4 Reasons Internet Service Companies Will Beat Device Manufacturers In the Mobile Race

About 8 years ago, wasn't there some perception that Software companies shouldn't get into hardware? Didn't IBM and Apple fail with spectators citing their hardware businesses as being huge cash sinks? Wasn't it around that time that Microsoft really took off after building an OS that could run on pretty much any hardware?

In the past 5 years Apple has been riding the successful iPod all the way to the bank! Microsoft and Nintendo are destroying (sales) on everything coming out of the Sony arena and Dell and HP saw falling profits in 2006 only to be saved by Microsoft's Vista OS.

Is now the right time for software companies to once again pursue the hardware market? I'd say yes, and I'd cite the following 4 reasons for why Software companies will be very competitive against device manufacturers in the next five years.

1) Information Communication Device: A cell phone is primarily a communication tool. A cell phone is almost a perfect information consumption device. I can read my www.NetVibes.com feeds on my blackberry, I can text my friends, I can send and receive video's, images and pictures. I can email. I can MMS. I can Google Talk, MSN Messenger, Yahoo Messenger etc. all from within my device. It isn't a huge shock that this is what I use my phone for. The device serves to consolidate these services into one umbrella. And I don't much to distinguish between the services I use to communicate anymore. They all seem the same - and they work perfectly - my phone has replaced my PC / Laptop for all of these channels making it next to impossible for any single device manufacturer to offer me a more compelling communication option. It’s the Internet Service providers that have enhanced my communication options and device manufacturers would be stupid to compete with the above services - with the exception of Blackberry Messenger I've not seen much that is even decent manufacture provided software. Thus, Device manufacturers cannot do much to make my communication experience better. The big Internet players carry the most schwag: More people in their networks, more connections to other information sources / destinations (kind of like why I quit Wayn, and Beebo when I realized 95% of my friends were on Facebook). They can even take that communication experience back to the web or make it shared with my phone or a device of the future. Why should RIM / Nokia / Rogers be involved if I want to check my gmail? They shouldn't. The internet should.

2) No Manufacturer's Proprietary Software: Windows made the PC UI consistent and this lead to their OS being the OS of choice. Nothing like this exists in Mobile, and this is because first the Hardware manufactures use their own proprietary software avoiding a license fee for the OS, second carriers want to load their proprietary software and charge a usage fee - you get a dually branded device - "Blackberry Pearl by Rogers Wireless" with Rogers Blackberry TV. The Manufactures have tried to partner with the Internet Players: Microsoft, Yahoo, and Google, but then the Carriers have the option to remove all the software before selling to customers – after all they are the resellers. Obviously this totally undermines the competitive landscape of mobile software. Further customers DO NOT seek out and INSTALL applications on their phones. Window's Mobile OS has not been a hit for MSFT. The Internet players are all pissed off at the device Manufacturers, the device manufacturers are frustrated with the Internet players and then came the iPhone. To AT&T the iPhone is a Data hog, to Apple where PC meets the phone, and to the consumer - a breath of fresh air and a severe disconnect from these ghetto manufacturers proprietary software applications. In fact, most of the iPhone sites work on my Blackberry Pearl (when the Opera Browser is installed). I've read other people can view the iPhone sites on their Nokia's (when the Opera Browser is installed). This all comes down to: When the Opera Browser is installed. And that folks, is why Device Manufacturers are doomed. I can install one single 3rd party application on my phone and it unlocks 100% of the internet functionality that I need to exist. The Blackberry browser pales in comparison to Opera Mini - it's not even close to as good. Using the built in Blackberry browser is like showing up to a Formula one race with a Toyota Prius and expecting to take the pole. In this high speed, consumer facing RIA world we call the web - we need specialized software built by companies with experience. Not junk ware built by Device Manufacturers and tossed on their platforms just because they can. We need standards – after all we did design them. We need cross platform. We need interoperability. But especially as a developer, if I can write one mobile web site and not care which device it’s running on. That just makes sense – and developers will not go back to writing stand alone mobile applications for one specific platform because of this. Device Manufacturers make nice devices, but their software sucks.

All of this information consumption leads to another problem still, bandwidth, how to charge and how to collect, how to keep the pipes open and flowing all the while keeping them full.

3) Advertising Revenue and Service Plans: We purchase Cable TV and basically pay to have people advertise to use. Genius, whomever thought up this scam is pure genius! We get a questionably better and wider range of shows, and they get a wider range of shows to advertise to us on. But seriously think about this: the more mobile bandwidth we consume, the more information we consume, the more information we consume the bigger the range of information there is to advertise to us on. When you perform a mobile search on Yahoo! on your cell phone your carrier doesn't get a cut of the advertising revenue. The carrier builds the sidewalk for you to walk to the store on and then charges you for walking? Isn't there a problem here? The store keeps getting richer and richer, and I pay to walk to the store? No wonder nobody's walking. If Google / Microsoft / Yahoo! end up developing in house Mobile Phone Hardware products then they can get people walking by providing mobile users 1/2 or 3/4 or 7/8 of their advertising revenue to the carriers to help support the bandwidth use. This provides incentive for consumers by making it cheaper to consume bandwidth on particular sites (the bigco sites) than it does on other sites (the littleco) and provides value through the entire “digital supply chain” - sustenance. With the privatization of the internet – or at least private channels – this concept will only continue to grow. The real money in mobile correlates location to advertisement relevancy in that the advertisement viewed is more applicable in one geographic location over another. The big internet players are in much better position to be able to leverage these trends. They already own geographic tools, they own advertising networks and they have far more total cash on hand – they are much more agile businesses and they are far more use to working with their customers than say Nokia, Motorola or RIM. Simply put, Internet companies are in position to subsidize your viewing experience through the advertisements you consume and view. Carriers must work with the Internet Companies but not the Device Manufacturers to spread this wealth – So doesn’t it make sense to have the Internet Companies be the Device Manufacturers? Or at least be borderless against them?

4) Hardware Innovation: The cell phone manufacturers are no longer technology innovators. Hardware is basically stuck waiting for other bottlenecks to work themselves out. Sure sure, there is innovation to be had - I mean come on, the most successful part of the iPod was the scroll wheel – big deal. The Carriers support the huge costly 3G networks. Hardware can far outperform 90% of the capabilities of the networks it runs on. In many cases software actually correct these hardware issues. It is technically possible to watch an HD movie on my wireless device – but if everyone did it the cell networks wouldn’t be able to support it. So, it appears as Marc Cuban said – the internet is dead (I say it with a grain of salt). At least, there is no next revolution on the immediate horizon, just time for the array of technologies that have been building up to actually mature together leading the next software standard or should I say consumer software standard or what becomes the norm. In this type of a business climate, how is it possible for a company that supplies hardware (and arguably a bunch of crappy proprietary applications) to continue to drive growth? They can attempt to start their own social network or sharing sites, they can try to hook these into their devices, they can try to leverage enterprise software like a BES to drive unit sales inside the enterprise. They can’t do it by innovating on hardware because it’s already done. They can make their iPhone red, say it’s for AIDs and sell it, or use whatever gimmick to drive unit sales –BUT They CANNOT innovate in the arena’s that make the internet the internet: Consumption of information, Search, and Communication. With Hardware Innovation more driven by other technologies, this really means they can’t innovate (Camera innovations from camera companies and sold on license to phone manufacturers etc…). Even if RIM purchased Ask.com, I’d still use Yahoo! Mobile for search! With the release of the iPhone manufactures face an obvious ultimatum: connect your devices to the internet or die a slow cold death. But connect them using robust SOFTWARE like Opera Mini – Hardware is done – we are connected. Firefox – Make a Mobile Browser!!! Look what the internet has done to the music industry, look what it’s doing to television. It’s about to do the same thing to the mobile phone – and it’s all about consolidation and consumption of information – not hardware innovation – that makes our lives more convenient and simple given this is the norm we have to deal with.


It seems the only way to get total and complete mobile platform dominance is to make a mobile hardware device and put interfaces into all your internet services on it then force it down the carriers throat. So what if it’s built by Nokia – it’s branded and supported by Google, or Microsoft, or Yahoo!. It’s a gPhone, yPhone, or phonIE.

This is no longer about the Telephone, it’s a realization that we can make laptops so small and powerful that they look like phones, act like phones, and perform the same functions as phones. I’d welcome Google providing me a device that I can actually do stuff on, as opposed to this technologically advanced Blackberry Pearl that still can’t read bloody HTML emails.

Over and Out

No comments: