iPhone BOM

Thought I'd throw this picture in a blog entry as a handy reminder for iPhone direct material (DM) costs.
From iSuppli:

Are we being lemmings or is video on the mobile phone really hot?

WSJ covers (may require subscription) mobile video startups: MyWaves, Cellfish LLC and 3Guppies (what kind of a name is that?!):

So, what is the thesis here? Are we being lemmings* by chasing mobile video?

Personally, I am not very optimistic in the short run about broadcast or streamed video, at least not in the US. I'm more optimistic, however, about short video segments or mobisodes (user generated or premium). However, I would question the market size for something like this (especially given device fragmentation issues) as well as the willingness-to-pay for video. The standard answer applies here: ad supported business model!! It might work for video. The Telephia survey points to higher recall rates for ads inserted into mobile video clips.

Here's a quick sampling of research and thinking on mobile video:

WSJ is not very optimistic:

But still the services haven't caught on. Of the nearly seven million users who watch mobile video or TV from their phones every month, the vast majority watch clips sent to them from family or friends, rather than video prepackaged by a carrier, according to research firm M:Metrics Inc. Overall just 3.6% of U.S. cellphone users subscribed to a mobile video service in the first quarter of 2007, up from 1.6% in the year-earlier period, according to market researcher Telephia Inc.

Quite interestingly, Telephia in its own press release puts a very positive spin on it, although the focus is on revenue and subscriber growth, not so much on the growth in the penetration of subscribers who use video, which is what WSJ focuses on.

After another quarter of impressive subscriber growth, mobile video is rapidly becoming a significant new media distribution platform. According to Telephia, the world's largest provider of syndicated consumer research to the telecom and mobile media markets, mobile video revenues in the U.S. totaled $146 million in Q1 2007, growing 198 percent year-over-year (see Table 1). There were 8.4 million mobile video subscribers last quarter with penetration doubling to nearly four percent since Q1 2006.

M:Metrics appears quite bullish about video in 2005:

"The fact the more people intend to watch mobile video than the number who are downloading games today is very encouraging for this market"

But, points to slower take up in 2007:



In-Stat points to complexities that are holding back the growth in video:

While Mobile Video Services are a hot topic with great potential, the market is very complicated, and will take quite a few more years to completely sort itself out, reports In-Stat.

Another cautionary note (on Mobile TV) from Analysys.

Michael Mace has an excellent post taking a hard look at the realities of mobile video. The most disturbing part of his post (by his own admission) is the economics of delivering video:

Tilson of Case Western quoted some very sobering statistics on the economics of mobile video. He said one megabyte of data delivered as SMS messages yields £268 of revenue to an operator in the UK. That same megabyte delivered as video yields 20 pence of revenue, roughly 1/1000 the revenue. Of course, a single user of video is much more likely to consume a meg of data than is an SMS user, so the billing per user might still be fairly good. But video quickly exceeds the capacity of a typical 3G data network. He said no more than six viewers per cell can watch video at one time, and if 40% of users on a typical 3G system watched six minutes of video a day, they would saturate the entire network.

Be sure to read the comments down there - there are some optimists cheering for DVB-H.

All that said, it would be nice to look at some data on how many use YouTube Mobile, especially given that the iPhone comes with a YouTube player.

____________________
*Lemming: A short-tailed, furry rodent known for its peculiar habit of committing mass suicide by hurling itself -- along with hundreds of over Lemmings -- over steep cliffs and into the ocean.

*A reference from another WSJ article: "I don't want to use the word 'lemmings,' " says Scott Bonham, a partner with Granite Global Ventures. "But it's sort of like five-year-old kids playing soccer: They all swarm around the ball."

From Down Under: mobile phones becoming indispensable

Just as I get depressed about the seeming lack of stellar exits in the mobile space, I run into this survey, for some temporary cheers:

-More than 90 per cent say their lives could not "proceed as normal" if they were suddenly without one.

-The typical mobile phone user makes calls "relatively infrequently", and 28 per cent make less than one call per day.

-Workers with mobile phones say the device increases their workload and also boosts their productivity.

-Among 14-17 year-olds, only 12 per cent do not regularly use a mobile phone while of those aged 18-39, 94 per cent are regular users.

-Most calls are made between partners, with women also more likely to call their children, parents and extended family. Men are more likely to make work-related calls.

-Ten per cent of mobile phone users said they don't switch off in cinemas, and half don't in restaurants.

Yep, the social impact is huge. But does that translate to profits?

How much longer are we going to sing the same old story:

• Huge opportunity as we connect the next billion (Ex: Handset penetration rate in India - about 15%). Anyone know how forthcoming the next billion are to pay for mobile applications/services? ;-)
  
• Voice revenues are going down. Data revenues are going up. 3G deployments and usage is on the uptake. But... what's the killer app that will fill the pipe?
  
• Users are getting younger, which means its time to beat the social networking/user generated content drum... what invariably follows this line of thinking is the fact there are many social networks and hence the proverbial long tail.
  

Its a fragmented world indeed - carriers, consumer types and preferences, handset types (screen sizes, input methods, software platforms) etc. The big players with deep pockets and scale economies are critical to this space, although the walled garden approach they have adopted thus far stifles innovation and hurts the end-consumer.

Frontline Wireless and some celebrated VCs are trying the revolutionary approach - building out an open network. (A recent Red Herring article on that topic.)

In the meantime it remains to be seen how mobile applications can be used to monetize the billions who are addicted to the lifestyle impact of the mobile device.

Thinking about investing in a startup? Screw direct to consumer and go B2B!

Mobile seems to have all the characteristics required of a typical VC investment - large and growing addressable market, favorable demographics, fragmented space, early in terms of user experience etc. You would think its a hot and sexy sector to invest in... Truth be told, it is unclear. There isn't a great deal of evidence on big exits, relative to the amount of VC dollars that have been poured into each teeny weeny mobile application/usecase. The few exits that come to mind: SavaJe, AppForge, VoiceSignal, ScreenTonic, ThirdScreenMedia and Tellme.

As I grapple with trying to figure out what type of investments make sense in the mobile value chain - platform companies vs consumer apps vs infrastructure providers vs technology enablers, I've always wondered if there's an accessible source on the debate amongst VCs on the return potential boring investments versus flashy investments.

The WSJ article today seems to have sparked off a debate by highlighting a handful of recent B2B IPOs:

The profits generated by the dozens of stock debuts of these work-horse, business-focused equipment companies dwarf the venture returns of the handful of recent consumer deals, such as Google Inc.'s $1.7 billion purchase of YouTube.com, which had been backed by just one venture-capital firm. Indeed, of the 79 technology IPOs in the U.S. since January 2006, only a handful involved companies directly serving consumers. One was troubled Internet-phone company Vonage Holdings Corp.; its stock has plummeted in the past year amid heightened competition and a patent dispute with Verizon Communications Inc.

VC blogger Ed Sim seems to think modest exits are just fine as long as the investment is in a "capital efficient" company. On the surface it seems logical. I did attend a panel discussion where a similar case was made by Ann Winblad about SaaS investments. Mark Sherman sums up his investment case for SaaS.

Would be nice to see some data on exits (IPO, M&A) to support the "capital efficiency" argument for direct-to-consumer (eg social networking, social shopping etc) startups.