How Far Away Is Mobile—Really?

Event: Kelsey Group Drilling Down on Local Search 2005

Session Title: How Far Away Is Mobile—Really?

Session Date: April 20, 2005

Session Time: 2:15 pm – 3:15 pm

Session Description:
A potentially big component of the interactive local media market is wireless/mobile. There are roughly 1.5 billion mobile phone subscribers around the globe and approximately 170 million Americans that have wireless phones. The conventional wisdom holds that a lookup (whether DA or wireless Web) on a mobile device reflects an immediate consumer need and is therefore a highly qualified local lead. And as most of the directory publishers and search engines ramp up wireless products, the question is, how far off is a bona fide mobile search opportunity? Is it simply another distribution platform, or will it be separately monetized through usage fees and/or distinct advertising revenue? What needs to happen before widespread consumer adoption can take place?

Session Participants:
Stephen R. Baker, Head of Emerging Applications; VP, eBusiness, Fast Search & Transfer
Oscar Berg, Product Manager, Mobility, Eniro
Heath Clarke, CEO, Interchange
Ali Diab, Sr. Director, Local Products, Yahoo!
Joe Herzog, Director, Emerging Products, InfoSpace
Brian Lent, President & CTO, Medio Systems

Related Posts: buzzhit!’s Drilling Down on Local Search 2005 Index Page

Session Details[*]:

Q: What are the differences between US, Europe and Asia in usage, technology, etc to provide context

Clarke: European markets lead wireless usage by a few years; conversely Internet is a few years ahead here. 30% of directory assistance is intiated SMS in Europe (still for fee). 54% CAGR in text messaging for the past few years.

Herzog: In US, expect more of what Yahoo and Infospace offer; driving from computer to phone; PC applications will lead.

Diab: I think it’s interesting that some think Europe is ahead; technologically speaking, I think things are at parity now. Business models different; US carriers have much more control. As they lose control here, they’re gaining more in Europe. One thing that’s different here is the luxury of the web here; most Europeans don’t have Internet access; mobile applications become a substitute there. Americans are also car bound; integration of web services (satellite radio, etc) will grow here.

Q: Will handset makers have a bigger roll in defining the applications/services than today?

Berg: Definitely. People buy mobiles because what they do, contain. It’s very personal; always in your pocket.

Q: So will the gatekeeper transition to manufacturer or carrier

Herzog: I think you’re going to see bundled devices and services; I don’t think the carrier gatekeeper changes

Diab: I think the handset makers will continue to lose power; more and more manufacturers from Korea, etc., leads to fragmentation. Carriers will become more important, especially for client-based applications on the mobile; that’ll be carrier dependent

Lent: I think it depends on who exposes the services; US carriers have a great deal of control over what goes into the phone

Diab: Carriers control the handset data

Clarke: To the extent that services are provisioned over the web, carriers and manufacturers lose control; the consumer has ultimate control

Q: To what extent have we not yet arrived at the “right” device; GPS. Is it just around the corner?

Herzog: Right device + network + application, made easy for the end user. We’re close, but not there. Apps are still hard to find, slow. 40% YOY replacement rate. We’re probably 18 months out

Q: What does the device look like? Treo, Blackberry

Herzog: That plus non-qwerty based devices; triple-tapping not an issue for certain age groups. Advances in voice technologies will improve things

Diab: Not a device issue at all. It needs to be as easy to access as typing 411; now you need to fire up a browser, nav, etc.

Clarke: Pysical device challenges, keyboard, screen. Local search even on the Internet isn’t where it needs to be. 300K pages aren’t it; first result or two needs to be spot on to deliver the right experience on mobile

Lent: 600M+ devices last year; how many were full keyboard, etc. Gotta work for devices people want to carry

Berg: All depends on what people want to do; for Internet use, it’s gotta be bigger screen and keyboard. So much variance in device capabilities, form factors; makes it harder

Baker: A lot depends on the client application; a lot of European YPs are prototyping clients now; allows you to build in personalization, etc.

Q: How do you deliver relevance on a mobile device if we’re still struggling online? What are the advertising impacts

Clarke: Consumer experience is everything. Might have to forgo advertising revenue to grow the marketplace. We don’t allow non-geographic regions.

Baker: Very little room around advertising for first query. The opportunity is to upsell transaction services (for movie search, ask about restaurant reservation or parking garage)

Lent: Perdictive analytics will help winnow the set. The carrier needs to be involved; they have all sorts of data on you as a mobile user that can help target results (+ GPS)

Herzog: Many usability challenges; low psychology barrier

Diab: You generally don’t dial 411 for something 300 yards away; the pressure to generate revenue is less than on the web, because they’re making money on the 411 call to begin with

Q: Privacy issues…

Lent: Amazon uses a lot of personalized information; it’s not about using it, but not letting it loose

Herzog: There’s a big difference between using that information for the users benefit, vs. selling that information to third parties.

Q: What’s the business model that’s going to serve everyone and drive mass adoption

Lent: Two major phases. Current and 3 years out. 3 yrs out, it will be CPA based, cost per call, etc, once the infrastructure is built out. Near term its about supporting the carrier who ones the relationship; driving loyalty, bandwidth and minute usage, etc.

Baker: Generic directory assitance is under pressure by what Google and Yahoo are doing; it’s about enhanced services, where there’s value add (restaurant example again)

Diab: Agree that it’s value added service. Yahoo doesn’t believe spamming people on the phone is a good idea. We think that there is an opportunity to provide complimentary services to the carrier and share in the revenue

Q: How big is the market in 5 years

Lent: 2.5x as many mobile devices as PCs. Average price-per-call is $20.00 vs. PPC of $0.30; could be the first trillion dollar market [being provocative, intentionally]

Baker: Advertisers will be willing to pay more for local PPC

Diab: I think it’ll be a $0B network as WiFi, which is effectively free, becomes widely available

Q: Look-ups are going to be for smaller items from the car, not looking for a divorce attorney

Lent: True, but there’s a volume game here. In a mobile environment, you’re probably much more likely to complete the transaction

Clarke: The consumer who calls up and doesn’t know the business name is the opp in 411, and that’s less than 1% of calls

Herzog: Music, ring tones, games, etc; premium data services will be the third largest opp, not first or tenth

Q: How do these competing models impact each other; for example, Google giving away 1GB of storage destroyed Yahoo’s mail storage upsell model

Diab: Not any different than any other industry, models can coexist, depending on user needs, frequency of use… they’ll subscribe, pay per use, etc

Herzog: Winner is free to end user, best ease of use, and revenue bearing for the carrier. At first, high end phone clients, end users will pay a fee per month; it’ll drop to zero over time, subsidized by advertising. They’ll tolerate it as long as there’s rev share

Lent: I agree with Joe… the mobile industry is the only communication industry that hasn’t been ad supported (TV, Radio, Internet, etc all are); must be free to users, though some fee for bandwidth (spectrum costs billions of dollars).

Q: What about SMEs? Is this big box only? Who gets SMEs in front of users

Clarke: It’s search. It’s value add or upsell to existing advertisers.

Lent: Who owns the relationship? I want to advertise to mobile users in my area… but that’s across 5 carriers. Seems like a great opportunity to leapfrog to a CPA model.

Q: Does that impact the Internet model (in reverse)

Lent: Don’t know if it accelerates it, but online is going there anway

Clarke: Certain industries lend themselves to CPA, CPC, CPM, etc. Enormous challenges in tracking CPA

Diab: Advertisers will be reluctant to pay a fee for someone who was looking for them anyway (i.e., without promotion). Transaction rev share does make sense in a duplex medium

Berg: We’re one stop; all channels; mobile is bundled with Internet (WAP service)

Q: What do you do to get people with WAP/data enabled phones to use those services

Berg: Multi-channel answer; Yahoo’s got the right idea, SMS from PC to phone… WAP link in the SMS would be perfect

Diab: We do

Mod Comment: And Infoseek just did that today

Q: Focus group were all heavy Internet, had phones that could do data, but weren’t. What’s the biggest constraint

Lent: Quality of experience, results, etc. Handset button should be “search” not “web”

Baker: No transparency for customers as to what it costs; I never know how much I’m going to be charged, when I can just do it on my PC

Herzog: It’s the unknown of the packet fee charge; bills can be very expensive, $100s. Sprints “Vision” flat fee is the right direction

Audience Q: If WiMax frees us from carrier control, what happens

Herzog: WiMax will open up broadband, making it cheaper, but no impact on mobility

Lent: Regulatory issues if WiMax becomes a primary form of communication

Audience Q: Will users need to be retrained to use shorter querries?

Baker: Query transformation will help us get closer to what users want with shorter strings as the technology improves

Herzog: There’s also the ability to use SMS-lingo query

Clarke: I think that makes it harder, let’s stick with English. 20-27% of YP searches fail as it is. [Ed: Sterling says that data is a year old]

Q: A year out, what are the one or two issues that have been solved, or advanced

Herzog: Query intelligence and location based services

Lent: Resolving more information about location

Clarke: Disambiguation of search from wireless devices

Baker: Client-side applications

Berg: Simple user interface with location abilities

Diab: Carriers will make location info more available; user interfaces will improve; devices will be faster, more pleasing to look at

* These are raw, unproofed notes taken in real-time. Nothing attributed to any speaker should be assumed to be an exact quote. Rather, my goal was to capture and communicate the essence of what was said. If there is a significant mistake, please post a comment or email me; I will make a correction at my earliest opportunity.