There has been a lot of talk about the application economy and how has it changed the consumption of mobile internet. The contribution of application stores towards making applications a huge success cannot be ignored. However, there is still room for improvement and below is my list of five things that I hate about applications:

1. Applications are lost on change of handsets: Mobile phones, unlike computers, are changed much more frequently by the users and in many cases they are changed within a year. Users download applications over a period of time and start to store critical data on the applications. However, when they change their handsets, the applications cannot be transferred to the new handset. The users have to download the applications again which is not only a waste of time but can also be expensive in case of paid applications. Moreover, the data stored via applications on the old handset is lost forever. If the mobile ecosystem does not pay immediate attention to this problem, then it is possible that in future people would just not download paid applications or would not care to download applications all together.

2. Frequent updates to applications: The developers keep adding the functionality all the time and push the updated applications to the end users as software updates. For heavy application users, at any given point of time, there are applications waiting to be updated. Imagine if the applications were hosted on the web instead of being native, then there would have been no need for the application to be updated all the time. A cache version could have been used at times when the connectivity is not available.

3. Portability across platforms: All the applications are platform or OEM specific. Applications that work on iPhone do not work on Nokia and that work on Nokia do not work on Android. The cost of cross platform development is high and on top of that the application store owners act as gatekeepers to the applications which means that there is a possibility that an application may not be able to make it to all the application stores. Moreover, the user experience on the same application is not the same across different operating systems. As a consumer, I do not want to be tied down to any one specific handset brand to be able to use my favorite application.

4. Links do not open inside application: Today, when I use any application, the links open up in the mobile browser and not within the application. This is very annoying and a very big reason why the mobile application advertising has not taken off in a big way. Steve Jobs has talked about this issue but I do not see things changing anytime soon. Toggling between the mobile browser and application is a pain and many a times, I do not open the link unless I really find the description interesting

5. Applications drain the battery fast: Most of the applications are not optimized to low power consumption. By following a simple rules, the applications can be much more energy efficient which the application stores completely ignore while acting as gatekeepers. I need to charge my phone many times in a day to be able to use the applications or simply need to switch off the applications to conserve energy for voice. For me voice takes precedence over applications but then I am not able to take full advantage of the applications. I believe, it is the combined responsibility of the operating systems, OEMs and developers to make Green Applications that consume less power. OEM on their part should look to increase the battery capacity that can do justice to the high end phones.

This was my hate list of applications. Do comment on what you hate the most about the applications.

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• $1.8B potential for location-based advertising http://bit.ly/8Ysh2x #
• RIM Avoids Indian Ban Hammer, Cooperates With Security Authorities Over BlackBerry E-Mail http://bit.ly/9nhuld #
• YouTube courting Hollywood for pay-per-view movie service by end of 2010, says Financial Times http://bit.ly/d8gNIM #
• Intel gobbles up Infineon’s mobile unit in $1.4 billion deal, looks to ‘accelerate 4G LTE’ http://bit.ly/bX1ezr #
• Foursquare Now 3 Million Strong http://bit.ly/dBNPYh #
• Cisco May Be Making A Run For Skype http://bit.ly/bZJ5g9 #

Intel, the world’s largest chipmaker, has announced that it would buy Infineon’s wireless business solutions group (WLS) for $1.4 billion in cash. WLS’s has annual revenues of ~$1.16 billion but ranks at No. 5 in the chipset industry, far behind sector giants Qualcomm, Texas Instruments and Broadcom.

There could be several reason to Intel acquiring the wireless business of Infineon some of them are listed below:

1. Reduced reliance on Personal Computers: The mobile business especially the smartphone business has been booming and it is important that Intel places some bets on the mobile and other handheld devices. Intel, which sold its chip business for mobile handhelds and cell phones to Marvell Technology for $600 million four years ago, faces pressure as Apple’s iPad and other tablet computers chip away at demand for notebooks and PCs. Intel, for its part, has been steadily increasing its mobile presence. In May, the company unveiled a new Atom-based processor platform specifically aimed at the smartphone market. Intel recently also combined its Moblin Linux OS with Nokia’s Maemo to form MeeGo. There is a clear trend in Intel’s recent moves towards reducing its dependence on computers.

2. Relationships with top handset OEMs: Infineon has been supplying chips to most of the top handset vendors including Nokia, LG and Apple. This deal would give Intel a foothold into the mobile handset business and assured business as the chip set suppliers are normally long term partners for an OEM due to complexities in the manufacturing process.

3. Move to embrace LTE: Intel had earlier placed its bets on WiMax as a 4G technology but increasingly it is getting clear that LTE might turn out to be the technology of choice. Infineon’s acquisition can be an indication of shifting loyalties of Intel in favor of LTE. Intel has suffered several setback in the WiMax space including the write off of $1 billion investment in Clearwire. Already TD-LTE is emerging as an alternative to WiMax in the same spectrum band. In such a scenario, its acquisition of Infineon is not a surprise.

4. Access to Talent: Talent pool is always one of the important aspects of any acquisition and I am sure Intel will benefit a lot from the key talent at Infineon.

5. Interplay between PC and Wireless: Intel could potentially equip every PC with 3G which could accelerate its 3G volumes and directly challenge Qualcomm’s 3G dominance. This would result in blurring differences between PC and smartphones.

While the McAfee purchase has led to a certain amount of head-scratching from industry watchers and Intel investors who failed to see the synergy between Intel and a security software maker, the Infineon deal appears to be a better fit. I would request your views on the reasons for this deal.

• Location Is the New Shopping Assistant http://t.co/Ke5LGBL #
• BlackBerry sales drop ~50% in India as consumers turn wary http://www.telecomcircle.com/poi #
• Leak HTC Upcoming devices http://www.telecomcircle.com/a58 #
• Intel Said to Be Near Purchase of Infineon’s Wireless Unit http://www.telecomcircle.com/w7j #
• Fennec Shows Glimpse of Future Mobile Browsing http://t.co/fOd9sIt #
• OPERA says number of women accessing mobile web surges by 575% in past 2 years http://www.telecomcircle.com/7sb #
• Ericsson study sees linear TV survive in on demand world http://t.co/VcqdPV1 #
• Nokia and Intel build a joint research lab, plan to create the mobile 3D future http://bit.ly/93eeqF #
• Apple Shares iTunes U Stats: 350,000 Files Available, 300 Million Downloads So Far http://bit.ly/9YAdRM #
• Apple shutting down Quattro banner ads to focus on iAd http://bit.ly/c0IjRP #

“Don’t be evil“ is the informal corporate motto of Google, originally suggested by Google employees Paul Buchheit and Amit Patel at a meeting.  Google has the philosophy that”You can make money without doing evil.” Google claims to have made “Don’t Be Evil” a central pillar of their identity, and part of their self-proclaimed core values. Google has been accused of deviating from this motto a few times in the past. In 2006, Google reached a deal with China and censored search results as part of the Golden Shield Project of China. The argument changed from “Don’t be evil” to “Evil Scale” in case of China. Steve Jobs accused Google of back stabbing by entering into the phone business and now the policy proposal along with Verizon this month seems to be last nail in the coffin.

One company for which I had utmost respect was Google. However, my faith in the company is now shaken after the policy framework it released along with Verizon in US in a bid to control the wireless internet (Download Verizon-Google-Legislative-Framework-Proposal to read the fine prints). In the proposal, it is clearly mentioned that for Wireless Broadband, the non-discriminatory requirement would not be applicable. This means that a service provider can engage in undue discrimination against any lawful Internet content, application, or service in a manner that causes meaningful harm to competition or to users. In other words, Verizon would decide in US which content and application can get priority over others and Google by virtue of its dominant position, would get a preferential treatment. It is like two giants coming together and deciding that no new service or application can come up unless it has their blessings.

Most of the industry observers have termed the action of Google as end of net neutrality which would lead to a two tier internet. One super fast internet for the privileged content and the other for the less privileged like the startup firms. First of all there is no logic for applying different parameters to wireless broadband and wired broadband. Yes, the carriers are making investments but the investments in the wireless broadband are less than that in the wired broadband and with technological advancements, the bandwidth cost is coming down drastically as carriers move from WCDMA to HSPA to 4G.

The network carriers have been indulging in acting as toll gates in the past. Many carriers across the world have restricted or slowed access to the peer to peer (P2P) file sharing services like BitTorrent, FastTrack, etc. In October 2007, Comcast, one of the largest broadband internet providers in the USA, started blocking and jamming P2P applications such as BitTorrent. Their rationale was that P2P is mostly used to share illegal content, and their infrastructure is not designed for continuous, high-bandwidth users. The network management clause gives partial legality to this action under the disguise of reasonable network management to reduce or mitigate the effects of congestion on its network. One of the core issues behind the network neutrality controversy is over P2P applications.

Apart from P2P file transfer, the carriers would also try to block Skype, Pandora and other VOIP services to protect their voice revenues. The operators can be transparent about blocking VOIP services but it does not help the consumers in any way. Will they treat the Google Voice the same way as Skype or Pandora? Knowing Google, I am sure it would be willing to do a revenue share with carriers to get carriers to allow Google Voice.

I am particularly worried about the startups companies as any technology that would threaten the carriers either from the service point of view or from bandwidth requirement point of view is likely to be be blocked on wireless internet depriving the consumers of any innovations. Imagine a situation where a startup were to come up with a service that can threaten the carriers or the allies of the carriers, in all probability the carriers are likely to block the service. It is very much evident that the wireless internet is the next big thing, even bigger than the wired internet and hence it is imperative that we do not create unnecessary hindrances to its growth.

Wireless carriers are trying to manage their relevance so that they do not become a dumb pipe just the way it happened to the wired carriers. This explains why Verizon is a party to this recommendation. Coming from the industry giants is going to put extra pressure on FCC. Even AT&T is not averse to Google and Verizon’s position on net neutrality in the wireless industry. The proposed penalty for violation of consumer rights like failing to be transparent would by just $2 million which the carriers would happily part with if they can hurt the smaller competitors by blocking their service.

All in all, if these proposals are excepted by FCC, the consumer would be the loser. To summarize, I would borrow the quote of Jeff Jarvis of Buzz Machine who called this proposal a Munich Pact.

Netizens are now citizens of the Sudentenland. Just as Czechoslovakia was not invited to its cutting apart, so were we not invited to Google and Verizon’s parlays.

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Here are the top news articles for the week ending 22nd Aug:

• RIM Shops for Mobile Ad Network http://www.telecomcircle.com/rnz #
• Newspaper Reports #iPad mini (7” iPad) Coming in Christmas
  http://www.telecomcircle.com/o7l #
• NOKIA announces X3: 3G cheaptouch; 4×3 keyboard; WiFi; available AUG for EUR125 (US$275) contract free http://www.telecomcircle.com/iwr #
• LG hopes to launch the first WinPho7 device: Optimus series; 3.8″ touch; QWERTY in US; OCT launch expected http://www.telecomcircle.com/9l8 #
• Verizon Wireless fall roadmap leaked http://www.telecomcircle.com/pd8 #
• QUALCOMM to ship 1.5GHz dual-core snapdragons in Q4, phones may come as early as Christmas http://www.telecomcircle.com/417 #
• Telecomcircle.com has been valued at $150,241 http://t.co/J4DfMdl #
• New blog post: Mobile Driving Online Traffic To Offline Stores http://bit.ly/dcCpZi #

Internet changed many industries but its impact on the retail industry has been the maximum. The value chains and the supply chains changed dramatically especially in the developed countries due to fixed internet. Now the mobile internet is changing the way people shop but its impact is significantly different from that of fixed internet.

Retail industry has a variety of players from organized players to mom and pop stores. There is always a never ending tussle between the different players in the retail and also between the manufacturer and the retailers. In fixed internet, the manufacturers saw an opportunity in reaching out directly to the consumers, bypassing the retailers. The retailers felt threatened and they saw declining footfalls but could do little. Declining footfalls made retailers reevaluate their store and location strategies. New players like Amazon emerged while the brick and mortar retailers like Barnes and Noble struggled. However, with mobile phones, the retailers have an opportunity to engage with their consumers in a way that would attract them to their stores. Mobile phones can not only increase footfalls into a store but can also be used to give superior in-store experience. The capability of mobile to drive “online traffic to offline” stores sets it apart from the fixed internet.

Retailers pay a high rent in the malls or high street and can recover their investments only if there are higher footfalls. Physical presence also means that the sales person can convince the buyer to buy more. For this to happen, it is important to convert online traffic to offline traffic into the stores. Retailers are now planning to capture the attention of potential buyers on the internet or mobile and do the fulfillment at the retail point. The mobile phone can be used to locate a store, create effective loyalty program, convert a non-user through real time coupons, advertising and alerts. All these applications have the potential to increase the footfalls at the retail point as the consumers can find out about the stores and the deals available while on the move.

Foursquare is a highly popular mobile application available in the US which is tracking the consumer locations and rewards the loyal customers of a store or coffee outlet. Foursquare gives opportunity to small business to benefit from the location of a potential buyer. A bar can run promotions not only when a person checks into the bar for the first time but also when the person checks in after a certain number of times. The stores can pull the consumers even when they are around the store by pushing promotional messages. Foursquare is clearly giving tools to the retailers that can help them increase footfalls by rewarding loyalty. Pepsi has tied-up with Foursquare to take advantage of the location based marketing.

There are several applications on iPhone application store that enable the retailers to give promotional coupons to mobile users. Free mobile applications, such as Yowza, Coupon Sherpa, MobiQpons, and Cellfire, allow consumers to check for nearby businesses offering special deals. Because mobile coupons target customers who are near a store’s location, the redemption rates can exceed those of paper coupons. These applications are again increasing footfalls to the retail stores.  Starbucks has successfully used mobile coupons to increase footfalls to its cafe.

Imagine a situation where a movie theater dynamically offers discount coupons to fill up the hall on weekdays or a retailer can push a coupon to sell if he knows that the consumer has brought products from competitors or products complementary to what he sells. Perishable goods can benefit hugely by pushing mobile coupons in the evening based on the inventory. This would help the retailer to sell the stocks at full price if there are buyers instead of offering discounts after a certain time say after 8 PM for the bakery products. The bakery just needs to push a discount coupon to mobile users in the vicinity if it is unable to sell the inventory and it can do that even before 8 PM. Again this is driving the online traffic to offline stores but profitably.

What enables the mobile to drive online traffic to offline store?

There are many features in a mobile phone that the PC can never match:

1. Location: Mobile phones can provide the location of the consumer that allows targeted advertising and location specific offers and deals
2. Personal: The mobile device is a personal device. This means that unlike PC that is shared by many users, the mobile phone’s usage can be mapped to individual characteristics and behavior.
3. Always On: Another positive feature of a mobile phone is that the device is always on and is always with the user. It is possible for the retailers to push real time coupons, offers or advertisements.
4. Larger Penetration: Mobile phones have a much higher penetration than the computers across the world. This means that the mobile phone has a larger potential as compared to computers especially in the emerging markets. Today, there are more smartphones sold than the desktops which has suddenly changed the dynamics in favor of smartphones. If you add tablets, iPads, iPods, etc. to the list of portable devices, then the devices that are carried by consumers become much larger in number than the desktops and laptops.
5. Camera: Most of the mobile phones come with camera and hence it is possible to convert them into bar code readers that can help the consumers in finding more about a product or even compare the prices of the same product in the location around them.
6. Additional channel: Mobile represents an additional or incremental revenue opportunity because people can buy anytime and anywhere. Mobile also helps in directing footfalls to a physical store as many consumers want to touch and feel the product before buying and in this case the mobile phone acts as a discovery medium. Many retailers like Ikea, Next, etc. have a mobile store but the fulfillment in most of the cases is happening in the stores.

The potential of mobile phone is immense but the retailers need to have a well thought out mobile strategy. The mobile strategy is completely different from the internet strategy and it is critical for the retailers to hire people from the mobile industry to manage the mobile channel or outsource to the people who know mobile the best.
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When pushed to the wall due to competitive pressures from the CDMA players in 2003, Bharti Airtel decided to focus on cost reduction as well as prepare itself for explosive growth. More than the cost reduction, Bharti wanted to ensure that it builds a world class network and still able to focus on the core, i.e. the customers. In the last post, I had discussed the framework for deciding on outsourcing of different functions of an operator. In this post, I would focus on the outsourcing of networks – the benefits of network outsourcing and how should it be managed. In order to illustrate my point, I would use Bharti as a case study as it was one of the first few operators to outsource and is still ahead of others in terms of its thinking in this area.

What were the reasons for outsourcing of network by Bharti?

Bharti realized pretty early that network is not the core for the company and needs to focus on customers by providing them a reliable, affordable and best in class service experience. To be able to do this, it needed more resources and was unsure of the results due to lack of expertise in this area. Bharti was in no position to manage the network better then Ericsson or Nokia or Siemens (now Nokia Siemens). It was facing competitive pressures from CDMA players (Reliance and Tata) and need to have a single minded focus on cost reduction (refer – How can carriers make 40% EBIDTA margin at 2 cents/min tariff?). They embarked on the outsourcing journey with the following objectives in mind:

1. Focus on the core and outsource the context
2. Faster time to market as well as build scalable networks
3. Enhanced customer experience through better quality of service
4. Get the best people/company across the globe to manage network
5. Predictable total cost of ownership (TCO)
6. Convert CAPEX to growth based OPEX
7. Controlled spending due to optimal capacity planning
8. Get access to latest technology, expertise and processes leading to improved productivity

Accenture’s report on network outsourcing points towards huge cost advantages -

The potential benefits of a broader use of network outsourcing are considerable. Based on our experience,clients can generate cost savings of up to 40 percent, achieved through lower-cost sourcing of high-quality talent, consolidation of fragmented operations and the synergies of leveraging resources across companies and geographies.

However, we should look beyond cost advantages to the other benefits that I have listed above.

What are the different Levels of Network Outsourcing?

1. Build and manage capacity:

Normally most of the carriers start with outsourcing the designing and deployments of the networks. This is most simple form of outsourcing with relatively low risk. The risk is low and so is the value to the operator. This helps the operator in reducing its total cost of ownership of the network and can get the capacity deployed as and when required.

2. Managed Operations or Services:

In this case, the equipment vendor takes full responsibility for network and service operation activities. Activities can cover planning and design, as well as the establishment and deployment of the operator’s network and management of the day-to-day activities, including field operations. In this case, the real synergies start to emerge and can add immense value to the operator.

3. Hosting Services:

In this form of outsourcing, the vendor takes responsibility for management and integration of the hosted solution and facilitates content distribution as well as content life cycle management. The typical  offering includes entertainment and media services (music, TV, downloads etc), messaging and communication services (MMS, voice SMS, video mail and push email etc) and charging and management services (prepaid and automatic device configuration etc). Hosting enables faster launch and integration with cost efficient service. This is the most mature form of outsourcing and brings maximum value to the operators. With the increasing number of VAS offerings, the management of Value Added Services (VAS) is becoming increasingly difficult leading to many operators looking at option of hosting services from the equipment vendors.

What has ensured the success of network outsourcing for Bharti?

Traditionally, the operators have been responsible for building and management of the network including billing (refer the telecom value chain in the figure below).

Bharti decided to outsource the management, design, development and deployment of network including capacity and coverage to players like Nokia Siemens and Ericsson. The ownership of the assets rested with Bharti while the management and maintenance of the equipment became the responsibility of the service providers (equipment vendors). To ensure predictability of the costs, the payment was based on the peak hour capacity used by Bharti and excluded the unused capacity (capacity is measured in terms of Erlangs; An Erlang is a unit of telecommunications traffic measurement.  Strictly speaking, an Erlang represents the continuous use of one voice path.  In practice, it is used to describe the total traffic volume of one hour).

To ensure the success of network outsourcing, Bharti prepared a detailed business case detailing its cost structure and the expected cost structure post outsourcing. It also prepared the detailed performance indices and incorporated them in the service level agreements (SLAs). The most important aspect of the contract was clear definition of the roles and responsibilities of Bharti and the service provider. On its part, it developed an efficient governance mechanism that ensured its close control on the network operations. Bharti’s employees in the network function were transferred to the roles of the service provider.

Key lessons from Bharti’s case study are -

1. Do not outsource a few tasks in the network operations but outsourced the entire process.
2. Do not base outsourcing decision on only the cost considerations but also on the larger value proposition of being able to provide subscribers a world class experience.
3. Do not focus on only outsourcing the current process and doing the “same thing for less” but also look for opportunities to consolidate and transform the entire function. In case of Bharti, the service providers were able to provide greater value as they eliminated the manual work and implemented best practices that they followed across the world.

Initially the contract was for three years but it was extended again given the benefits it was able to give to the operators.

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Like any business, we face the dilemma of outsourcing even in Telecom Industry. There are various views on outsourcing and the arguments of the proponents and opponents are equally convincing. Indian companies like Bharti Airtel, Idea, Vodafone Essar have outsourced some of the functions like network and IT which is still considered as core by many telecom operators in the western world.

Outsourcing is an important decision and it cannot be decided without giving proper thought to it. A framework is needed to help the operators decide on the contentious issue of outsourcing. If a function is core to the success of a company, then it cannot be outsourced but the problem is how do we identify the core. Geoffrey Moore explains the concept of core vs. context in his book “Living on the Fault Line” -

Everything begins with strategy. Strategy determines what is core to a company’s competitive advantage. Sustainable differentiation is the basis of economic success. Differentiation creates the basis for customer preference and gives a company pricing power. Sustainability is based on a barrier to competition and increases the returns on investment. Core is defined as any process that contributes directly to sustainable differentiation. Context is all other processes required to fulfill a company’s commitments to one or more of their stakeholders. Everything that gets done in a company is either core or context.

In optimizing resources, the goal in core is to create competitive advantage. Differentiation is critical here. This is the place to invest human and financial capital. On the other hand, with context activities, the goal is to meet market standards. Differentiating on context is a mistake and one that is costly. The key is to extract human and financial capital from context wherever possible and repurpose for core.

Moore uses the 2×2 matrix to determine the functions that can be outsourced but also cautions on the way it should be outsourced. I have taken the same matrix and applied on the Telecom Industry to arrive at the outsourcing framework for mobile operators (refer figure below).

The above becomes a very good framework to decide what needs to be outsourced and how. The companies cannot outsource the core that is mission critical. I would say that no operator can outsource its customers to any other company. Similarly, the development of employees cannot outsourced as it is the employees that define culture of the company and they bring in the customers. Strategy and Finance functions should always be kept close to the heart as they certainly help a company differentiate itself from others.

Anything in the top right quadrant (context and mission critical) is difficult to outsource but can be outsourced as they do not differentiate the business from competitors. Network operations were probably core when the mobile services were being rolled out but now it is no longer a differentiator (it is a hygiene) and hence can be outsourced. If we continue to insource network operations, we are likely to waste scarce resources and attention in an activity that does not give us any advantage. This may result in missing the opportunities due to lack of focus. The outsourcing of non-core activities also help us unlock the company’s wealth that can lead to higher stock prices.

IT services should also be outsourced as the companies do not have enough resources and cannot focus on development of cutting edge IT systems. Similarly, there could be other companies that can manage the VAS and customer support services better. One company’s context can be core of some other company. It is always better to outsource the context functions to a company that treat them as core. This would ensure that the value keeps generating within the system.

Functions that are support or non-mission critical and context can easily be outsourced. The challenge here is to ensure day-to-day quality and period quality checks should give the desired results.

For the context and yet mission critical quadrant, we need to have a very robust outsourcing strategy as the key challenge is keeping the control. The partner selection needs to be very carefully thought decision and the relationship should be governed by strong service level agreements (SLAs). In the next few articles, I would focus on how to outsource and what should be strategy of the operators while outsourcing.

References:

1. Geoffery Moore’s presentation on book ‘Living on the Fault Line’ - Geoffrey Moore – Core vs Context

2. Interview of Don Price, CTO-Bharti Airtel

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Over the last many months, I have received numerous requests and gifts in my Facebook account from a game called Farm Ville. There is a friend of mine who is regularly playing this game and updating her status with the levels she has managed to crack in the game. I too played this game for a while and found pretty addictive but never realized that just within a year of its launch, FarmVille has become the largest online game with over 82.4 million active users (over 1% of world’s population).

Zynga’s Farm Ville has become symbol of success for social games but there are many other players making significant strides. In last one month, I have come across multiple VC investments or acquisition in this space. MTV networks acquired social game developer Social Express (MTV will use Social Express to develop games based on TV shows from MTV,Nickelodeon and other Viacom-owned brands), Playdom brought Metaplace apart from 5 other acquisitions, Disney brought game maker Tapulous, Zynga brought Challenge Games and XPD …. and the list goes on. This flurry of activity started last year when EA acquired Playfish for $400 million. Recently, there is another rumor doing rounds that Google has secretly invested $100-200 mn in Zynga and gaming would be the cornerstone of Google Social Networking site. Zynga managed to get half a million VC dollars last year and is estimated to have clocked $350 million as revenues. Zynga has a big hand is making Facebook popular and is the biggest customer of Paypal.

What is Social Gaming and how is it different from Multiplayer Gaming?

Social games are turn based, multi-player games that use social platforms to provide users with an identity and to provide the backbone for simple forms of communication (such as notifications, etc). Social gaming is probably not for hard core gamers and is more likely to attract casual gamers. The key component of social gaming is awareness of other’s actions in the games which acts as catalyst to attract other friends in the network. Top social games are Farm Ville, Texas HoldEm Poker, Cafe World, Mafia Wars, etc.

Social gaming companies rely on turn-based asynchronous game mechanics to lower the stress level and focus on playing with your current circle of friends. Games such as Warbook, Ikarium, and Friends for Sale have the benefit of closely matching the current behavioral model of social networks in which posting to walls and poking one other serve as the primary modes of communication. These games allow users to take time to make their decisions, they integrate well with a players current set of friends, and they do not require the “presence” that real-time games require. Multi-player games in contrast are synchronous games.

What makes Social Gaming a game changer?

People seeking cheap, escapist gaming fixes during the downturn has seen social gaming reach hundreds of millions of consumers globally leading to social gaming being named by Brandweek as one of the Top 10 digital trends to watch in 2010. There are many reasons for success of social gaming and the prominent ones are as follows:

1. Ability to use social graph of users

Zynga has shown how to creatively leverage the social graph to spread the word around about the application. Continuous postings and poking help generate the interest of non users to casual gaming. There are over 230 million social gamers playing games like Farm Ville or Mafia Wars.  The games involve gifting and rewards which keep the game’s interest in the game.

There are possibilities of cross selling other games from within a game like in Farmville, players are encouraged to play other games from Zynga (“Did you milk the cow? Take a break with a milkshake in Café World!”).

2. Sense of Achievement and need to consistently maintain high score (Engagement)

People are looking to be successful at things. Its hard to get ahead in business or careers, many things in life aren’t noticed as true achievements as they should be. People find these games addictive because they give them a sense of accomplishment and give them opportunity to achieve more. They like to announce their achievement to their friends and continue to play to get to higher levels. Social games are high maintenance games and the hard work goes waste if the user does not play the game regularly… the more you play, the higher are the chances of a high score. Social games are like soap operas that never seem to get over.

3. Micro-payments boosting Revenue Generating Opportunities

It has been seen that if a game is charged upfront, few users are willing to pay but the users are ready to pay for smaller value items that might be required to boost their score, e.g. a car racing game can be free but users can be asked to make small payments for alloy wheels or better engine or better looking car. Since the game is social in nature and the payments are of smaller denomination, the users do not mind paying for them. This strategy has led to huge upsides to the revenues of the social gaming organizations. About $1 billion revenues are expected this year from social gaming and still it is considered under-monetized.

4. Advertising Opportunities

The advertising on social games has so far been limited but has a huge potential. According to industry insiders, active social gamers spend anywhere from 45 to 90 minutes on the games providing ample of opportunities for advertising. Microsoft used advertising in social gaming when they launched Bing.com. Sony is promoting its Vaio Laptops on this media. In-game advertising is a huge opportunity waiting to be exploited. Many companies from movies and music to FMCG are likely to add social gaming as part of their marketing mix.

5. Key Statistics look encouraging

According to a survey commissioned by Popcap Games, an average gamer is a 43 year old woman (sorry all stereotypes on the gaming profiles have been proven wrong!!!). Other findings include – Facebook is the most popular destination for online games, with 83% of respondents saying they have played games there. Twenty-eight percent have purchased in-game currency with real-world money. The average gamer has played six social games, and more than 50% of gamers started playing a game because a friend recommended it or because they saw a friend playing it in a news feed or other social stream. Now this is viral effect!

6. Potential on Mobile Phones

The social games can be played on mobile phones. Imagine, you can continue to gain points on Farm Ville by playing on your mobile when you have free time – it will be highly addictive. Also, the total number of mobile phones far outnumber the PCs in the world. In case of social gaming, the primary user is a woman and in emerging markets, the women normally have a mobile phone but do not have access to a PC. Also, on the mobile phones, context (location) can be added to the game giving  a completely new dimension to gaming.

7. Use of Virtual Currency

Anybody who has played Farm Ville on Facebook would be aware of credits that you need to buy virtual goods. The virtual goods can either be earned by playing the game more often or by participating in research or by participating in viral marketing or by simply buying using real cash. The value of virtual goods was almost $9 billion in 2009 in Asia and $1 billion in Western countries. It is expected that the virtual money would continue to rise and has the potential to be used in both physical and online world. The advertisements are likely to become more engaging and interactive with the advertisers doling out virtual currency or goodies. So much so that Lolapps has predicted in a report that by 2015, the Government will regulate virtual currency and try to attach its value to real currency. Already, virtual goods are taxed in China and South Korea.

Summary

Social gaming has a huge potential and is not only a game changer for the gaming industry but also has a potential to impact the growth of social networks. Google is planning its social networking site with Gaming as one of the key plank. With social networks permeating our daily lives, entertainment is being redefined and social gaming is here to stay.

*** For those who do not know about Farm Ville ***

Farm Ville is a real-time farm simulation game developed by Zynga available on the social networking website Facebook. The game allows members of Facebook to manage a virtual farm by planting, growing and harvesting virtual crops and trees, and raising livestock.

FarmVille leverages the social networking aspects of Facebook. Along with their own farm, players can invite their friends to join and be neighbors. Acquiring neighbors has benefits in game play — not only can one earn money and experience (by visiting and helping on neighboring farms), but with eight or more neighbors, a player can expand their farm and own more acreage. Gifts (such as trees, animals, and decorations) can be sent to both confirmed neighbors and any other Facebook friends even if they do not use the application. The Gifts received from neighbors usually have relatively expensive buy prices in the market; so getting gifts from friends is one of the best ways to get relatively expensive items. Many of the items available to gift to friends are not available in the FarmVille market.

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Word of Mouth has been the oldest marketing tool but was relegated to the background due to higher popularity of direct advertising. In the last century, the mass media became popular and direct advertising soon became a great tool in the hands of the marketing professionals. At that time, the number of TV channels were few, newspapers were few and the radio channels were also few so if you broadcast your message, almost everybody is bound to notice the advertisement. However, things have changed now with the expansion of mass media. Higher number of TV channels mean that the companies have to spend much higher to reach the same number of people. Even on the same channel, there are more companies advertising which means that an average individual sees 1000-4000 ads in a day.  Moreover, there is a degree of distrust in direct advertising and people are more willing to rely on the recommendations and consumer opinions (refer to the survey from Nielsen below).

Given the fact that the word of mouth and recommendations from known people are trusted more that any other form of advertising, it is important to take full advantage of the social media which includes the entire conversational media like social networking sites, blogs, forums, etc. It could be a great tool to attract new customers and give confidence to the existing customers that they made the right decision by choosing your brand.

Booz & Co has identified six elements for creating online customer lifetime value.

The next generation of successful online business models will combine the elements of a traditional retail site—trust, ease of use, and personalized offers—with social apponomics features, such as personalized advice, community, and the functionality of customized applications

Social media would enable the companies to create a community that can be used as a test market for bouncing off ideas and can also provide personalized proactive customer support. However, the first challenge is to create the community and then the second challenge is to to keep the community engaged. If we can overcome the two challenges, the viral marketing is mostly likely to be successful. I would explain  and list the various possibilities in social media by taking examples of online business or a mobile application but these may equally be applicable to any other business:

1. Use Facebook Connect:

An average individual has over 10 virtual identities (ids) on the net and at most he or she is able to remember 5-6. Last thing anybody wants is to create another id and any new website wanting its customers to create a new log-in id for its site is sure to put off a lot of customers. With almost 45% reach, every second person on the web is likely to have a Facebook account which can be used as log-in for any site.

2. Create applications for Social Media

If people are looking for recommendations from about existing users, then provide them that information using creative applications that post reviews and activities on Facebook, Twitter, etc. So, if there is a website that books movie tickets and gives great deals to its users, then it should create an application where the users are prompted to post the purchase on the social networking sites. Since the customer got a good deal, he would want to announce it to the world and satisfy his ego and at the same time it might entice the others in his network to avail the same deal from the website once such information is posted on Facebook.

Businesses may also look to create applications to increase the awareness about its brand and increase the usage. Pizza Hut’s page on Facebook announces all the deals that are available to its customers and has a application that allows the Facebook users to order their Pizza without leaving Facebook. I do not have statistics on usage of this application but I am sure it must be adding to the delight of the customers and may have snatched a few customers from Dominos.

3. Create Facebook Page

Having a Facebook page is a great way of not only reaching out to new customers but also keep them engaged and increase usage. Facebook page is the ultimate opt-in markting channel for any company. Coca Cola’s page on Facebook has over 6 million followers and this page is certainly adding to the brand value of Coca Cola (Click on the image below to see a clearer picture).

Companies can drive and measure response with special offers on the page and that would drive more fans to the Facebook Page.

Bad experience on Facebook page does not mean that the brand value would suffer. The cult following of iPhone has not dimnished due to a poor presence on Facebook. On the facebook page of iPhone, there is no information about the company, there are only 4 photos and almost zero engagement (click on image for better clarity). However, most of the brands are not as lucky as iPhone so ignore the power of social media at your own peril.

4.  Create Engagement Ads

Instead of serving direct ads, the companies can take benefit of the engagement ads available on Facebook. This would give a better recall to the brand as the engagement ads can be much more fun and interactive. If your social strategy relies on advertising in social media, it’s probably better to hang on to your money (Teddy Hall, COO Meteor Solutions)

5. Incorporation of a Facebook “widget” on the website

Show off your fan base by displaying the Facebook Widget on your website and add to the fan base directly from your website. This would help enlarge the community which is a captive audience for any future communication or test market.

6. Be visible on Social Media Sites

The top management should not only be present on Twitter, Facebook but also should be blogging about their companies. Zappos, an e-tailer has 500 of its employees active on Twitter ensuring there is ongoing conversation with the customers. They also take advantage of Youtube to facilitate word of mouth marketing and have 10 blogs to create an active community. Zappos was aquired by Amazon last year.

“You will make mistakes. If you are sincere about helping the community, the authenticity will show and your mistakes will be forgiven.” – Zia Yusuf, executive vice president for SAP’s global ecosystem and partner group. This quote from Zia sums up how should we approach the social media. If we are honest with the community, there is no reason why it would not reciprocate.

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Recently, O2 announced a revised set of data tariffs for new and upgrading mobile customers in the UK. Customers will have a choice of “smartphone tariff plans” with a bundled data allocation of 500MB, 750MB or 1GB, depending on the total monthly fee, which ranges from £25 to £60. Earlier this month, AT&T had withdrawn unlimited data plans from its network. If the AT&T and O2 are any indicator of the future, the unlimited data plans could soon be a thing of the past.

In April 2010, Opera Mini users generated over 398 million MB of data for operators worldwide. Opera compresses the data by up to 90% and despite that this huge data was consumed by its users. Opera has close to 26.23% market share as per a report from Statcounter as of June, 2010. This means that the total data consumption across the world is much larger than 1150 million MB (Cisco estimates it to be closer to 2000 million MB) and this has been growing at over 100% annually. Cisco has predicted that the mobile data usage would continue to grow at over 100% CAGR until 2014.

If the data consumption continues to grow at the rate forecasted, the operators have a huge problem at hand. The increasing market share of iPhone and Android (Android has reached 10% share of smartphones in just 6 quarters) is likely to make the situation worse than Cisco’s forecast. In the figure below, it is clear that though Apple and Android have just 25% share in smartphone sales, they consume almost 67% of the total data traffic. This means that the average data usage on iPhone and Android based phones is a little under 3 times than that on any other phone.

The data networks were hugely under-utilized before the launch of iPhone. Operators had invested huge money in 3G networks and the due to low usage, they were finding it difficult to recover the investments. In order to increase usage and adoption, the carriers started to offer flat data plans and some of them went a step further by giving unlimited data plans. This was a great strategy on part of carriers and the analysts lauded it profusely and even lectured the carriers that were not offering unlimited data plans on its value proposition. With the advent of iPhone, the mobile Internet usage shot through the roof as the applications became more data intensive and the users started to download full track music, use peer-to-peer (P2P) file transfer and streaming services.

In US and some European countries, iPhone has really high market share putting extra strain on the carriers in those countries. O2 revealed that less than 0.1% of its subscribers account for a third of all network data traffic. Just 3 percent of users on smartphone tariffs account for 36 percent of its smartphone data traffic. The disproportionate data network usage by smartphone users (especially iPhone) meant that the other users were subsidizing the data usage of smartphone users. This is not only unfair but also unsustainable. O2 has been spending around £1m a day to upgrade its network to cope with the “exponential demand” for data on smartphones. AT&T had also claimed similar numbers on data usage.

It is getting increasingly clear that the operators in most of the countries would be left with two choices: either increase the data capacity by investing in the newer technologies like LTE or stop offering unlimited data plans. Given the financial health of the carriers and the maturity of LTE, it is likely that the carriers would adopt the later approach, i.e. stop offering unlimited data plans to consumers. Alternatively, the carriers can adopt the approach of promoting and offering incentives on handsets like Nokia and RIM that are either more data efficient or the data usage is lower by consumers on these phones.

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Apple WWDC 2010 – Steve Jobs Keynote Quicknotes (Contributed by Navdeep Manaktala)

iPhone 4

• US Smartphone Market Share – RIM: 35%,iPhone: 28%, Windows, 19%, Android 9%, other 9%
• US Mobile Browser Usage – iPhone : 57%, Android : 23%, RIM : 13%, Others : 7%
• Hardware
  • New design (leaked iPhone)
  • Thinnest smartphone ever (claim) – 9.3mm thick; 24mm thinner than the iPhone 3GS
  • Stainless steel body for strength
  • Glass display for optical quality and scratch resistance
  • Integrated antenna – The outter rim of the case is the phone’s antenna
  • Display :
    • 3.5 in display
    • 960×460 pixels (4x more than current iPhone)
    • Retina display – 326 pixels per inch (300 is supposedly the highest for the human retina). Highest ever resolution on a phone
    • 800:1 contrast ratio (4x better than current iPhone)
    • IPS Technology for superb color and wide viewing angle
    • Going to set the standard for displays over the next few years (claim)
• A4 processor (same as on iPad. Designed by Apple)
• 40% improvement in battery life (larger battery + improved processor) – 3G Talk (7 hrs), 3G Browsing (6 hrs), WiFi Browsing (10 hrs), Video (10 hrs), Music (40 hrs), Standby (300 hrs)
• 32 GB of storage
• Quad-band HSDPA/HSUPA
• 3-axis gyroscope, adding pitch/roll/yaw, rotation around gravityvide 6 axis motion. Gyro + accelerometer pro – Perfect for gaming
• Camera : 5 Mpx, front & rear, backside illuminated sensor, allowing more light to get to the sensor, 5x digital zoom, LED flash, tap to focus
• Video : HD (720p @30 fps) video, tap to focus, built-in video editing, one click sharing, flash support for videos also
• iMovie App : Create video clips with ability to add pictures, backgrounds, location, music, etc.
• Software (iOS4)
  • Folders, task switcher, unified mailbox, enterprise features (as outlined earlier this month)
  • Choice of Bing for search
  • Will ship 100 millionth iOS device (iPhone, iPod, iPad) this month
  • iBooks now also comes to the iPhone (including download same book for all your apple devices at no extra charge). iBooks will also automatically sync your notes, books, and place wirelessly across all of your deivces
  • PDF support
  • Support for video calling (being called Facetime), front and rear camera support, only via Wifi in 2010, support for landscape and portrait mode
  • To be also made available for existing devices
  • Colours : Black, White
  • Price : $199 for 16GB, $299 for 32GB ; iPhone 3GS (8 GB) is going to be $99
  • Availability : Jun 24^th

iAds

• Objective – To help our developers earn money so they can continue building apps
• Selling iAds for 8 weeks now
• Adverisers so far – Nissan, Unilever, AT&T, Citi, Chanel, GE, Liberty Mutual, State Farm, Geico, Campbell, Sears, JC Penny, Target, Best Buy, Direct TV, TBS, and Disney. Have committed $60 million in iAd advertising
• Support for full screen and full interactivity

Platforms

• Apple supports two platforms – HTML5 (fully open, uncontrolled platform) and the AppStore (curated platform)

iPad

• 8500 native apps
• 35 million app downloads over last 65 days = 17 apps per iPad
• 5 million book downloads from iBooks over last 65 days = 2.5 books per iPad
• New feature on iBooks – Notes (post mark shows alongside wherever you noted)
• PDF support

AppStore

• 225k apps
• 15k apps submitted each week in 30 languages
• 95% of apps approved within a week
• Top reasons for rejection of submitted apps – App doesn’t function as advertised, Use of Private APIs & App crashes
• eBay app – 10 mn downloads of app since its launch last year. 600 mn transcations via the same in the first year and expected to do 1.5-2 bn transactions this year
• NetFlix coming to the iPhone (14 mn subscribers). Like on the iPad, you can resume movies from where you left off on other platforms. Full catalog and Instant Queue access
• Farmville by Zynga, one of the most popular online games of all time with 80 mn players currently, comes to the iPhone with pinch/zoom, notifications, etc.
• Guitar Hero with strumming (certain notes are swiped, rather than tapped) comes to the iPhone
• 5 billion downloads on iPhone. Across the 3 stores, there have been over 16 billion downloads
• Across all three stores (App stores, iTunes, iBooks), Apple has over 150 million credit cards users
• US$ 1 billion payouts to developers to date (70% of end user revenue)

Watch the video of the address on the Apple site.

There is a strong rumor of Qualcomm partnering with Airtel to roll-out TD-LTE network in India. Qualcomm has bid for the ongoing BWA spectrum and would need to find an Indian partner if it were to win the bid as Indian laws prohibit any foreign company to hold more than 74% share in any telecom company.

Qualcomm has a good chance of winning the bid as it would do anything to get the spectrum and showcase the TD-LTE technology. Airtel has not been able to get 3G spectrum in almost half the circles and would be keen to leapfrog technology by launching 4G across the country. 3G spectrum can then be used for freeing up the 2G network. Qualcomm on the other hand has no interest in launching the network by itself and is only interested in blocking WiMax from getting further foothold in India. Thus there is a perfect match between Airtel and Qualcomm.

I had mentioned in my earlier post that in a statement, Qualcomm made it clear that it intended to act only as a facilitator: If it wins the spectrum auction, Qualcomm plans to partner with an India-based operator to build a TD-LTE network and then exit the business. Surely, Qualcomm would like to partner with a pan India player and with significant subscriber base. Qualcomm has good relationships with Tata and Reliance but does not view them as potential partners which leaves is it with Airtel as the only choice. Vodafone is a global company and would not like to have a tie-up with Qualcomm.

Please note that this rumor has not been confirmed by either Airtel or Qualcomm.

Lately, a new dimension has been added to the fight between WiMax and LTE, which is TD-LTE. Developed largely in China, TD-LTE has started to make inroads into other markets as well. Huawei recently launched TD-LTE network for China Mobilewhile Qualcomm has put in a bid for BWA spectrum in 2300 MHz in India and plans to roll out TD-LTE network. It is reported that TD-LTE networks may also come up in Indonesia. In the US there have been statements by Clearwire that they want to migrate from their current Wimax to TD-LTE deployment. Reports state Russian operator Svyazinvest has also picked TD-LTE for mobile broadband deployment. GSM association has also thrown its weight behind TD-LTE. All in all, TD-LTE has crept out of its Chinese comfort zone and been unexpectedly linked to some of the world’s most influential mobile markets. These developments are a major blow to the WiMAX camp, the technology normally associated with TD spectrum bands.

What is TD-LTE?

There are two versions of LTE. FDD-LTE uses the FDD (Frequency Division Duplex) paired spectrum with two separated channels, one for the uplink and one for the downlink, which is the type of spectrum most mobile operators have. TD-LTE uses TDD (Time Division Duplex) unpaired spectrum channels that combine uplink and downlink, and split resources on the basis of real-time demand. Voice is inherently symmetric in the uplink and downlink so it is well suited for FDD spectrum allocations. Data traffic benefits from TDD spectrum, as it is typically asymmetric but the degree of uplink/downlink asymmetry is not fixed. The development of TD-LTE was initially pushed by China Mobile and regarded as a mainly Chinese standard, similarly to TD-SCDMA.

TD-LTE provides backward compatibility with 2G and 3G networks and hence would work even outside the LTE coverage area.

Why sudden interest in TD-LTE?

All vendors are trying to increase the installations of the network in which they hold the maximum number of patents and not necessarily moving towards development of a standard platform with a clear migration plan. In a statement, Qualcomm made it clear that it intended to act only as a facilitator: If it wins the spectrum auction, Qualcomm plans to partner with an India-based operator to build a TD-LTE network and then exit the business. The bulk of Qualcomm’s sales come from technology licensing agreements. Qualcomm has a veritable monopoly on CDMA patents and is seeking to expand the market for its other intellectual property holdings as the global wireless market moves toward 4G technology. The CDMA evolutionary path is coming to end after EVDO and hence Qualcomm would not like to risk the revenues by allowing the operators to move to a technology (read WiMax) where it has fewer patents. NSN, Motorola, Sequans and other companies are also reported to be active in the TD-LTE space so that they do not miss the bus in China.

In many countries, there are upcoming spectrum auctions for 2.3 GHz and 2.5 GHz spectrum bands that is better suited for TDD. Operators so far found little interest in the TDD band and WiMax had positioned itself very well for the TDD band. Operators are in general opposed to the WiMax roll out as it encourages open ecosystem and moreover was an entirely different technology with no evolutionary path from either GSM or CDMA. WiMAX  is controlled by IEEE, the consumer electronics industry, which is far more open than telecom/3GGP. However, now operators see a clear synergy in rolling out TD-LTE networks if the TDD spectrum comes up for auction. In India, the operators may actually be bidding for BWA to roll-out TD-LTE rather than WiMax.

There is another belief that is gaining traction is the fact that TD-LTE provides a migration path for WiMax players. Bruce Brda, Motorola’s senior vice president and general manager of home and networks mobility, said in an interview with a leading technology magazine that

Carriers can choose to deploy LTE networks either in FDD (frequency division duplex) or TDD (time division duplex) versions. Since WiMax is a TD technology and shares more assets with the latter, TD-LTE presents a more efficient migration option for WiMax operators. Those with broad spectrum rights such as Clearwire in the US have the option of dividing up that spectrum between WiMax and TD-LTE so that they can enter the LTE market without cutting off their existing subscriber base. But a small carrier with limited spectrum will not be able to maintain both business lines, and will have to decide between the two platform.

On the handset side, there is a flurry of activity with HTC announcing TD-LTE handset pilot and RIM’s announcement on TD-LTE Blackberry for China Mobile. Efforts are on to produce a converged LTE device, capable of supporting both TDD and FDD versions of the next-generation technology.

TD-LTE seems to be a technology which is seeing the ecosystem building around it and has a potential to co-exist with FDD LTE. It would be interesting to see if it indeed leaves behind WiMax in terms of roll-outs.