VisionMobile - Business models of mobile ecosystems - Digital Winners
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VisionMobile hosted a workshop on mobile ecosystems in November 2013. The document discusses the shift from mobile telephony to mobile computing and the fundamental changes this brought about. Ecosystems have become the gatekeepers for capturing value in mobile, challenging traditional telecom business models. Successful ecosystems like Apple, Google, Amazon and others redefine markets, boost demand for complements, and bundle value around their core products. Telecom companies face disruption from this asymmetric competition as value migrates to adjacent industries. Handsets are also transitioning from a hardware to a distribution role for digital services and e-commerce.
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VisionMobile - Business models of mobile ecosystems - Digital Winners
- 1. VisionMobile Ecosystems Workshop at DIGITAL WINNERS November 2013 Copyright VisionMobile 2013 Copyright VisionMobile 2012
- 2. VisionMobile | the ecosystem analysts Developer Economics Mobile Business Models Trends watch The biggest, most global developer research platform Thought-leading research for managing disruption and reinventing your business Tracking under-the-radar industry trends Tier-1 clients Digital ecosystem experts Media coverage trusted by the top brand names in mobile Thought leaders in the economics of ecosystems and telecoms in the software era Global media reach Copyright VisionMobile 2013
- 3. apps, devices shifting basis of competition asymmetric business models cross-industry competitive arenas 3 Apps are just the tip of the iceberg Copyright VisionMobile 2013
- 4. 2000s: Mobile and computing are separate islands Telecom island private, vertically integrated, intelligent network Computing island public, horizontally integrated, dumb network Dumb & closed Intelligent & open Intelligence = software 4 Copyright VisionMobile 2013
- 5. Today: Mobile computing brought the two together Convergence led to clash of business models and emergence of new leaders Intelligent & open Intelligence = software 5 Copyright VisionMobile 2013
- 6. Fundamental shift in how value is created value is created on top of digital ecosystems in all aspects of user needs mobile telephony mobile computing telco are the gatekeepers of the communication needs (less than 5% of spending) ecosystems are the gatekeepers for the rest 95% of needs Communications Health 3% Communications 3% Alcoholic beverages, tobacco and narcotics 3% 3% Housing, water, electricity, gas and other fuels 23% Clothing and footwear 6% household spending EU27 Furnishings, household equipment maintenance 6% Education 3% household spending EU27 Transport 13% Restaurants and hotels 8% Recreation and culture 9% Miscellaneous goods and services 11% 6 Source: Eurostat household spending for 2011, VisionMobile Food and nonalcoholic beverages 12% Copyright VisionMobile 2013
- 7. Fundamental shift in how value is captured and delivered asymmetry challenges the very fundamentals of traditional business models Communications 3% mobile telephony telco is at the center of the value distribution Alcoholic beverages, tobacco and narcotics 3% Clothing and footwear 6% Health 3% Communicatio ns 3% Education 3% Housing, water, electricity, gas and other fuels 23% Furnishings, household equipment maintenance 6% Transport 13% Restaurants and hotels 8% Recreation and culture 9% Miscellaneous goods and services 11% Food and nonalcoholic beverages 12% mobile computing multi-polar value distribution …but, apps are just the tip of the iceberg 7 Source: VisionMobile Copyright VisionMobile 2013
- 8. Fundamental shift in how competition is defined challenges business models of incumbents competition between products competition between industries inside-out thinking outside-in thinking defined by product features what product the customer will buy? defined by product benefits what customer is trying to get done? vs. vs. “selling a newspaper” “killing 10 minutes of time” vs. vs. “selling a phone service” 8 “keep in touch with friends” Source: VisionMobile Copyright VisionMobile 2013
- 9. Fundamental shift in the basis of competition in mobile companies need new capabilities to compete in this new market environment mobile telephony mobile computing 4 apps 1M apps (voice, text, contacts, camera) (encompassing all user needs) value creation value distribution value capture telco and their suppliers ecosystem owners and participants business models 9 telco proven & predictable new & unpredictable Source: VisionMobile digital ecosystems (iOS, Android, Amazon, FB, …) Copyright VisionMobile 2013
- 10. The success formula of ecosystem business models based on case studies of Apple, Google, Amazon, Facebook, KakaoTalk, and others 1redefine the market in terms of what customer is trying to get done 3 2 identify complements to your product boost demand for complements and ensure supply 4 bundle your product with the flow of value 10 Copyright VisionMobile 2013
- 11. The 101 of economics of complements widely used by Internet players in competitive strategies Core product Complement A product consumed with the main product Product demand increases as complement price decrease 11 Copyright VisionMobile 2013
- 12. Apple ecosystem recipe 12 Copyright VisionMobile 2013
- 13. Apple media business – a $8.5B empire? (fiscal 2012 ) but the real story is bigger than that apps, games magazines, newspapers Bigger than 13 music, movies ebooks combined Copyright VisionMobile 2013
- 14. Why Apple is in the media and apps business? iPhone Lion share of Apple revenues are coming from sale of iPhone, iPad and Mac devices iPad Mac We run the App Store just a little over breakeven iTunes Peter Oppenheimer, Apple CFO 14 Source – TechCrunch, Company reports Copyright VisionMobile 2013
- 15. The mechanics of Apple iOS ecosystem ecosystem around iOS platform is designed to drive hardware sales telcos reduce friction for the iPhone business contributes App Store to offer $$$ and user engagement content, apps and services users and data plans access to market complements, revenue share subsidies operators developers sw publishers content retailers content owners internet players brands verticals iOS platform premium product experience accessory manufacturers premium $$$ contribution how value is captured 15 Copyright VisionMobile 2013
- 16. Apple iOS ecosystem recipe ecosystem recipe redefine the market complements apps and content boost demand make it easy for users to discover and obtain apps bundle with demand 16 communicate, play , work and relax on the go (computing on the go) Apple devices Copyright VisionMobile 2013
- 17. Google ecosystem recipe 17 Copyright VisionMobile 2013
- 18. Why Google is in the mobile business? Lion share of Google revenues is coming from online advertising 18 Copyright VisionMobile 2013
- 19. Google strategy pillars: Flatten, expand & mine Flatten anything standing between eyeballs and ad inventory Uses the economics of complements to increase the value of Google’s core product. Android and Chrome strategies are examples. Expand the footprint of ad inventory Across user journey by introducing new services like Gmail, Google Maps, YouTube, Google TV. Mine information on every user Helps Google to better micro-target users directly increasing the value of its inventory. Mobile payments will provide even more customer intelligence. 19 Copyright VisionMobile 2013
- 20. The mechanics of Google Android ecosystem drives eyeballs, consumer insights and commoditization of mobile Google app developers media publishers telcos reduce friction for Android distribution eyeballs, insights contributes mobile platform monetisation & user reach content, apps and services data plans, app sales rev. share handset subsidies operators technology and design handsets Android platform mass-market product experience Handset OEMs eyeballs contribution how value is captured 20 Copyright VisionMobile 2013
- 21. Google Android ecosystem recipe ecosystem recipe redefine the market computing on the go affordable mobile internet complements apps and content handsets, networks and apps boost demand make it easy for users to discover and obtain apps commoditise handsets, networks and apps bundle your products 21 Apple devices Google services Play, Search, Maps, YouTube, Plus, Gmail, Drive Copyright VisionMobile 2013
- 22. Amazon ecosystem recipe 22 Copyright VisionMobile 2013
- 23. Amazon: From books to dominant e-commerce platform transformed itself expanding onto new areas and business models Kindle devices (“mobile storefront”) platform for 3rd party sellers (2M sellers) E&GM books and media 23 Copyright VisionMobile 2013
- 24. Amazon: A $60B e-commerce empire but running on a single-digit profit margins Amazon 2012 revenues: $61.1B Other services AWS, credit cards, other seller sites, … Electronics & General Merchandise Electronics Computers Home, Garden & Tools Grocery Health & Beauty Toys, Kids & Baby Clothing, Shoes Jewelry Sports & Outdoors Automotive & Industrial 24 $2.5B 4% $19.9B 33% $38.6B 63% Media Books Music Movies Games Software Copyright VisionMobile 2013
- 25. What business is Amazon in? “Amazon is in the business of taking the right decisions for customers” Amazon VP of Design, Brian Kralyevich at SXSW 25 Copyright VisionMobile 2013
- 26. Amazon expertise: Convert engagement into sales The retailing business depends on ‘foot traffic’ to Amazon and depth of consumer insights Recommendations Traffic to Amazon 20%-30% of sales come from recommendations ** Only 16% of people go to Amazon with explicit intent to buy something ** (** Andreas Weingend, ex Chief Scientist at Amazon) 26 Copyright VisionMobile 2013
- 27. For Amazon, Kindle is an alternative to Google ’foot traffic’ can be acquired by ads, affiliates, developing apps or subsidizing devices $$$ - Search ads Online ads Traffic to Amazon $$$ - Referrals Affiliates Traffic to Amazon $$$ - Amazon apps Smartphone apps Traffic to Amazon $$$ - Device subsidies Subsidized devices Traffic to Amazon $$$ - Revenue share Telco/OEM as affiliates Traffic to Amazon Source: VisionMobile Copyright VisionMobile 2013
- 28. “Our business approach is to sell premium hardware at roughly breakeven prices. We want to make money when people use our devices – not when people buy our devices.” Jeff Bezos, Amazon http://www.sec.gov/Archives/edgar/data/1018724/000119312513151836/d511111dex991.htm 28 Copyright VisionMobile 2013
- 29. The mechanics of Amazon Kindle ecosystem drives foot traffic to its retail properties making most of Amazon users app developers media publishers monetisation & user reach applications and services content and E&GM retailing traffic contribute devices nothing Amazon Fire platform Personalized content and shopping experience proven software stack open–source OS traffic contribution how value is captured 29 Copyright VisionMobile 2013
- 30. Amazon is playing in winner-takes-all market reinvests the profits to become the only winner invested $13.9 in fulfillment infrastructure including 50 new facilities since 2010 source: Ben Evans 30 Copyright VisionMobile 2013
- 31. Amazon ‘Fire’ ecosystem recipe all play in devices, but for very different reasons and with different business models ecosystem recipe redefine the market affordable mobile internet convenient leanback shopping complements apps and content handsets, networks and apps tablets boost demand make it easy for users to discover and obtain apps commoditise handsets, networks and apps sell tablets at cost bundle your products 31 computing on the go Apple devices Google services Play, Search, Maps, YouTube, Plus, Gmail, Drive Kindle as a mobile storefront’ Copyright VisionMobile 2013
- 32. What about telco? Copyright VisionMobile 2013
- 33. Telecom was disrupted by asymmetric competition that forced value migration from telecom to adjacent industries contribute content, killing telco content business market telco and OEM thought they own device sales 33 Copyright VisionMobile 2013
- 34. Telecom was disrupted by asymmetric competition that forced value migration from telecom to adjacent industries eyeballs and consumer intelligence contribute content, killing telco content business contribute mobile platform, killing traditional OEM business market telco and OEM thought they own device sales 34 Copyright VisionMobile 2013
- 35. Telecom was disrupted by asymmetric competition that forced value migration from telecom to adjacent industries eyeballs and consumer intelligence contribute content, killing telco content business device sales 35 contribute mobile platform, killing traditional OEM business market telco and OEM thought they own contribute devices turning distribution on its head e-commerce traffic Copyright VisionMobile 2013
- 36. Telecom was disrupted by asymmetric competition that forced value migration from telecom to adjacent industries eyeballs and consumer intelligence contribute content, killing telco content business market telco and OEM thought they own device sales contribute services, bleeding core telco business 36 contribute mobile platform, killing traditional OEM business contribute devices turning distribution on its head e-commerce traffic user engagement Copyright VisionMobile 2013
- 37. The 3rd wave of disruption in the handset market hardware becomes distribution vehicle for digital services and e-commerce traditional model hardware = profits emerging model hardware = distribution take most profits “demolition derby” break-even or lose money No Name 37 Source: VisionMobile ? ? Copyright VisionMobile 2013
- 38. Taking it to extreme: Handsets as a distribution channel high-end specs promotes a politician 38 Copyright VisionMobile 2013
- 39. The success formula of ecosystem business models Use the formula to greatly increase your market opportunity redefine the market identify complements boost demand bundle with the flow If you don't, someone else will 39 Copyright VisionMobile 2013
- 40. Knowledge. Passion. Innovation. Let’s talk! michael@visionmobile.com Michael Vakulenko | Strategy Director | @mvakulenko Updated: 12 November 2010 Copyright VisionMobile 2013 Copyright VisionMobile 2011
- 41. want more? “Mobile Innovation Economics” first-of-its-kind workshop on the mechanics of mobile business models http://visionmobile.com/strategy Copyright VisionMobile 2013