Andreas W Gerdes and Malcolm H Ross, founders of iWORLD Group (iWG) and the iAnytimeAnywhere (iAA) Network, were both invited to participate at the 3GSM World Congress held at the end of February in Cannes. More than 22,000 people from the world of international mobile telephony attended this event. Several other iAA members were also present at the conference, which has been hailed as the world's GSM meeting place and which attracted a host of prestigious speakers and delegates from world of mobile telephony.
Andreas and Malcolm participated in various sessions of the conference, with Andreas forming part of the Industry Vision Panel, discussing the topic 'Making Money with 3G Services' and Malcolm chairing the Keynote session entitled 'Making the Internet Mobile'. In both their contributions, the iWG representatives emphasized the importance of building businesses that focus on providing services that generate profits, and went on to outline their skepticism about the potential of 3G to make any real impact on the evolution of the mobile-commerce industry.
Andreas' talk was right on target - as throughout the much-vaunted New Economy, businesses that were flourishing a year ago are now struggling to find the profits in their ventures. The notorious Butch Cassidy was once asked, why do you always rob banks? His answer was short and sharp: "That's where the money is". And as the 3G-technology race intensifies, industry leaders should really be stopping to ask, but where exactly is the money in 3G?
From the iWORLD Group perspective, it is essential that before embarking on any venture, the company always seeks to identify existing pots of money that could be tapped into by offering a value driven mobile commerce solution that substantially increases the value of that driver as well as to calculate the service's worth to the customer actually using it. In this way focus can and is directed at identifying the money in a business idea before getting excited about it. iWG is fundamentally returning to the basics of business, in which viability and profitability was measured by the amount of money customers spent, and the actual turnover of the company, and not the price of equity or market fluctuations and trends.
Within iDeasTank, which is where all iWG ventures are conceived, analysed and validated, market segments with strong value drivers, aimed both at business and consumer, are examined, as well as how mobile communications can make a substantial increase in the value of that driver. So, for example, if the driver is hope, any business that aims to be profitable should first ensure the foundation of the services or products they offer will enhance or answer their customer's desire for hope.
iWG set up its business building operations with a determined focus on finding the money in all the services the company develops. Though we now live in a more or less fixed world, we are looking ahead to the not-too-distant future when we will be living in a mobile world. Industry estimates put the number of mobile device users at over 1 billion by the year 2003, and as digital systems converge the culture of mobility will spread through the US, Europe and Asia.
So, where is the money in 3G? To take the voice medium first, even in Helsinki, where the mobile phone penetration of 15 - 25 years olds is 130%, 8 out of every 10 voice calls are on fixed networks. Taking into account that a mobile phone is not shared and is always carried about with its user, there is no doubt that voice could be four times bigger than it is today.
In commerce, even with 2G you can order a pizza using voice. The pizza costs 10DM, 60 pfennigs go to Amex and only 30 pfennigs go to the mobile operator, and pizza hut gets 9.60DM. Music download - Hollywood gets the high profits not the retail shop, not the trucks delivering to the shops.
One of the vital ingredients will be focusing on lower customer churn. Vodafone paid Mannesmann $7,800 per customer. With 30% churn equaling losses of $200 dollars per month, this is four times the average RPU. Reducing customer churn will be key to accessing increased revenues, and this can be achieved through offering customers 'sticky services'. For an example we need only look at Virgin's services; their business is capturing and keeping customers with sexy services.
iWG is developing services that strongly illustrate this element; customers of iWG e-mobile solutions are attracted and retained through the offering of services that are up-dated constantly and that are tailored to maintain customer interest and loyalty.
But is 3G necessary for us to be able to achieve this? At iWG we believe current technologies are sufficient for e-mobile solutions, and 3G is, for mobile purposes, at best overkill, and for data transmission purposes, nowhere near as efficient as the service that will be available on fixed systems in offices or homes by the year 2005-7, which is the earliest 3G will be available. In our view, there are no obvious killer applications promised by 3G. Digital postcards are one service that 3G promises, but if customers send one a day, that will still only be equivalent to 30 seconds of voice. Another service that is being talked about is MP3 downloads. Our view is that there may be a few, but most will be loaded in comfort at home, and at a much cheaper rate, too.
The three critical success factors of mobile are coverage, coverage and coverage. But when we're talking about mobile commerce they are 1) constantly asking, where is the money?, 2) getting experts in the specific industry to run the project and 3) understanding your customer and earning the money you get from them.
The bottom line, we feel, is that whoever captures mobile e-commerce in 2G will own it in 2.5G and in 3G. iWG was set up to create a new mobile e-commerce market in each of the continents of Europe, Asia and the US. Each CEO recruited to lead iWG's spin-off companies will be an expert in the target business, and with 700 million 2G phones in use already today, we are in a position to capture the high ground.
No situation is ever without risk, and in this case it is the 4G danger that we have to look out for. Indications are that by the time 3G is available, people will be served with 100 megabit per second to the desk through the corporate network. 10 megabit will always be freely available in hotel rooms, airport lounges and at home, making 3G mobile at 300 kilobits per second will seem incredibly slow, to be used only when nothing better is available. And, since corporate networks will be serving city centres primarily, one has to ask the question why are all 3G operators rolling out in these locations first?
The answer is that nobody has properly examined where the money is in 3G. And, as Butch Cassidy would have surely have said if he were around today, why go somewhere if you haven't worked out yet whether there's any money there?
The response to both Malcolm's and Andreas' contributions questioning the viability and value of 3G was enormous, and both iWG representatives were asked to elaborate in further private meetings with many of the attendees, financial analysts and media, who were keen to understand the iDeasTank-inside processes focusing on creating and capturing value. The iWG message came across very strongly, and has sparked a far-reaching debate on the viability of 3G.