Friday, December 17, 2010

Mobile Monday - Silicon Valley: Year in Review and 2011 Predictions

In my previous post I covered the annual WCAWhat’s Hot (and What’s Not) in Mobility 2010  event where a panel of VCs offered opinions on the current state of the wireless business, along with predictions for the year ahead. The following week I attended a similar event put on by the Silicon Valley Mobile Monday group: 2010 Year in Mobile Review and 2011 Predictions, where another panel of local wireless personalities gazed into their crystal balls to prognosticate the most significant trends in mobile technology.

The Monday panel was moderated by Mario Tapia of GetJar
Panelists were:
Om Malik - founder of GigaOm
Rich Wong – Accel Partners
Matt Fix - Vodafone Ventures
Joe Jasin - SDForum.org  and DNA Investments, LLC
John Malloy - Blue Run Ventures


You can watch a video recording of the event on Ustream, but for a more concise summary here are my notes.  There is some common ground covered by the WCA panel (i.e. mobile advertising) and some differences as well (much more focus on FaceBook).

Subject areas for discussion were presented by the moderator to the panelists:

What are the most significant trends in social networking applications?

  • Om - The rise of Facebook mobile was the biggest trend in 2010. It has been under-reported. Everybody focused on Android. There are two reasons that smartphones are selling... Twitter and Facebook. 
  • Rich: Facebook places is the most important aspect. It is not just a social app, blending makes it a good app.
  • Joe: In 1999 there was social network in Korea. But it is not a phenomenon in other parts of world.
  • John: Facebook (FB) is not good for developers. FB become a “carrier”, their model is not good for developers.
  • Om: people are confused by places. FB is personalizing mobile. Om disagreed on FB being just a U.S. phenomena. FB now in feature phones like X3. FB bypassing everyone on communications layer. This is good and bad for developers.
Augmented Reality (AR)
  • Matt: still nascent. Still looking at it, a lot more development needs to happen.
  • Joe: it’s going to happen whether we want it or not. We will have video, audio and spacial 3D.
  • John: AR a techie thing, like LBS (location-based services). It will be important when it’s pervasive and "horizontal". Need to find datasets that matter; for example - where we can harvest data.
  • Rich: depends on how visionary you are, a good traffic app is AR. AR is well-intentioned but a bit off. When data sets get richer it will occur, but not by holding up your phone.
  • Om: processing power is not going to be there until 2014-15: dual core processors + more bandwidth.
Mobile Advertising
  • Rich: We have had the acquisition of Admob (Google), Quattro by Apple. This is just the "end of the beginning". Mobile ad 2.0 will lead to more successful companies.
  • Om: people are looking back to predict the future. RIght now there are terrible click-through rates. Using web thinking on mobile. Need to use more of the human capabilities: such as touch, sensors, etc. Need to make it compelling to the user. Brand experiences, need to not look like an ad. Brands form direct relationship with consumers. Google is not "grokking" it.
  • Joe: could cross-platform help? Om: NO! Don’t have millions of views in mobile.
  • Matt: how do people make money in apps ecosystem? Brands throwing money at mobile ads now?
  • Joe - opportunity is in the back end (ad server networks).
  • Rich - ad agencies are still not making mobile a line item. It's like adding a Twitter or FB button on a web page, still in transition.
  • Om: Groupon is creating performance advertising at a level not seen before. Groupon gets people to take action. An ad has 2 reasons to exist: to drive sales, and recognition for a brand.
  • Comment by an attendee from Federated Stores: app clutter is a problem, branded apps need to be updated frequently.
  • Rich: ads are one of the few revenue opportunities for app developers.
  • John: advertising is too broad a topic. A truth of 2010 is the pay per download failure. The paid download model is yet to be defined. As Mary Meeker says - the only growth opportunity is the internet. If online is still a growth opportunity, then mobile isn’t there yet. You've gotta have, I don’t know why. It  took internet a long time to get there. (GetJar is an example)
Gaming
  • John - it's a hard business that looks easy from the outside. It's hard to make a Zynga. In games what is interesting is game mechanics, engagement, a lot of lessons to be learned. Mobile devices are quasi-time killing entertainment devices. Games must entertain users.
  • Joe: overall gaming is a crowded space. Difficult to make money.
  • Rich: it's astounding how much money mobile social nets are making, look at DeNa in Japan.
  • John: look at angry birds as a standalone business. It's hard to see a hit game takeoff.. One-hit wonder.
  • Om: You are talking from a VC perspective. If you get a hit as an app developer...life is good!!!

Location

  • Matt: I have not done investments in LBS (location-based services). They come and go. It is basically a commoditized service to have location info. Need to find ways to leverage.
  • Rich: using checking apps at South-by-Southwest (SXSW) shows what happens when you have “liquidity”, smart mobs.  Check-in apps provide real utility, but probably not enough for standalone companies. LBS will be compelling when you combine with your social network, local like Groupon. LBS needs to be blended into other apps, not standalone.
  • John: key enabling technologies are not commoditized. This is good for developers. LBS-enabled phones are now becoming more common. Check-ins are very early… only early adopters are using them. Ultimately you need someone in the Midwest to use it. Kind of early… but commoditization is good. Don’t need the carriers, to wait for LBS.
  • Joe: connecting different topologies creates other opportunities, for example business-to-government.
  • Rich: did (investments) adMob and GetJar, but hasn’t seen monetization opportunities in the last 2 years. Greater chance of getting lucky now due to development of the ecosystem.
  • Om: There is a physical limit on how addicted you can get to a platform. The attention barrier is a challenge. You can’t build experiences for 500M people, maybe 2-3M. FourSquare is still only at 5M devices activated, but how many are using?
  • Joe: optimism comes from open architectures.

Payments - what happened in 2010, what will happen in 2011?

  • Rich: Mobile payments are divided between gateways for carrier billing, and those looking for an on-ramp around carriers. Carriers are taking 30-40%. Until the “taxation” rate is lower mobile payments will be constrained. Operators are not going to reduce rates fast enough. Someone who figures out how to bypass operators could be successful.
  • Joe: payments built into apps
  • Om: 5 "people" - Amazon, Apple, PayPal, FaceBook, and Pay by Phone (New York ?)… others not clearly differentiated. Amazon will be a big player.
  • Matt: everyone is looking at it, OEMs looking at near-field commutations (NFC). It is big in Japan only because NTT built the ecosystem. Mobile payments will be a big theme for next year: Boku, Zong.
  • Om: The problem is that Verizon Wireless thinks they are a software company… carriers don’t look at themselves as communications companies.
  • Rich: carriers have liberalized.

Platforms: Android outpacing iPhone..how did that happen?

  • John: This was the big thing of 2010... a 2nd platform. Clearly it is now a 2-horse race. It's been that for awhile.
  • Joe: Isn't Linux taking market share? Why not in handsets? Momentum from servers?
  • Om: whole It's the whole Android ecosystem vs. one phone from one company. It is frustrating from a consumer point-of-view that every latest Android phone is the greatest. I won’t rule out Nokia just yet (gasps of surprise from fellow panelists), because they sell 100M phones per year. I won’t rule out Blackberry, they have one shot at coming back. I like Windows Phone-7, I just won’t buy it.
Globally
  • Rich: Android is the story of what’s happening in emerging markets as well. I thought that feature phones would last longer.
  • Joe: China? Development path has been #1 Android, #2 Symbian, #3 feature phones… then the iPhone if we have resources.
  • John: 3 places: U.S., Korea and China. The (global) innovation center for mobile has moved here to Silicon Valley (it once was Japan, etc.) What happens when China has 3G? There is less innovation elsewhere. People come here.
  • Om: The next thing is 3G in developing markets, India, etc. That starts to change the mobile experience. Will it shift the center of innovation?
  • John: need commoditization, so it will take more time for India and China to catch up. The ecosystem is not there, happened in U.S. 
  • John: big thing (a hope and a prediction) is HTML-5 being competitive with native apps. It gives the market a chance to find the next wave of internet consumption. The web ultimately become mobile. The mobile browser vs. apps.
  • Joe: the world is looking at Silicon Valley. Emerging markets will develop their local apps, not horizontal. Could we see M&As by foreign companies? Companies like Tencent.
MeeGo?
  • Rich - tough. First devices ship next year? Developer community energizes a platform. Hard to build momentum. Caveats in India, wherever Symbian is dominant.
  • Joe: MeeGo has a good cross-platform plan.

Crystal ball for 2011:
  • Matt: seeing a lot of security threats as an operator. Likely to see widespread shutdown of users, hacker next year. This will be an opportunity for companies like LookOut
  • Rich: Android will accelerate.. Motorola, tough for Nokia and BlackBerry. Getting mobile ads right for monetization.
  • Joe: LTE a given. More voice recognition. 
  • Om: Samsung will be the  #2 smartphone player, because they own the component ecosystem. Motorola will start to dwindle away because of Samsung. Nokia X3 will be a  big success.
  • John: Android is pulling ahead, HTML5 becomes more viable. Gives bridge to launch a  company more effectively, in a web-like environment.

3 comments:

ggmama said...

I had to miss this event. Thank you very much for writing some a comprehensive report!

Rohit Mittal said...

Hi Mike
Your posts are very informative. It seems you have moved away from analog into more digital and higher layers (facebook, payment etc). So perhaps you may want to change the title of your blog :-)

Thanks
Rohit
loveanalog.blogspot.com

Mike Demler said...

Thanks Rohit. I strive to be informative.


I have actually been writing about a wide range of topics for quite a while. If you look at my profile in the sidebar, you can see my rationale for this blog title:


"The World is Analog" reflects my personal perspective, both on technology and on life in general.


As "digital" abstractions of reality shape more and more of our experiences, it becomes more important to keep a grasp of what is truly real... and that real world is analog. All sensory experience, the physical world we live in, and most importantly - our interpersonal relationships - are analog!