Its now twenty years from the first fixed-mobile service bundle which launched the whole revolution of digital convergence centered around mobile. There had been digital convergence prior to mobile already on the fixed-landline-internet side but digital convergence without mobile would be... pretty pointless by now. Anything we now look at, from Big Data to IoT to Augmented Reality to Cloud Computing etc is dependent on a mobile convergence element. So lets take a stroll back through recent mobile tech history and see how we got here and where we are now going.
MOBILE GOBBLED UP THE TELEPHONE CALLS
For mobile its first convergence started with 'fixed' telecoms. I led that project back at Elisa/Helsinki Telephone with Radiolinja and Finnet Group when my product 999 international calling services were deployed to run on both fixed networks (where most users were and most money was) and the emerging radical new way to use telephones, the mobile networks (where the growth was and where usage and money would then migrate). Back twenty years ago many 'experts' said 'that will never happen in mobile' on things like 'most normal consumer would use it' and nobody - not even me - thought mobile could supplant the fixed network and replace those services. I saw it as a secondary communications channel but one that had enormous growth rates. Only two years later we would see mobile subscription rates match and then grow past fixed landline rates in Finland and then that what seemed unbelievable, the usage of fixed landline started to decline. Young people started to shift to 'only mobile' use and we saw households start to abandon landline connections.
A decade followed of unhappy co-existence of landline alongside mobile. Many thought that the affluent clients, major business/enterprise customers and larger households would hold onto landlines (wrong) and that the internet connection to the homes via landline would hold the landline business (wrong). Also the convergence on the landline side to cable TV would sustain the fixed landline (wrong). That was a bit like throwing an anchor to a drowning man, it only pulled the fixed landline more into the abyss. Many telecoms operators/carriers made their strategic choices in that world, and a few made colossal mistakes like AT&T in the USA and BT in the UK selling their mobile arms which became far bigger and in the case of AT&T would later come back to buy the former parent. The landline telecoms business connected at its peak nearly 1.3 Billion households with a reach to about half of the planet's population near about 3.4 Billion people. That passed and now the fixed landline business is in decline. The peak revenue for the fixed landline business hit about 700 Billion dollars of which over a third was in international calls. Skype and mobile international calls plus newer communcation methods like mobile messaging wiped out most of that profitable business.
When I observe 'what I caused' haha, I think that fixed landline telecoms business will not die out, it will just shrink to a more specialized business-oriented service range. Some back-haul services and connections run on the landline backbones of telecoms operators. So a 'wholesale' telecoms grid service is needed and it needs to be robust with high capacity and it needs to connect things like mobile networking backhaul to cellular network towers; and across networks, across oceans and provide basic infrastructure connectivity. For some 'mass telephone' businesses like calling centers, they would typically be operated in a 'telephone farm' where users would be on some kind of landline connectivity (probably, into perpetuity). It is a bit like the contest between railroads and airlines. Most of the profitable human consumer travel went to the faster and more convenient air travel (in long haul) and trains would carry more the cargo loads of business, but railroads still provide a useful valuable and modestly profitable transport service. And in some local niche uses - short distance travel - railroads can do a better job than airplanes (currently) can like train travel in cities for suburban and near town residents - as long as the railroad tracks have already been laid in the past and you don't have to build a new railroad (similar to how if an existing telecoms backhaul line already exists in that town to that block of buildings, then it can be well utilized). And in some cases high speed rail can then attempt to compete with air travel like many high speed train projects around the world but these would typically then require a 'very' busy travel corridoor of suitable distance like say Tokyo-Osaka or London-Paris etc and even then high speed rail can only achieve rough parity to the human consumer travel experience vs cheap air travel and at least currently nobody seriously suggests high speed rail would challenge air travel for global travel supremacy. I do think mobile vs fixed contest will mimick closely this parallel with trains and planes. The vast majority of consumer/human calls and telecoms traffic will live on mobile but fixed landline business will not die out, it will just continue to shrink in proportion and will soon become only a niche specialized service for a few industries (calling centers) and 'cargo loads' like backhaul for mobile networks.
Back twenty years ago when I proposed doing our convergence project where I suggested my international calls (on fixed landline) would be merged with Finland domestic long distance calls (on fixed landline) and then both of those two to be also merged with mobile - my bosses were initially skeptical and I did have to do a series of calculations and show recent data and projections to show this will become 'meaningful enough' to make it worth doing. At that point Finland led the world in mobile adoption rate (at about 35%) and it was by no means obvious Finland would ever reach the same level of mobile penetration rate as the 'mature fully deployed landline penetration' which was at over 60% per capita and Finland had reached 'all household' connectivity for landlines (in reality a little below 99% of all households). Just two years later Finland would become the first country where mobile subscription penetration rate passed the landline penetration rate. In terms of timing, it was 'the' perfect time to go into this type of convegence and looking back, gosh it seems 'obvious'. Yet it was not. Most contemporary experts back twenty years ago were certain mobile would 'never' match fixed landline in its reach and penetration rates. When I think back, I would draw the lesson that at some point future growth is purely a 'gamble' and a big risk indeed (VR, drones, wearables etc) but if a given technology does take off and grows, at some point it becomes an 'inevitable' type of trend which we can see now in things like smartphones, the mobile internet, mobile payments etc. And then there will be a MASSIVE echo chamber of 'experts' who will insist - this can never happen. Like we've now heard how many said 'cameras on smartphones will never replace 'real' cameras. 'A wedding photographer will not show up using a cameraphone' etc. Or that plastic will not lose to mobile money or the internet on tablets and PCs will easily defeat the puny little clumsy expensive slow internet of mobile phones. Hahahaha yeah.
MOBILE AND MEDIA CONTENT
That was voice calls. We saw a similar shift to mobile with messaging, SMS text messaging which many thought would never take off, and others thought SMS would be only a tiny niche slice in the shadow of the mighty email messaging technology already widely deployed. Yeah. We all know how that went. But beyond communication methods, mobile would start to cannibalize other types of services. The immediate next target was media content. News, games, music, movies, TV shows, etc. Media. Early mobile phones of the 1980s and 1990s could not do media downloads. Then came SMS text messaging and some basic messages could be sent, such as Finnish newspaper Aamulehti started its headline news service via SMS. But the revolution came when media content could be delivered as paid media. That was the invention by Saunalahti in Finland in 1998 and the first paid downloaded content onto mobile phones was the basic humble ringing tone. We now laugh at that concept and find it quaint and just a flash moment of history but it bears remembering first, that everybody laughed at ringing tones. They insisted that Apple's new iPod and iTunes would be the obvious way that digital music would go and grow (how wrong they were). During the 2000s decade ringing tones would far outshine iTunes and artists like 50 Cent would celebrate how much more money they made out of mobile than they did out of CD sales or out of other digital sales like iTunes and MP3 sales on other music stores. Why was this? Because ringing tones could be sold to nearly every phone and the reach meant literally now several Billion people. As far back as year 2005 the mobile networks reached 2 Billion humans (today the human subscription reach is 7.4 Billion) and if the iPod could reach 100 million around the same time then we can see the obvious discrepancy. It was simply a matter of scale. Were it not for more advanced music FORMATS created and deployed for mobile (MP3 files and music videos) then today we'd still have a massive empire also around ringing tones.
But from ringing tones we get a second incredibly valuable lesson in mobile cannibalization, and that is that of the drug dealer addiction model. Once we start to do something on mobile, we never go back. We can go 'deeper' into mobile - SMS text messaging users now shifting to Whatsapp for example - but there is no going back. We don't go back from having music on mobile, to carrying a separate MP3 player like an iPod again. It got so bad, that Apple had to release its own musicphone to fight for this market - that phone of course became the iPhone and Apple, a company that in the 1990s had been on the brink of bankruptcy, now powered by mobile, in 20 years, became the richest company in human economic history. This now gives us a valuable 'thought model' for mobile: mobile always wins. If it was a stand-alone PDA that competed against the 'smartphone' - mobile always wins. If it was the GoPro stand-alone camera or the cameraphone - the mobile always wins. If its the TomTom navigator GPS device or the mobile phone navigation - mobile always wins. If its music, gaming, news, advertising - money - mobile... always.... wins. We saw it with tablets. A race of tablet-sized laptop PCs vs phablet-sized smartphones and who won? It wasn't even close! Mobile always wins. If we now think into the future, wearables (Apple Watch haha) or VR headsets (Oculus) vs say Augmented Reality (see Pokemon Go) or say bitcoins and Paypal vs mobile payments - it is that same rule: mobile ALWAYS wins.
SEE THE SIGN-POSTS
So then lets see the 'signs' of what we can learn from the domination of mobile media. The very first sign was 'launch'. It was possible to download music to a phone in 1998 or it was possible to download a news television clip to a mobile phone in 2001 or it was possible to download Angry Birds etc. That is the first step, someone deploys that new tech. That is just the start. Then we monitor. Next big milestone is 'major brands' join in. So we see The BBC iPlayer, CNN's iReport and so forth. A period of big 'argument' ensues of will this particular tech win or lose and what are the alternatives. Another big milestone is when one of the industry leaders declares, mobile will be the biggest revenue source (for that sector). We heard this first from Electronic Arts saying about mobile gaming. But majors like Warner Music said that soon thereafter about music and the BBC said about TV and radio content, etc. And then we get the first casualty, the proverbial 'Canary in the Coal Mine'. When one of the legacy brands dies and blames explicitly mobile for its death. This we saw with the Finnish daily business newspaper Taloussanomat which was the first to end printing the paper edition which stated explicitly, the reason for their demise was mobile. As this happens, we will then witness the big data shifts. TV viewership shifts to mobile. Newspaper readership shifts to mobile. Music, gaming, movies etc all shift to ever more mobile. For that we see then the 'maturing' of the industry, where the industry learns not to 'repurpose' existing content to the new media, but to create original content that suits the new media. We heard this first from MTV when they started to teach that a mobile screen needs a separate TV crew, and MTV started to use two separately-trained TV crews to shoot the same MTV programming like Jackass and MTV Music Video Awards etc. One crew shoots for the big screen (TV and PC screens) and the other crew shoots the same show but for the small screen of mobile. This is what I was writing about in my book Mobile as 7th of the Mass Media and we just heard last year that the NBA basketball league has adopted this way to shoot their games now - because so many watch on mobile phones and their experience watching TV content on a mobile is not as good, as a purpose-shot 'mobile optimized' content stream direct from the NBA.
With all this, lets not plot out the 'death' of legacy media. Back when cinema appeared many thought movies would kill books. Then when radio appeared, they thought radio would kill the music recording industry. When TV appeared, they feared TV would kill cinema (and kill radio and kill newspapers and books). And with the internet, the internet was feared it might kill off radio, recordings, cinema, print and TV. But all survived. They adjust. Yes the PEAK may be past. It seems like we have just see the peak of TV as a media power and it is now starting its decline into second place as mobile grows in power, but I am not foreseeing an end to print or radio or cinema or TV. Mobile still grows in power but the other media will also continue, in perhaps a more diminished role yes, but they are not about to die out. But some individual brands and titles and shows and formats will not survive. One that is really truly past its prime is "reading yesterday's news today" ie the newspaper industry. Printed papers and magazines and catalogs and books and brochures will have a place far into the future but 'newspapers'? That have YESTERDAY's news? That is an idea that is about as relevant as the Zeppelin is to air travel or a steam engine to power a train. Newspaper brands need to rush their transitions to mobile because a printed paper newspaper concept will not have many years left and trying to live on that model.
AND THEN CAME ADVERTISING
Where there is media, there is advertising. And sure enough, almost as soon as the first content became available on mobile, we then saw advertising on it. I chaired the world's first conference on mobile advertising and saw that stream 'join' into our expanding range of digital convergence around mobile. The first advertising-sponsored media content downloaded to mobile was the daily news by MainosTV3 in Finland delivered by SMS from today's TV news headlines, and sponsored by advertising (the last 20 characters of the 180 character SMS text messages were the brief message from the sponsor). It was an opt-in daily news headline service that launched this aspect to mobile content and media. The very early reaction to mobile ads was 'I hate it, I hope it never succeeds' and 'I would never agree to it'. Yeah. Fast-forward 17 years and today mobile advertising reaches over 5 Billion humans and nobody thinks twice about the ad that is briefly seen before we get to watch that clip on YouTube we wanted to see on our smartphone. Mobile advertising alone is a 40 Billion dollar industry worldwide and is growing by leaps and bounds. It should be noted that the 'similar' digital online advertising world has stopped growing. And that is where I just last week posted the shock blog article about Adidas the sporting brand declaring they will end TV advertising because their youth audience is glued to their smartphone screens.
Here in advertising we see the same pattern as with mobile media overall. First it was some experimentation. Then big brands come in. We see major advertising agencies like Ogilvy and Mather, or Saatchi and Saatchi get into mobile. We see major global brands like Coca Cola, Nike, Ford and MacDonalds do mobile. Then we see big legacy telecoms and tech brands make their big 'plays' into that area like NTT DoCoMo of Japan setting up a joint ad company with Japan's biggest advertising agency Dentsu, or Google buying the biggest mobile ad platform Admob. And then its just a matter of time. Ford suddenly announces that they will no longer do any ad campaigns that do NOT include mobile. It does not mean 'only mobile' but it means always including mobile. Then we hear from WPP (world's largest advertising group) and their China head who say in China all advertising is mobile-first but if you don't have a big budget, you go mobile-only. (Wow?). And now: Adidas. Advertising is a 500 Billion dollar industry where TV, radio, print, outdoor etc legacy ad format revenues are flat or declining. Digital on the PC side has stopped growing. But mobile forms nearly 10% of the total global ad revenues and mobile keeps growing at break-neck speeds. And mobile took a company that didn't know HOW it might make money, an obscure search-engine internet company, and powered it to become the second most valuable company on the planet in barely more than 10 years since they uttered the words 'the internet will go mobile'. Google is also the world's largest advertising company if we counted advertising as their main revenue source (which it is while they would like to be known as a search engine company and internet company rather than an ad platform).
Mobile always wins. At some point Google noticed that what they can make money on, in their primary business back then of the search engine - was advertising. Then they bought Admob at some stage and today their vast empire in digital from YouTube to Gmail to Google Maps to Android is all of course aimed at winning the mobile ad wars (and collecting the data we generate to better target those ads). When Google uses me in their workshops and seminars, I am there to help various local companies and advertisers understand why mobile is different and what are the unique abilities of mobile. Google understood that very early on, that mobile is different from the internet and to succeed in mobile, you have to mobile-optimize. But this is a tough lesson to learn for all who join in, or are absorbed into the digital convergence story. Like now those involved in mobile money
MOBILE MONEY IS 20 YEARS OLD AS WELL
So lets talk money! Many experts in digital, if asked about mobile payments, will sing songs of Bitcoins, of Apple Pay and of how Starbucks does its mobile wallet. They may remember to mention M-Pesa out of Kenya. But like with so many areas of digital convergence the knowhow seems to have started at Apple as if there was nothing before it. Mobile payments are literally two decades of age. The world's first opportunity to pay by mobile phone was in Finland when Coca Cola set up two vending machines that accepted payment by SMS text message. Instead of inserting coins into the vending machine or your credit card, you could just send a message from your phone to a specific number. And moments later you hear the 'clonk-clonk' sound of the can of Coke bouncing around inside the vending machine and your cold beverage drops out from the bottom. And three weeks later when you see your phone bill, it will include a line of one Coca Cola purchase at Helsinki Airport which was then deducted from your phone account (or added to your monthly bill which now becomes payable). What a wonderful simple indeed magical solution to the situation we have all been in - I'm thirsty but I don't happen to have the coins right now to pay... Oh, and is this worthwhile for Coca Cola? They found that wherever they deploy mobile payments, they get 14% more money out of the same vending machine! 14% more business simply when you deploy mobile money! How brilliant is that?
This obsession with Apple Pay and Bitcoins and Paypal is silly to me. Paypal has just passed 200 million users, which if you are a tiny internet-industry player, that may seem like a big number. Not until you compare to mobile payments. A Visa study last year found that just inside Europe, 54% of Europeans pay by mobile. In Europe ALONE the mobile payments user base is larger than global Paypal !!! As I reported on this blog one month ago, we've passed the point where more people use mobile payments than use a credit card, and mobile payments is just catching up to the total number of humans who have a bank account right now (will pass that number within a year from now). Yes. There are.... 2.5 BILLION humans who use mobile payments. That is not Apple Pay, gosh that is not Paypal and darn it, nowhere nowhere nowhere near that is not Bitcoins! What is mobile payment? 54% of the total mobile payments processed last year were handled via SMS payments! What is number two? Not a mobile wallet like Starbucks or Apple Pay! Number two is WAP Billing ie carrier billing! If you do mobile payments you have to understand such concepts as QR codes and USSD. But lets dig into this cannibalization of money. When mobile and money collided, what happened? Well? As I said, mobile. ALWAYS. Wins.
What do we see? We see the same signs. Some major brands are doing mobile payments. Did you see Danske Bank of Denmark and their Mobile Pay? Its their mobile banking solution which lets you pay people from mobile to mobile if they also have a Mobile Pay account (and 3.4 million people or 61% 30% of Danish population are already users) but get this - if you don't have a Danske Bank Mobile Pay account, the money can be sent.. by SMS text message (duh!). So anybody can be paid by Mobile Pay. (Thank you to reader Elo Larsen for user updated data.) This is the smart way to do mobile money. Not a 'walled garden' approach where ONLY those inside Apple Pay walls can be paid. Rather the smart mobile 'inclusive' way where anybody can be paid. So we have tons of major banking and money players getting involved in mobile from Visa to yes Paypal. Then we have other brands like say Coca Cola whose latest innovation is the Coke Play loyalty program and virtual money system by which you can now use Coca Cola Coke Play points to pay for things like videogames and music downloads or to pay for telecoms air time. Yes, Coca Cola has created its own branded currency already. Mobile is on the way to kill cash!
Talking about killing cash. We've chronicled on this blog the steps again. Estonia was first. In parking. They had a string of parking-related crime powered by cash. So they changed the laws and made parking payments impossible with cash. As every Estonian has a mobile phone anyway, lets accept mobile payments (and other digital payments) for parking but no more cash. And the parking-crime-spree ended. But notice - an INDUSTRY in one country, has abandoned cash already. Not killed by Paypal or Bitcoin or Apple Pay or plastic. Killed by mobile money. Next up was Sweden. In Sweden similar crime-related issue with bus tickets. So they stopped the handling of cash by bus drivers. You can buy your ticket many ways, most use mobile to pay of course, and Swedish busses no longer accept cash. But most tickets paid by mobile. Mobile. Always. Wins.
And where next? Now lets go to Malaysia. In Kuala Lumpur's giant KLIA 2 airport where Air Asia has its home base, they stopped human check-in counters last year. Yes. You can fly with Air Asia. You can buy your ticket on mobile or the internet or from a travel agent. But if you try to do check-in at the airport, there is no counter to handle the paper ticket processing. So how do you get onboard the discount airline airplanes? You either go to the ticket machines and handle your boarding pass ticket processing there, at the airport. Or you print out the paper documentation of your online ticket purchase and show the paper. Or do what most Malaysians do, you just process the boarding pass onto your phone. Show the QR code boarding pass at the airport and you're set. Easy-peasy. I was doing a non-scientific count at two counters at the airport last Autumn and figured that about 1 in 10 had a paper-printed ticket from a ticketing machine; about 1 in 20 had a paper-printed traditional printer-ticket (online ticket purchase and print-out for example at hotel lobby) these were ONLY foreigner Westerners who showed up with such pieces of paper haha. And all the rest, about say 17 out of every 20 passengers just showed their mobile phones at the boarding gate to the Air Asia flights.
This is the same story again. We see first mobile becomes possible to do something (to pay). Then we see major brands in payments get involved like Danske Bank and Visa; and we see major brands outside of banking/payments get involved like Vodafone with M-Pesa in Kenya or Apple with Apple Pay. We see other brands use the technology like Coca Cola. And all at once, we start to see the 'end is coming'. Slowly but surely some areas stop using the old way. You can't use cash anymore to pay for parking or bus tickets and then you can't do check in anymore with a human being either, but all is happily handled through mobile. We saw this movie with mobile media, with gaming, with music, with news. We saw this movie before, with mobile advertising. Now it is playing again, with a new lead actor but the plot is the same. New actor for James Bond but we know who will be alive at the end. Mobile. Always. Wins. So look at another airline. Finnair invented mobile check-in 16 years ago. How has that evolved. Now Finnair uses its intelligent and automated customer service system to offer paid upgrades to its frequent fliers, to move them from Economy Class seats to Business Class seats on selected flights and in order of priority by status in the frequent flier plan. How successful is that? 23% of all Finnair Plus passengers who have been offered a self-service paid upgrade, have already paid to upgrade themselves to Business Class on a flight! Now we have mobile doing what it does best. It does something that was not possible before. In this case, powered by mobile, money is SELLING our seats.
This is how I see the future unfold as well. Mobile is cannibalizing the world eating up everything. But doing things better, easier, faster. Doing things previously not possible. And then we get a new opportunity that comes up for mobile, what happens? Mobile. Always. Wins.