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Mobile Fix - January 29

This week it’s all about money. Apple were the first with their results and the headline of $18.4 b profit - the biggest ever recorded - was overshadowed by slowing growth. So we may have seen peak iPhone – but with 1 billion installed base (across all their devices and defined as used in the last 90 days) their focus has to shift from selling luxury hardware to other ways of monetizing those users. The last season iPhone is still compelling – so people don’t feel the need to upgrade as often. What will be in the iPhone 7 that will make it a must have? Their service revenues of $5.5bn would be a stellar business for anyone other than Apple and, whilst they don’t have a legacy in services, they could use their huge cash pile to bring in the talent and rights that could make a difference.

 

Asked about VR Tim Cook said he doesn’t see it as a niche – and Apple have made a significant hire in this space – so we should watch for their plans here.

 

We still think Apple – or someone else in GAFA - will start to invest in sports rights to act as an anchor. We believe that such a mobile offer of Champions League etc would be compelling and drive usage, but maybe the real opportunity is to add VR to a sport? (More on VR later in Fix)

 

Other commentary considered the slowing of iPad sales, but again we should consider there are now around 250m iPads in usage and Ben Evans tells us there were only that many PCs when Windows 95 was launched. As this piece points out few people have worked out how to use the iPad – often it’s the desktop content shrunk or the smartphone version stretched. Making something bespoke – with an elegant ad model - could still be a smart move for publishers.

 

Other device manufacturers are struggling too – Samsung sales were flat.

 

Facebook results were equally sensational but it’s clear they have lots of growth potential. They now have 1 billion daily active users – up 17%. 934m of these were on mobile – up 15%

 

The way Facebook pivoted to mobile and refocused the ad business on mobile is astonishing and shows no sign of slowing down. Just closing the gap between US ARPU and that in other regions will generate huge revenues as Brands export their US FB ad strategy to the rest of the world. Taking their learnings and applying that to Instagram (just started) and the rest of the web with Atlas (just started) will also drive the revenue growth. And just wait until they start to monetise Messenger and WhatsApp.

 

Their product keeps evolving too – any day now the Like button will be replaced by Reactions. A better user experience and a wonderful way to enrich their data pool. This long look at how that decision was made is a great insight into Facebook.

 

Twitter

 

With the old CEO now back as the new CEO – who is also the CEO of newly IPOd Square, Twitter is once again in the spotlight. As a series of senior people exit the stock price is in the doldrums and talk of a take over has resurfaced.

 

The Product experience is at the heart of the debate over its’ future – will the 140 character limit be relaxed? Can new services like Moments get traction? Is the loyalty of its hardcore fan base in jepeordy?

 

VC Mark Suster sums up a lot of this as he points out he spending more time on Facebook. Tech guru Walt Mossberg makes a strong case that it is just too complicated – we were explaining to someone how you use the . sign before a username so the tweet is seen by everyone and realized we were just bemusing them.

 

More evidence of a confused product was the news that Twitter have stopped showing ads to some of its core users. And MIT think Twitter is beset by socialbots.

 

They are not helped by rivals adopting some of their better features – this long piece argues that Facebook have squashed Twitter and Google are integrating real time responses from the US Presidential debates in their search results.

 

Twitter is still invaluable but the noise generated (often by following more and more people) means the value is harder to hear. The new talent being assembled by the new/old CEO doesn’t have a lot of time to get the Product right. And balancing the needs of the casual user with the features familiar to the hardcore fanbase is going to be hard.

 

VR

 

Our view of VR has changed dramatically in the past few months. Originally we saw it as slightly gimmicky and really geared towards gamers. But watching things like Cardboard and seeing how the content is evolving, we now believe this is really significant.

 

Talking with the smart people at Jaunt this week we see serious money being invested by serious people across tech and the creative community. And the experience of the great content emerging, demonstrates that the smartphone is the perfect device for VR – we will just get used to carrying a Go4d Glass as we do headphones.

 

With around 2 billion smartphones being used by the end of this year, roughly half of which have a decent data plan(?), VR launches with a 1 billion potential users.

 

Google are making the running here - with 5 million Cardboards sold – and 25 million downloads of the Cardboard App

 

The New York Times gave away 1 million Cardboards so readers could see the films they creating and here they share their favourites from the Sundance festival. This interview with one of the films creators is worth reading too.

 

Facebook are clearly going to be promoting Oculus Rift and their 360videos are already being pushed by their Creative Shop. And remember that Apple are poised to enter the market too. For brands this is a great opportunity to embrace a new communication form that is ideally suited to Mobile and enjoy the fact something brand new has a mass market potential from day 1

 

Its time to take this really seriously

 

Publishers

           

As Googles’ Accelerated Mobile Pages gets publisher buy in – in preference to the rival Apple and Facebook products? – their strategy for ads is becoming clearer.

 

Apple are adapting their service to enable pay wall subscriptions so that should drive uptake. In the end publishers will use all three products because why would you not take advantage of the distribution and the chance to test how they each work.

 

On paywalls we read this analysis suggesting the Times - with their paywall - is profitable and comparing that to the Guardians woes. We wonder about this – the Times seem to be relaxing their policy a little and undoubtedly they must be watching how the Sun does, now it’s ad funded.

 

MNOs

 

The ongoing cycle of mergers and acquisitions underlines just how valuable Mobile Network Operators are. With huge customer bases and the opportunity to drive towards quad play as well as all that first party data, means there is lots of potential.

 

But it’s a tough market. In the US Sprint are fighting to survive so they last long enough to profit from their superior network. French disrupter Iliad is apparently looking at entering the UK market. Their Free brand has been very successful in France fighting on price and smart tech – each customers Box acts a a wifi hotspot.

 

Mobile Money

 

Whilst data on Black Friday suggests consumer take up of Apple Pay and other mobile wallets is muted, lots of people want to play. Some major US retailers are hoping to win this market by launching their own wallet whilst refusing to accept Apple Pay

 

A Citibank study shows Finland to be the most advanced country for Digital Money but a good study shows that lots of innovation is in markets like Somaliland.

 

New legislation in Europe is going to shake up how payments work and by definition what banks can do – with a number of fascinating start ups poised to launch. This study is a good read on what is happening and how a bank needs to evolve.

 

Quick Reads

 

The last bit on money; The Apple tax on Google. In 2014 Google paid $1bn plus around a third of all iOS revenue to maintain their position as default search engine on the iPhone. That strikes us a bargain.

 

Sorrell on advertising Always worth listening to.

 

Bill Gates on how mobile is transforming Farming

 

New product features from Snapchat

 

A fascinating look at how the Uber business model is a virtuous cycle. The thing we love about mobile and social is how it enables new business models.

 

Good video interview with Barry Diller on Yahoo, Twitter etc – he believes Jeff Bezos will become the richest man in the world

 

Finally New research shows kids spending more time online than watching TV. Those concerned with preserving the status quo have chimed in with criticism of both methodology and the findings. Our take is that even if lots of the content is the same, the choice of device speaks to the desire for control over the content. Once you know you don’t have to stick to the schedule and that you can share the content and/or your thoughts on it, you don’t go back to linear TV. At no time in the future are these young people going to put on their slippers and sit back and accept scheduled TV.

 

The world has changed and it better to deal with that, than complain about it.

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