of their inome on mobile. Not apps, not location-based services.
Guys, am I a crazy guy? I have written nine books on mobile services and apps. Bestselling books including the fastest-selling telecoms book of all time. My books and theories are referenced in 70 books published by other authors. I lecture at Oxford University on the mobile services and apps opportunity. I've been invited to speak at 250 conferences in 50 countries, including time and again and again in the leading countries where the most innovative services and apps are made - in Japan, in South Korea, in the Scandinavian countries etc (And in North America all the time as well). If my peers trust me, maybe you should consider the value of this blog. I am not saying that there is 'no money' in mobile. I am trying to steer you away from the fool's gold, and into the real opportunities. While they are not as sexy, the real opportunity is in SMS, in MMS, in WAP and basic mobile browser-based services - and especially in the Emerging World countries where literacy is a big issue, there is still billions to be made in basic voice related services. Please give your team and project and company and brand the chance to succeed in the real gold rush. Don't go for the fool's gold. (and fire any 'experts' who are suggesting those paths for you)
Wanna read a positive roadmap to your future where the money is? Go real Digital Klondyke, the Cyber Eldorado.