Sticky Smartphone

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Pt 2: Content Creation Digital Disruption in TV, Video and Media.

This is the continuation of the strategic battleground in the media industry the lines of battle are drawn here.

If your ead the earlier post, this post focuses on the strategy in the content creation aspect of the value chain - 

Content is a hits-based business and is a key driver to user acquisition. Owning strong content brands creates demands from consumers and can create complementary revenue models from consumer goods. This provides a stronger negotiating position for the content owner. However, it is also be a huge cost to discover new shows that attracts large audiences. According to Film LA, pilot production costs have been increasing.

The number of pilots produced reached 186 during the 2012/13 cycle, the objective is to discover popular content since this is the biggest leverage that content owners have when negotiating with content packaging and content distribution companies. Likewise, for companies that provide the connected device, whether that be decoders, set top boxes or direct to TV broadcasters, popular content drives sales and subscriptions. This is one of the main factors that have driven new companies into content production such as Amazon, Microsoft, Netflix etc. because existing content creators may not be willing to provide the rights to their content to these new companies due to reasons such as exclusive digital deals, or bundled digital rights in different territories, or simply because these new digital services are competing with their own. For Amazon, Microsoft and Netflix to acquire larger subscription bases, they need to both license existing popular content and produce enough unique popular content to attract consumers.

Viewing behavior has also changed. Short form content on mobile devices occupies the most time used, and with mobile usage increasing, the demand for short form content increases. This has resulted in new content production companies focused on user generated content such as Maker studios  (recently under acquisition by Disney) and Awesomeness TV (acquired by dreamworks). Maker Studios house 50,000 channels on YouTube which makes this method much more scalable and cost efficient in terms of content acquisition.

Services such as YouTube have spawned a new generation of video consumption habits particularly with the millennial generation. Millennials are increasingly moving over to online and mobile video content and on more ‘snackable’ content.

(source: Reuters)

User-generated snackable content has become a main driver of video viewing for the millennial generation and is a direct competitor to non-hero shows. Since production of snackable content can be cost efficient, start-ups are looking to move into this space, from individuals creating YouTube channels to multi-network companies that are packaging them up.

Snackable content isn’t purely focused on TV, but also on digital platforms, in particular the rise of mobile has grown the relative audience for short-form video, and since traditional TV has never focused its strategy on short-form digital content, it left an opportunity for new companies to develop this space.

Since owning content is a key asset in negotiation and user acquisition, we are seeing vertical integration from platforms and distributors moving into this space in an attempt to attract more consumers, alongside new players looking to build a foothold in this field. Yahoo! recently announced 2 original comedies,  along with Sony in support of it Playstation, and Amazon studios have been running for a few years [8]. In particular, Yahoo have subscribed to Nielsens’ Netratings service to measure internet audience as a method to attract more advertisers to their video products.

Content Creation Strategy

For content creators having a vast library of popular content, this enables them to strategically choose whom to license their content to. It is in their interest to maintain as much competition further up the value chain since that will provide them with more options to monetize as competing platforms/services look to license the best portfolio of content to drive users. A prime example is House of Cards, they licensed the content to Netflix for exclusive rights to stream the content online first, afterwhich the content owners were able to license further rights to other buyers such as Comcast, ensuring that they can try to maximize value from their content whilst maintaining competition for the content.

For companies that exist in the other parts of the value chain, there are a few reasons to expand into content creation. If your platform is servicing a growing and evolving segment of the market such as mobile, snackable content or adapting to changing user viewer habits; new content may need to be created to service the platform. If exclusive or original content is seen as a driving factor for user acquisition, it also makes sense to create content to ensure there is a unique offering to potential users.

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Why it makes sense to go iOS first when developing apps

Android is a clear market winner (as of August 2014) when it comes to units sold… so why do many developers make their apps iPhone first? 


Wow, Android has over 80%.. Let’s dig into the data a bit more. What happens if we blow up the data and look at it from a country by country basis. -


Certain countries are more Android dominant than others, but places like China skews the data, since there are 450M unique smartphone users there, and with a 80% Android share. It’s the same picture for many developing countries where budget Android smartphones are selling a lot.

How are these smartphones used? Let’s look at traffic share -


For less than 20% in shipments, iOS still commands 44.19% of traffic at a global level. If we were to isolate this to developed countries, and countries with a much more mature mobile data infrastructure, the numbers are more telling. iOS still rules the roost when it comes to usage.

If your app is targeting Android dominated economies  (e.g. developing countries, S.Korea etc.) then you would go Android first, but if you’re targeting more mature markets with well developed mobile data networks, it makes more sense to go iOS first and follow up with Android later. It’s better to test with a likely high use market first, than to waste effort and split resources working on 2 platforms when the product is not proven, hence reducing potentially wasted effort.

Get it right first, before scaling, and the optimal way to test is by reaching out to users who are more likely to test it out.

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Digital Disruption in TV, Video and Media and the strategic battleground.

This will be the first in a series of articles that looks at how mobile and the internet is disrupting traditional TV services and what TV companies are doing to battle back against this onslaught. Companies such as Netflix, YouTube are both complementing traditional TV and slowly migrating long-term TV viewers away from the likes of Comcast etc. This has cause big movements such as Netflix paying Comcast, Verizon et al, as well as the Time Warner Cable acquisition by Comcast.

The current landscape:

With the growth of digital media, consumers are increasingly influential in controlling their content consumption habits so that they can view the content they want, wherever they are, whenever it is convenient for them, and on their own choice of device whether that is a tablet, smartphone, TV or some other device. This puts enormous pressure on the existing Media value chain. Incumbents and new digital companies are undergoing change to both keep their position in the media chain, or in an attempt to wrestle control across the value chain to exert ownership over the changing landscape that is user viewing habits by providing new business models, service and availability options.

The disruption occurs across content creation, packaging, ad platforms, content distribution, connected devices and user experience displays, which are the main components of the media value chain.

Each part of the chain is currently undergoing disruption from within via incumbents who are radically modifying their business models, digital strategies and technologies to control a singular component in the value chain; or by expanding vertically across the whole value chain to control customer experience; or to control the gateways that access the customer. In many ways the landscape is replicating what happened in the game console industry and the mobile phone industry where traction was picked up via subsidized sales of hardware with licensed content on exclusive terms. Gatekeepers are the distributors of content who have existing business models such as re-transmission and subscriber fees. Drivers of audience to a platform or a service is still driven by popular content, however consumers are increasingly frustrated by access hurdles such as windowing and regional rights restrictions.

Existing digital subscription services across multiple platforms such as music (Spotify/Pandora) as well as mobile app markets (iTunes / Google Play) is leading towards an expectation from consumers that video content should comply to similar models. This is shifting the way people are viewing video where availability and service is becoming a driving factor and causing the shifts in the current media and entertainment business, as the average time spent on digital content is set to surpass TV. 

This isn’t to say that TV is in decline, rather that digital will outgrow TV, in fact in many cases, TV and digital are complementary as multi-screen use is growing.

Each major player is attempting to exert control in their area of the value chain, or moving across to supply more power to the areas in which they are seeking growth to leverage as much influence as possible with consumers. This has come in the form of creating strong content brands, strong services brands, or directly owning access to the users via subscription bases.

New technology has led to disruption in viewer behavior providing a new set of opportunities that companies are either positioning themselves to move into, or attempting to defend themselves by building positions that give them leverage in their part of the value chain. This has led to vertical integration as new entrants to the market attempt to provide a compelling service that meets consumer needs whilst moving against traditional business models. Conversely, incumbents are adapting to these new behaviors and moving vertically to ensure they maintain influence in their core competences.

We’ll look more closely at each part of the value chain in the next article.

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The rise of Trojan Horse Platforms, KakaoTalk, Wechat, Line

UPDATE 20th Feb 2014: Since this article was written, Rakuten acquired Viber and Facebook acquired Whatsapp

They start off as apps, apps that we use daily. They add service after service as they slowly evolve into an ecosystem of their own and before we know it. It becomes one of the de-facto places we visit on a daily basis to get all the things we need. 

Conquering Asia

You may have heard of KakaoTalk, Line and Wechat. Kakao dominates Korea, Wechat is the de-facto chat app in China and Line is massively popular in Japan, and most of the rest of Asia. You may be mistaken in thinking they are messaging apps, similar to whatsapp and Viber, but you’ll be mistaken. They have evolved past that point and are now platforms in themselves.

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I’ll look at each app to see what they are providing and to see where they are potentially heading.

KakaoTalk

Kakao is dominating the South Korean landscape, 130 Million users, topping the revenues and download charts. Starting off as a messaging service, it is also a game platform and will begin rolling out a content platform. With an expected $200M in revenues for 2013. With its game publishing platform, it is dominating the games section and becoming one of the main places to go to find new games (in Korea) which gives them a huge element of control over their userbase.

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Line

Line has around 280 Million users worldwide, with hugely impressive revenue figures, 31.3 Billion Yen  2013 revenue numbers up to Q3. That’s around $300M USD for 3 quarters last year.

Besides all the games they release, Line services include sticker shops, birthday cards, even extending out to create their own episodes of content - Line Town. 

WeChat

Wechat have approx 270M monthly active users, with their main growth in Q3 last year increasing when they started to focus on revenues by adding games and payments services into their messaging app. Raking in $82M USD in revenues on singles day alone, Wechat have been adding multiple services such as a taxi service which reported 100,000 rides in 9 days, investment services accruing $130M in its first day. You can blog on wechat and use it store articles to read.

Becoming a Platform

The evolution of these messaging apps into full fledged discovery, content, games platforms makes these apps into a platform ontop of a platform. Effectively a Trojan Horse Platform. They work because

  1. Sharing and network effects are built into the app from the start, it’s designed so that recommendation are easy to send, particularly because people generally do not ignore messages as it is to blank out news feeds from social media. It’s a lot more personal.
  2. Messaging apps is something that people will look at multiple times a day, adding additional services gives immediate access and more reasons to visit the app making it a de-facto location as these services complement your daily usage.
  3. As an app, you can be cross platform, Line exist on iOS, Android, Blackberry, Mac OS and Windows, it doesn’t tie you down to a specific OS or to a ‘higher tier’ platform. 
  4. Control over the userbase, since many people tie their network (contacts) it becomes a switching cost to move to a competitor messaging app… but not hardware device or OS. This gives the trojan horse platform direct access to the user. Especially given that (wechat for example) own some of the payment and financial aspects of the user.
  5. Ecosystem development, wechat are working hard to integrate services from many providers such as LinkedIn. Kakao publish games from other developers. They are creating their own ecosystems on top of their platforms and are becoming a gatekeeper to their userbase whilst adding these complementary services.

For now whatsapp and Viber are still messaging apps, but they will have seen the developments in asia and are likely looking at a way to assume this type of control as a Trojan horse platform in the markets where they are dominant,.

What does this mean to everyone else?

For everyone making apps or services, it means there is now another channel to tap into users and means that there is another layer of controllers in the mobile ecosystem as a new set of gatekeepers emerge to plant themselves into the value chain and control access to users.

It’s all about owning the wallet of the end user.

Filed under whatsapp viber wechat line kakaotalk platform trojan horse

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Kissmetrics vs Mixpanel : Start-Up Metrics

You’ve tried Google Analytics (GA) and now you’re looking for a tool which provides you with other ways to provide more actionable insights. Mixpanel and Kissmetrics are the tools you’ll likely come across. Both have a free version based on the number of events you’ll likely use, so they are ideal to test out, but which one is best suited for you?

2 of the main reasons that you’d want to try Mixpanel or Kissmetrics are because you want to perform Cohort Analysis and/or you want to track individual behaviours. There are a couple of articles out there that already cover some of the differences. This one from March 2011, and this more recent one from November 2012. In brief the first article rates the tools based on -

  • Documentation
  • Live Data
  • Interface
  • People Tracking
  • API

Personally, although useful to some extent, they don’t really explain to me how to get the types of answers that I’m asking. For example, If I want to know how long on average it takes for people to hit a certain event, and I want to compile a cohort analysis to see if the actions I’m making are improving this goal, which tool is better?

On that basis, I’ll use Dave McClure’s Startup Metrics for Pirates AARRR and see how Mixpanel and Kissmetrics can be used to extract the metrics you want. These are all personal opinions and you may have a different preference based off how you apply your metrics.

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Acquisition

Both Mixpanel and Kissmetrics allow you to plug in campaign data into your pages.

For Kissmetrics, when looking at funnel reports, you can select the campaign properties as check the effectiveness of each campaign source to see which channel/websites are the most effective at  bringing in traffic that is most efficient toward achieving your goals. This means that if you were to put marketing dollars into a particular channel/website to acquire users, you should know where to place your bets.

For Mixpanel its pretty much the same, set up a person property called campaign or use utm configurations and when you pull up your funnel reports you get the same display as in Kissmetrics.

Activation

Both tools are pretty much equal here, using funnels, you select which events you expect people to perform to go down your activation funnel and you get your conversion and see at which events do people drop out.The main differences between the two is what other data is available in from the funnel report.

In Kissmetrics, you can hover over an event and “view people in this step”. This provides you with a list of people who reached this point in the funnel, allowing you to individually click in and see what events and properties you’ve recorded for them

For Mixpanel, you are provided with trend charts, you can see what percentage of people passed this part of the funnel in a day to day map (or week or month if you so choose).

Which one is more useful? For me, Kissmetrics provides an easier way to see who has performed this part of the funnel which lets you dig down into the behaviors of individual users.

Retention

Retention graphs by both tools are similar but have enough differences for you to be able to pick a preference. 

Kissmetrics power is the ability to create retention tables beyond grouping by date. You can select advanced options, and group people by their properties or events they have performed, this can provide some powerful insights, such as figuring out which campaigns provide higher retention. Kissmetrics also let you see the absolute figure when you hover over the retention chart, this can make processing the data easier to digest.

Mixpanel’s power is the ability to segment. After selecting an event, you can choose which properties that an individual can possess and the retention chart is filtered this way. In some ways similar to Kissmetric’s advanced options, but a bit fiddlier because you would have to create a report for each segment to be able to compare.

For me, in terms of the retention tables, Kissmetrics is better than Mixpanel, But Mixpanel also provides a retention tool via their engagement mailing tools, this is useful creating retention actions. Intercom.io is a better solution for this at the time of writing.

Referral

Configuration will allow you to track referral. One way would be to set up a persons property to have a referral variable and if they are referred by another user, attach their id to this property.

Kissmetrics provide a dashboard where you can compile different metrics to see how things are going. You can use this to determine how ‘viral’ your app is. A way to do this is to create a referral event, so when someone signs up to your app through a referral, the event is created and attached to the referring user. You can then track how many times a single user has successfully referred someone and use the “Average Number of Times Event Happened Per Person” metric

You can use the same technique for mixpanel. To display the data, use formulas where you can select the number of times the event has been and divide it by the number of people who visited the site and see how viral your app is. 

Both metrics are slightly different, but as long as you understand what you are measuring and create actions to drive these numbers there shouldn’t be a problem.

Revenue

Both tools have dedicated revenue functions. 

Mixpanel has this embedded in their people section, you can segment revenue by sources, and other properties and figure out where the revenue come from.

Kissmetrics uses events which you can map to their standardized revenue events, after which you can then see your revenue reports y referrer, lifetime values and other customer data such as churn rates.

Other

One useful function that Mixpanel provides that Kissmetrics doesn’t is the ability to increment properties. This means you can keep track of variable for users such as credits, if someone spends or buys credits you can increment/decrement that variable. This can be really useful, but unfortunately, where it would provide most value is if you could use these properties easily in a cohort table. Thus this feature is most useful when combined with Kissmetrics cohort table which can be grouped by property. Unfortunately, It’s not possible to combine the tools .

It’s important to remember that both tools are still iterating and developing so this is merely a current state of the play.

Photo Credit: Double Faced Matter Horn by Gabriel Zech

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The Evolution of the First Waterproof Phones

Sony recently announced the Xperia Z, a phone that can be used in the shower and recoverable even when dropped in the toilet. But is it the first waterproof phone? No… is it even the first waterproof smartphone? No.. the first waterproff smartphone was made in 2006 but previous waterproof phones needed extra bulk to keep the water off, did this make them undesirable?

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So above we have the Sony Xperia Z, but waterproof phonesa are not new to Sony, they’ve tried waterproof phones before, in fact most of these phones were made for the Japanese market.

2005 saw the first major wave with the Casio Canu 502S / GZ’One with a 1.3MP camera and 256MB RAM.

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2006 saw the arrival of the Sony Ericsson SO902iWP+. It sported a QVGA display and a memory stick duo slot.

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Nokia first dabbled with water resistant phones in 2006 with the Nokia 5500 Sport. This ran on Symbian, so is the first ever waterproof smartphone.

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Japan continued to lead the way and Fujitsu created a whole series of phones from 2007 onwards, the Fujitsu F703i, F704i and F705i 

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By 2008, US company,.Sonim released the XP3 Enduro, not content with water resistance, they tried to make this phone as shock proof as possible.

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But by now, underwater photography and the megapixel race was heating up. Back in the japanese market, Casio released the W61CA, a 5.1MP water proof phone camera

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Samsung’s first dabble into waterproof phones came with their Marine B2100 in 2009 with 7MB of memory, it’s still in the dumb phone territory.

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and so waterproof phones continue such as the Fujitsu F01B, a 3.4 inchtouchscreen devices with a 12.2MP camera.

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The first water resistant Android phone is released by Motorola, the Motorola Defy, a 3.7inch Touchscreen and 5MP Camera

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We’re still waiting for the nanotech super-hyrdophobic layers that companies such as Nokia are working on. Then waterproof p[hones will really be at the stage where they are fully waterproof and don;t require extra bulk.

Filed under first waterproof phone waterproof smartphone

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How Football Manager Can Get You a Real Career

That’s right, a computer game about football management can help you to develop skills that are useful for your career.. and I don’t mean getting a job as a Football ManagerFor those who don’t know what it is, Football Manager (FM) is a simulation game, developed by Sports Interactive (SI), that puts you into the hot-seat of managing a football club.

So how can you weave ‘Playing FM’ into an interview? What is the skill that FM can help you to develop? It’s Analytics, that’s why it fits in this blog. If we look at what skills are currently in demand in the workplace it’s Big data. Companies, everywhere, are looking for people who can analyze the data that they generate.

  • Marketing companies are increasingly analytical about their campaigns
  • Product companies need deep analytics to improve and iterate their products, 
  • Retailers have all sorts of data that can help them to optimize things from the positioning of their products on their shelves through to the data on all those loyalty reward cards.
  • Web Design is much more metrics driven to increase results.

So how does Football Manager help you develop valuable career skills?

I started playing FM under its previous carnation (Championship Manager), One of the common complaints were that after playing the game over many seasons, some of the newly generated players looked odd and the game appeared unbalanced, e.g (defenders were no longer brave). So I built a tool in my spare time that analyzed player attributes to see if there were differences in how players evolved over time to check for big differences. This taught me to code a little and how to analyze data.

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It’s a simple tool that spat out a text file that showed you the differences between the data at 2 different points in time (e.g. do all defenders lose the ability to be aggressive in 20 years time?). SI used it at the time, however, I eventually became too busy to be able to do this, and I’m pretty sure SI developed their own tools to do this much much better than the buggy code I created.

The later versions of FM makes it possible for anyone to develop analytical skills - I’ve purposely selected some screenshots below that show you what Football Manager is all about.

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This screen shot shows you how well a player has improved.

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This one shows you their training regime.

One aspect of improving any product is testing. This means changing variables and checking the results. For example, in a web page you may want to improve the % of people who sign up. You usually do this by split testing, or A/B testing. Then you analyze the data set afterwards. 

Look at those 2 screens… it’s the same principal. You tweak the training program, you assign different players to each program and then you compare the results to see which is more effective. There are a lot of people who are doing this already and unaware about the skills they are developing and how transferable they are to the real world. Take a look at the Tactics and Training Forum and you’ll find a lot of deep analytical talk where people discuss how to tweak training programs to improve players the most. It’s a hotbed of statistical analysis, A/B testing, spllit testing, metrics, measurement… no different to a professional analytics group on LinkedIn.

If you’re looking to develop your skills using FM, I recommend you use FM Genie Scout… some people may call it cheating… but it’s the ability to use it for data analysis that makes it so useful. Look at this screenshot - 

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It could be Google Analytics. The history function let’s record multiple data points. Here’s how you would perform a split test playing the game and using this tool -

  1. Create 2 training programs, 
  2. Split your players up into those 2 program 
  3. Play the game over several seasons,
  4. Periodically saving a history point. 
  5. Analyze the data to see which program was more effective.
  6. Tune your programs and repeat.

It makes it easier to discover what changes are more effective for which player attribute, not much difference to optimizing a website or product… the fundamental skills are the same. For those who are more advanced, you can spit the data out into a spreadsheet. Once you’ve done this over several data points, you can plot any graph or create pivot tables to analyze player progression.

And that is how Football Manager can help you to develop real skills that are needed today.

Filed under football manager analytics split testing career

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Why it doesn’t make sense for Google to be a carrier

In 2008, Google bid in spectrum auctions in the US prompting speculation that they wanted to become a carrier, actually this was focused to unlock open-access rules which allows any device or application to connect to the spectrum used by the carrier, effectively enabling OTT applications (Google voice, Skype, Whatsapp etc. However, rumours and speculation have continued to be persistent about Google becoming a carrier. Here are some reasons why it doesn’t make sense for Google to be a carrier

1) Current Carriers Hate Competition

The idea that Google might enter the carrier ring would make current carriers think twice about subsidizing Android devices, why subsidize the competition’s devices? You don’t see vodafone branded devices on other carriers. Carriers won’t take kindly to Google encroaching on their turf. Carriers still have some power in making or breaking devices. One of the reasons for the fall of Nokia could arguably be because carriers refused to take their devices and promote them because they remain one of the main sales distribution channels for phones.

2) International view

If Google were to successfully gain spectrum in the US, the rest of the world would instantly stand up and notice. Will Google try something similar in the future in different countries? This would lead to an Android ‘backlash’ as more and more carriers restrict sales channels

3) Hardware sales is not Google core

Google would have to sell their Android devices through their own stores. Google just don;t have the DNA to do this. It would take time before they can do this effectively. They could try online sales, but the failure of the original Nexus when it was boycotted by most of the carriers demonstrated how physical sales channels still dominate when it comes to phones. Android has gained traction now, so there may be more success via online only sales, but most people still like to physically compare phones unless they have already have made their purchasing decision. This would still affect effectiveness of sales.

4) Customer Support

Ever tried getting customer support from Google? There’s no easy direct way to contact them. Support for the Nexus was terrible, providing only email and forums. Supporting customers with their carrier issues is on another scale, and something that Google has never experienced.

5) Infrastructure

Owning spectrum is one thing, building out the infrastructure to support an entire country is another, and it would take a lot of money and time to build out a decent network. Sure, they could be a MVNO to begin with, but i wouldn’t bet on many other carriers wanting to help Google unless they were required to by the FCC. Secondarily, Google is a software company and not experience in the rollout and upgrades of network infrastructure to the scale that AT&T, Verizon and T-Mobile have.

6) What are the advantages?

There are very few benefits for Google. The main one is the customer relationship. Rather than sharing that with the carrier, it would give google direct ownership of the customer, which means they can better lock people into their ecosystem creating hurdles for people to switch out, effectively creating a switching cost that many people won’t bother with. However, the costs and lack of expertise is likely to cost them more than the benefit gained from running this type of strategy.

Given the above, it just doesn’t make sense for Google to traverse down the carrier route. They would be better off utilising their market power with Android as a negotiating tool with carriers.

(Photo credit wallshq.com)

Filed under google carrier android nexus

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4 Ways That AT&T Screwed All Carriers with the iPhone

The iPhone was a ‘great success’ for AT&T initially, but they made a couple of crucial mistakes that changed how all carriers are perceived and all the carriers negotiating power. Pre-iPhone, carriers were in control, they could accept and reject any phone, push out requirements to manufacturers and control the whole process.

  • Want VoIP in your phone? AT&T the carrier could ask for custom software.
  • Want WiFi enabled on your phone, the carrier can ask for it to be disabled.
  • An App Store? No Thanks, the carriers were trying to build their own app stores following the successful Docomo model in Japan. 
  • Update your phone software… sorry, that’s controlled by the carrier too.

In fact, if the manufacturer wanted a phone to be subsidised by a carrier they usually had to customise the phone software in some way, otherwise a Vanilla version meant the customer would have to pay full price. If a phone was ‘in demand’ negotiations over customisations may be easier. Effectively, the carrier wanted to own the customer, afterall, they held the customers billing details, and importantly their phone number.

So what did AT&T do wrong?

  1. Mistake 1 is the well documented unlimited data at $30. This effectively anchored a whole industry to a price point that was not sustainable. Before this offer came about, it was not possible to get an unlimited data plan. It caused an ‘arms’ race between carriers which meant increased capital expenditure costs in building up enough bandwidth to cater for unlimited data usage and half opened the door to over the top services.
  2. Mistake 2 is subsidising the iPhone too much. The subsidy for the iPhone ate into their profits and their profits increased after sales of iPhone decreased from 4.3M to 3.7M units from Q1 to Q2 2012. The subsidy and corresponding price that AT&T agreed with Apple, and the success of the iPhone anchored the expected price customers would pay for the iPhone. This affected all carriers.
  3. Mistake 3 was giving control of software updates to Apple. Previously, all software updates were controlled by the carrier. AT&T gave this control over to Apple. The original iPhone did not have an App Store, “Web Apps would have done”. But Apple could upgrade all iPhones and push an App Store that they controlled. All carriers who were trying to build their own app ecosystems were pushed out of the way in one fell swoop. AT&T gave away app store control and made that decision for all carriers. Over the top services (such as whatsapp, Line, Wechat) took advantage of this because no carrier owned App Store would ever approve these type of apps. 
  4. Mistake 4 was ceding activations to Apple and ownership of the user. Previous to this, who “owned” the user? The carriers effectively controlled the user because they had their phone number, and they had the billing relationship. Activations and the App Store ecosystem ensured Apple could move in and take ownership of the customer away from carriers.

One of AT&T’s requirements for the iPhone was am attempt to control media sharing by locking down Bluetooth. Ring tones were big profit earners and they didn’t want people to be able to easily share music files and make them into ringtones. With control of iTunes, this was not important for Apple.

These main strategic errors by AT&T affected all carriers and led to, price anchoring for unlimited data, over the top services, profit reducing subsidies and the battle of ecosystems that is all about who owns the relationship with the end user.

Filed under iphone att carriers app store user relationship price anchoring unlimited data app ecosystem

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How to Calculate Customer Lifetime Value with Flurry and Apsalar

I was looking around the web to see how people calculate Customer Lifetime Values, one thing became painfully clear. Most websites have an assumption that you already know your customer lifespan, or the customer lifetime… aka How long an average user will use your mobile app (or website or service).

Well, there’s an easy way to calculate it, and I’ll show you how. You can even get more advanced with segments. Here’s the simple way first.

First off calculate your Expected Average Customer Lifetime

Using Flurry

Open up Lifecycle Metrics and you will see retention rates over different time periods in the rolling retention.

(*Data is for illustrative purposes)

Usually the first month will have a large drop off (the people who try your app only once and decide against using it again). You can either factor this is and use this as your worst case scenario, or average it out over the months. In the above graph. The worst case scenario is a monthly retention rate of 60%. Averaging out would give a retention rate of around 75%.

The calculation is Lifetime Expectancy = 1/(1-RR) 

= 1/(1-.75) = 4 Months  (for 60% retention rate it is 2.5 Months)

*RR = Retention Rate

You can do the same for different time periods where necessary (e.g. weeks) and can get more accurate results when you use segmentation.

Using Apsalar

(*Data is for illustrative purposes)

This is the section you need to get your retention rates.  Apsalar cohort your data into weeks/days, so you will have to average out each column ( in the example table 34.18+37.59+36.47+33.83+31.4 / 5) = which is around 34.7%, with following rates of around 90%, (so for this 5 week period it’s around 78% retention rate average and 34% worst case scenario), and do the same for all other weeks. Then you will be able to calculate the average retention. Compile the same calculation as you did for Flurry and you will get a lifetime expectancy. Be noted that Apsalar will only let you do this for daily or weekly retention.

In Apsalar,  because you will have already created cohorts for your tables, you can create lifetime expectancy for every cohort group, which means you can compare the different groups for their different retention rates.

Lifetime Value

Calculate your monthly revenue, divide it by the number of active users that month, and that is the average revenue per user. If you have other variable costs per unit sale (e.g packaging), then deduct that from the average revenue to work out the average marginal profit per user. Multiple the average marginal profit per user by the expected lifetime and that is your customer lifetime value.

*If you had marketing campaigns to retain or acquire users, you need to deduct it from your average revenue per user.

NOTE: Pick with care, each analytics tools define and measure retention in different ways. e.g. For Apsalar, ir depends on the ‘cohort’ event you pick. For Flurry it’s an active session. Frequency also matters, someone who uses an app 2 times a month will appear in monthly retention figures, but will not appear in some of the weekly retention figures.

Segments

Both Apsalar and Flurry allow you to create segments, this means you can create lifetime expectancy and lifetime value for each segment that you create. Each segment may produce different amounts of revenue and have different lifetime expectancy. This means you can focus down on the segments that create the most value for you. Be careful though, different segments may well have different acquisition costs, so you need to calculate that to make sure you don’t spend more than the lifetime value of the customer.

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