Communities Dominate Brands

Like minded music fans come together at pitchforkmedia.com

IN the New York Times of August 29th was an interesting article about a music review site
pitchforkmedia.com

The New York Times says

Pitchfork has emerged as one of the more important indie taste-makers in any medium, with 125,000 unique visitors a day and only three full time employees.

The critical writing about the music is compared to the legendary Lester Bangs and Greil Marcus. Bands that have struggled for years once picked up by pitchfork have often witnessed a rapid increase in sales and their music.

Summing up the New York Times says

The web is a place where (a) tribe is built and serviced by likeminded folks who thrive on the insiderness of it all. There is a common language, common values and a belief that whatever obsession is being serviced it is the right one to have.

Don't feed the lions?

When I was chairing the TV-Video and Mobile conference in Berlin last week, I met Alexey Chuikin of Admarplus ie Plastic Media of Moscow. He gave a few innovative examples of engagement in totally unexpected areas.

The Moscow Zoo. Like all zoos around the world they had signs at all the cages to the animals saying "please do not feed". Don't feed the monkeys, don't feed the lions, don't feed the tigers, etc. That is so typical of our society, with signs everywhere telling us what we are not allowed to do. No longer. If you visit the Moscow zoo, today you see signs saying "if you want to feed this lion, send an SMS text message to.." and you will be charged a premium text message fee. A nice way to engage with the zoo, to participate in its costs; and the zoo gets to turn a negative command into a positive request. Very clever !

Planting trees. Even more heart-warming was the recent campaign Alexey's company had done for the WWF (World Wildlife Fund). They ran a campaign to plant trees in Russia. The payment was again via premium SMS text messaging, and as a further gimmick, each participant received a picture as a return message, of the kind of tree they had helped plant. A wonderful method for people to participate in conservation projects, even through very small budgets, and of course using the mobile phone.  I wish this idea spreads all around the world with all charities (and the above one with the zoos of the world).

Obviously these examples are yet more proof that engagement can work, and thus echo themes in our book Communities Dominate Brands. We will definitely include these two into our next book with Alan. Thank you Alexey for these wonderful ideas !

Monster statistic: 2 billion cellphone users; now official

This was the milestone I had been predicting for the past six months that it would hit specifically September 2005. Now it is official. The research organisation Ovum and the GSM Association released the data on Sept 18, 2005, that worldwide there are now 2 billion mobile phone users. That is 2 thousand million. Wow. And its so nice to nail this kind of forecast ha-ha..

Putting the number in context. There are twice as many mobile phones, than there are internet users of any kind. There are three times as many mobile phones than there are personal computers. There are more mobile phones than credit cards, more mobile phones than automobiles, more mobile phones than TV sets, and more mobile phones than fixed/wireline phones. In fact a staggering 30% of the global population carries a mobile phone. Since Taiwan first did it in 2001, today over 30 countries have achieved over 100% cellphone penetration rates, and even laggard USA has gone past the 50% penetration rate. In the most advanced mobile markets such as Finland, Italy and Hong Kong the typical first-time cellphone customer is under the age of 10.

It is the only digital gadget carried by every economically viable person on the planet. Younger people have stopped using wristwatches and rely only upon the mobile phone for time. It is the only universal device, and the device of the Century.

Every mobile phone user can be reached by SMS text messaging (ie more than twice the number of people that can be reached by e-mail). Each mobile phone can handle payments (if the mobile operator/carrier decides to enable that ability) ranging from paying for public transportation as 40% already do via mobile phone in Helsinki Finland, to buying airline tickets and using the mobile phones for check-in and as boarding pass, as the discount airline Norwegian already does.

And almost every mobile phone user keeps the mobile phone literally within arm's reach 24/7. Yes, 60% of us actually take the mobile phone physically to bed with us, either to use the alarm feature or to hear incoming text messages.. If we lose our wallet we report it in 26 hours. If we lose our mobile phone we report it in 68 minutes. As to those who are new to these phenomena, no, we don't only use the phone outside. In fact 70% of all phone calls are placed indoors, and a whopping 60% of all data access by mobile phone is done indoors.

On the related topic of our book and this blogsite, digital convergence, the mobile phone is becoming the evolution target for much of the converging industries. 19% of all music revenues are generated by mobile phones. 14% of videogaming software revenues come from mobile phone games. More cameraphones are sold this year than all non-mobile phone digital cameras ever sold. I am just chairing the TV and Mobile conference here in Berlin, and I promise you this industry believes there is a big future in the convergence of TV and mobile.

Finally on our main theme, digital communities. In our book we introduce the concept of Generation-C (for Community) the super-consumer of tomorrow. The preferred gadget of Gen-C is of course the mobile phone. In fact almost all community behaviour is migrating to mobile phones, from blogging (there are more mobile blog sites already than there are regular internet blogsites - but most of the moblog sites are in two languages I don't speak - Korean and Japanese) to videogaming to dating to chat to TV-interactivity such as voting for reality shows etc.

Two billion. Awesome !

Tomi Ahonen   :-)

Should be locked into room to read our book?

Paul Goodison maintains a very active blog on developments in convergence from a broadband perspective, called Broadband and Me. He blogged briefly about IP TV developments under the heading "Convergence - IPTV", quoting from the BBC, and then added a wonderful reference to our book.. Check this out:

"IPTV will eventually change the 'broadcast' paradigm. A new report, highlighted by the BBC:

The 'pull' of broadband network television will replace the 'push' of traditional broadcast television," explained co-author Graham Lovelace. This means that the control of what programmes and content is available to watch will move out of the hands of the traditional broadcasters and into the hands of the viewer

I think broadcasters should all be given a copy of "Communities Dominate Brands" and then go and lock themselves in a room and try and work out what they are going to do, because if they don't react soon they will be history."

Thank you Paul !! 

And as soon as I am done chairing this conference here in Berlin about Mobile Video and TV, I will blog about the cool stuff they've talked about. Hopefully around the weekend..

Tick, tick, tock

Naresh Ramchandani wrote a very interesting piece in the Guardian Only true greatness can save us from death by PVR

New broadcast opportunities for advertisers are coming. Sponsorship is already here and will soon be joined by less-regulated product placement, branded content, and a dozen other things. And as Tess Alps pointed out here last week, the old creative rules don't apply to these new opportunities. Great commercials are rarely written by novices, and the same will also go for great sponsorship and branded content.

The optimists will say that five years is a long time, but the skills are short and the clock is ticking.

And it seems some companies in the UK are starting to follow the trend. Unilever has cut its ad budget by 20% over the past 5 years, which has cost the television market £60m in revenues.

Now that is interesting, but add in the recent news that Skype has just sold itself to ebay, Hollywood struggles with epochal change and a growing realisation that 'search' has changed the way we do business, means that Naresh is right - the clock is ticking.

The Financial Times on Saturday 17th September said in its piece

The entire foundation of the $100bn marketing industry is shifting, slowly but surely, to the simple idea of people looking for things on a search engine

This may sound extreme - and yes it is - I don't believe that marketing has reduced itself to search only, because there are so many more ways to engage people. But what it does mean is that from designing new products and services, or creating new marketing communication strategies one has to constantly keep in mind that the way we used to shop and consume content and information has changed.

Tha means marketing needs to evolve too.

Economist falls for Skype-hype: wrongly predicts end to mobile voice calls

I am a passionate fan of the Economist, and have read the weekly periodical religiously for over 30 years. I also greatly enjoy its technology and business-oriented stories. I have been honoured to be quoted in it, and to have spoken at an Economist conference, and have even had the Economist New York HQ as my customer when I sold computer networks on Manhattan as I started my career into IT. This week's cover issue - and lead editorial - is "How the internet killed the phone business."

The story is about VoIP (Voice over Internet Protocol) with the eBay purchase of Skype forming a major part of the story, and with the other case example being the other big internet voice disruptive player, Vonage. The main thesis of the story, the majority of the emphasis etc, is on how the voice calls of fixed wireline telecoms business are under serious threat by VoIP such as offered by Skype and Vonage. I totally agree with this main thesis, and have written, spoken and blogged about it to great extent over the years. I've even chaired the biggest VoIP event, Pulver's VON.

The article, however, in a surprisingly superficial manner considering the heritage of the Economist, makes unsupported claims that mobile telecoms will suffer the same fate. In fact the cover story says that mobile operators are more threatened than traditional fixed wireline telecoms operators. They write "The most vulnerable are those operators that are most dependent on (voice) revenues. In particular this means mobile operators." I am afraid that for once the meticulous journalists at the global business weekly have been taken in by marketing hype, and have leapt to conclusions that will be found to be totally unsustainable.

As telecoms is a trillion dollar industry - bigger than advertising, military spending or the global automobile industries for contrast - and now the Economist predicts its demise, I will want to examine the issue with the support of facts rather than mere marketing hype. And as I wrote the world's first business book on how to make money with advanced mobile telecoms (m-Profits, a global bestseller in 2003) and I regularly lecture on this very topic at Oxford University, I think I have to address this issue and the fallacies in the otherwise excellent article.

So lets be clear. I agree that VoIP services such as those of Skype and Vonage will dramatically threaten the existing fixed wireline telecoms business of traditional telecoms operators. I do not agree that this same threat is in any way meaningful for mobile operators. To use an analogy, it is like the introduction of electric and diesel trains to transportation in the middle of the last century. They did radically disrupt the existing steam-based train business. But diesel trains and electic trains did not particularly affect the emerging airline business. And by the 1950s it was very obvious that airlines were the preferred means of travel, rather than trains. In the same way VoIP will threaten the fixed wireline telecoms voice business, but the preference (and majority of users and majority of revenues) is already with mobile telecoms.

Why would VoIP service providers not disrupt the mobile telecoms industry? On the fixed telecoms side, most landline connected households and offices in the Western world already have either narrowband or broadband internet. If a family or business is paying a monthly fee for its internet connection, it can "upgrade" to some VoIP based phone service and get essentially voice calls for free. If that household or office currently spends money on the fixed wireline phone based voice calls, this becomes a very compelling offering. Why pay a monthly charge of say 10 or 20 dollars to the telephone company for the fixed wireline phone, if a cheap headset etc can be connected to the PC and suddenly internet based free calls become possible. Again, I totally agree with this scenario as cannibalizing voice calls made from fixed wireline phones in the home or office.

Now, lets look into the future. We see it already in Scandinavia today. In Finland and Sweden, already 40% of all homes have abandoned the fixed phone line completely, and use only mobile phones. It doesn't matter how inexpensive or free there would be a Skype or Vonage -type VoIP service on the fixed internet connection, when the home does not have a wired connection of any kind anymore ! The same trend is happening in all advanced mobile markets, following the Finnish and Swedish example with a short delay. Take for example my sister. She has no fixed line phone in her home. It doesn't matter how free we make Skype or Vonage, she will not go back to the phone company (or her cable TV company or any other provider), and start to pay a monthly subscription for another fixed connection, to then get free calls that are tied to her home. She has cut the cord, and will never go back.

This this is preposterous? Look at your own kids. They are growing up knowing only a mobile phone. They will not WANT a fixed line at their home. Only old fogies bother with wired connections. No matter how free some services might be on it.

So even if we assume that "all" fixed wireline phone calls migrate to VoIP, this will leave a large part of the mostly young population that is beyond the reach of the service. It is like the diesel and electric engines to the trains. Wonderful for crossing a continent, better than a steam engine. But they cannot cross an ocean. A part of travel can only be covered by airplanes, and no matter how great we make the new train engines, a part of the business is beyond their reach.

Worldwide in 2003 the total number of mobile phone subscriptions grew ahead of the total number of fixed telecoms subscriptions. This year, 2005, we have seen the total mobile telecoms revenues exceed fixed telecoms revenues. So of the trillion dollar industry, in fact the Skype and Vonage opportunity only directly deals with less than half. Less than half of all users can even be reached by VoIP. Less than half of the total telecoms revenues are directly affected.

Now lets examine the threats by VoIP to the mobile telecoms voice business. Last week Skype made its first announcement of a mobile telecoms operator launching Skype on its network. E-Plus in Germany became the first mobile operator to offer Skype (and thus VoIP) openly and officially on its network. Did it crash the revenue model of mobile operators in Germany? Actually, the Skype service is offered at a monthly flat fee of 39.95 Euros !!!  Not at all "free calls."  In fact the exact opposite. Skype costs about DOUBLE what voice calls cost in Germany on average. The average voice revenues on German mobile networks, are about 24 Euros per month. At 40 Euros, Skype will not even be attractive to any users who don't spend more than twice the national average on voice calls alone.

Here we now come to the fundamental truths why VoIP will not disrupt the mobile telecoms business model. On fixed wireline telecoms networks, mostly capacity is not an issue. There is enough fibre cable connectivity between connecting points of the network that the actual cost of delivering a bit of data (such as a bit of a voice call) is almost zero. However, the radio spectrum is not built to excess capacity; quite the opposite. The radio spectrum is a very sparse natural resource. We are already at capacity during rush hour in most major western cities. There is no excess capacity. No provider can offer you voice calls on mobile networks for free or near-free because they have a capacity ability to do so. Where some new entrant operators, such as 3/Hutchison in some markets, have done that, it is only because their network is so new it has not yet reached any meaninful utilization levels. Once they are approaching normal user numbers, they will be equally constrained.

What does that mean on a practical level? It means that any VoIP connection that is enabled on a mobile phone - and I can do that today with for example my Nokia Communicator - will consume a limited radio resource. There are only a few simultanous connections that any one base station can maintain at any one time. That is why every time I connect, whether using a voice call, or read a WAP page, or download a music file - or connect using VoIP for a voice call - there will be a charge, that is proportional to the load that I will put on the network.

Again, to use a train and plane analogy. Trains are rather heavy. To add the weight of a single person will not materially add to the costs of delivering that train on schedule to its destination. For the most part, trains (in the Western world, for human travel, not counting city trains in rush hour) have excess capacity. They would not suffer directly if one additional person rode on any given trip; the only real damage could be to long-term price levels. So if they wanted, they could offer free travel under given situations and not "harm" the daily operation of the railroad (note this would dramatically affect long-term pricing models, which is why trains are not doing it). But airlines are severely constrained. Not by the availability of seats on the plane - but by the limited natural resource of landing slots at major airports. London Heathrow cannot take more planes every day. There is a limit to how many planes can land say from Singapore. That is why Virgin, British Airways, Singapore Airlines, Quantas etc all fly 747 Jumbo Jets on that route. Because they are limited how many times they may land, they want to bring in the biggest planes they possibly can. This is why airline travel will not be free for any foreseeable future. Because the costs to create more space in the congested environment (airports) is too expensive.

Back to my criticism of the Economist. They make a good point about VoIP disrupting fixed wireline telecoms. They unfortunately did not interview any mobile telecoms experts on what will be the impact to mobile. In their various conclusions that are relevant to fixed, they then extend the same conclusion to mobile, and make a hasty generalization. The article includes a table listing the most threatened telecoms operators, with China Mobile, Vodafone and China Unicom first as the most exposed operators and BT Group, SBC and Cable & Wireless - fixed wireline operators the least exposed. I totally disagree. VoIP is a natural threat to the voice business of fixed operators (thus BT, SBC and C&W should be on the top of the table). They are already severely under threat by new discount service providers in the long distance and international call business; the entries of cable TV operators into the voice teleocms business; and the migration of younger customers away from any fixed wireline phone connection whatsoever. VoIP will be the final nail to their coffins.

"Pure" mobile operators such as China Mobile, Vodafone and China Unicom, are actually the most insulated from cannibalization of VoIP. We have had 100% ability to use VoIP on mobile phones since 1998 when the first Nokia Communicator was released, and no such threat has materialized. For the very reason I explained above: that any "free" VoIP service on a mobile phone will still incure usage charges on the "data" side that totally wipe out any possible "savings" gains from the VoIP calls. Look at your own "internet" service on your mobile phone or laptop modem card - you are charged per megabyte or by minute, or if not, you have a monthly limit of how much "fair usage" you can have per month. There is no such thing as free internet on the mobile network. There is a natural resource scarsity that guarantees this.

Yes, we will see VoIP services on mobile networks. They will be rolled out by the mobile operators just like E-Plus has done in Germany. These services will not be free. They will not be cheap. They will support the price levels of mobile operators. With 30% of the global population already addicted to mobile phones, these users, their traffic, and their revenues will not migrate BACK to being tangled up with a cord. No, mobile telecoms is like airplanes were to trains: the preferred means to travel. People will be willing to pay a premium for the convenience of mobile calls, and VoIP will do nothing to alter that.

By the way, the Economist says the end will come in about 5 years, so we will see who is right about this. I am certain Alan Moore and I will still be here at this blogsite five years from now. And having watched that VoIP technology slowly evolve - I placed my first VoIP call in 1997 - I am totally confident that here is one prediction where I will be proven right and the Economist wrong. Lets see what happens, and I suggest you don't hold your breath that mobile operators will go under. No, it will be the fixed operators that are threatened by VoIP, not mobile.

Book review: UK Chartered Instiute of Marketing (CIM)

The UK Chartered Institute of Marketing (CIM) has reviewed the book The review by Mark Stuart appears also in their newsletter WNIM, Whats New in Marketing. The review is very kind, and here is the summary paragraph from the interview:

"Although wary of another book claiming that the world has forever changed, I have been won over by this deeply impressive book. Packed full of statistics, examples and case studies, the arguments are well supported and persuasive.  The authors provide a comprehensive exploration of this emerging topic which is presently unrivalled. Thought-provoking and practical, you will be hard pressed to find a more challenging marketing book this year."

See the full interview at the Chartered Institute of Marketing website at this link: Book Review

Play on words based on our book title

This was a wonderful endorsement of our book in a very different style. We have our first play on words, where the author uses our book as the basis of his news story (and cites our book of course).

The site is    www.imodestrategy.com  which wrote an analysis of the purchase of telecoms disruptive provider Skype by internet giant Ebay. i-Mode Strategy entitled its story "Communities dominate as ebay steals Skype for $4.1 billion."  At the end of the news story, i-Mode Strategy concludes this kindly to us, recognising the title reference, as they talk of the impact of this acquisition:

"The focus on communities is powerful and one of Tomi Ahonen's favourite topics and in fact the subject of his latest book Communities Dominate Brands."

Thank you i-Mode Strategy, and we truly loved the way you used our book title in your story. Thank you very much !! For any readers of this blog, you might be interested in adding i-Mode Strategy to your websites/blogsites you read, as it is an excellent English-language site to keep an eye on what is happening in the most advanced mobile internet country of the world, and one of the most advanced digital convergence countries, Japan.

(For those who are interested, another excellent site to follow Japanese developments in English is Wireless Watch Japan.)

And naturally yes, we do of course discuss both eBay and Skype in our book..

MTV does more engagement

MTV busily building closer engagement with its core audience on TV. MTV (as in the Music video channel) has been experimenting with mobile interactivity for a long time.

They were one of the world's first TV-interactivity players in the Spring of 2001 with the revolutionary Video Flash, the first TV show where users actively decided what is to be seen next (voting via premium SMS for the next music video to be shown). This was a main element of my early mobile internet and digital convergence stories in late 2001 - and a "Pearl" first shown at a public conference in June 2001. Obviously I also included the Video Flash example in my books. Since then MTV has experimented a lot with the medium, even to the degree of launching as MVNO (Mobile Virtual Network Operator) in Sweden (as we of course wrote in our book Communities Dominate Brands in the third chapter, on Business Entities Transforming).

Now MTV is doing it again, as reported in the current issue of the New Media Age (Sept 8, 2005 issue). In its brand new show, MTV Hits in the UK and Ireland, they will introduce a segment called Mr Know-it-all. The viewers are invited to send in any question of any kind via premium SMS and Mr Know-it-all will supply the answer. The show expects this to bring in the creativity and curiosity of the young viewers, and obviously help MTV engage its viewers even more. Great idea ! Lets see how it evolves. Keep an eye on MTV, they will be a major player in the youth-oriented converging worlds, and they have a wealth of insights into what works and what doesn't.

Dodgy Chefs get the community treatment

Charles Astwood is the kitchen nightmare that Gordon Ramsay can't fix. More horrifying to many restaurateurs than AA Gill, Fay Maschler and the man from Michelin all coming to dinner at once, Astwood spends at least part of each day listening to London's top chefs scream at him. And why? Because Charles Astwood has transformed ordinary punters into critics.

reports the Guardian in Reviews on a Plate

London Eating is a site dedicated to restaurant reviews by us ordinary Joes in the street.

The Guardian says

Since its launch in 2000, the site has grown to become the largest online restaurant guide in the UK, with more than 650,000 unique users visiting the site each month and more than 100,000 reviews, all submitted by ordinary diners

Who says communities don't dominate brands!

Even Jamie Oliver has gotten the treatment - Jamie in inimitable fashion did respond.

Is this the death of the restaurant reviewer? Probably not, further more Astwood believes that his site also provides a service to restauranteurs. "I know for a fact that the Ivy checks our site to see what is being said about them, and they are not the only ones," he says. "It's a much more effective customer-interaction tool than trying to persuade people to fill in a comment card."

There are strong arguments from The River Cafe amongst others that London Eating is not good for restaurants for a whole variety of reasons. But the evidence does seem to suggest that our opinions do matter.