I shall be writing posts on the mobile industry. This is a first one in the series.
Forecasting a nascent market is difficult, risky and sometimes embarrassing in hindsight. Market uptake depends on multiple factors: clear business propositions, deployment of infrastructure, marketing of services, customer experience, availability of compelling value proposition (for the customer/user, the complementary service providers/partners), network effects, and the like. Nevertheless, forecasting is itself a big business. Forecasting requires constructing a model that includes making assumptions about these and other factors, applying some sort of complicated formulae, and making relevant predictions. Often forecasters come up with best-case, worst-case and most-likely scenarios to cover the entire range.
As such, most forecasts should be taken with a pinch of salt.
When it comes to new, emerging services like Mobile TV, there are various ranges I have seen. Three years ago when I first started researching this area, most people were very skeptical about mobile TV. The most common responses I heard were: Who would want to watch TV on their mobile phone? Why would they watch it? What would they watch? There’s nothing on it! Who provides these services? I don’t even get a good voice signal. Video on mobile sucks, and variations of it.
Moconews reports, citing an ABI Research report, that mobile video services (service revenues for video messaging, video calling and video sharing) will grow from $1 billion in 2007 to $17 billion in 2012. Most of these (~90%) will come from N. America,
I don’t have any point answers: it’s pointless to forecast to the second decimal anyway. What I do know is that there are compelling drivers for this emerging market of broadcast mobile video, and there’s significantly higher interest in the past year or two from many players in the value chain.
Roughly, the Mobile TV value chain looks like this:
Network operators <-> Infrastructure Vendors <-> Content Developers/Aggregators <-> Mobile Device Manufacturers <-> Consumers
This is a huge and complicated market, with multiple players, competitors, complementors and stakeholders. I shall cover the players, the technologies, and some of the issues in later posts.
August 24th, 2007 at 1:28 am
You make two points here: forecasting methods and their reliability, and forecasting in emerging areas such as mobile applications.
The former is a booming area for those who love complicated Excel sheets, with various statistical tools built in, but the outcome is only as good as the assumptions used and the ‘gut feeling’ of the dudes who get to make a call on which scenario to base their investments. For instance, had mobile operators used Real Options to assess demand, would they have paid over the odds for 3G licences in the UK? Moot. In hindsight, perhaps no. But look at the rate of growth now versus forecasts and you will see how tough it is to be a futurologist.
You may be interested in this OFCOM report issued yesterday:
http://news.bbc.co.uk/2/hi/technology/6959864.stm
The latter? Well, texting was never considered a big money-spinner by any mobile operator. I have written and published at length in the past on mobile business models and the link with profitability is as hard to establish as the forecasts mentioned earlier. Pound-per-bite, texts are the most expensive e-communications but since they are wisely packaged in bite-size chunks, people do not do the necessary maths and keep texting. An estimate says over 1B texts are sent in the UK every month and that is about £100M into the pockets of various operators!
So it is equally important to innovate in areas not so obvious to the ordinary middle management person. Like appropriate packaging and pricing. Like reducing the fixed, recurring cost and having the wisdom to encourage more usage through cost-plus pricing to drive some parts of the market.
Greed and fear in equal measure hinder innovation. It is not always the fault of those who suffer NIH and in-the-box thinking.
August 24th, 2007 at 7:35 am
Shefaly, thanks for your comments.
You make good points. It’s not clear if the Operators had used Real Options that they would have paid billions for the 3G licenses. Hard to tell. But as Yogi Berra put it: ‘Prediction is hard, especially when it’s about the future’.
SMS texting is a whole different game. It’s one of the innovations that came up from the grassroots, largely from teenagers who couldn’t really afford to pay the the prohibitive voice charges. That it has flourished beyond the wildest dreams of any operators is an understatement. You are correct in that it’s important to innovate in the non-obvious areas.
I hope to write more on grassroots innovations later.
Thanks for the Ofcom report. Moconews reports on it yesterday and I am going through it to see the trends, the most significant of it being that mobile TV uptake it still quite tiny. I will have more on it in a later post.