This iPhone hype reminds me of the early days of the PC, when marketing centered around major breakthroughs. Remember the PET? TRS-80? Sinclair? Commodore 64? Apple II? IBM PC? They were all notable for certain reasons. Maybe it was “pre-assembled” or maybe it was an attractive price point or maybe it was color. Compare to mobile phones today: iPhone, RAZR, Sidekick, Blackberry. They are all notable for certain reasons. (Thankfully they are all pre-assembled.)
Over time, the PC became commoditized as it hit the mainstream consumer market. This was generally good for consumers because it gave them a basis for decisions and clarified where models differed. So I thinking that the wireless industry might end up going the way of the PC industry. After all, wireless service, while differentiated in the final offering to consumers, is essentially a commodity. When I try to find the absolute root of the problem, I always come back to the consumer. Does the bell curve of the consuming public KNOW that their phones can do more than complete a voice call? Do they care? Where do they get educated?
If you asked me to characterize the primary marketing message of any wireless carrier, it would be “X minutes for X dollars per month.” Every advertisement I see leads with this value proposition, so that is apparently the most important education a carrier wants a consumer to receive. I honestly don’t know how effective the rest of the messages are. I personally cannot remember any of those messages. “We have the best network” is bouncing off of me know, after every carrier has made this claim in some form. What else is there? I don’t know. And I think that is part of the problem: The industry has taught me that the “language” I need to compare service providers is a simple formula which is more minutes for less money. If that is the only education consumers are getting, does that mean they are the only dimensions on which any carrier can compete?
A brief history of computing:
1st generation: Mainframes based on vacuum tubes and punch cards. (ENIAC, 1946)
2nd generation: Mainframes based on transistors. (The transistor was invented in 1947)
3rd generation: The Integrated Circuit (invented in 1958 and commercially deployed in 1963) ushered in the era of the Minicomputer.
4th generation: Intel commercially releases the first Microprocessor, the 4004, in 1971, underlying the architecture of the famed 8086 microprocessor used in the IBM PC in 1981, and paving the way for the Microcomputer revolution.
And that is where we stand today. Architecturally, computers are essentially the same as that first IBM PC in 1981, albeit better, faster, etc. The last real innovation in personal computing was the Mac OS in 1984, followed by the Windows OS in 1985.
Where it gets really interesting to me is how computers were marketed to consumers. Read Intel’s “Anatomy of a Brand Campaign” for what I think is the move that really paved the way for a later shift in how we buy computers. They started by marketing their 386 processor, and then their 486 processor. Because those were not legally protectable trademarks, every manufacturer used them, which was akin to educating consumers to understand cars as having engines with 6 cylinders or 8 cylinders.
Think about it – the awareness by consumers that something under the hood differentiates the ultimate value of the overall product, even if they don’t fully understand how it works or even what it really is, is a powerful concept that gave them the tools they needed to compare computers side by side. If you were shopping for a computer and they both had 486 processors, how did you differentiate them? Megahertz. Nobody really knows what a megahertz is, but they know it measures speed, and faster is better. Thus the language of computers was born, and today anyone who buys a computer knows intuitively that industrial design aside, the decision will be based on:
- the processor
- its speed
- RAM
- Hard drive capacity
- operating system
- monitor size
- and several other secondary but also homogenous attributes including wireless connectivity, graphics processor, etc.
This language is really what enabled the likes of Dell and Gateway to sell computers sight unseen. Most importantly, when Microsoft Windows became the defacto OS for the vast majority of computers, consumers no longer had to worry about whether or not the available library of software applications would work with the computer they wanted to buy. People only buy computers to run software on them, so application portability was key to consumer adoption. When you can boil down a purchase decision to a set of specs like a checklist, the price-to-value equation quickly dominates the decision. Add a money-back guarantee and you take the risk completely out of the buying decision.
I just watched a stock ticker scroll by on TV. Blue Nile (NILE) is up about 100% since this time last year. Their market cap is almost $1 Billion. They sell diamonds over the internet.
Would you buy a diamond over the internet? I would. Aside from the fact that they are irrationally expensive and typically purchased for occassions where rationality is suspended, this is one of the lowest-involvement purchases a consumer can make. Why? Because all you have to know is the spec on the rock you want, and it is widely understood that that spec contains only these attributes on the checklist:
- color
- cut
- clarity
- carat
These attributes have sliding scales from bad to great, and their combination drives cost. It is that easy.
Just as there are literally millions of combinations of differentiable attributes that drive consumer adoption of computers, so are there literally millions of different things you can do with a diamond to make someone want it. You can make a ring, a necklace or a bracelet or any other category of jewelry, but it starts with those four attributes. A sparkly diamond will work in basically any setting. This is a form of application portability.
This somewhat obvious (now) marketing approach has simplified the buying process of computers and made bling available to a much broader consumer market.
So what about mobile phones?
How did you buy your last mobile phone? How will you buy your next one? If you answered, “Over the internet” you are still in the minority. Here’s a short treatment on the subject of this “clicks-to-bricks” product category, where a lot of research is done online, but the actual purchase is done hands-on in a retail store.
Why is that? Could it be that differentiation is so great among manufacturers and individual devices that there is no common point of reference for consumers? Could it be that this is greatly retarding adoption of data services?
Does that last sentence seem like a leap of logic? Let me explain. The blogosphere is perenially alight with the “walled garden” discussion, and there are strong points for and against.
I am personally in favor of walled gardens, if you want to call them that, because I believe that if the capital was deployed to create a closed network and consumers are ok with it, then those capitalists are entitled to protect their investment. One of the best arguments against walled gardens is that the applications you buy on one carrier do not go with you to your next phone or your new wireless carrier, should you decide to switch either.
Ok, that’s a problem for consumers, but look at the problems that preceed it:
1) There is no “language” for consumers to commoditize basic mobile phone functionality. Any application developer will tell you that the RAZR, in all of its incarnations, is underpowered and very difficult to develop for. Any consumer will tell you that the touch-sensitive keys on the Samsung Heat, with their millisecond-delayed response time, make for a difficult user experience.
These are specific examples of tribal knowledge around particular devices that could only influence satisfaction of a purchase decision AFTER the fact. But what are the attributes that you would compare to make a purchase decision between mobile phones? Do consumers know that processor speed actually matters to the final user experience? Shouldn’t ARM be differentiating to consumers to solidify their leadership position the same way Intel masterfully executed on their Intel Inside campaign?
What about memory and removable media? As the mobile phone morphs into a music player and an internet browsing device, won’t memory and storage capacity matter? Yes, but still all the marketing you see is about a device’s “thinness” or its ability to play video. This is 2007 - I EXPECT it to play video, but how well does it play video and why?
2) There is no common frame of reference for what a mobile device does. This is the common operating system argument. Hand your mobile phone to someone you know and tell them to buy a game or a song or a ringtone. Most people will not be able to do it because all mobile phone UIs are different. Think of how many times in your life a friend/spouse/coworker/complete stranger has called you up and asked you how to do something on their computer.
Them: “How do I make that annoying paper clip man go away?”
You: “Click Start, Settings, Control Panel and click Add/Remove Programs…”
You were only able to do this over the phone because you had the same OS. Try that same thing today: Call someone right now and ask them to walk you through how to watch a mobisode of the hit television series 24 on your mobile phone.
The Tribe Around Us is an oft-overlooked source of marketing power. Back when I was at Moviso, we found that one of the main reasons ringtone sales took off was that other people around you heard your phone ring and that educated them about customized ringtones. There was a high incidence of the question, “Can you send me that ringtone?” (To which the answer remains today, “No.”) Worse than not being able to leverage the Tribe Around Us is the fact that the devices are tied to services that are offered by wireless carriers that are trying to differentiate their service offerings based on the combination of services they provide. This means that the most powerful promotional medium – word of mouth – is unavailable to carriers to drive adoption of data.
The worst incarnation of this effect is, of course, that even if that word of mouth promotion is working to some degree, in practice there is no ability for consumers to act on that promotion. I am talking about a concept as simple as cutting and pasting a URL and sending it to a friend. This functionality simply does not exist in the mobile space.
But these barriers are not insurmountable:
- We need a “language” to describe mobile devices; we need a “386” or “the 4 Cs of diamonds” to educate consumers and drive purchase decisions.
- We need a common UI. Carriers and device makers have tried to differentiate on this dimension and it hasn’t helped – can we please try an OS that works across all devices so that device manufacturers can differentiate on features and functions instead of whether the left or right soft key ends a call? This is Apple’s second chance at licensing a defacto standard OS for an entire product category instead of tying it to hardware sales. Were they too successful with the iPod to think this isn’t a winning strategy? Am I missing something here? If they want to own the entire mobile space within only two short years, shouldn’t they, shortly after the launch of the iPhone, announce that the whole iPhone OS is available to all device manufacturers?
- We need application portability. Consumers see messages – expensive messages – telling them that they can get TV/music/games/ringtones on their mobile phones or that they can vote for American Idol via text message. “Now was it American Idol on Cingular and TV on Verizon or the other way around? It only works on certain phones? Which ones? Shit, I better go into the store for the very painful and time-consuming retail experience to get some answers.” Not only should consumers be able to understand which applications work on which devices, they should generally understand that ALL applications work on ALL devices because those devices exist to separate me from my money in exchange for an application that either saves time or wastes time. It should be as simple as that.
So, are mobile phones like PCs?
When I step back and look at how network operators plan to increase data ARPU, it is by and large through applications. (Applications that live on the device, like software on a PC.) If this is the case, shouldn’t we, as an industry, be looking at how to make the device more deeply integrated to the applications that will drive ARPU? Would that drive revenue? I think so. Would you buy a computer with Windows on it that didn’t have Office? Most people consider Office to in fact be part of Windows and expect for it to come pre-loaded as an integrated part of the device.
The more an “application” on a device feels like a “feature” OF the device, the more it will get used. The only problem I see is that while my mobile phone comes pre-loaded with software, the most useful items like the calculator, clock and Bubble Breaker do not drive ARPU. The applications that DO drive ARPU (SMS, Camera, MMS, Email, Browser) are just stuck in a decidedly “1.0″ revision cycle - they are very useful, but not as useful as they could be to the mainstream consuming public. When the other 90% of mobile consumers start sending pictures, it will be in part because we will have made the leap to the next generation of this basic functionality.
The first version of Windows was not more useful than DOS. In fact, it wasn’t until Windows 3.11 that it really started to make sense.
