It’s a new turf war for consumer brand loyalty, and MNOs yet again face the threat of becoming “little more than a connection” to a world of consumer services where brand loyalty goes to device vendors and apps, not to the operators. It seems thoroughly unfair, that MNOs lose out, after all they are the guys who created this industry, without the networks none of this would work, yet they increasingly see the glory go to the apps and devices.
Wired and wireless networks power the entire world of telecommunications, yet consumers flock to device brands and web-based services, sites and apps, and networks are under increasing pressure over their margins. The rapid emergence of another all-new device sector, Tablets, is only compounding this battle, driving data usage higher still.
Massive changes in the last few years
Five years ago, the names Apple, Facebook and Google were not names that held much significance in the mobile industry, yet now they are among the biggest names in the game, and they are upsetting the balance big time. Now we see giant stalwarts of the industry struggling against declining market share – Nokia, RIM, Microsoft, what is left of Motorola – while new names rise, such as Amazon, and while Facebook spend a billion on Instagram, and OMGPOP (makers of DrawSomething) sells for a small fortune within just a few months of launch.
The handset industry is undergoing a massive shake up. In 2005 and 2006 the hottest handsets on the planet were the Motorola RAZR and (certainly in Europe) anything from Nokia. How the handset industry has changed in just 5 years! Motorola effectively spun-off its ailing handset division after years of heavy losses, and Nokia’s share price has collapsed almost 90% from November 2007 to August 2011.
Accept it; it’s all changed in the wireless business.
Android now dominates, Google are one of the biggest names in wireless.
YouTube now generates more mobile data traffic than any other app or service.
Facebook, Google, YouTube, Twitter, Amazon and Ebay are some of the most visited websites in the world.
Apple recently became the most valuable company on Earth.
Samsung recently surpassed Nokia, after 14 years at the top, to ship more handsets in Q1 2012 than any other handset vendor.
This is business; there are winners and losers, that’s just how it goes.
Engineers vs. consumer electronics
Here in Europe, operators have failed to effectively own the consumer relationship for years, and this is a subject we at Portio Research have written about in our research reports on a number of occasions. In fact, I would go so far as to say that many MNOs have a history of failing to anticipate consumer needs. MNOs come from a historic background of engineers building cable networks and radio networks, a history that goes back well over 100 years to Bell and Marconi. Many MNOs have a deeply ingrained history as engineers, guys with spanners and transistors and soldering irons and bits of copper wire. They built (literally, physically!) this industry, giving us the underlying technology that made the mobile and wireless industry possible, and for that we are all grateful. Without those towers and base stations, none of the rest of it would be possible.
However, they have become vast consumer-facing companies, with tens of millions or even hundreds of millions of customers (think China Mobile – managing that beast is a bigger job than managing many small countries; more people, more money; 700 million customers and many billions in revenues). Many MNOs are not fast-moving enough to keep up with the demands of this user base. MNOs spent years building and selling technology, failing to see that consumers don’t buy technology, they don’t buy ‘GPRS’ or ‘LTE’ or ‘HSDPA’ because they don’t know what it is. Consumers don’t buy acronyms, they buy lifestyle solutions, lifestyle enhancements, they don’t buy what it IS, they buy what it can DO, for them. Consumers buy ideas, services, games, time savings, fun; they buy desirable looking devices, not ‘XX Mbps data speeds’. Most consumers have no idea what XX Mbps is or what it can do for them.
The mobile industry grew so fast that MNOs all over the world, built from companies of engineers, suddenly found themselves handling tens of millions of consumers in a cool, trendy new industry that is all about youth-led trends, games, social media, mobile payments, consumer credit, lifestyle enhancement and cool, sexy gadgets. MNOs the world over have been on an incredibly steep learning curve, barely keeping pace with what’s new in mobile as thousands of smaller, leaner, faster moving companies, funded by venture capital, backed by sharp young minds, have flooded into the industry and built hardware, software and services which hook up to MNO’s networks and compete for consumer brand loyalty.
Handset vendors don’t come from that same engineering background, they come from the much younger and faster-moving world of consumer electronics, where vendors have long since accepted that products are usually out of date by the time they hit the store shelves, and so ‘staying up to date and working on tomorrow’s new trend’ has always been a core marketing and R&D focus in these companies. Where network engineering is the core focus of an MNO; selling the latest cool, highly-desirable device is the core focus of handset vendors. This difference is crucial.
Consumer electronics is a young industry, it barely existed 30 years ago.
Radio engineering is a much older, more mature business, from an older mind-set, which owns costly infrastructure, the land that infrastructure sits on, and fleets of engineers.
NTT DoCoMo had branding right, back in the growth days of i-mode. They had handset vendors produce a broad range of new handsets branded for DoCoMo with an i-mode button. The handset manufacturers own name and logo barely appeared on the device. However, in Europe MNOs struck no such deals and branding was lost to Nokia years ago. In the US, loyalty went to Motorola, BlackBerry and others…and now of course that brand loyalty goes to Apple.
As markets continue to evolve, and as consumer demands change, we should not lose sight of the fact that MNOs are the core of this whole industry. I don’t think it is wise to side-line the MNOs as brands. Instead they should be supported and encouraged to continue to improve network quality and coverage and reliability (is it just me, or has voice quality deteriorated in recent years?) and to continue to innovate. We need an environment of constant investment in network speed and capacity (and quality!) to ensure the entire wireless industry can continue growing for many years to come.
MNOs should protect their brands more fiercely, learn from the past and value their assets more carefully going forward. If we could have seen the level of consumer usage of Facebook, YouTube, Google, etc a decade or so ago, maybe mobile data pricing would have been very different from the start. MNOs nee to hire more customer-facing young people from advertising and other fast-paced consumer-facing sectors, to help them engage with their customers, selling fewer acronyms and more lifestyle enhancements.