Over the Air and Emerging Markets

Two weeks ago in London, I presented at Over the Air on Emerging Market Opps. I thought I’d highlight a couple of the case studies here and embed the presentation (that I hastily put together on the plane 🙂

SMS GupShup – I was amazed to learn that this social network of only 2 years, now represents 7-8% of all SMS volume in India – insane! Who says it’s too late to start a social network? Given Orkut’s and Facebook’s strong presence in India, you’d be skeptical that a new social network would be able to make a dent but SMS GupShups unique approach by making SMS the primary interface worked. Users can chat over SMS and subscribe to various SMS content feeds. SMS GupShup generates revenue primarily through SMS ads appended to each message and/or via sponsored SMS messages sent by SMS GupShup groups.

Nokia Comes with Music – Anyone who has ever worked in the music industry knows that the intersection of music and technology has been an up-hill battle in terms of generating revenue. Numerous startups have died at the will of the labels and others live on a shoe-string trying to make their business model work. In any case, most labels/publishers do not generate any revenue in emerging markets let alone many advanced markets. These markets thrive on piracy apparently with micro-economies of shops that can install pirated music onto your phone for a fee. In an attempt to solve this, Nokia launches Comes with Music which basically means if you buy this specific Nokia phone, you get unlimited full-track download which is naturally restricted by the amount of available storage on your device (but you can of course delete and download more). The cost of the unlimited full-track download service is baked into the cost of the device (estimated to be a $50 premium over the same phone without Comes with Music). Nokia takes a portion of this $50 and returns the remainder to the labels/publishers. Fascinating model and no idea how well it’s working and whether ad-supported music streaming will impact full-track download?

Full presentation with many more use cases below:

The real interesting question out of the Over the Air group was weather these solutions were only stop-gaps and not sustainable in the long-term. For example, SMS as the primary interface or as the communication layer makes sense but once data becomes cheaper and more pervasive and smartphones begin to penetrate, users will flock to the mobile web and apps? The counter argument is that these companies will obviously adapt and leverage their brand accordingly.

Understanding PDE (Positional Determining Entity)

In the past 2 years, the industry has finally moved beyond LBS as a category to LBS as a feature. As stated previously, “What app wouldn’t be more useful with location?”! What’s misunderstood in all of this is how location is retrieved by the app and what this means.

E911 (government mandated subscriber location lookup) in the early days was the initial motivation for opeartors to introduce network-based location lookup. This location is acquired through a combination of network triangulation technologies and is delivered to the requested entity (eg person or app) via a positioning server. This approach is often referred to PDE or carrier-based location lookup.

The challenge with PDE has been in business models; operators have been charging for PDE location queries and a variety of middle-men and/or aggregators have been trying to sell this access (eg Wavemarket, Autodesk’s former mobility group, Alcatel Lucent and others). Most developers obviously can’t afford to pay 5-10 cents per location lookup and have thus resorted to the many free alterantive ways to get location such as determining location by the cell tower or getting location through WiFi or most obvious, getting location from GPS (readily available through APIs in smartphones today.

You may ask, why PDE if you can get location in other means? The challenge with the alternative solutions, is that the app can only get location for you (and you only). This is great for use cases like Google Maps but what if you wanted to get the location of your buddy or what if you wanted to send an SMS when one of your friends walked by your house – yes, that would be kind of creepy but advertisers love this scenario (proximity marketing). Unfortunately, the only way besides doing a FourSquare check-in to get the location of one of your buddies or a passerby is using carrier-based location lookup.

To entice more developers, many of the carrier location aggregators have been trying to offset the 5-10 cents per query pricing via alternative business models. For example, a developer can receive subsidized queries in exchange for sharing advertising revenue from their app. Unfortunately as much as mobile advertising is growing, it still cannot offset even a 5 cent query. The better question to ask is why is there a charge at all – if PDE was free, there would be a whole new set of apps that could be enabled built leveraging real-time location. For example, without needing an app running in the background, I could track the entire life-path of a user – an advertiser’s goldmine in terms or profiling! Well, as with most things, the reasons things are the way they are is often not the most logical:

1. Without naming operators, some can’t scale PDE. I’m pretty sure they want to open it up, assuming the right privacy features were in place but the query volume would kill the network infrastructure. Let’s see what happens as initiatives like GSMA’s OneAPI continues to push forward – this is a solvable problem.

2. Some operators are restricted by their licensors. For example, CDMA operators use Qualcomm’s QPoint to power the PDE and likely have licensing fees based on volume that inhibit their capability to open it up.

3. And of course the biggest problem is that there are a handful of developers (eg Family Locators) who are actually paying 5-10 cents per query. Unfortunately, when somebody is willing to pay, then let them pay even if it inhibits innovation. I guess we’ll have to wait for Google to make it free (somehow)!

In any case, let’s see how this evolves. Carrier-based location lookup can open-up a whole slew of new applications that cannot be achieved effectively today. It moves the problem from getting location to the larger problem of privacy which many others are trying to tackle.