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« Paging Stats Police: Canalys jumped gun rather badly, Android is NOT yet ahead of Symbian (but will be soon) | Main | Big Milestones by Some of Our Faves: Angry Birds, Layar, Guardian etc »

February 04, 2011

Comments

Brandon

I'm glad my hero wasnt in the dumbphones category. Even though it does suck lol

Brian

Nice article Tomi! Is it possible to breakdown the numbers for SMS/MMS - how much of that revenue is operator revenue (e.g the 10p they typically get for sending a text on paygo) and how much is for value-add services either provided by third-parties or the the operators themselves?

Yuri

Hi Tomi,

Its always interesting reading your articles! The SMS/MMS numbers are impressive, but to continue Brian's thought - those are mostly big money for the operators, and popular TV shows. It seems to me that emails, chat applications, and in-app purchases are going to erase that market in the coming years. Why would users and advertisers / content providers, the two end-points of those services, continue to pay tons of money to the middle-man (the operator)? In my opinion the charge per SMS/MMS is a plain robbery. Imagine having to pay per email or chat message you send...
Not that micro-payments through PayPal, Google Checkout, or the operator are not going to have a fee, it will still be minute compared to the SMS/MMS cost.

Yuri

Actually, I didn't think that through... A 70/30 percent split for in-app purchases is everything but minute. PayPal's micro-payment charges are more reasonable, but are not going to be as convenient as in-app purchases...

plantronics headsets

Dimensions of communication opportunities in the wireless SMS was a value of 300 billion U.S. dollars in 2010. Before you say, thats a teen chat, no, SMS can also be used to produce news, advertising, marketing, coupons, and contribute to a massive consumption of interaction with other media such as television voting in American Idol. Yes, the whole 100x mobile data smartphone app more applications that are sold in stores.

Arun

I remember that Apple announced paying out $1 billion to developers in 2009, over a download count of 1 billion or so. That means total revenues for 2009 itself is about $1.4 billion. Given that they clocked another 7billion this year, don't you think the revenues would be quite larger than 3billion for apple itself?

Bob

yes Arun, but itunes money pales in significance with the hardware revenues of Apple.

Arun

@Bob:
Perhaps I should ve been more clearer.
I was referring to Apple's App Store revenues.

Maukka

I think Baron95 is right on the money, at least in terms of what's moving inside Elop's head. On Friday, Nokia will most likely get deeply involved in the Windows ecosystem, in one way or another. So I guess it's ByeBye to MeeGo.

kevin

@Baron95: Agree that Stephen Elop got it right about the war of ecosystems, where companies try to profit on devices, OSs, content retailing, or advertising, with all trying to commoditize all the other elements in the ecosystem chain.

Here's the ecosystem simplified (to 2-dimensions), depicted as a chain:

Content creator - Content distributor/retailer - Pipe - OS - Device User($)/Ad viewer

Any element on the left side of the can also have an "Ad provider - advertiser($)" pointing to it, where the advertiser totally or partially replaces the user as the monetization source for the elements in the ecosystem.

Content can be apps, music, film, tv, books, magazines, messaging, payments/money, etc. Anything that can be digitized is content that can be converged into the ecosystem. Pipe can be cellular, broadband, cable, wifi, etc.

So for example, Apple profits from selling devices. It's aim is to commoditize the other elements, in other words, make it so a user's decision to purchase its device won't be dependent on a particular pipe, OS, or content creator. Apple became a content retailer, but did so at break-even, so no one else could become profitable as a content retailer, It develops a customer base, tools and marketing so that content creators want to use its retail store, and defend itself from being locked out of content (like it was on PCs).

Microsoft profits from selling its OS. It wants users to want and pay for its OS, not a particular brand of device (so devices get commoditized like they were for PCs). It will try to use its Xbox content as a draw, in the same way that Sony is starting to use its Playstation content as the draw.

Google profits from providing ads, and it uses that revenue to pay all the other elements, so they can charge the user less, thus giving Google-aligned elements an edge. Google provided Android OS so that it could commoditize OSes and defend itself from being locked out of providing ads.

Amazon profits from content retailing (books, music, etc), and it now provides the Kindle device so it won't be locked out from the user. And on it goes.

All these players want the pipe to be a commodity, i.e., neutral or dumb. The cell carriers, though, want additional revenue from content retailing or advertising or even branded device sales. But they have been slow to make their part of the ecosystem not a commodity. (In the US, one can argue now that Verizon Wireless has tried hardest and succeeded in differentiating its pipe from the others.)

So the paradigm is changing and it is fascinating. The "mobile industry" will include more and more larger players from other industries. And device makers have to be careful not to think that they're only competing against other device makers, lest they become dumb devices controlled by another industry altogether.

kevin

The chain should be as follows:

Content creator - Content distributor/retailer - Pipe - OS - Device -----User($)/Ad viewer

Somehow the dashes disappeared.

 Tomi T Ahonen

Hi Gang

Am a bit busy this week but will try to get to all replies. Lets do the first 5 to start with

Hi Brandon, Brian, Yuri, plantonics and Aron

Brandon - haha..

Brian - good question. I have it in the Almanac for 2010 and am in the process of calculating it for the 2011 edition. In rough terms, on revenues, about 10% of SMS revenues is premium SMS, and MMS at 32B dollars and SMS at 105B dollars, obviously MMS is about a quarter of the messaging as you asked. Meanwhile the average price of an SMS is down to under 2 cents and and more than half of MMS revenues are premium MMS (content) so the volume of SMS is far far greater than that of MMS.

Oh, I'm sorry, was too fast. Yes, you asked for operator revenues - well, out of SMS, more than 90% goes to the operators (all of person-to-person and a miniority of premium SMS revenues). In MMS its far more than half.

Yuri - you make a compelling argument. We had this argument more than ten years ago with my consulting department when I was still employed at Nokia and we came to the conclusion that by mid-decade (around year 2005) the majority of mobile phone messaging traffic would be the free types, instant messaging and email. That didn't happen. We now know why - they are NOT replacements. An email cannot replace an SMS, neither can IM. They can do part of the job of SMS but cannot do all of it. Theoretically MMS could replace SMS (but won't either, for other reasons).

So lets just take some evidence. SMS passed email in total users worldwide in 2002. Today, the total number of SMS users is literally 3x bigger than email. Last year the number of users of SMS grew by...17% - in one year! The growth in email has nearly stalled - and in ALL advanced 'industrialized world' countries the number of email users is in decline - the only growth now is in the 'emerging world' countries, where first-time email users are still adding to the count, often when they get to use a PC at work for the first time, or join the PC lab at the university etc.

I will leave it at that. You make a good point, we've debated this for years and the evidence is utterly against your view. I would urge you to read the messaging chapter in my free ebook The Insider's Guide to Mobile - which you can download right now at Lulu.com for free - just search for Ahonen and its the first book you'll see haha.

On Paypal, its a great idea, which is suffering from the reach of only 10% of internet users. Its a nice concept, but its not even used by the majority of PC owners haha.. And mobile is 5 times bigger than the total population of PCs. I know Paypal is rushing to go mobile, I do think the mobile giants will crush Paypal in this race - witness NTT DoCoMo, China Mobile, Vodafone, Nokia, SK Telecom, Globe, Telefonica etc. Even US players, Apple and Google are going mobile and one or two of their big carriers announced mobile money initiatives late last year to join the races.

And yes, there is a whole chapter on mobile money in that free book too, so read that as well haha.. 25% of the whole national economy of Kenya is already transiting mobile phones - that's Vodafone mobile money for you in just one of their countries haha.. When do you think Paypal can claim that 1% of any country's total economy transits Paypal. Not for many many years to come haha, who gets their paycheck paid via Paypal, who pays their taxes via Paypal, who pays their car payments or their mortgage via Paypal - not for years to come haha..

plantronics - your numbers are off by probably a magnitude of 10. The US market for SMS could not have been 300 Billion dollars - the total global value of all non-voice services was about that. SMS alone is worth a little over 100 Billion and if you want to say 30B was US SMS, that is roughly in the ballpark. If you don't believe me, check out Chetan Sharma's regular US market analysis, or the CTIA numbers or FCC numbers. All available at free sources.

Arun - the 1B paid by Apple was analyzed here on my blog quite thoroughly when the number was announced last summer. It is cumulative sales since 2008 and extended through 2Q of 2010. I remember roughly speaking that about half a Billion dollars was the value of the latest half - ie from Jan 1, 2010 to June 30 2010. Since then we've seen a big jump in iPhone App Store downloads - which I attribute to two factors (but have not seen evidence on it yet) - first, that the various game developers learned that you can't expect to be another Angry Birds, and sell 4 million copies at 99 cents each - the better way to make money is through freemium apps, give the app for free, make the money on virtual properties. So we've seen a shift to more free apps in games, which generate far more downloads than paid apps.

The other factor I believe was the iPad, with many high-profile launches of iPad services, media, newspapers, etc, both paid and free - and thus the iPad has probably achieved far more downloads per iOS device last Autumn, than iPhones and iPod Touches in the first 2 years since summer 2008. Thats how I see it, but we'll find out when the numbers start to come out in the near weeks and months.

Thank you all for writing, please post more comments, I'll return to answer to all

Tomi Ahonen :-)

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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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