The Mobile Device Investor and the Bubblegum Theory

While we still don't know the impact of Ovi, iPhone, or Android on the dynamics of tomorrow's device landscape, we know that "End Users" have evolved into sophisticated buyers of new devices, especially as subsidies gradually decline.  Although I don't think anyone quite knows where the value is going in the new mobile ecosystem (is it migrating to software, devices, services, networks, content…?), everyone is trying to understand how to best monetize the new mobile economy as relationships between all the players - operators, manufacturers, software developers and Internet /media companies - shift. There are no spellbinding stories yet.

In my last blog, I tried to formulate the term "mobile device investor" to drive as large a wedge as possible into the idea that mobile consumers are simply End Users - people who are unable to multitask when chewing bubblegum and only in search of a good application or service to contribute to self actualization. In today's world, mobile device investors are typically not End Users praying for the next killer application (these, as far as I have seen, do not really exist in the mobile market). Rather, consumers today are increasingly acting like investors and have heightened expectations for mobile devices - they expect these to continuously improve and evolve (Apple and Nokia are two of the few companies that deserve an underscore on this point). In this sense, devices increase the value of customer ownership in a big way (especially when combined with brand & access).

Yet how can operators make this innovation process repeatable and scalable for an entire industry, and not just for one or two very large (extremely innovative) consumer electronics companies?  To begin with, interest in many new device categories - Netbooks included - by mobile operators is not so much about a new play to open new markets, but rather a new way to focus on consumers that want devices that mold to their lifestyles.  Many pundits in the mobile industry argue that this will ultimately translate into a world where we will see multiple-devices in each room, purse, pocket, car, etc. Clearly we are only at the tip of the iceberg in discovering which other device categories could emerge as revenue opportunities in wireless in the next 5 years, and connected consumer electronics companies have only started to identify what other opportunities exist beyond the phone.

Although the product experience has been the ultimate way for operators to retain subscribers (while creating sticky data strategies that generate new revenue), there are few examples of compelling new services that create a paradigm shift in attracting new subscribers. As a result, a global (not-so-silent) revolution among carriers is occurring on two complementary fronts:  one where the operator is completely redefining its user experience by becoming a full software developer (and owning a significant piece of the open source software stack), and the other where carriers seek to develop & innovate "tail end value" in the mobile device itself as consumers increasingly demand devices that mold to their lifestyles.

With this in mind, the “consumer as mobile device investor” theory means that devices are not only the "killer housing" for the compelling user experience, but also a vehicle for operators to stay ahead of pioneering manufacturing and media/Internet players wishing to shake up the status quo.  Indeed, waiting in an anticipatory mode for the next iPhone is likely not the way operators want to drive data revenues.  For example, preempting the next big device is exactly what mobile operator 3 did by introducing handset maker INQ's so-called "Facebook phone," which integrates social networking information and status updates in its contact list and offers an extremely easy interface for people who have never used data-centric devices.  This is not just an extremely special device, but one that is not possible under most current operating systems (Windows Mobile is too inflexible, iPhone too verticalized).

Now, as operators begin to discover where they can uniquely add value – and how to leverage that value -- service providers are increasingly aiming at more effective ways to influence the device investor. This includes developing more open network environments and, of course, embracing open source as a high potential customization phenomena. Enter Android, an operating environment that is rapidly morphing into a beloved ownership target for operators and producers of mobile devices (I will not attempt here to summarize why). This year, we hear, Android volumes will double (if not triple) the penetration that iPhone achieved in the first year - thus it is easy to imagine how dozens of Android enabled devices will ship in 2010, allowing operators to apply innovative business models in multiple ways and leverage Android as a strategic platform to attract mobile device investors of all shapes & sizes).

Not likely, you say?  You recently saw that the iPhone claims nearly two-thirds of the mobile browser share? This data however offers only a snapshot of what is really happening, and does not say much about a platform's ability to natively, easily, and profitably deliver internet-based services, when, if we take Windows Mobile as an example, despite selling over 20 million handsets in 2008 alone, it still only drives some 7% of the mobile internet traffic,  while Android, having sold about one million handsets in total, drives an equal amount of mobile web traffic.  If you were an operator looking for a strategic platform from which you could attract new device investors, drive a new business model, new service revenue, or a new user experience, which would you choose?

The browser on the G1 may or may not be a pleasure to use, but when we look at which OS’s will dominate the ‘beyond the phone’ markets, it is becoming increasingly clear that the operator response to the device investor will decide the future, and the buyers of such devices are increasingly becoming long-term investors who can both chew bubblegum, search the Internet and make phone calls at the same time.