A message from Qualcomm to Broadcasters

MediaFloQualcomm’s decision to shutter its once-vaunted mobile television product, FLO TV (a.k.a. MediaFlo), ought to send a clear message to the broadcast industry that subscriber fees for Mobile Digital Television (MDTV) are perhaps not the right way to go. Staci Kramer of PaidContent.org reported Monday that the service will “wind down by the end of the year.”

The company is in discussions with AT&T and Verizon about the future of its white-label wholesale service, which continues for now and includes the majority of its TV customers.

Qualcomm CEO Paul Jacobs acknowledged the consumer service’s problems earlier this summer and suggested the company might be better off focusing on using its spectrum and network to distribute other content. This shift places the emphasis on leasing the network, not programming for it.

According to Ms. Kramer, that spectrum is worth $2 billion, so don’t feel sorry for Qualcomm.

That may be comforting when it comes to dollars overall but it doesn’t make FLO TV less of a failure or MediaFlo so far less disappointing. Founded in 2004, the costly mobile TV venture attracted Verizon and AT&T as distribution partners but has been hampered by limited availability on devices and an inability to achieve full distribution. It launched direct-to-consumer FLO TV in 2008 but the marketing message was muddy and consumers weren’t as interested as the company thought in acquiring a separate device and paying a subscription for mobile TV. (emphasis mine)

What people want with their portable device is unlimited texting and unlimited Internet. They’ll buy apps and pay for services like GPS Navigation, but, as Staci says, consumers aren’t interested in paying $14.99 a month for mobile TV. The one thing that Jacobs said might work is live sports, which brings me back to MDTV.

TV broadcast directly to your portable deviceRight now, the broadcast industry is split over whether MDTV should be subscription or free (advertiser-supported). I have been saying it should be free since I first heard of the concept, because it is the only way that local broadcasters can assume a role of relevancy in the new world. Some broadcast groups, however, want that “second revenue stream” as provided by subscriptions, but this will kill it. Firstly, any subscription fees would be split with either the phone manufacturer or the carrier or both. Secondly, there’s no demand for it. None. But portable, advertiser-supported broadcasting could be significant. It would garner a new type of video advertising, because, well, as Nexstar’s Perry Sook said last week at the Borrell mobile conference, if your portable device becomes your wallet (it will), then “your wallet will be in your TV, and your TV will be in your wallet.”

Broadcasters should accept the MediaFlo message for what it is — clear directions for the future of MDTV. Think about it. A broadcasting license would actually mean something again, because it would restore scarcity to an important facet of the digital video distribution system. We must get off the subscription bandwagon and unify with a “free” model.

The browser is mobile’s killer app

In Google’s view of the Mobile Web, the browser is what really matters, and in a time of everybody building apps, I think this is absolutely spot-on. Apps are closed systems within proprietary operating systems, so reaching across all operating systems — including those that are yet to come — is problematic at best. The advent of HTML5 allows for rich experiences across all browsers for anybody wishing to play in the Mobile Web, so spending all of our time and resources playing with apps is something we ought to reconsider.

Brendon Kraham, GoogleThis concept of the browser as killer app was put forth by Brendon Kraham, Team Manager of Mobile for Google, at the Borrell mobile conference in Dallas, and it was a presentation that was, frankly, pretty eye-opening. Kraham offered four conclusions about mobile:

  1. Growth is accelerating. This was a common theme throughout the conference. Kraham referenced Mary Meeker’s projection that within the next five years, more people will be using the Mobile Web than the Wired Web. The revenue graphs shown by Borrell are remarkable, so there’s little disagreement that mobile is where its at.
  2. Openness will win. This is why Google created Android. Despite the beauty of walled gardens today, people will eventually expect the same things from the Mobile Web that they do from its wired big brother. This is one of the reasons that net neutrality laws MUST be extended to the Mobile Web, ‘lest the Telcos turn it into tiered options based on money. There are 60 devices running Android worldwide today, with 200,000 new activations every day.
  3. The browser is the new killer app. As noted above, if we wish a ubiquitous present in the Mobile Web, then the mobile browser is what we should be preparing ourselves for. Kraham noted that the line between mobile and wired is blurring more and more each day. I think it’s absolutely necessary to pay attention to this concept.
  4. Mobile consumers are looking for local information. 30% of all Google mobile searches are local, according to Kraham, so portable media is very personal and very local. Search is also the top opportunity for mobile, and Google is, well, tops in search. Kraham showed slides representing mobile search activity in San Francisco over the life span of smartphones, and growth was 11.6 times over just a two-year period. Truly remarkable.

So if the browser is the new killer mobile app, then mobile landing pages for small and mid-sized businesses are hugely important and a significant opportunity for somebody. Kraham noted that the number one thing merchants want with local search is to drive people to their landing pages. However, he noted, most are just crap (my word). Mobile landing pages, he said, must “optimize USER experience,” and that’s very different than simply providing an online brochure. It takes skill to think like a customer, but that’s what’s necessary in the mobile world.

He spoke of several new innovations that Google has been working on, including hyperlocal distance information and click to call. In a search for a business, they can include our location and produce a map that shows where we are and how we get to the searched business. “Click to call” is a technology that’s included in a search ad, where users click on a unique number which routes them to the business they’re seeking.

Money in the mobile space will be much more about enabling commerce than it even is online, and we need to think this way, if we’re going to be successful.

The future is unmistakeably mobile

smartphonesThis week’s Borrell conference on mobile money has revealed some fascinating concepts and thoughts that require elaboration. Let’s begin by acknowledging that nobody really “knows” where all of this is heading, but there are a lot of smart people milking the mobile space for everything they can get out of it. Some of it is extremely cool, but as you’d imagine, much of it falls into the “throw it against the wall and see if it sticks” variety.

Deseret Media president & CEO Clark Gilbert, whose keynote presentation was stunning in its thoughtful approach to the whole problem of the disruptions we face, noted that media companies may be facing a similar situation to what mainframe computers faced when PCs first came along. The mini-computer was disrupting the mainframe industry, but it was soon blown away by the PC. The mini-computer business didn’t see it coming, because the creators were convinced theirs was the disruptor. Blithely asking the question “Who would want a computer in their home?” was their real downfall. Gilbert suggested traditional media may be the mainframes with the Wired Web being the mini-computer disruption, but the real disruptor may be the Mobile Web. He wondered if media companies are really prepared.

One thing’s for sure; if media companies treat the Mobile Web as they have the Wired Web, we’re going to have serious problems, and that’s essentially what this conference was about.

Nexstar CEO Perry Sook noted that the portable media device will be “your wallet” in just a short period of time and thought about the day that “Your wallet is in your TV, and your TV is in your wallet.” Sweet, but perhaps a little unnerving for the average Joe.

Rob Weisbord of Sinclair talked about “geo-fencing,” the use of Bluetooth to build a sort of geographic force field on behalf of an advertiser who can then push messages to anybody driving through or walking through. While currently only available via app, Weisbord spoke of the day when the capability will be built into the operating systems of all mobile devices, thereby making it “app-less,” a regular part of your phone. You’d walk into Kroger and immediately receive a text message about deals and coupons. You’d drive past Wal-Mart and receive a similar text message. Add to that previous purchase knowledge, and it becomes a direct marketer’s dream.

One thing I noted (and tweeted) during the event was the unexpected blowback against Groupon, the mobile couponing company. Groupon provides deals on behalf of local advertisers and offers to partner with local media companies to help them get into the business and make some money along-the-way. Clark Gilbert noted that Groupon — and a host of other companies like them — aren’t driven by helping local media companies — they’re real mission is to harvest the media company’s email database, and the moment that harvesting begins to trend downward, they’ll leave and compete against their former partner. Two people mentioned this, and that awareness was refreshing and a sign that at least some people are beginning to figure out that the new media money space is all about data. I had not seen this before.

I wonder about many things when I’m among my friends in the business, and this time was no different. I wondered, for example, when we’ll stop assuming that we can push things at people without them pushing back. The Web — and by extension, the Mobile Web — is a direct-marketing marvel, and that very personal device you put in your pocket is your new mailbox. Nobody wants a mailbox full of stuff they didn’t ask for, and I think we underestimate this as we look at the future and what’s possible.

Another thing I wondered about was whether the people in the room truly understand what’s happening to them and their businesses. When media company reps stand up and tout their “content-driven product strategy,” I wince, because the evidence clearly shows that separating making money from content is the way to go. “Deals” was a popular topic, for example, but that has nothing to do with news content. It is trust in the brand that opens doors for new ventures, not content produced by those brands.

Bob Gilbert of Morris Media emphasized his company’s tablet strategy and stated that Morris believes tablets are a “do-over” for their whole business, a “start-over” to get things right. Their tablet product looks — amazingly — like a newspaper, because they want to “replicate the curation of print,” to “show connections to our roots,” and to “be a bridge from the old to the new for consumers.” I love the folks at Morris and wish them well, but this feels like a roll of the dice to me.

In reference to Clark Gilbert and Deseret Digital, several people mentioned throughout the day that it is the resources that Gilbert has at his disposal that allows his company to be so innovative. “We’re publicly traded and don’t have resources like that,” was the comment. I want to reiterate Gilbert’s response to that statement: “What choice do we have?” I think that’s a fair question.

I also think that is the number one takeaway from this conference. Mobile is on us like a freight train, and we’ll never capture a winning share of the ad market, if we don’t invest and invest well.

Exclusive: Mobile advertising to skyrocket

The sensational growth of the mobile application (apps) market is causing forecasters to take another look at projections for mobile advertising. Borrell Associates, for example, has dramatically boosted its projections for the growth of mobile ad spending, according to new data being released this week. Borrell now predicts mobile advertising will be a $16 billion market by 2012, skyrocketing upwards from $1.9 billion in 2009. Kip Cassino, Vice President of Research for Borrell, thinks it’s going to be big. “We’ve seen the beginning of a swing,” he said, “that looks a lot like the swing we saw when search first started to get going back in 2003.”

“It’s going to get a lot stronger a lot quicker than we first expected,” he added. Here’s the dramatic graph:

New Borrell Mobile Advertising Projection

The numbers are all about the mobile app market.

Kip CassinoThat market in and of itself is huge — projected to be $7 billion this year, with 8 of 10 apps being free, according to new data released this week by Gartner. Analysts predict mobile application stores’ revenue will grow to $29.5 billion by the end of 2013, but that has nothing to do with advertising. But this enthusiasm for apps is what researchers hadn’t anticipated, according to Cassino:

The apps in and of themselves don’t cost much to put on your mobile device, but they are the vehicles for an awful lot of marketing. They will be the way the TV stations, radio stations and others will bring their programming to people, the way all kinds of advertisers will try and get themselves in front of customers.

Gordon Borrell agrees but adds that local is a different animal when it comes to anything new.

We are sure mobile advertising will go up faster than we estimated in the past, and we’re now pretty sure it’ll go up faster than everybody else is forecasting. That said, I’m still skeptical that you’ll see the floodgates open in terms of spending by small businesses on mobile advertising. It’s never happened that way in the past with a new medium. They’ve always been reticent and conservative at first, then like lemmings when something begins providing undeniable and consistent results. So I suspect the big lemming-leap is probably a good two, maybe three years away for local mobile advertising.

So if you’re a local media company, what can you do to prepare?

The most important thing is to get into the app business, with emphasis not on content but commerce. The problem here is which phone do you build for or which service do you use? I’m not sure that matters as much as just getting into it. Start with the iPhone and move forward from there. In the beginning, it’s probably fine to start with content, but keep an eye on developments in the commerce space, like the aggregation of Twitter feeds from local businesses. Those could be turned into mobile apps.

Pay attention to your RSS feeds. I’ve been harping on this for a long time, but your RSS feeds simply must be more than “click here for more details.” Let’s not just shove links in people’s faces, but give them some real meat via RSS. This is what will drive your mobile apps downstream, so give it some thought today.

Pay close attention to the marketplace and be prepared to pull the trigger at a moment’s notice. Much of my day is spent reading and staying in touch with what’s happening in the tech world. You can and should do the same. Follow the folks at TechCrunch, GigaOm, TechMeme and elsewhere to keep abreast of developments in this rapidly-changing world.

I’m sure Gordon will be discussing this among many other things next month at Borrell Associates’ Local Online Advertising, The ‘Business of Making Money’ Conference.

MDTV now appears unlikely to be free

For the past few years, I’ve been predicting that Mobile Digital Television (MDTV) would be the salvation of broadcasters, but I’m beginning to have my doubts. The broadcast standard has been agreed upon and portable devices are being made with the chip, but there are things taking place behind-the-scenes (or not taking place behind-the-scenes) that threaten the main competitive advantage that broadcasters would have in the MDTV space — that it would be free.

According to a new study from market research firm iSuppli that’s being reported today in Multichannel News, 17.6 million television systems for automobiles will ship in 2015, up from 8.2 million this year. That would seem to be great news for the MDTV future, but there’s a major competitor standing in the way.

For broadcasters, the major mobile TV play is being led by the Open Mobile Video Coalition (OMVC), which represents more than 800 local TV stations that plan to use the ATSC’s mobile digital TV broadcasting standard. The OMVC has lined up device manufacturers that plan to sell products that work with the DTV specification, and the group plans to launch a customer trial in Washington, D.C., in 2010.

Also hoping to crack the market is FLO TV, Qualcomm’s mobile television subsidiary, which has a deal with Audiovox to offer an in-vehicle entertainment system delivering live TV service through more than 12,000 new car dealers in 85 markets. FLO TV is currently available through AT&T Wireless and Verizon Wireless and via a Qualcomm-developed handheld device with a lineup of more than a dozen live channels, including CNBC, ABC Mobile, Disney Channel, Fox Mobile, MTV, NBC2go and Nickelodeon.

The difference between FLO TV and the OMVC is that the latter is over-the-air via bandwidth assigned by the FCC and, therefore, free. Verizon’s V‑Cast, on the other hand, costs $14.99 a month. So far so good for broadcasters, right?

However, The AP is reporting today that the whole idea of free TV is up for grabs, as the networks that provide the programming for broadcasters are increasingly looking for a revenue stream besides advertising.

That will play out in living rooms across the country. The changes could mean higher cable or satellite TV bills, as the networks and local stations squeeze more fees from pay-TV providers such as Comcast and DirecTV for the right to show broadcast TV channels in their lineups. The networks might even ditch free broadcast signals in the next few years. Instead, they could operate as cable channels — a move that could spell the end of free TV as Americans have known it since the 1940s.

“Good programing is expensive,” Rupert Murdoch, whose News Corp. owns Fox, told a shareholder meeting this fall. “It can no longer be supported solely by advertising revenues.”

So if the people who create the programs want subscriber fees, that will certainly drift over to MDTV, and broadcasters will either have to come up with a system that pays for programming — and charge consumers for it — or they’ll turn the whole mobile television space over to companies like FLO TV. Perhaps there will be a combination, but it’s seeming less and less likely that broadcasters will be able to arrange programming combinations that will appeal to “free” MDTV. Programming wants to be paid, and if what Murdoch says is true, advertising won’t fill the bill.

If, however, broadcasters could persuade their networks to provide cable and other programming that would be broadcast for free via MDTV, this would seriously threaten the business model of the paid (such as in “cable”) portable TV industry and give local broadcasters a much needed breath of fresh air. I think advertisers would love it, and everybody would win. However, the more people like Murdoch bitch about needing that “second” revenue stream, the more doubtful a free MDTV with quality programming becomes.

We need to continue to watch this carefully, for the future of local broadcasting may be at stake.

Mobile TV is a minefield for everybody involved

The big media companies want to have their cake and eat it, too, when it comes to mobile video, and this, I think, will not go over well with consumers. According to Online Media Daily, panelists at the Media Summit New York last week discussed their “preference” for a dual revenue stream model in the mobile video space. Like cable, NBCU and Disney want subscriber fees AND advertising revenues in distributing their content via mobile devices. You want mobile video, you pay a fee to your carrier and then sit through advertising.

No thanks, folks.

NBCU is a place where we make money from distribution partners and advertisers,” said Chip Canter, vice president, wireless platform development at NBC Universal Digital Distribution. “What we’re trying to do is drive dual-revenue stream models: fees for distribution and supplement that with advertising.”

…Tim Connolly, vice president for mobile distribution, ABC, Disney and ESPN Media Networks, explained that Disney isn’t about to offer cable programming for free (ad-supported only) on mobile when it charges cable operators a licensing fee for the same content. “The ad infrastructure in mobile is incredibly immature,” he said. “It’s not anywhere near the point of making it freely available today because the ad structure isn’t there to support it.”

I think all of these people underestimate consumers, who have the power to say “no,” because there are so many other ways to access network “content.” Mobile TV applications, like Verizon’s V‑Cast, are pretty cool, but they’re not cheap. Until people can view mobile TV via their living room sets, I just don’t see this taking off like the networks hope it will. And if there will be ways (Bluetooth?) to move your mobile signal to the “big” TV, who’s going to pay for cable?

And all of these companies are going to have to deal with the clout of Mobile Digital Television (MDTV), which is coming downstream. Media companies with licenses to broadcast digital programming to mobile devices would love to have subscriber fees, but the medium wasn’t created for that. Because it’s free, however, the value proposition for advertising is much more acceptable to consumers, and this is where the money will come from.

I believe the networks need to work with their affiliates to provide cable programming (they all own cable programming) to mobile devices for free, simply because it will be a powerful, new advertising vehicle. If local stations can only broadcast local programming and their own signals, it’s not going to be a profitable venture for anybody. If the nets absolutely insist on subscriber fees, that might be all right as well, but those fees aren’t going to amount to much, especially in the beginning. It’ll take awhile to establish measurement paradigms and the static advertising platform that businesses will need. And if consumers want to move their MDTV to the living room set, the signal will be high-quality and digital, much more suited to a bigger screen.

This is a minefield for everybody involved, and the networks should tread lightly. The dual path may well survive, but it’s very unlikely it’ll be in the form the networks want. Advertising, for example, may be “supplemental” to the nets, but it’s damned irritating to end users. Will a viewer in the supermarket really want to sit through a 5‑minute commercial pod?

Of course, if the networks continue to insist on this “dual path,” then certainly they will one day demand subscriber fees from their affiliates as well. What will happen then? Stay tuned.