Asia’s Sexiest Business: Mobile Data
By Eric Ransdell, Tue Jul 29 12:45:00 GMT 2003
Mobile data companies in Asia are generating real revenues today and it is sure to last a lot longer than its Internet predecessor.
The Vision Queen taps a stiletto heel along to a slow burn of a track by the deep house DJ Osunlade as she surveys the late afternoon crowd in Shanghai's Face Bar. Located in a turreted, Art Nouveau villa in the former French Concession, Face is the unofficial meeting place for Shanghai's movers and shakers. But whether it's the investment bankers standing beneath the giant wooden Buddha, the fashion editor seated at the teak bar or the young man in sunglasses on the opium bed who may or may not be a Taiwanese pop star, they've got nothing on the Vision Queen. "I'll tell you what," the Queen says after a sip of her verdant mojito, "I'm in the sexiest business in China."
In her previous iteration the Vision Queen was a Singaporean-Chinese named Cheryl Chong who once worked as an ad exec for J. Walter Thompson in Beijing. In 1999, while working on the Motorola account, she got the mobile data religion. "I just felt it was going to be huge, so I went to my boss and told him I was going to quit and start my own mobile data company," says Chong. "He said, 'Fine, I'll quit too and come in as your partner'." And thus the woman whose business card describes her as "Vision Queen" of Shanghai's eDong City MSP was born.
Today Chong is one of thousands of people throughout Asia who are making mobile data the fastest growing new industry of the 21st century. In China, mobile data has grown from a zero base just 30 months ago to a $2 billion industry today. Throughout Asia last year, according to Connie Hsu a manager with Pyramid Research in Hong Kong, mobile is now a $19 billion industry. For 2003, Pyramid estimates that figure will almost double to $27 billion.
"Although it's scary to even say it out loud, it's quite similar to the dot.com boom of the mid-nineties, but with a very big difference - most MSPs are actually turning a profit," says Chong whose eDong City, a provider of ringtones, games and live chat, has already broken even after one year of operations.
For eDong City and most Asian MSPs, it is still humble SMS that is driving the mobile data business. In fact, of the $19 billion mobile data generated in Asia last year, according to Pyramid's Hsu, half was from SMS.
And in Asia SMS' growth only shows signs of continuing. With mobile phone penetration at a mere 18 percent throughout the region, Asia's SMS boom should continue well into the next few years - particularly given that lower voice tariffs and cheaper handsets are attracting more customers in the region's developing nations.
That's not necessarily bad news for operators and manufacturers who have invested heavily in 2.5 and 3G. Why? Because SMS has unleashed a wave of new business creation throughout Asia. From the company in Indonesia whose SMS service reminds Muslims five times a day it's time for prayers to China's MSP/Internet portal Sohu.com with its 60 million members, every business that has grown with the rise of SMS has a vested interest in migrating its customers to next-generation mobile data services. Having pushed SMS to its creative limits - and, in the process, created a multi-billion dollar industry out of a feature most analysts thought consumers would never use - Asia's MSPs are chomping at the bit to develop the enhanced content and services that will drive 2.5 and 3G's uptake.
Unfortunately, if Korea's 3G experience is anything to go by, that wait may be longer rather than shorter. Currently less than a million of Korea's 33 million mobile phone users have made the switch to 3G. "It's been a big disappointment so far," says Charles Mooon, who covers the country for Pyramid Research. "And the main reasons are the cost of handsets and the pricing of services."
In Korea, handsets using Qualcomm's Evolution Data-Optimized system (EV-DO) cost between $400-500. That's bad, but what's worse is the pricing. Because Korean operators charge on a per-bit basis, the cost of downloading a music video can exceed $6.50 - or roughly 20 percent of the average Korean teenager's monthly phone budget. Which is why Korean 3G users suffering from sticker shock at phone bills in excess of $350 can be forgiven for feeling like the operators are trying to recoup their massive investments in just a few billing cycles.
Expecting 3G users - who, in Asia, are primarily 18-28 year olds - to increase their mobile phone budgets by a factor of 10 is simply not a sustainable idea to build a business upon. Yet what Asia's SMS experience has conclusively proven is that there is huge demand in the region for mobile data services.
The ringtone market in Asia, for example, is now worth $1.3 billion and is expected to reach $3.6 billion by 2007, according to Pyramid's Hsu. That may be small change compared to the huge investments operators have made in next-generation networks, but it's enough to sustain the hundreds of MSPs who are making the bulk of their money from ringtones.
In terms of next generation mobile services, Asia's MSPs have done all they can. Their innovations have created a booming new industry and a demand for mobile data where there was none before. For now, they can only wait as the regions operators work out issues such as pricing to entice more subscribers to make the move to 3G.
Because in Asia, as elsewhere, the 3G game is ultimately the operators to lose.
Though they may be just four friends operating out of an apartment or a company with a staff of a hundred in one of the region's gleaming high-rises, it is the creativity of these MSPs that has made mobile data services the most vibrant new industry in Asia. If 3G gains widespread adoption, the explosive growth of this new industry could continue well into the next decade.
But for now, that is up to Asia's operators who's game it is to lose.
Eric Ransdell is the former Silicon Valley Bureau Chief for US News and World Report magazine. Now living in Shanghai, he covers mobile technology in Asia.