September 11, 2006

Hint: Money and influence tend to be related.

Almost every wireless industry conference has its obligatory "carrier bashing" panel of mobile content start-ups and medium-sized companies complaining about how mobile carriers do not "get" content. With few exceptions, the parade of statistics, anecdotes and panelist opinion seem to pull on Star Wars imagery of plucky rebels taking on an entrenched empire.

Carrier representatives typically take such criticism in stride, secure in the knowledge that the vast majority of content start-ups need carriers more than carriers need content. Those with sharp ears can pick up the translation of a typical carrier position on mobile content as "Yes, compelling mobile content and services are critical to our future business, but no, we're not going to do much more than point developers and/or content originators to our portal where they can upload it." Why the contradiction?

It could be that carriers are being true to the stereotype, which makes the fact that they somehow muddle through to make huge profits all the more infuriating. However, the truth is a bit more complex, even though a simple reading of the revenue numbers makes the carrier strategy of offering full moral support (and little else) not as duplicitous as conference audiences are sometimes led to believe. Indeed, it might just be a very sensible way to go.

Marketers should remember that mobile content has been talked up since at least 1997, when some of the first wireless application protocol (WAP) phones came out. Next year will make a decade, so it might be a good time to check out just how much real money all that effort has generated. If we dig into the money side, it is clear that non-voice services constitute only a small part of the overall revenue pie. This chart from the end of last year projects total mobile revenues to rise by about $300 billion over the next four years to reach $1.5 trillion by 2010.

In October 2005, Morgan Stanley pegged non-voice revenues at $74 billion, of which some 70% were related to messaging (SMS, MMS, IM, mobile e-mail). Even in mobile-data-heavy Japan, the largest mobile Internet category in terms of usage continues to be e-mail.

Taking a look at the non-voice, non-messaging market of pure-play mobile content, the current global mobile content revenue figure is about $20 billion. At current growth rates, that market should double by 2010.

In the US, the latest eMarketer numbers show that messaging still leads the non-voice category and will continue to dominate for the foreseeable future. By 2010, there is a decent chance that entertainment services and content might equal messaging as a non-voice revenue generator. But that is a long way off in mobile Internet years.

More to the point, if we look at how US subscribers are actually using their mobiles, we see that different flavors of messaging, text and photo overshadow other categories. It seems that despite the best efforts of wireless marketers inside and outside of carrier organizations to convince consumers otherwise, most people still believe and act as if the mobile handset is a communications device after all.

Thus, by 2010, the preceding charts suggest that the pure-play mobile content sector will account for about 3% of total wireless revenues. Conference panelists can dress it any way they want. But the carriers are not being conniving when on the one hand they say that mobile content is very important to them and then do little to follow it up. If they say that content does not count, they have painted themselves into a corner to where they are mobile voice providers — no more and no less. This will make life very uncomfortable for certain operators that spent billions on 3G licenses on the idea that people would use their mobiles for content. Strategic maneuvering aside, the fact is that non-messaging-based mobile content as a stand-alone source of revenue is and will remain trivial to the mobile carriers.

For that bit of industry gloom, marketers should only give thanks. The inability of both mobile carriers and content providers to create a substantial, sustainable, transaction-based mobile content market means that they need to work with brands to make mobile Internet work. Most of that work will involve messaging of some kind or another. Stay tuned next month for eMarketer's report on the state of mobile message marketing around the world. Click here to be notified when it is released.

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