Making Money on Mobile
By David James, Wed Oct 03 00:00:00 GMT 2001

Businesses seeking to prosper in the unfolding Mobile Age - and seeking to avoid a dotcom debacle - need to adopt a business model that has six basic ingredients.

Business opportunities in the Mobile Age will not be identified by the earmarks of past successes, nor will they be implemented with business models that pay rich dividends today. We are talking about the future here. And, as Yogi Berra - that great baseball player and philosopher - once said, "The future ain't what it used to be."

How will the mobile Internet evolve? And what are the basic ingredients of successful business concepts that will build and sustain wildly popular and profitable services and applications?

Profusion confusion

These are turbulent times for the mobile Internet as it struggles to find form and footing. A profusion of technologies is emerging to carry and manage data, some of which will dominate broad segments of the market while others will provide specialized or unique services.

GSM is duking it out with CDMA to become the dominant 3G technology, each migrating from earlier technologies on different paths. Wireless protocols and languages, such as WAP, Java/XML and XHTML, are laboring to deliver Web content to wireless devices efficiently and economically.

Wireless local area networks (LANs) are springing up in offices, airports and convention centers to connect the mobile masses at high speeds up to 11 Mbps. Wireless wide area networks (WANs) are establishing broader coverage at slower speeds up to 128 Kbps.

Infrared connections - in partnership with the mobile Internet - are transferring data effectively via line-of-sight links at close range. Likewise, Bluetooth technology is connecting at greater distances - up to ten meters and without the line-of-sight limitation - and is being rapidly incorporated into a variety of wireless devices.

For users of mobile technologies, there is a profusion of hardware devices - mobile phones of various shapes and sizes, laptops, PDAs, pocket PCs, palmtop computers, and two-way pagers and organizers (including the popular BlackBerry).

Between the technologies and the users is a complex array of network infrastructure software, middleware and gateway interface connections, connection management software, and applications and content. And there are wireless application service providers (WASPs), wireless Internet service providers (WISPs), portals and proxies.

Boundless boundaries

In this confusing environment of rapid change and growth, opportunities would seem to be boundless. For those who would tap into these opportunities, the trick is to adopt a business model for a service or product that can be provided at a profit over a sustainable period of time.

The first step is to decide what it is that a substantial number of potential customers will want - and will be willing to pay for.

In the wireless arena, where popular applications to date are mostly voice communications and paging, there are two notable business models. NTT DoCoMo has thrived on its popular i-Mode service in Japan, and Research in Motion Ltd. found a winner with its BlackBerry wireless devices in North America.

The keys to i-Mode's successful business model have been providing a wide selection of third-party mobile content and incorporating the fees for the content into a single bill from NTT DoCoMo. The key to BlackBerry's successful business model has been a simple always-on e-mail and SMS service.

Model mania

As the mobile Internet emerges, it's clear that people will want - and will pay for - a lot more than just voice communications and messaging. Here are some of the areas that will surely spawn a number of successful mobile business models:

* Entertainment - games, gambling, and downloading video clips, music, e-books and other content

* Information - breaking news, sports scores, weather, traffic, stock prices

* Alerts - warnings, sales offerings, options, margin calls

* M-commerce - online purchasing, stock trading, price comparisons

* Location-based services - vendors' offerings to passers-by, search for restaurants and vendors in an immediate vicinity, locate family and friends

* Research - searches for data and information formatted for mobile devices or downloaded

"The basis of any successful business model for the mobile Internet is giving customers what they want," says Peter Rysavy, president of Rysavy Research, a wireless networking consulting firm based in Hood River, Oregon.

"For carriers, that means reasonable pricing - $1 per megabyte of data or less - for a broad set of applications, including office productivity apps such as Microsoft Exchange, Lotus Notes and Web-based applications, and providing broad coverage, good roaming options and good security. Add support for all platforms, including laptops, PDAs and WAP. Do all this and the customers will take up the service in droves."

Six basic ingredients

1. Market Potential. There must be a need or use that customers will demand - and pay for - over a sustainable period of time. Not a fad or a novelty that will evaporate when the next fashionable innovation comes along.

2. Value-Based and Payment-Simple. As with all successful businesses, the customer must feel that he or she is getting something worth the price. This is a price satisfaction ingredient, and an important part of it involves price clarity and ease of payment.

Fixed pricing plans quickly became the norm for Internet service providers when customers resisted tiered pricing plans. Mobile services - owing to high costs and complex delivery systems - present a greater pricing and payment challenge.

A key factor in the success of NTT DoCoMo's i-Mode service is the single monthly bill. And recently, because its i-Mode and new 3G services are based on packet-switching (which delivers data in irregular streams), the company is offering pricing plans based on timed-data connections.

3. Provider Synergy. Let's face it. Carriers are not going to create all the interesting content and applications that the mobile masses will want. And service providers are not going to profit if they can't easily deliver their services and collect fees. Mobile business models need to stimulate content creation and facilitate delivery and payment. This calls for collaborative models.

NTT DoCoMo's i-Mode business model has proved to be highly synergistic for the third-party content and application services that i-Mode delivers. It is a revenue-sharing model, with DoCoMo collecting the third-party's charges and remitting the revenues after taking a fee for its collection service. The model has proved successful for everyone involved, and it has spurred the creation and delivery of services that people want.

4. Platform Versatility. Wireless Internet services will be accessed by a wide variety of devices often utilizing different technologies. No doubt some of the mobile devices will converge in design, but additional devices will probably appear. While the manufacturers of mobile devices seek uniform capabilities, they also seek to introduce technologies and gadgets that are new and better.

A basic ingredient is the ability to serve as many customers as possible. For device manufacturers, this means the capability of its devices to access as many services as is feasible for the device. For service providers, it means being able to work on as many device platforms as is feasible for the service.

5. Mobile-Friendly. Mobile devices and services - for their business models to succeed - will need to be easy to use, interesting and intuitive. Disenchanted users will complain of "thumb fatigue" in manipulating complicated menus and entering data on small keypads, of "text trauma" in reading long messages on small screens, and of "data depression" while downloading music and video at slow speeds.

"A compelling user experience is the key to mass adoption of the mobile Internet," says Gayle Moss, vice president marketing of BitFlash Inc., an Ottawa, Ontario, Canada developer of software that delivers visually rich content and applications to mobile users.

Moss believes that visually enticing graphics and user interfaces can significantly enhance a mobile Internet business model, even for existing applications such as text messaging. A message from an investment advisor has far greater impact, for example, if it shows a stock's graph or chart, claims Moss. "The Internet had been around for over 30 years but only became a household word when the World Wide Web provided a graphical user interface," she says.

Other mobile-friendly solutions will be found in voice activated commands and interfaces. The conversations we will overhear in a public place may well be between a person and a computer, rather than between two people.

6. Future-Founded. Today's mobile business models need to be based on tomorrow's mobile lifestyles and needs. This is where creativity and luck come in. Those creating a mobile business model must predict the future and be lucky enough to be mostly correct - or quick enough to adjust course along the way.

One of the best ways to predict the mobile future is to consider how our current activities would change if we used a mobile device - that is, how today's non-mobile activities might become mobile. If a mobile device could do something better, or could make the activity easier or more enjoyable, that's probably where we are headed.

For example, instead of swiping a credit card and signing a piece of paper, we'll probably click once on a PDA or mobile phone. Instead of checking for headlines, stock averages and traffic reports on a TV set or radio, we'll probably glance at a mobile device or listen to its response while on our way to a meeting. Instead of mailing photos to family members, we'll probably send them off over the mobile Internet as soon as we take them.

Location-based services are bound to be the source of a number of successful business models in our (distant) mobile future. Apart from accessing maps that show one's precise location, a user will be able to obtain advanced 'value-adding' services.

A good mobile Internet business model calls on each of us to look to the future. We need to be guided by another sage thought of Yogi Berra: "I don't want to make the wrong mistake here."

David James is president of Business Strategies International, a San Francisco-based consulting and venture-development firm specializing in technology business opportunities.