Archive for October, 2005

3GSM 2006 in Barcelona

Saturday, October 29th, 2005

Regarding 3GSM, I have nothing important to offer but this:

You might want to start thinking about booking your hotel, as options are already thinning out. I just booked my travel, and I was reminded of a tip I have for you: Do not stay at the Ritz Hotel. (It was recently renamed The Palace.) You have probably heard that the quality of hotels in Spain is a bit lower than in some other European countries. So, if you are traveling from somewhere outside of Spain, you probably want to try to make up for this by booking one of the nicer hotels.

In my opinion, the Palace Hotel in Barcelona, formerly The Ritz, is neither Palatial nor Ritzy but that’s not why you shouldn’t stay there. You shouldn’t stay there because they do not have irons and ironing boards available to guests. If you are traveling any distance, when you get to your hotel and open your suitcase, your blue shirts and khakis will be wrinkled. If you stay at The Palace in Barcelona, you will not be able to iron them. That means you get to walk around the conference in your wrinkled blue shirt and khakis, all unprofessional-like, with people pointing at you and murmuring.

Yes, you can have them press your clothes for you, but you can imagine how unaffordable that option is. I recently spent $100 to have just a few items pressed. Does your company’s expense report policy allow for $100 in pressed blue shirts and khakis?

I cannot recommend another hotel in Barcelona, but I can say as a recent guest that I would not recommend this hotel for a business traveler. Before you book your hotel in Barcelona, be sure to call ahead to find out if they have such things that you may assume any hotel would have, and don’t assume “5 star grande luxe” actually means what you think it means.

Posted in Mobile Industry | No Comments »

There is more headroom for INSP

Wednesday, October 26th, 2005

Like I said before, INSP is undervalued. Even with today’s boost on yesterday’s earnings call, this company is still only trading at roughly 2x cash on hand. I read Needham and Co.’s report this morning maintaining a Buy rating for INSP with a target of 28 and would personally peg it higher than that for the year. (There really is seasonality in the mobile content space, and December tends to pleasantly surprise everyone.)

Some analysts disagree with such a rating, like Merriman Curhan Ford analyst Richard Fetyko, who downgraded the stock from Neutral to Sell. Fetyko based his downgrade on the competition facing the search business. “The search and directory segment has hit a wall and should begin unraveling in the coming quarters. Unfortunately, that also happens to be the company’s higher-margin business,” He said. He probably has a good point, considering the heft of Google and Yahoo. I can’t imagine the effect of their market presence is accretive to InfoSpace.

Yesterday I sent my girlfriend an IM a couple of hours before the earnings call: “I think I am going to put $100k into INSP.” She replied that it is a volatile stock, but what the hell - I should invest in what I know. I didn’t end up placing the trade. Schadenfreude anyone? That’s ok, I’m not mad at you. I didn’t do it because she is right. I should invest in what I know, and as much as I feel I should know about INSP, I really don’t know this company despite the fact that the lion’s share of their mobile revenue is being driven by the company I used to work at (Moviso) which they bought in 2003.

The increase in the share price today is from the retail market, mainly speculators and shorts covering at the bell. I don’t get the impression from the message boards that these are serious investors looking optimistically at the mobile content space as a growth opportunity. To get my money as a buy and hold investor, (and to attract serious institutional investors) three things have to happen first.

Here are my thoughts, (for whatever they are worth) many of which I mentioned in an earlier post but want to expound upon now, and this is the last time I will do so:

1) It is my opinion that InfoSpace should be a pure mobile play. This is their only path to greatness and I would be surprised if they don’t realize it. Fetyko is one analyst looking at the search side of their business and doesn’t like what he thinks he sees in the future. I cannot comment on InfoSpace’s Search business since I don’t know enough about it, but my personal opinion is that it is a valuable asset that will not perform to its potential as long as Google is around whereas in the mobile space they are competing with relative newcomers and the space has not consolidated yet and they have as good a chance as anyone at becoming the dominant player. Bottom line: I don’t want to invest in a search company that is in any way competing with Google. If I like Search, I will invest in Google. After Diller bought AskJeeves, other media companies realized how important a search strategy could be to their core business. A major media company could utilize search in a very different way than the major search portals are doing today because they could leverage their reach in other channels to complement their existing media properties with search. Newscorp is my top pick to buy InfoSpace’s search business, and I’ll bet InfoSpace is strongly considering selling this asset to focus on the core mobile business that has mostly been driving their growth for the past 8 quarters. But I don’t think they should sell it off, and I don’t think they should focus on the mobile business that has made them money in the past. Rather, they should refocus their search infrastructure to be the dominant search player in the mobile space.

When InfoSpace finally decides to recognize their biggest opportunity and be a mobile-centric company, the onus to deliver the value will be upon Stephen Davis. Stephen starts in mid-November, and here is the list of objectives I would love to see him focus on:

- Articulate a clear vision for InfoSpace about mobile media and information

- Shore up media infrastructure relationships with key carriers and slow the market erosion going to the likes of Motricity

- Invest internally in organic growth and introduce consumer-focused branded information, communication and media applications, essentially shifting from a service-based company to a product-based company

- Initiate direct consumer marketing for products not competitive to their white label business

- While initiating various vertical products around their core assets, make absolutely sure that nobody is at all unclear of their absolute dominance of the mobile local search business

2) Forget mobile entertainment that has anything to do with licensing Hollywood content. First of all, it simply isn’t in their DNA to be a mobile entertainment company. Frankly, it wasn’t in our DNA at Moviso to be a mobile entertainment company – our success was based on technical aptitude, early arrival to the market and the strength of exclusive white-label provider relationships. Nobody on my team at Moviso was particularly adept at dealing with the music industry. I was admittedly the worst and was only focused on one thing: Increasing daily transactions. Hiring Stephen and putting Jules Haimovitz on their board is an indication that they are planning to move more in this direction and I think it is a mistake for two reasons:

a) They will continue to get squeezed by their distributors. Here is a funny story: (but not funny haha) I was on my way out of town one weekend and Paul Palmieri from Verizon Wireless (25% of our revenue at the time) calls me on my cell phone.
“Hey.”
“Hey – what’s up?”
“I need another twenty points.”
“You need another twenty points? Of margin?”
“Yes.”

“Um, Ok.”

There was no flying out for a meeting. There was no powerpoint deck. Had I said no, Verizon Wireless would have ended our relationship. He made the same call to Carolynn and every other ringtone provider. Every mobile application developer or service provider serves at the pleasure of the wireless carrier, and particularly in a white label relationship the distribution is more valuable than the content. So, you can expect continued downward pressure on margins from the distribution channel as long as InfoSpace continues to focus on white label services as opposed to off-deck marketing and distribution.

b) They will continue to get squeezed by their licensors. The first ringtone license was $.01 per ringtone from the publishers for an experimental mechanical license. Then it went to stat rate, which at the time was $.075 and later went to $.082. We were able to establish a fairly industry standard rate of either the stat rate or 10% of gross, whatever was greater. At this rate, you can expect dreamy 75% gross margins. That was for polyphonic ringtones. Then what we called TruTones came about, and in addition to the mechanical license, we had to get a master license from the labels and they want (and get) 50% of gross. This is in addition to your 10% mechanical license. Now add a significant rev share to the carrier. Now look at InfoSpace’s gross margins hovering around 20%. And they are signaling that they want to stay in this business?

On the earnings call, there were two questions to David Rostov about margins which he blatantly dodged. Analysts wanted to know A) what percentage of mobile revenue was attributed to ringtones and B) what percentage of that was attributed to TruTones. The answers are A) a lot and B) a big and growing number. The analysts know that they are facing market share erosion from the former and margin erosion from the latter. Rostov said they don’t really break their revenue down that way, though of course they do internally. I do consider it fair of him to say they don’t report their numbers at that level of detail for competitive reasons.

Here is a true statement about the music industry: They get paid. And, they play nice as long as they are getting paid. You think they are washed up, marginalized by technology, inefficient dinosaurs? Good – they like to be underestimated. Try an end run and you’ll find the RIAA so far up your ass that you’ll actually cough up money. The simple fact of the content business is that the value always finds its way to the owners of the content, and the intermediaries get disintermediated as efficient point and click tools replace entire cottage industries built around them.

Being in the middle of two powerful margin-decreasing forces is bad, but you can still make a buck, as InfoSpace has clearly demonstrated. Plus the volume is so impressive that I don’t advocate simply abandoning this business. Rather, they should be forecasting the sunset of this business line and focus now on putting in place the differentiated products that can replace this revenue in the future several times over.

It is difficult to look sideways at impressive success – the ringtone business became a fountain of money that they simply couldn’t turn off, and much credit is due to the smart people who work at InfoSpace who turned what was a nascent business into a solid success. The only criticism I can reasonably offer is that they are apparently choosing to be in the middle of these opposing forces at a time when there is wide open opportunity in several categories where they could dominate that are direct-to-consumer and don’t require expensive content licensing agreements. If they stick to this strategy, the first big licensing deal you will see them do will be exclusive mobile rights to a blockbuster movie, a major game or a hot entertainment property like American Idol. This will be a mistake.

3) Plow a ton of money into R&D. Yes, as an investor I want to see some strategic acquisitions because the cash sitting in the bank does me no good. If I want to invest in cash, I will open a money market account. Organic growth driven by internally-developed products is the best chance they have to dominate the mobile space. They have such a strong kernal of IP they could build around that it would be a shame to not capitalize on it. Despite the various reports about the top talent leaving recently, I frankly would argue that a long-overdue changing of the guard is a very positive move for this company. Proprietary IP, not licensed content is what grows value. I was excited to see the mobile search product in action, and I expect at least one major carrier to be offering it soon. That is a step in the right direction and one I hope they continue to replicate because it is the only way to truly build enterprise value.

Maybe they are executing on some stealth multi-year development strategy and they are about to astound the industry with some crazy cool special sauce. I dunno, but I don’t think so, as much as I wish it were true.

In summary, I have to say that had I not gotten distracted yesterday with other things I probably would have placed that trade and I would be a few bucks richer today. That means that on some level I believe in the massive upside opportunity this company has. Mostly, I want to see a bellwether for the mobile media space to legitimize it as credibly investable. In my opinion, InfoSpace is the company closest to being able to achieve this important dominant position.

When you step back and look at it, the suggestions I make are not radical – they just address the primary items any investor wants to see: Clarity of purpose and direction, a solid plan to get there and a defensible business model not subject to the whims of third parties or planetary alignment. To be fair to the 600 people at InfoSpace, they have built a very valuable company and it is easy for me to make sweeping statements about what should be done from where I am standing. That said, I know this industry better than most (but maybe not as well as some) and I think my view of this company and their opportunity is credible and I wouldn’t voice my opinion but for the greater good of an important industry in need of role models. Lastly, I realize it is hard to escape organizational inertia, but it can be done and I hope they do because they are ::this:: close to being the dominant force in the mobile space. They have massive upside potential and I wish them luck.

Posted in Mobile Industry | 1 Comment »

Lower Your Garden’s Walls, Lower Your ARPU

Monday, October 24th, 2005

Lower ARPU aside, the industry is still growing. But there is one trend that could kill the ARPU driver with the greatest potential.

Total Telecom reported last week that Global mobile ARPU fell 13% in the second quarter as compared to the same quarter last year.

Eastern Europe saw a 27% decline and Asia saw a decline of 18%. The U.S. saw a comparatively smaller decline at 2%.

The reasons for declining ARPU are generally understood, but there is some conjecture about the future. Here, let me conject…

Competition Drives Pricing Pressure
Open any Sunday paper and you’ll see a full-page ad for one of the top three U.S. carriers revealing their apparent race to the pricing bottom in order to attract more subscribers. The offer is invariably increasingly x000 more minutes for a decreasing $x9.99 per month. So while the average monthly bill has decreased almost by half in the past ten years, the total number of subscribers has increased more than 10x, which has driven revenue over 60x to the $100 billion U.S. wireless industry today.

Apparently, there is massive demand for communication. Good to know. Charts about dollars that go up and to the right always look pretty healthy, so who really cares about Average Revenue Per User when it is apparently being offset by volume? There are some reasons to be concerned:

The cellular telecommunications industry is competing with FREE
VoIP is one of the most transformative technologies of the decade, and possibly the century. What happens when free or nearly free IP-based telephony goes mobile? Rather than employ a metered or semi-metered model, the communication provider of the future is the ISP, providing access to data via tools that consumers will find themselves (like a Skype client for their multi-air interface handset.) Even then, people will only pay for QOS, which is the reason I maintain my T-Mobile Hot Spot account despite the fact that I am increasingly finding free though sometimes unreliable connectivity in places I didn’t expect to find it before. I should note that QOS can still be made available for free, since the cost of offering it in a limited geographical area is simple and cost-effective especially if your primary business model is to get people to sit in your store and buy stuff. Now when I absolutely have to call Europe, I go to a Panera Bread Mecca and do it for free where I know the signal will be strong and uninterrupted. (I also love to spend money there to reward them for their apparent vision of the “Atkins Backlash” driving millions of carb-starved people to the yeasty, floury comfort that only freshly-baked bread can deliver.)

If you are saying to yourself, “That will never happen,” think about some other industries that have found themselves competing with free to their great detriment. The music industry ignored the MP3 format and the internet to their great detriment and they will never recover. True, it didn’t completely kill their business, but it did unseat them as the only source of content. Once they lost control, it was (and continues to be) a downhill slide from there.

Panera won’t put Cingular out of business, but isn’t Google planning to wire the country with free wifi? I predict a coming chilling effect on the cellular telecommunications industry. After all, I am not using my cell phone anymore to call Europe. That is a contributing factor to declining ARPU, and I wonder how big that trend is. Still, this is a legitimate business issue grounded mainly in free market competition.

The cellular telecommunications industry is competing with other verticalized communication services
I noted recently that I have:
- This blog,
- A personal blog,
- A channel on Rabble,
- A travel blog,
- A Skype ID,
- 2 primary AIM handles,
- 1 primary business email address,
- 2 primary personal email addresses,
- A gmail account for large files,
- 5 Yahoo email accounts, (1 spam catcher, 1 Yahoo ID and 3 for which I have forgotten the password)
- A profile on Evite that I use from time to time for that kind of stuff,
- A profile on Match.com, (purely for research purposes)
- A WAP site,
- A fairly active and useful profile on LinkedIn,
- 3 mobile phones, (one unlocked which I use primarily for voice and when I travel abroad, one test phone and my Nokia N90)
- 2 laptops,
- and a SideKick.

Think about your own list and it probably won’t be much different from mine. You have multiple emails, IM handles and clients, two-way publishing points, etc. I am not unlike many people who are verticalizing their communication because there isn’t one perfect tool that does it all. In 1999, I had 2 email addresses and a Nokia 6190. That was old skool.

The net result is that my time and attention is finite, but I am communicating more in general. Therefore, the biggest opportunity to the cellular telecommunications industry is to offer the kinds of applications that verticalize my communication. Note that only one of the services I listed is voice-centric. If I am using my various communication tools more, and none of them are available to me via my primary mobile device, this will drive ARPU down since the percentage of my consumer wallet allocated to communication that intersects my mobile device is surprisingly small. They’ve got me for voice and SMS for sure, but as my communication options increase, the total amount of time spent on cellular voice is simply decreasing. I personally think the biggest opportunity for network operators to grow data ARPU is to focus on communication-based applications since it is in line with their core offering, but of course I have a bias. This is also a function of free market forces, and if carriers choose not to provision the kinds of communication applications that people are using, that is their business, and a perfectly legitimate reason for decreasing ARPU.

The cellular telecommunications industry is selling data
In and of itself, selling data and not just voice is generally seen as a step in the right direction. I am obviously in favor of this trend. I have made the argument before that in some cases it might cannibalize other revenue, but even that is not such a big deal since the total sale of data (primarily driven by high-margin SMS) is increasing. The argument I have made before is that when you download a game and pay a one-time fee, the marginal value to the carrier is very high, but then you use the game offline potentially for months or years without utilizing the network. It sounds like a favorable “gym membership” business model at first (people pay but don’t use it) but when you consider that your offline game exists to fill your time when you are sitting in the airport, the opportunity cost of selling the game may be the value of the many SMS you might have sent instead if you didn’t have the game. It is a difficult argument to back up, and I have never come across a study on the topic, so if you know of one please let me know.

No matter. If it is even anecdotally true it is a legitimate contributing factor to declining ARPU, but not a big deal given the current volume and besides, the truly exciting games are network-based and I think that is the future of mobile gaming.

There are also plenty of other reasons for declining ARPU, and I think that in addition to the ones I mentioned, they are simply the result of healthy competition, market pressures and enabling technology which are all good for the consumer, particularly if the industry as a whole is growing.

BUT, there is one possible reason for declining ARPU I want to discuss that truly concerns me.

The cellular telecommunications industry is selling data off-deck

This is the ARPU driver with the greatest potential, and it is already in jeopardy.

Can the effect of Jamba be measured? What does this mean for the future of data ARPU:
Lawsuit accuses Jamba of making misleading ringtone offer
Jamster slammed for mobile selling practices

Verisign CEO Stratton Sclavos pre-announced that it would miss its 3rd-quarter consensus estimates due to weakness in its wireless business, citing among other things “new advertising guidelines and restrictions in several key European markets.”

It is possible that the translation of that last part might go something like:
“Our somewhat aggressive business model that pushes content to people who in some cases did not know they were opting to receive what we push them had to be, ahem, revisited.”

I am not indicting Verisign, though there does seem to be some evidence to support the possibility that their business practices are misleading.

There are others. Try searching for “SMS.ac scam” and you’ll get an interesting mix of results mostly focusing on misleading business practices.

Here is the problem:
Wireless carriers operate in a highly regulated industry and are fearful of offering content that may be objectionable, and rightfully so. The solution is to offer billing services to various 3rd-party content providers and/or allowing their users to get to content they are not provisioning but are nonetheless profiting from. Such arms-length mechanisms as Premium SMS and BOBO arrangements are a perfectly reasonable way for carriers to avoid scrutiny, operate more like ISPs when it comes to data services and provide their subscribers the content they obviously want without having to actually provision it themselves. I personally think the carriers should be fully entitled to profit from the content we all know people want with impunity but unfortunately they have to work within the rules of doing business set forth by the FCC. With off-deck marketing, a wireless carrier can and should claim ignorance to the content of the transactions passing through their system, and as an added benefit they get to leverage the marketing power of their various unknown partners. Content outside of their walled garden is not their responsibility to police. I think it makes perfect sense.

The unfortunate part is this: The only business model that can be promoted in the environment I describe is “Push.” When you push someone something, you make your cut on the PSMS. Profit-minded capitalists are therefore incented to push as many PSMSs as they can, and that’s where business models get scammy. You see businesses that dupe you into a subscription when you were absolutely sure you only authorized a one-time transaction. Or you see businesses pushing you content you didn’t want and cannot opt out of. It’s like once they have your phone number and any kind of authorization (or not) they fire a very costly spam cannon at you. Then they amplify their business model by expanding their reach through channels like MTV and Nickelodeon asking you to text 12345 to short code 45678 to receive your free blah blah blah. Then it goes downhill from there.

The problem with push is that it is separated by a very fine line from spam. Email spam is annoying enough, but in the mobile space it is also very costly, and it would be impossible to do if the carriers weren’t lowering the walls on their walled gardens. I do not blame them at all, but it bears mentioning that the most important asset they have is the billing relationship with their subscribers. A near-frictionless billing mechanism like PSMS, if immediately and vigorously abused, will end up hurting consumers, the wireless carriers and all content providers (legitimate and otherwise.)

How many customers does a wireless carrier lose due to an abusive 3rd-party content provider? If the answer is one, it is too many.

We are about to see the same thing that happened with premium-rate landline billing. Tell me honestly – are you not afraid to dial a 900 number? You are almost guaranteed to see a $50 item on your phone bill if you dare dial one. It got so bad that the FTC had to step in and create a rule stating that consumers have to be able to see upfront what they are going to pay, what they get in return and what happens in a billing dispute.

I’ll bet you these are the basic dimensions you will find in the complaint filed against Jamster.

So let’s say the FTC steps in and makes a rule about premium rate billing on mobile phones. Would it matter? Did it matter for 900 numbers? No – if the FTC steps in, that means it is such a problem that it is far too late and we will never get the shit back in the horse. People will simply never send anything to a short code ever again. And there goes your hockey-stick data revenue.

This should scare the shit out of everyone in our industry given the number of people who believe data ARPU is going to replace declining voice ARPU. For that to be true, we must recognize as an industry that consumers respond to fair value for their dollar.

A carrier’s storefront is only so big, and it is difficult to monetize effectively. Off-deck marketing, leveraging existing audiences and promotional dollars, is the only path to increased data ARPU. Teaching consumers now that it is easy to get scammed on their cell phones by off-deck marketers is not the way to ensure the future data revenue streams that are going to be critically important when organic subscriber growth can no longer drive topline revenue in saturated markets.

So, a dilemma. You can ensure long-term customer satisfaction and keep your gardens walled and offer only vetted content and services that under your watchful eye will not abuse your customers, or you can take the short-term revenue gain now and manage by exception hoping that most of the 3rd-party services will be legitimate. It is a tough decision to make and I have not seen measurable evidence of the fallout from the handful of scam-based business models in the mobile space, but as the mobile phone number becomes the singlemost important piece of personal information it would be wise to offer consumers some level of protection lest they find their own way to do so.

Posted in Mobile Media | 5 Comments »

TravelPod Integrated With Rabble

Sunday, October 16th, 2005

TravelPod today announced their integration with Rabble. TravelPod is a great site, btw. I believe verticalized user-generated content is the most disruptive force in media, and I see great value in companies focused on a specific media purpose. TravelPod owns the travel blogging space by taking familiar self-publishing conventions and adding functionality that fits their vertical. (Their itinerary map thing that allows you to place flags on a map of places you’ve been is very simple and cool, and adds a lot of value.)

As far as strategy goes, I think this announcement tips our hand a bit, so I figured I would share a little about where we are headed and why I love this cooperation with TravelPod. First of all, we want to enable TravelPod users to download the app and take it with them on their travels around the world, so obviously a J2ME client is on the way for the 4th quarter to accommodate not only growing distribution in the U.S., but also so that we can facilitate our pending expansion into certain international markets. I brought the J2ME build with me to Europe recently and it worked great – we are currently in testing across a large handset matrix and you’ll be able to get it soon. TravelPod is a bit ahead of the curve from a distribution standpoint, but only by several weeks.

We generally view Rabble as a tool and a community. That tool is powered by our platform that is basically a proximity-based media networking engine for the mobile space. Rabble uses a subset of the platform’s functionality. We have some other applications in development now that will be functionally very different from Rabble, but are still powered by the same platform.

With Rabble, we plan to create consumer value over time in two ways:

1) As a Tool - we will expand functionality by adding useful features. (Some of these things you can easily imagine, like audio and video support, presence, etc.)

2) As a Community - we will give the community more valuable services to interact with, making Rabble a mobile media and communications hub. (Last week’s announcement about all of the indy record labels putting their bands on Rabble to help fans connect with their favorite bands is an example.)

The TravelPod integration is a good example of the latter. You can use Rabble in its native state to interact with an active and growing community of mobile users focused on blogging, messaging and social networking, but you can also use it in conjuction with some other site or service. We don’t reinvent most web-based blogging and social networking sites, but we do add mobility very well, and make the functionality appropriately simpler for the mobile environment than on the web. Rabble is growing organically unto itself but is also a sort of consolidation point for different types of social and personal publishing services in the mobile environment, enabling users of these other services to put the respective functionality in their pockets.

Making mobile apps is hard. Getting distribution and integration with billing systems is hard. Making it all work in an international cross-carrier environment and meet triple-9 uptime SLAs is hard. But that’s what we’re good at, so companies like TravelPod can add a bolt-on mobile strategy that comes with favorable economics without really having to do any more heavy lifting than a one-time backend integration. For the cost of a few hours of an engineer’s time, TravelPod now has another way to serve its customers by enabling them to access and update their personal travelogues from their mobile devices. This is great because people on vacation don’t usually bring their laptops with them. It adds value to TravelPod and it adds value to Rabble. Both companies further their respective strategies, we both make a few bucks and everyone is happy.

I guess you could call this part of our strategy “Rabble as Appliance.” Think of it as a mobile link that gets added to the value chain for any kind of social application. It is one more way to keep your users connected to the value your site or service provides. It is also in the market now, doing well, growing in subscribers, and we are building a critical mass of active, paying users that can be leveraged by companies like TravelPod, which we are happy to do because “leveraging the user base” in this case actually means “offering more valuable service” to our already happy users. Rabble has bidirectional integration with sites like TravelPod, Blogspot and LiveJournal, and there are many more on the way.

When I think about self publication and communication from a user’s standpoint, I really don’t think there is one tool that adequately enables me to do all the things I want to do. I have my channel on Rabble, which I personally use more as a local community networking tool here in San Diego, though I have made friends in NY, TN, AZ and other states. Aside from my Rabble channel, I also have this blog, which is limited in scope to our company and industry, but is my primary two-way communication platform about both. I wouldn’t blog here about the recent trip I took to Spain. For that, I set up my TravelPod travelogue. I also use LinkedIn more now than I used to, you can find me on Skype and I use AIM for most of my daily communication. I also still use my mobile phone for voice, though it is surprisingly infrequent. (A data-only MVNO would make a lot of sense to me.)

I have no fewer than seven active points of communication, each a vertical functional island that serves a specific purpose. The number of my verticalized communication tools is expanding, but what they all have in common is that I want them to be available wherever I am and whenever I want to use them. That means I want them all on my mobile device. This is why our Appliance strategy makes so much sense to me. The LiveJournal brand is deeply important to its users. We don’t compete with them, rather we enable them in the mobile space, along with many other verticalized communication tools that all share common functionality with the superset of our platform’s capabilities. And it is all presented in a simple but robust package on mobile devices. Very tidy.

So, without actually posting our product roadmap, I hope I have shared enough to help you understand why the TravelPod integration is exciting not only on its own because their service is awesome, but also as an example of the kinds of media networking apps we are in the process of enabling. I also hope this explains a little bit how we architected the platform and where we see Rabble with respect to certain types of companies that may look competitive to us but that we actually view as potential partners. I’ll remember to make a post sometime soon to go deeper into our Platform strategy. I’ve gotten a few emails from people asking for more content about our status and progress, so I’ll try to stay up on that. It’s hard because I want to be as transparent as possible without sharing strategically competitive information, so I try not to talk about such things until they are just about to happen. If you need to know something specific, please just ping me via email.

Anyway, I want to thank TravelPod for having a vision for at-the-moment personal publishing. We appreciate them taking the first step toward mobility with us early on. The next version of Rabble will have much tighter integration with them, and more features that will make travel blogging easier.

Posted in Rabble | No Comments »

The Mobile Media Era (With exciting InfoGraphic below!)

Sunday, October 9th, 2005

I have a Nokia N90 I am using to test an upcoming version of our platform. This is the device I have been waiting for to mark the beginning of the revolution in media devices. I put a similar bookmark in the history of media after the London subway bombings when the first and most compelling content came from survivor Adam Stacey, who filmed, from his mobile phone, himself and several others escaping from the subway following the explosion. That was the moment that officially began the shift in media in general to the future paradigm of media: The LMNO. But I have been waiting for the device to increase in quality to the point where “broadcast quality” and “amateur footage” are indistinguishable. The N90, while not amazing, achieves that by being good enough.

My generation’s children will ask their parents some funny questions:

“Daddy, why did you use linear optical storage media?”
“Well, honey, we didn’t yet know how to insert magnetized particles inside a globule of ferritin protein and assemble them in arrays.”

“Daddy, why did you rely on the finite fossilized remains of dinosaurs to power inefficiently distributed power plants to produce electricity at the cost of the planet’s environment and my potential future?”
“Heh heh, well sweetheart, we didn’t yet know how to make solar cells inexpensively enough and efficiently enough to create clean energy to distribute power locally, or make it portable.”

“Daddy, why did you rely on a non-free-market oligopsony of media distributors to provide network-scheduled formulaic, homogenous content in release windows over which you had no control with no personalization or participation and with no active market-determined value of said content?”
“Well pumpkin, we just didn’t know how to distribute personal media via a series of overlapping personal networks, empower people as producers, enable them on a location-aware grid and redefine media from something that is produced and pushed to consumers in a series of monetization windows to something that is discovered, added to, borrowed from, shared, redistributed and discovered again all to the benefit of millions of people with mobile-connected Personal Media Devices in their pockets.”
“And your mobile phones were just for voice communication?”
“Pretty much.”
“Yours was a dark era.”
“Yes it was, darling. Yes it was.”

Kids say the darndest things.

My Nokia N90 takes high-quality pictures and video. When connected wirelessly wherever I am to a platform that acts as a media marketplace, I become a distributed on-location media production node. Add in my PIM and I also become a media distribution node. Consider that there are other producers and distributors in the marketplace, and I become a media consumer, too. All from the same device. In two years, every digital camera will have a DO or UMTS chip in it - they are all going to have to connect to a platform that provides a marketplace for storing, sharing and more widely distributing content.

The links on the value chain required to build a fully distributed edge-of-network media paradigm that have been missing are now materializing. The device was a big step, connectedness is being solved before our eyes, and distribution paradigms are being built now by several companies that see the whole chain clearly. What this means is that we are entering an entirely new media era.

I made a table for you to explain what I mean. I call it “Shawn Conahan’s Media Eras Infographic.” Our company is about sharing media so feel free to use it in your powerpoint, change it if you think its incomplete, etc., but really take a critical look at it.

I broke the media eras down into TV, CABLE, INTERNET and MOBILE. Before TV there was Radio and Print. I also left out Town Criers, Papyrus and Smoke Signals, but I hope the Shawn Conahan’s Media Eras Infographic is illustrative enough. My basic approach was to look at various dimensions of media and the business of media production, delivery and participation and illustrate how they differ from era to era. I pointed out the key differences between eras by highlighting them. As paradigms shift, they are the pivot points that are most responsible for unlocking the value of each era.

TV
The golden age of radio from 1935 to 1950 gave way to a new medium, TV. The big innovation with TV when it killed the radio star was that you could actually Watch it. At the time that was a big deal. Compared to radio, the value proposition to consumers was higher because TV offered content of comparatively higher production value.

CABLE
The post-war golden age of television eventually gave way to the Golden Age of Cable, sparked on October 1st, 1975 when HBO aired the Thrilla In Manilla. With Cable, the production value wasn’t necessarily higher than television, but the cost structure was such that it ushered in the era of Vertical Programming, and the most successful brands of that era (CNN, MTV, ESPN, TCM, even the Weather Channel) were built upon the simple notion of “all [whatever] all the time.” That plus an increased number of channels unlocked a huge amount of value. Still, the business model didn’t change from “Pushing” media, firehose-style this time, to consumers.

INTERNET
The internet changed that. The only business model the internet understands is “Broker.” All of a sudden, disintermediation became the basis of the new economy and the value to the consumer was a bookstore that carried every book and was open 24 hours a day. The simple notion of the hyperlink changed consumer participation from “Watch” to “Surf,” and the Pushed media model simply didn’t work. The cost structure of distributed media obviated the need to produce and distribute content from the center of the network because there was no economy of scale required. Notably, it blurred the lines separating “media” from “interactivity,” and competition for peoples’ attention came not just from other pushed media sources. For this reason, I would argue that the Golden Age of the Internet started when Napster (the first, cool Napster) launched and is now coming to an end in a flurry of lawsuits and regulation. Napster showed what the internet can be - a massive P2P media collective. Business models and other issues aside, Napster showed us there is huge demand for combining communication and media.

MOBILE
And now we are entering the Mobile Media Era. The business model is changing again, this time with an emphasis on people and communication, not just commerce and entertainment. “Broker” takes a backseat to the more personal “Connect” as the main value driver for consumers. Notably, it is the first time in the history of media that people have been walking around with both media consumption and production devices, making them active participants in the creation and distribution of media. No longer Watching or Surfing, people are co-creating, mashing, blogging and networking together a media fabric that threatens the status quo in a significant way. Media is being more widely distributed farther away from the center of the network, this time right to the furthest edge – the pocket of ever man, woman and child with a mobile-connected Personal Media Device. I find it most interesting that low production value MMS is often more compelling than slick, high-production quality television because it is personalized and serves a purpose very different from TV. I would like to state clearly that, while it is an important link on the value chain, the definition of “Mobile Media” is not “TV on your mobile phone.”

The TV is being replaced by the Personal Media Device. The set top box is being replaced by the SIM chip. The MSO is being replaced by the wireless carrier. I wonder if John Malone sees the similarities.

The last row in the table is “Messaging Hub.” I find it interesting that during the TV era, the state-of-the-art messaging control center for most people was an answering machine connected to one phone line. It was a totally separate island that did little more than act as net to catch the result of a failed attempt to communicate. During the Cable era, we mostly switched to voicemail, which provided some flexibility, but personal communication was still a totally separate environment from media consumption. During the Internet era, Email took over as the primary messaging hub for most people, and it was more closely integrated with the media people consume. Interestingly, it still retained the basic functionality of a voice answering system, (to leave a message to be returned later) but this time the timeshifting was intentional. This led to presence: The overt availability to communicate is displayed in your AIM buddy list.

Now we are seeing convergence create a two-way web that integrates our media such that you have a channel on which you create, consume and share your media. “Find me on Xanga” or “Did you see my post about that?” are illustrations of how our very own “channels” are increasingly the hub of our media and social lives. The Personal Media Device elegantly converges those functions and puts them in your pocket. Put very simply, this is “Channel You.” The mobile applications that enable people to do that more are the winners in this new media era.

At its simplest level, Channel You acts as your value-added messaging hub. “Get my favorite song off my channel,” or “check out my TravelPod from my trip” are present-day examples. As more content is added to Channel You, it will become more valuable. Think of how many times your friends call you to ask for a restaurant recommendation. That will be on your channel. So will your availability to communicate and the automatic routing to your preferred mode of communication.

Now consider that there are millions of other people with their own create/consume channels, too. Plug them into a location-aware grid and enable them to transact their content in real time. Whether you are there when a tidal wave crashes through your resort or you simply snap a pic at the World Series or your kid’s little league game, when plugged into a marketplace of other creator/consumers, you become an active part of the media conversation. Upstream Media is the key.

So which kind of media company is going to win the future? Will it be an incumbent media company that sticks to the media conventions a past media era, pushing repackaged broadcast content to passive consumers on their mobile phones? Or will it be one that fully engages the distributed mass of consumers as participants, enabling them to transact their own content and adding value to the individual and the whole by providing produced content as well?

More simply put, do you believe democratization of media at the edge of the network wins in the long run? do you believe Flickr is a better, disruptive and potentially larger user-generated version of Corbis? Do you believe Craigslist is a better approach to classifieds that will end up supplanting the very notion of the local newspaper? Do you believe a million people around the world with mobile-connected camcorders and a place to transact their content is a threat to Reuters?

Imagine a reporter at the New York Times looking at a map of the world on her computer with little dots representing media being generated by ordinary people like you and me. Then all of a sudden a bunch of red dots show up, all clustered around Banda Aceh. Click and zoom to a list of pictures uploaded instantly by people on the scene of a massive tidal wave. One second later, that content is inserted into the editorial process and they are first to the story. Or that same image might be on your mobile device and you get to cut out the middle man entirely, or better yet - write your own story about it and syndicate it.

All this to me means we are entering a new media era. It also means massive upside in the mobile media space for those companies that are focused on accelerating this new era. Now go capitalize on this paradigm shift.

Posted in LMNO | 7 Comments »

Rabble: Best of the Web Winner

Tuesday, October 4th, 2005

Well, there really isn’t exactly a “winner.” BusinessWeek did a Best of the Web survey which recently concluded.

Readers voted in various categories for their favorite site/service/tool/whatever, and Rabble was vying for position in the “Toolbox: Wireless Services” category.

Rabble “won” its category with 77% of the votes, though they didn’t send us a trophy or anything. For as new as it is, and as limited as the distribution is currently, I am pleased to see its awareness and popularity already.

Click around on some other categories and you’ll find some interesting surprises, and maybe a site or two you hadn’t heard of.

Posted in Rabble | No Comments »

Tripping the Chocolate Fantastic

Monday, October 3rd, 2005

Did you see Trip’s speech at CTIA last week? I wasn’t there, but someone sent me this article about it saying it sounded similar to our vision. (It is good to see more people moving in the right direction.)

“If Trip Hawkins has it right—and he’s a multimillionaire who has been right more than a few times in his business career—then the online wireless IT and entertainment industry had better realize soon that ‘it isn’t all about content. Not now, it isn’t, anyway.’”

Right on. It reminded me to show you a related post I made earlier this year called Content is Queen. If you didn’t read my blog back then, maybe take a look if you have a minute.

He talks about mobile “social applications” as the real value in the mobile space, which validates the Intercasting mantra, though not the LMNO ideal. I think social networking is half the equation, but the coin of the realm is the media people create and transact. I do like his view on gaming as a platform for social interaction. “Alternate reality” is no longer that far off from “reality” as we increasingly use the same tools to conduct our real lives and our virtual lives. When Cyworld is a click away from your work, using the same browser you were using to conduct your research, run your productivity software, communicate or whatever, there is really no reason to distinguish between the two. It is perfectly reasonable to meet friends, conduct business or sell a car within EverQuest.

In simple terms, games stimulate us because our brains are optimized from an evolutionary standpoint to respond to reward from risk-based exploration. That’s what propels species ahead of others, drives evolutionary specialization and creates entrepreneurs. It is also the reason why people literally get addicted to gaming and communication applications.

Chat rooms are the simplest of all games because they meet the basic criteria: You seek (other people), deploy (a modicum of) skill to participate, and the reward is a response from someone else. Think about every game you have ever played - you seek and are rewarded for having sought in the form of some reinforcement, whether it is gold coins, higher levels or social approbation. Chat rooms are the same way. So is blogging. (”Are you an A-lister?”)

In this sense, “social applications” (though I think that term is fairly useless - we need a better one to describe this area) satisfy the same risk/reward structure our brains respond to. You seek interaction by doing something, and your reward is communication, connection or just social approbation. This is why people love the “Hot or Not” sites. It also explains why millions of people post their profiles on Match.com never intending to go out on a single date - they just want to see how many people will send them an email telling them how great they are.

Social applications are not games, but Trip is correct to say that social structures can be facilitated in a gaming environment, and I agree that if you believe personal connection is the ultimate reward, there is no more perfect platform than the most personal of electronic devices - the mobile phone - on which to build these applications.

Posted in Mobile Industry | 1 Comment »