This makes NO sense. Nokia CEO Stephen Elop himself has said that the war in mobile today is one of ecosystems, not of mere handsets or their software. Elop himself has explicitly mentioned advertising as one of the key components of a mobile ecosystem. If Elop practised what he preached, he would not be selling his mobile advertising unit, he would be nurturing it, growing it - not selling it.
Google believes so strongly in mobile advertising, they bought Admob. Apple's Steve Jobs believed so strongly in mobile advertising, he launched iAd. The company that invented the cellular telecoms industry - and launched the world's first mobile internet service, NTT DoCoMo of Japan believes so strongly in mobile advertising, they created D2C the world's biggest pure mobile ad agency. Even Stephen Elop's past employer Microsoft believes so strongly in mobile advertising, they bought ScreenTonic, and today have mobile advertising a central aspect of the Windows Phone ecosystem. And what does Elop do at Nokia? He just sold Nokia's mobile advertising unit on Friday to a company previously known as Matchbin and now renamed Radiate Media.
CENTRAL TO ECOSYSTEM
I don't want to make this blog a monologue about Nokia. But if Elop does something this mad, at this time, then I do have to observe it. As it is Stephen Elop who has been lecturing the world about how the race in mobile phones is no longer one of hardware or software, it is about ecosystems. And Elop himself defined ecosystems as they relate to mobile handsets in general and Nokia explicitly, as: "Ecosystems include not only the hardware and software of the device, but developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things."
Advertising! One of the key components of a mobile ecosystem. And Elop has tried to rally his Nokia employees to engage in a battle of ecosystems. He warned that Nokia's competitors "are taking our market share with an entire ecosystem." He claimed last year in his notorious Burning Platforms memo that Nokia had fallen behind on this ecosystems war. He said that Nokia had "lacked accountability and leadership" and that Nokia "had not delivered innovation fast enough".
OBVIOUS MAJOR GLOBAL TREND
Apple decided to launch iOS in the summer of 2009, at a time when the total global shipments of all iOS based devices, iPhones, iPads and iPod Touch'es had not passed 50 million cumulatively (including devices no longer in use). Yet Apple felt mobile advertising was that important to the Apple iPhone and iOS ecosystem. Steve Jobs himself explained why the ecosystem would be stronger with an ad platform explaining that "developers have to find a way to make some money" and that the iAd platform was a way Apple could help its developers in its ecosystem.
Google decided to buy Admob in December of 2009. At that time, there were far less than 10 million Android smartphones in use worldwide. By 2011, Google's Chairman Eric Schmidt was saying that mobile advertising was delivering 2.5 Billion dollars of ad revenues to the company.
I mentioned that NTT DoCoMo created D2C together with the Japanese advertising giant Dentsu. Microsoft got into mobile advertising years ago with the purchase of ScreenTonic. Major mobile industry players from carriers/operators like Vodafone and Telefonica to equipment makers like Ericsson and Alcatel-Lucent offer solutions in the mobile ad space.
Mobile advertising (roughly) doubled in annual revenues in the year 2008 when the world economy crashed. Mobile advertising almost doubled again in 2009 and 2010 yet again. Early numbers say mobile advertising had again roughly doubled in 2011. By 2011 the global advertising industry had embraced mobile ads from Ford saying that mobile ads will be integral to every ad campaign they run on any medium, to US food giant Kraft saying 'no mobile left behind'.
If you believe in growth opportunities coming from those sectors of the industry that expanding most strongly, mobile advertising is that right now. Certainly Google, Apple, Microsoft, NTT DoCoMo, Vodafone etc see this and invest heavily in it. Is there any doubt, that mobile advertising is a key component in any ecosystem in mobile? None whatsoever.
WHEN DID NOKIA GO mAD
I happen to know the mobile advertising side of the mobile content and media industry quite well, as I was the first person to discuss commercially launched mobile ads at any international conference (in Austria) literally within weeks after they had launched (in Finland in year 2000). And I was honored to chair the world's first mobile advertising conference in London the next year. That conference had many pioneers of mobile ad space, presenting, as were some big advertising companies who had launched their mobile advertising units. But there was only one handset manufacturer presenting at the two-day conference on mobile advertising. That handset manufacturer was ...Nokia.
Nokia was studying the mobile advertising opportunity more than a decade ago, so much, that they had an internal unit looking at it (modest in size at the time) and Nokia had commissioned a global study about mobile advertising in 2001, long before most thought that ads served to our pockets were even commercially plausible.
Nokia monitored the space, and as mobile advertising slowly achieved acceptance beyond some of the most advanced markets like Japan and South Korea (and Scandinavia) Nokia then got serious about mobile advertising when it bought Enpocket. When was that? In 2007 ! Two years before Apple and Google got serious about mobile advertising. And since then Nokia had developed the mobile advertising arm at its Navteq unit, and bought other mobile advertising companies such as Acuity Mobile in 2009.
So is it factually NOT true (once again the Elop delusions) in this empirical case about fighting in ecosystems rather than handsets, that Nokia supposedly "fell behind, we missed big trends, and we lost time. At that time, we thought we were making the right decisions; but, with the benefit of hindsight, we now find ourselves years behind."
In reality, as it relates to mobile advertising (just like in mobile payments, location and mapping, app stores, videogames, music etc) Nokia caught the big trend, were indeed making the right decisions, and with the benefit of incredibly accurate foresight, once again, found itself years ahead. The truth is 100% diametrically opposite of what Elop has been saying (once again). Nokia was not years behind, Nokia was literally years ahead of all its rivals in this space.
BATTLE OF ECOSYSTEMS
Elop preaches about the battle of ecosystems. The Nokia Symbian platform, one of several Nokia technical platforms, and the one most suited for mobile advertising today, is not just the world's biggest smartphone operating system by installed base - and advertisers will equate installed base with 'audience' rather than new sales, where last year Elop's mis-management of Nokia smarpthones saw Symbian sales fall behind Google's Android and Apple's iPhone iOS. But lets just examine that potential advertising target audience a bit more. Here are the world's twenty largest countries by population, and the biggest smartphone OS as of November as measured by statcounter:
COUNTRY . . . POPULATION . . . BIGGEST SMARTPHONE OS
China . . . . . . . . 1.3 B . . . . . . . . . . . Symbian
India . . . . . . . . 1.2 B . . . . . . . . . . . Symbian
USA . . . . . . . . . . 310 M . . . . . . . . . iOS
Indonesia . . . . . . 220 M . . . . . . . . . Symbian
Brazil . . . . . . . . . 190 M . . . . . . . . . Symbian
Pakistan . . . . . . . 170 M . . . . . . . . . Symbian
Bangladesh . . . . . 160 M . . . . . . . . . Symbian
Nigeria . . . . . . . . 150 M . . . . . . . . . Symbian
Russia . . . . . . . . . 145 M . . . . . . . . . Symbian
Japan . . . . . . . . . 120 M . . . . . . . . . Android
Mexico . . . . . . . . 110 M . . . . . . . . . Symbian
Vietnam . . . . . . . 90 M . . . . . . . . . Symbian
Philippines . . . . . 90 M . . . . . . . . . Symbian
Germany . . . . . . 80 M . . . . . . . . . iOS
Ethiopia . . . . . . . 80 M . . . . . . . . . Symbian
Egypt . . . . . . . . . 75 M . . . . . . . . . Symbian
Turkey . . . . . . . . 70 M . . . . . . . . . Symbian
Iran . . . . . . . . . . 70 M . . . . . . . . . Symbian
Thailand . . . . . . . 65 M . . . . . . . . . Symbian
Congo . . . . . . . . . 65 M . . . . . . . . . Symbian
(above adapted from statcounter data from November 29, 2011, as reported by browserrank.com)
Yes! Nokia's 'obsolete' Symbian is the biggest smartphone operating system in 17 out of the 20 largest countries on the planet by population. And its not just that Nokia has this incredible reach. Consider the other competing advertising mass media.
In the USA, the television market is the biggest advertising market and the biggest mass medium. In some of the more affluent markets on the above list, most households do have TV sets like in China and Russia. In all but one of the above countries, more people access internet content on mobile phones than on PCs (the exception being the USA where the half-point will be passed this year 2012). And in many of the less affluent countries on that list, even radio does not reach as widely as mobile phones. Like they say in Africa, mobile is not the 7th mass medium, its not the first mass medium; it is the only mass medium.
Nokia owns the smartphone OS platform that reaches the widest audience in 17 out of the 20 biggest countries on the planet. Where iOS and Admob and others face strong competition in advertising from legacy mass media like TV, newspapers, radio etc; and obviously internet advertising - Nokia's Symbian platform is the dominant smartphone platform in all countries where legacy media is not established as a true 'mass' medium reaching even half of the population and where mobile access to the internet exceeds PC based access to the internet.
Nonetheless, Apple's iPhone has an installed based (not cumulative shipments, but active users) of about 150 million smartphone users today. Remember, for any iOS media partner - including any advertising, we need to add the other iOS users, iPads and iPod Touch'es, so the total reach of the iOS currently is about 240 million. Google's Android reaches about 250 million active users today. Microsoft feels it worthwhile to continue building its mobile advertising unit even as its reach across both Windows Mobile and Windows Phone smartphones, currently, is less than 30 million. But Nokia's Symbian has currently over 275 million users worldwide. And the CEO who thinks its a war about ecosystems, and believes that advertising is a key part of ecosystems, doesn't want to keep Nokia's competitive advantage here, one that Nokia years ahead of its rivals in discovering and exploiting?
NOKIA TRUE REACH FAR WIDER
The above picture is not the full picture for a Nokia ecosystem. Nokia sells more S40 based featurephones, which use the proprietary S40 operating system (not part of Symbian) but which could be described as 'smartphone lite' - just like Symbian, S40 does allow full internet use, allows application downloads and the use of the Nokia (ex Ovi) store for content, apps and services. Nokia does not give us a breakdown of the S40 sales, but Nokia recently celebrated the 1.5 Billionth S40 cumulative shipment number. In rough terms the installed base of S40 currently is more than 700 million, so when added together, Symbian and S40 give Nokia an addressable market potential of 1 Billion mobile phone users worldwide.
(Note this does not include the ultra-cheap dumbphones that use the even simpler Nokia S30 OS, by which Nokia's total reach was last year estimated at about 1.7 Billion)
This ecosystem of Symbian and S40, plus Nokia's other current and past OS platforms like MeeGo and Maemo; plus Nokia's upcoming low-cost smartphone OS, Meltemi, are all supposed to be supported by the Qt developer tools of Nokia. So if we count Nokia branded Qt ecosystem potential reach, it is well in excess of 1 Billion pockets. And add to that the Android installed base (Qt supports Android) and potentially Blackberry (the new Blackberry OS will be compatible with Qt) - the Nokia 'first ecosystem' if built around Qt has a potential reach of more than 1.35 Billion mobile phone users (more than 5x bigger than the total iOS ecosystem or the Android ecosystem; more than 12 times bigger than the total Blackberry ecosystem and more than 100 times bigger than the Windows Phone). Yet Elop is doing everything he can to sink that Nokia-controlled first ecosystem and replace it with what Microsoft tries to call the 'third ecosystem' ie Windows Phone, which only reaches the pockets of less than 12 million people in the world, and is legitimately called at best, the 8th ecosystem.
ELOP DEFINITION OF LEADERSHIP
We have seen it time and again. We saw it with the Ovi store, we saw it with Nokia developer relationships, we saw it with mobile commerce and NFC (the Lumia series does not support NFC while Nokia's own MeeGo and Symbian both of course do support NFC). And now once again we see it with mobile advertising. Elop discovers a significant Nokia advantage in its ecosystem. Even as it is an element of genuine leadership, that is supported by essentially the whole industry as an obvious trend, Elop goes against the trend. He damages the Nokia version (or in this case sells it). This destroys a Nokia native advantage 'in a war of ecosystems' and instead brings Nokia ever more to the full control of Microsoft, as its slave.
Before this action, Nokia could control how advertising might appear on Nokia branded smartphones. Nokia could sell advertising to its own smartphones. Now Nokia branded smartphones, when using the Microsoft Windows Phone OS, will be subject to Microsoft advertising concepts and spyware. Microsoft will also be selling the ads irrespective of Nokia's own brand. Its quite feasible for Samsung or HTC to spam Nokia branded smartphones via the Windows Phone ad platform. Is this the sensible way to go?
ONLY BECAUSE OF ELOP
This desperation move is purely due to mismanagement and mistakes by Elop. I am not claiming all was hunky dory at Nokia prior to Elop. I have written time and again, that Nokia was struggling in 2009 to 2010, and fired its CEO Kallasvuo, replacing him with Elop. I am not in any way suggesting that all was perfect at Nokia when Elop took over. But the first five months at Nokia, when Elop was in charge, saw the Nokia smartphone unit sales grow strongly, Nokia smartphone sales revenues grow dramatically, and Nokia profits at the smartphone unit jump at a Nokia record level. Nokia overall corporate profits grew. In the first five months of Elop's stewardship, Nokia's share price had grown by 11%. I am not saying all was well, but Nokia had passed the worst part, and was on the road to better. Nokia was 'on the mend'. And Elop was hired - as then Chairman of Nokia Jorma Ollila said when introducing Stephen Elop - Elop was hired to fix Nokia problems in execution.
From February 2011 to today, Nokia has set a world record in destroying its market share. In smartphones Nokia's market share fell from 29% in Q4 of 2010, to 12% of Q4 of 2011. Nokia very literally scared away six out of every ten customers it had a year ago. For the full year 2010, Nokia was twice as big as its nearest rival. By Q4 Nokia had shrunk to nearly half the size of its strongest rival, Apple's iPhone.
This carnage has all been a self-induced wound, and it started with the Elop Effect, but Elop has added to the problems continuously ever since. Elop himself admitted the damage to Nokia market share took him by surprise and admitted later to more surprise that Nokia plunged from generating profits to generating losses. It did not surprise any real experts of the mobile industry, many of us said days after Elop announced his mad Microsoft strategy last February, that this would be the result, like I did on this blog, correctly forecasting that Nokia's market share would crash to 12% by the end of the year, and Nokia's strongly growing profits in its smartphone unit would reverse into loss-making, and the damage to all of Nokia would be so severe, that all of Nokia would generate a loss by the end of the year.
Elop had a company that had growing sales, growing revenues, growing profits, and a growing share price - and turned that to losing sales, losing revenues, generating losses and a massively crashing share price (Nokia's share price fell to less than half in the next five months). This damage is not only the world record crash of market share of any mobile phone handset maker. Its not only the biggest fall ever witnessed in any one year by a global brand leader in technology such as computers or home electronics etc. It is literally the biggest fall of a global customer base, in any one year, of any company, in any industry - ever.
And Elop did not see it coming, and did not manage his company wisely. That is all water under the bridge. Yes it was the biggest management failure in the economic history of humankind, that we witnessed last year. Because of it, Nokia now is in deep trouble and has to try to sell assets just to remain alive. Elop has been trying to sell the NokiaSiemens Networking unit and is currently trying to sell the Vertu luxury phones unit. He has sold various Nokia assets from several sets of Nokia's prime patents, to a whole handset factory in Romania. And now he sold Nokia's advertising arm.
I can understand that the CEO of a company that is massively generating losses (no matter what the cause) is now resorting to desperate moves such as firing tens of thousands of employees and selling assets.
RATHER THAN SELL AD UNIT, WHY NOT ALLOW SALES OF N9
What I cannot understand, is if Nokia is in the business of selling mobile phones, and its most profitable smartphones are currently on the undersirable Lumia brand (where sales representatives at stores find that in 11 cases out of 12, a customer who buys a Nokia branded smarthpone refuses to take a Lumia) and the highly desirable MeeGo platform (where sales representatives find that one in four customers who buys a Nokia smartphone, will buy an N9 which uses the MeeGo operating system) - why is Elop not willing to sell the N9 (and its sister phone the N950) in every market!
Elop would rather sell Nokia assets, such as Nokia's patent portfolio, its factories, its staff, and now, its mobile advertising unit - than allow the MeeGo based N9 (and its sister, the N950) to be sold worldwide!
Elop's priorities are wrong. He looks at global trends where the whole industry is in agreement - like now with mobile advertising. And he goes against it. He finds a genuine Nokia asset where Nokia was years ahead of the rivals - like now with mobile advertising - and rather than fix that unit's execution to deliver massive profits for Nokia, he prefers to sell it. Google just told us last year that Google makes 2.5 Billion dollars of advertising revenues out of its mobile advertising arm. Why doesn't Elop fix this at Nokia, Nokia has a far wider reach in countries where mobile advertising is often the only mass market advertising medium.
The decision to sell the mobile advertising unit at Nokia may have been necessary because Nokia is so badly generating a loss. That loss is solely due to Elop's mismanagement of Nokia last year. Before February, Nokia's profits were growing strongly. And Elop himself admitted he miscalculated how badly Nokia smartphone sales would collapse, and he also admitted surprise to the sudden massive losses that obviously resulted. The reason Nokia is now conducting a fire sale of its best assets is only due to incompetent management by its CEO, causing self-induced damage to Nokia, its products, its carrier relations, its customers and its brand.
Nonetheless, to sell a mobile advertising unit for a major handset maker goes totally against the grain, where rivals are investing more in advertising, not less. And this is how Nokia's CEO actions speak the opposite of his words. This selling of a key Nokia ecosystem component is how Nokia's CEO communicates to his staff how his new management stops the competition from "taking our market share with an entire ecosystem." This selling of the mobile advertising unit is how Nokia's new CEO indicates "accountability and leadership". This sale of Nokia's pioneering mobile ad unit is how the CEO rewards those parts of Nokia that did indeed "deliver innovation fast enough".
The decision to sell the mobile advertising unit at Nokia was certainly not to the best interests of Nokia and Nokia's ecosystem. But the decision to sell away Nokia's own mobile advertising arm, and turn Nokia hostage to Microsoft's advertising, is in the best interests of Microsoft.
Nokia CEO Stephen Elop is once again acting in the best interests of Microsoft, and against the best interests of Nokia. He is in breach of stock market regulations and clearly has acted with a confict of interest. His actions must be investigated as a breach of his fiduciary duty to Nokia shareholders. He must be fired for cause and any Nokia Board Members who do not support an immediate investigation of Elop should be themselves investigated for collusion, neglect or incompetence.