While it’s difficult nowadays to write about telecoms or the mobile sector without drifting off into other areas of the TMT industry, Zeitgeist spent an evening last month as a guest of Accenture in Cambridge, discussing the successes and failures of the recent Mobile World Congress in Barcelona. It came in the middle of a year so far that has already some significant shifts from mobile companies, in terms of branding, operations and revenue streams.
2013 has seen some interesting news in mobile. The week before last marked, incredibly, the 40th anniversary of the first phone call made from a mobile phone. This year also saw Research in Motion renaming itself to BlackBerry, with shares sliding 8% by the end of the product launch announcement for its eponymous 10 device. It saw Sky acquire Telefonica’s broadband operations, while responding to major complaints about the speed of its own broadband service. It has seen Huawei, which in Q4 of 2012 sold more smartphones than either Nokia, HTC or BlackBerry, come under scrutiny particularly in the US for its lack of transparency. Moreover, after much editorial ink spilled on Facebook’s lack of initiative and innovation in mobile, the release of the ‘super-app’ Chat Heads has piqued interest as it looks to compete with Whatsapp, Viber, iMessage et al., which Ovum reckons cost MNOs $23bn in lost revenue every year. This news mostly pertained to developed markets; JWT Intelligence’s interview with Jana CEO Nathan Eagle features some interesting insights on mobile trends in emerging markets.
Interestingly, 2013 thus far has also been witness to the beginning of more flexible contracts and payments. At the end of March, T-Mobile USA announced it would offer the iPhone to customers for cheaper than its rivals, and customers would not have to sign a contract. It effectively ends handset subsidies – something which Vodafone pledged to do last year and was punished by the stock market when it failed to do so – spreading the full cost of the phone over two years “as a separate line item on the monthly bill”, which may strike many as still quite a commitment. Customers must pay the bill for the phone in full in order to be able to end their tenure with the network. The New York Times elaborates, “Despite T-Mobile’s promise to be more straightforward than other carriers, some consumers might still find it confusing that they have to pay an extra device fee after paying $100 up front for an iPhone.” In the UK, O2 is going a similar route. At the end of last week the company announced similar plans to T-Mobile. While still keeping contracts as an option, the FT explained the company was looking to a plan, dubbed O2 Refresh, “that decoupled the cost of the phone from the cost of calls, texts and data. Customers will be able to buy a phone outright, or pay in instalments over time, and then sign up to a separate service contract that can be cancelled or changed at any time.” Although O2 said in the article that they expected customers to pay the same as they would on a standard contract, the new plans by both network providers will surely add to customer churn. Brands will have to work harder to develop true loyalty rather than relying on the lock-in feeling that adds to switching costs for many customers. Conversely, this added flexibility may make the providers feel less like utilities, creating more choice and differentiation.
At the aforementioned conference Zeitgeist attended last month, Accenture hosted an evening they dubbed “MWC: Fiesta or Siesta?”. It soon became apparent that many of the speakers invited were less than enthused with the conference this year. This was partly because there were no extraordinary leaps in technology or hardware on offer. It was also because of, as one speaker lamented, “the proliferation of suits”. Another speaker complained it was like listening to The Archers: long storylines “that ended up having no conclusion”. The very essence of the conference though is not about trendsetting, or cool new consumer devices. Mobile operators are utilities, the excitement around such an event is not going to be as visceral as that of SXSW or Embedded World. It led some to wonder whether the “real innovation was being developed in such ‘niche’ events, away from the “glitz”. Moreover, perhaps Samsung’s decision not to launch their new S4 handset at the Congress alluded to this lack of excitement, or at least a wish not to be drowned out by other announcements.
Among exciting trends on display at MWC, M2M – something Zeitgeist has written about before – was front and centre at the conference, particularly with regard to cars. Phablets continued to make their foray into the consumer’s view, with bigger screens meaning more data transfer. Zeitgeist wondered whether such a transition would put even more pressure on networks already struggling with large data handling. And although Firefox’s new OS gave some – including those at GigaOm – hope that it could provide more innovation through diversified competition in the marketplace, others, including Tony Milbourn, Executive Chairman of Intelligent Wireless, speaking at the event, thought it “underwhelming” after “lots of hype”. Bendable screens were also to be found at MWC, but those speaking at the Accenture conference like Richard Windsor of Radio Free Mobile said it was early days and much was still to be seen from this new type of phone. Its potential though, he readily conceded, was formidable. Wearable technology was a huge issue at the conference and one that Zeitgeist is particularly interested to see develop, especially as companies like Apple, Sony and Google enter the fray.
It seemed then that the Mobile World Congress failed to reflect what is turning out to be a tumultuous year in telecoms. Not only is there an increasing desire to address consumer needs – in the case of more flexible contracts and more consumer-facing company names – but as economies sputter their way toward ostensible recovery we are also starting to see M&A activity return to the sector. Time will tell whether new technologies, such as M2M or bendable screens can breathe new life into the sector.
While the Mobile World Congress cools down - TechCrunch has some interesting thoughts - we wanted to touch on another tech issue, that of M2M.
Machine-to-machine communication is nothing especially new, but it is expected to see an explosion in use in the next 5-10 years. It is often referred to as ‘The Internet of Things’. Consultancy firm Analysys Mason recently held an interesting webinar on the subject, focussing on the B2B applications. The graph above is taken from one their webinar, and illustrates the expected rise in M2M device connections worldwide through 2020, according to device. Notably, the auto industry will see some expansion (think cars talking to each other to avoid colliding, staying in the right lane, basically driving themselves, a burgeoning trend recently picked up in The Economist).
Significant take-up will come from the home, with your dishwasher telling you when it’s time to put it on and your fridge telling you you’re out of milk and taking the trouble to order some more from Ocado without you lifting a finger. Zeitgeist asked one of the speakers, Steve Hilton, about how such devices could be promoted in the B2C world. One of the first things Mr. Hilton said needed to be done was to stop calling it M2M, instead communicating in a way that “isn’t all tech-y speech”. It would require focussing on the “fun”, “great” things you can do. Entertainment and security products using M2M will be of particular interest.
Currently though in the consumer sector this is a little-known technological movement that marketers will need to think carefully about how to communicate to their consumers, without making them worry about Skynet.
UPDATE (15/3/12): Not one to allay fears of any Skynet-like worries, CIA director David Petraeus last week commented on the rise of M2M devices and how much easier it will be to snoop on unsuspecting citizens, saying it would “change our notions of secrecy”. Wired elaborated,
“All those new online devices are a treasure trove of data if you’re a ‘person of interest’ to the spy community. Once upon a time, spies had to place a bug in your chandelier to hear your conversation. With the rise of the ‘smart home’, you’d be sending tagged, geolocated data that a spy agency can intercept in real time.”
The magazine gave the article the level-headed headline ‘We’ll spy on you through your dishwasher’.
Is China ready yet to take up the mantle of world’s biggest luxury consumer, or is the rest of the world still alive and kicking? This week it was reported that one in four Bentley’s are sold in China, meanwhile The Economist states that a “mere 1.4% of urban households make more than $15,000 a year, and only 11% make $5,000-15,000″. So who is this new audience? Zeitgeist can tell you anecdotally that there are lot of 20-somethings in the West who feel like luxury brands aren’t addressing them at all. There’s a dual tension here between old money and new, between understated chic and extravagant opulence. Groups populated by customers who are actually very different in their spending habits, but are grouped under the generic umbrella of “luxury” all the same.
Zeitgeist wrote a couple of months ago about a car brand that played on tenets of luxury to extol its own values; in the above video Audi does the same. What type of customer do you think it’s courting?
Shell and Renault might not leap to mind as producers of the most ‘green’ products in the market right now. Hence why both companies are trying to alter this perception by touting their so-called ‘green credentials’. In the past week, one brand has come off better than the other in managing these expectations.
Though unquestionably adept when it comes to social media – having in the past month launched their products on the latest incarnation of the Sims game, as well as the ubiquitous Facebook integration – Renault has fallen foul of the ASA twice over a period of five weeks. At the end of March, seventeen people complained that the company’s strapline for their new electric car, that it was a ‘zero-emissions vehicle’, was a fallacy, as it “did not take the full life cycle of the vehicle into account… the ASA adjudicated that if the car was charged using energy sourced from the UK’s national grid, CO2 emissions would be produced as a result.” The article also mentions a new set of codes by Defra meant to combat ‘greenwashing’ tactics. Yesterday, Brand Republic reported the ASA had banned a second Renault advert, when one person complained “it was using French rather than UK figures to make the claim that one of its electric cars reduces CO2 emissions by least 90%.” The ASA concluded the ad was “misleading”.
Where Renault has stumbled, Shell has not, with those wonderful JWT minds producing a simple but visually engaging advertisement that immediately speaks to the relative cleanliness and quality of its fuel.
One luxury brand not usually associated with such serious things like sustainability is Aston Martin. But then neither was BMW before it recently unveiled its prototype electric car (see headline picture). Campaign magazine reported yesterday that the manufacturer “is looking for an agency to handle the launch advertising for its Cygnet city car”. The project is being managed in conjunction with Toyota, based on that company’s iQ car. “a large proportion of Aston Martin drivers also own a smaller car, such as a Mini or smart car, which they use for their inner-city commutes or to do the shopping. Reports suggest that the Cygnet will cost around £30,000 and feature a low-emission economical engine.” It’s an interesting decision. Although one might initially blanche at the idea of Aston Martin producing a more economical car, as the above quotation illustrates, it is in fact very on-brand. In this case, why sell to half of the consumer’s automobile product purchase, when you can sell to it all? The model will, initially, only be available to those that already own an Aston Martin.
Zeitgeist is most pleased to see efforts being taken by the those industries with an environmentally questionable past to prepare for a cleaner future. Moreover, who’d have thunk it, but electric cars can be cool and fast (although UK hybrid and electric sales are unfortunately slipping). It’s clear from Renault’s example though that people won’t tolerate a greenwash. Perhaps the open-source project “c,mm,n“, will help.
As the media industry trade mag Variety reports this week, the annual “upfronts” for TV are in full swing. This is when TV executives put on an attractive show for the advertisers, in order to convince them that their shows are worthy of being invested in with some big brand names for those thirty-second ad breaks. What last year was a moribund affair – as the major US networks struggled with the economic downturn – has improved notably this year due to complex negotiations and a somewhat more bullish ad market. Variety notes that the iPad and its myrmidons will be a significant part of the push, as well as mid-end restaurants trying to lure back the consumers they lost to cheaper rivals and even a resurgence in the automotive category.
According to a Nielsen study undertaken at the end of last year, the average American watches about 140 hours of TV every month, “including more than seven hours via DVR [i.e. TiVo / Sky+] and another 3.5 hours via the Internet”. The TelecomPaper reported this morning that weekly internet usage has overtaken TV watching in Canada.
Digital expenditure remains a small piece of the pie for the TV industry. President of sales for Fox Broadcasting Jon Nesvig bemoans the lack of a “common measurement system” for both on and offline; digital spend for the moment remains a brand-building exercise rather than accruing a return on investment. The “old-fashioned 30-second spots still pay most of the rent”. Product placement also plays a large part in the US, while the UK continues to grapple with the implications of it. One interesting recent development is that of contextual advertising. As Variety explains, this means “… having spots run adjacent to relevant subject matter in programming. For example… a scene with a car crash in ‘The Bourne Identity’ transitions into a spot for the On-Star automobile security system.” Full measurement and integration of all platforms is clearly a way off yet, however when it happens expect digital ad spend to rocket up.