Editor’s Note: Welcome our Monday feature, Analyst Angle. We’ve collected a group of the industry’s leading analysts to give their outlook on the hot topics in the wireless industry. In the coming weeks look for columns from Current Analysis’ Peter Jarich, M:Metrics’ Seamus McAteer and Ovum’s Roger Entner. Click here to read past Analyst Angle columns.
By Chris Ambrosio, director, Wireless Device Strategies Service, Strategy Analytics
I am not fond of kicking a company while it’s down. Reorganizations, aggressive cost-cutting and employee downsizings are painful enough. A self-righteous analyst making obvious observations only rubs salt in the wound. Plus, avoiding this practice makes it much easier to get the free devices when they start giving them away again once business improves!!! That being said, there are lessons to be learned from kicking the dead carcass of an outright failure. This is more often than not a useful and often necessary exercise.
Witness the demise of Mobile ESPN. As this cadaver rapidly stiffens, what lessons are to be learned from its unsuccessful experiences?
A. Be realistic in your expectations and have a contingency plan.
B. Listen to the obvious—Voice calling is still the primary need of cellular users. On average, 11 percent of the major U.S. operator’s revenues are realized from data including SMS. Let me make it a little clearer—that means 89 percent of what users spend is spent on calling and talking to someone.
C. Your content is valuable but in itself is not enough. I consider myself a sports fan and liked the content that Mobile ESPN made available. However, I am a sports fan that holds investments, listens to music regularly, reads world and business news, and works full time. Mobile ESPN was not interested in demonstrating that its service even tried to satisfy these basic necessities, of which a few are far more important then daily sports news. Disney and Amp’d need to broaden the message to show how they meet the core requirements of most user’s daily life and experiences. Once these core requirements are met, content becomes a much bigger draw.
D. Don’t base your marketing campaign on the group that no one wants to be in. Mobile ESPN’s marketing theme was focused around that dopey individual fantasy gamer that no one can stand. Anyone in a fantasy league knows who I’m talking about, since every league has one. It’s that one obnoxious guy who seemingly spends 12 hours a day reading and absorbing sports news. The one you dread having to call for the draft, trade and scoring updates. I will leave it to your own experiences to identify potential Disney and Amp’d stereotypes, and hopefully we’ll avoid seeing them as the centerpiece of mainstream marketing messages from these players.
E. Device model and brand diversity is requisite, not optional. I was glad to hear Amp’d Mobile will soon expand their handset portfolio to include the Motorola Razr. The next thing they need to do is add about ten more models from four or five different brands. Benchmarking research in our Wireless Lab has shown consistently that handset brand and style and design account for 55 percent of the buying priority. With different tastes and brand perceptions, the availability of too few brands and models is dangerously limiting for new entrants needing to establish competitive benchmarks already established by major operators.
F. MVNOs must offer a significant number of handsets for less than $100 retail. Our research shows that the typical user pays around $65 for their handset. A full 30 percent of users report they paid nothing for their handset. With subsidies, major operators have successfully convinced users that a low cost of entry is a vital necessity when choosing a handset and operator. This will only increase in importance. Operators are increasingly using two- and even three-year contract terms to increase the up-front subsidy to get expensive, feature-rich handsets into the handset of their subscribers.
G. Do “minimal customization” on a meaningful number of handsets. This is a necessity. Realizing that your users will spend the large majority of their time in NOT accessing your content (89 percent of operators revenues are derived from someone calling someone else), make it easy to find my phone book, include a speaker phone, and add Bluetooth for headset usage. There should still be a few highly customized devices for the select few content aficionados who will want them, and these products should still be in flagships in primary mid and high-tier product SKUs. But there should be a larger number of more basic handsets offering minimal levels of customization at lower costs. Suffice it to say that device vendors will flock to you for these product SKUs as these types of devices offer a much higher profit potential.
H. Get users on board and then upgrade. Executing on points A through G will get subscribers. Once they subscribe, even if it is only for voice and SMS, they are still a captive audience to which multiple avenues are available for pushing themed content. This is where MVNOs need to focus to differentiate their position—on skillful manipulation and packaging of portal and off-portal content, device upgrades, and push-based marketing messages offer opportunities.
I am bullish on the outlook for MVNOs in the U.S. Over the long-term, themed/content specific MVNOs have the marketing-savvy and brand draw to make a highly profitable business. However, the cellular market is currently in a transition phase where users are ever-so-slowly learning the value and the benefits that wireless can offer them in their different life experiences. Themed/content specific MVNOs are arguably better-positioned to educate users on these benefits, as well as to educate them on new, wireless-based content consumption models. This will take time, especially when it is occurring simultaneously as mobile operators are learning the same lesson, in addition to how to price and market these new applications. During this transition time period, themed/content MVNOs need to play the game within its current boundaries and push hard to expand them or risk being the next carcass to be hung and quartered.
Questions or comments about this column? Please e-mail Chris at [email protected] or RCR Wireless News at [email protected].
