Only slightly bent

I’ve been somewhat skeptical on Android over the past couple of years. Now, however, it seems that Google is on to something that can be a game-changer on a few levels – free turn-by-turn navigation with Android, essentially delivering a possibly mortal blow (in terms of direct revenue) to the only significantly profitable location-based service the world has seen.

Now, I’m still not a big fan of the Android devices; even the new and praised Motorola Droid somehow fails to impress me. But it does, along with many other devices coming out soon, does give Android increased momentum. The success of Android still rests on device manufactures coming out with compelling devices and the Android-buzz/craze has yet to infect the ‘normal’ users.

But navigation is a billion-dollar business. If a significant player like Google starts offering decent-quality navigation for free, the others – namely TomTom / TeleAtlas & Nokia / Navteq, the two major owners of navigation data – are going to have a problem.

There’s a decent wrap-up of this development here.

In an ideal world (from the consumers’ point of view anyway), Nokia would adopt Android as their platform to eventually replace Symbian. Symbian as a platform, though still dominant, is heading for life support and inevitable death by a thousand cuts in the not-too-distant future. Maemo could make up Nokia’s other platform and Android the other. I mean why not? Nokia has never really excelled in the software space but can build and distribute awesome phones.

This is a cross-post with my contribution at genmobilec.org

This might seem like a stupid question – after all, if you’re hooked on for example Twitter, your service is being run by Twitter. Right?

Wrong. It is in fact likely that the service is running on the benevolence and patience of venture capitalists and other investors who believe that somehow, someday, it will be profitable. Because right now, more often than not, Internet services aren’t profitable business.

Facebook was for long a loss-making enterprise; and they made some significant losses. It is only now that they might be reaching the break-even point. Twitter on the other hand is expecting their first revenue (i.e. any money coming in at all) this quarter. Of course, since most of these companies aren’t public, it’s difficult to know exactly their financials. However, it’s still a safe bet to say most are not even breaking even.

Now, turn the attention to mobile operators, who have been accustomed to very reliable sources of revenue (voice calls). They are now having to venture into uncertain territory in order to continue on the growth path and try to fight against the somewhat inevitable commoditization of their business.

In one sense, operators have had it too easy. SMS has in just 10 years become one of the most incredible money-printing machines any industry has seen. With SMS, the operators enjoy what can only be described as excellent (or absurd, depending on your point of view) margins. And the enabling equipment is a bargain; SMSCs often have RoI times measured in hours or days. Premium SMS has, on the other hand, enabled many successful mobile services despite the operator margins.

But there are limits to growth in SMS and voice calls, so operators are looking to data to capture that growth. It’s easy in theory – just get people to sign up for $10 or $20 or $30 per month data package and voilá, your ARPU is suddenly back on the growth track. In practise, however, it’s not so easy – mainly because people are often difficult in the sense that they need a reason to spend their hard-earned money So the operators must be able to give a compelling reason for customers to sign up for a data package.

One interesting thing many operators are doing when searching for that reason, is turning to third party services. What’s more, they are turning to the above mentioned unprofitable Internet and mobile Internet services. Over the past few months, I’ve seen entire advertising campaigns by operators such as Elisa in Finland and Three in Australia that were focused on promoting just one service – Facebook, and mobile access to it. Riding on the popularity of Facebook, the operators want to sell you data plans and even devices.

This presents another interesting aspect; people have come to expect that Internet services are free. People have also come to expect that mobile services are not free, that you have to pay ludicrous amounts for simple things such as ringtones. But what happens when these worlds collide in the form of mobile Internet?

The jury is still out on this one, but really it all boils down to a simple question: what would you be willing to pay for?

Because contrary to what some people like to think, advertising will be unable to support all the services it’s now envisioned to support – at least in its current form. So how about Facebook or Twitter at $5/month? Would you subscribe?

The answer in short, it seems, is “not very”. And that’s because modern societies are so massively reliant on two things: electricity and fossil fuels. Our dependence on electricity in particular and how vulnerable our delivery system for it is, is highlighted by a recent report from NAS. The New Scientist has a good article on it (see links below) and it outlines how a simple, big solar storm (similar to what has taken place before, and will take place again) could wreak havoc almost instantly. It’s best to just let the article speak for itself:

According to the NAS report, a severe space weather event in the US could induce ground currents that would knock out 300 key transformers within about 90 seconds, cutting off the power for more than 130 million people. From that moment, the clock is ticking for America.

First to go – immediately for some people – is drinkable water. Anyone living in a high-rise apartment, where water has to be pumped to reach them, would be cut off straight away. For the rest, drinking water will still come through the taps for maybe half a day. With no electricity to pump water from reservoirs, there is no more after that.

There is simply no electrically powered transport: no trains, underground or overground. Our just-in-time culture for delivery networks may represent the pinnacle of efficiency, but it means that supermarket shelves would empty very quickly – delivery trucks could only keep running until their tanks ran out of fuel, and there is no electricity to pump any more from the underground tanks at filling stations.

Back-up generators would run at pivotal sites – but only until their fuel ran out. For hospitals, that would mean about 72 hours of running a bare-bones, essential care only, service. After that, no more modern healthcare.

The truly shocking finding is that this whole situation would not improve for months, maybe years: melted transformer hubs cannot be repaired, only replaced. “From the surveys I’ve done, you might have a few spare transformers around, but installing a new one takes a well-trained crew a week or more,” says Kappenman. “A major electrical utility might have one suitably trained crew, maybe two.”

Within a month, then, the handful of spare transformers would be used up. The rest will have to be built to order, something that can take up to 12 months.

Even when some systems are capable of receiving power again, there is no guarantee there will be any to deliver. Almost all natural gas and fuel pipelines require electricity to operate. Coal-fired power stations usually keep reserves to last 30 days, but with no transport systems running to bring more fuel, there will be no electricity in the second month.

Read the article and the report for more. But all this provides some serious food for thought; isn’t a society that could collapse within days or weeks just a little bit too reliant on electricity? Shouldn’t we be better prepared for events like these?

You bet – and I bet we aren’t even thinking about it in the right places.

Resources / further reading

• New Scientist article: Space storm alert: 90 seconds from catastrophe
• Space Studies Board of National Academy of Sciences (NAS): Severe Space Weather Events–Understanding Societal and Economic Impacts (read online for free!)
• A semi-related book: Electric Universe (my review here)

Most of us use many Internet services without paying much attention to the underlying business models – or lack thereof. The following observation by the Economist a couple of weeks back has a more profound impact than people are so far willing to admit:

Perhaps most dangerously, Web 2.0 still had only one business model, advertising, and the Valley was refusing to admit that only one company (Google) with only one of its products (search advertising) had proved that the model really worked. The older internet firms, Yahoo! and AOL, were doing their best to grab a piece of the action. But the “next big things” were selling negligible advertising, often on one another’s sites. Not one of them has become an advertising success in its own right.

Pretty much the only proven business model remains search advertising; what’s more, only one company has managed to really pull that one off. Think of all the Internet services you use, most of which are free for you to use. But since there are no free lunches, someone is paying for them. Chances are that most of the services you use are losing money and are thus unsustainable in their current form. Take Facebook for one – a loss-making business. Youtube? Estimated to be losing money at a whopping $500 million per year.

Clearly a service that only loses money cannot last forever. So, there are basically two options: come up with a way to financially support the service or eventually kill it. Advertising cannot feasibly support everything on the Internet and we can hardly rely on benevolent venture capitalists to keep pumping money forever, so in the end it’s you – the end user – that will have to pay for what you do. “Freemium” models work well for some services (e.g. Flickr), but it’s unlikely to work for all.

The billion-dollar question then becomes: what would / will you pay for?

While I already pay for several services, there are interestingly also services for which I’d like to pay but that do not offer a possibility to do so – in particular, I’m dying to pay for GMail; I would love to have a premium version of @gmail.com GMail with guaranteed up time and other nice things.

When one gathers the main media consumption patterns of people and sums up the figures, you end up with an interesting dilemma. For example, Finns:

• Watch an average of 3 hours 13 minutes of television daily [article]
• Listen to the radio an average of 3 hours 15 minutes daily. [article]
• Spend an average of 1.5+hrs on the Internet daily, though this varies a lot depending on which study you believe.
• Read the printed media about 2hrs per day.

That’s about 10 hours. Add 7hrs a day for sleep, 8hrs a day for work and 1hr for commuting and there’s no time for anything else but work, sleep and media consumption – and not even time for all of that. So it’s clear that exclusive media consumption – i.e. a situation where you for example only listen to the radio and do nothing else – must be somewhat of a rare thing. Do you actually ever only listen to the radio? Or even primarily listen to the radio?

This may not sound all too interesting. But consider this: the value of the channel to its main financiers – currently advertisers in almost all instances – is partly in how much you focus and pay attention to the channel. If you don’t pay attention to the channel, you’re likely not to pay that much attention to the ads either. And this is where it gets interesting because the two channels that are most conducive to exclusive or primary media consumption are mobiles and the Internet.

While I have no studies to quote about this, all it takes is some commonsense thinking: the TV is often used as a generic background noise generator in many families, with no real attention paid to it. The same goes for the radio during your commute. But whenever you use your mobile device, already the physical limitations of the device dictate that it must usually command your primary attention. And the same goes for the Internet – it usually entails reading and it’s difficult to primarily concentrate on anything but the reading.

There is a reason why Google makes so much money and why Blyk seems to be thriving.

It’s also why you should not underestimate the power of mobiles in the long run. At the moment, most of the money might be in voice calls and relatively stupid content like ringtones, but give it 10 years and you’ll hardly recognize the landscape.

Elsewhere, this ties in with Tomi Ahonen’s long-proclaimed thesis that mobile is the 7th mass media, with this exclusivity-argument perhaps being an additional point for the claim.

Among industry experts, it has long been known that so-called “always-on” mobile Internet applications present a huge and currently largely unsolved problem for battery life longevity. There various technical and non-technical reasons for this that I will not get into here. The point is that among normal users, it hasn’t so far created any outrage – not because it’s not a problem but primarily because people do not use always-on Internet services in significant numbers yet. But as that may change, it’s good to see what you can expect when you do start using them. (as always-on, I mean applications that require TCP/IP connectivity to outside the mobile operator’s network at all times)

Let’s take one mainstream application as an example. Widsets, despite the braindead name, is a semi-popular application that is basically, simplifying somewhat, a glorified RSS reader with some scripting support. It’s a convenient application in the sense that you can have news etc update on the background and it works on lots of devices.

But what does it do to your battery? Should one care? Let’s take another Nokia application, Nokia Energy Profiler, and find out.

To cut a long story short and go straight for the bottom line, take a look at this graph. It depicts the estimated battery lifetime when the phone is idle (i.e. on normal standby mode) and when there is a WidSets application running on the background with just five widgets.

Would you start using an application that cuts your standby time by 80%? It means going from a phone that could barely handle a day’s activity to one that requires recharging before lunch.

It should be emphasized that this isn’t a Widsets-specific problem nor is it a Nokia-specific problem; similar figures can be seen for most if not all always-on mobile Internet applications on all devices.

Interestingly enough, there are many things developers, operators and handset vendors alike could do to alleviate the situation. But nobody is because nobody’s complaining. If mobile Internet services take off like many predict – and many more hope – we just might get enough people to complain about it.