The View From Barcelona: An Industry in Transition

Written by Richard Wong

Monday, February 11. 2008 at 03:30 PM EST Post a comment

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BARCELONA -- Mobile World Congress -- It's February again, when leaders in mobile, Internet, and the media converge on Barcelona for its annual conference. Over 50,000+ attendees from just about every mobile company in the world are all crowding into Barcelona's Fira Montjuic grounds, for the annual five-day event.

This year, the event was renamed from 3GSM World Congress, to a more politically correct, "Mobile World Congress" with a nod to expand the tent to include the CDMA mobile community (e.g., Qualcomm Inc. (Nasdaq: QCOM) et al), and the emerging 4G technologies now in early deployment.

An Industry in Transition: End of the Operator Era?
In my view, the dominant theme this year is a fascinating industry major transition, and search for a new center of gravity. Historically, the MWC conference has centered around the mobile operators, as they have played their position as kings of the mobile industry: The industry players, and other vendors would line up to try to show their wares to any operator executive who would listen.

This year feels distinctly different. The operators are losing their status as the core kingmakers -- they no longer have dominant control of which technologies, services, and handsets consumers will see. Internet giants such as Google (Nasdaq: GOOG), Apple Inc. (Nasdaq: AAPL), Yahoo Inc. (Nasdaq: YHOO), and Microsoft Corp. (Nasdaq: MSFT), along with Nokia Corp. (NYSE: NOK), and the other top handset makers, are all banging at the gate, to end the operator-dominated era. Most players in mobile are now looking for ways to work around the mobile operators, or find marketing strategies going directly to the consumer, bypassing the operator. This battle between operators and the open mobile, off-deck world, will remain the key theme in mobile for the next three to five years.

A few highlights from the conference -- day 1

• Open OS wars: Open OS handsets, such as Symbian Ltd. , Windows Mobile, and Palm Inc. have grown, slowly but steadily over the past 10 years. The year 2007 saw an acceleration with Nokia pushing the N-series high-end, in response to the iPhone and presumed Google Android threat. Today, Microsoft and Sony Ericsson Mobile Communications announced a groundbreaking partnership to build higher-end devices using the Microsoft OS operating system. This represents a major strategy change for Sony, which has historically used Symbian. The first phone, the Xperia1 was announced today, and depicted here. The move is significant because, historically most handset players have been cool to Microsoft, fearing the same commoditization that PC manufacturers faced in the '90s. Could it be that the fear of Microsoft has now been replaced by a greater fear of iPhone and Android?

• Where's Android? Rumors have Google exposing its first Android prototypes here at Barcelona, but as yet, Google and the Open Handset Alliance are downplaying the announcement. It will probably be at least one more MWC before we start to see Android phones in substantive volume. In my view, given the long cycles required to get new phones to market, the growth of Nokia N-Series, Symbian, and Windows Mobile phones will have greater impact than Android in the next one to two years. (Update: ARM does have a development platform shell, only, on display at the show, just a sample of what's possible with the OHA, but not available other than for mobile developers.)

• Mobile Advertising growth: Much has been written about growth in mobile advertising this past year, but it appears the volumes are starting to become meaningful. AdMob Inc. (disclosure: one of Accel Partners 's investments), today at the show announced their January mobile ad statistics, showing almost 2.4 billion impressions served in January, up roughly six-fold since January last year. While iPhone remains at the bottom of the chart below, it looks like it should reach ~5% of ad impressions by Spring 2008, far above the percentage of phones shipped. Expect to see Nokia/Enpocket , Ad Infuse Inc. , Amobee Inc. , Medio Systems Inc. , and other mobile ad startups also highlighting their mobile ad offerings and statistics throughout the show.

• The 4G Cycle begins: While the mobile operators have just finished the buildout of their 3G networks, the cycle begins again with the evaluation and early deployments of 4G technology. This Mobile Congress will begin a hard-fought battle between competing protocols for next generation network buildout. WiMax is heavily backed by Intel, and the technology has been deployed at operators such as Sprint's XOHM. The traditional network equipment incumbents [Nokia Siemens Networks , Alcatel-Lucent (NYSE: ALU), etc.] are backing a protocol called LTE (long-term evolution), which extends from the existing 3G platforms. Interestingly, the industry association, GSMA, has thrown its support behind the LTE standard. Look for announcements with new performance claims, and early announcements on chipset and handset availability throughout the show.

• The Nokia Services strategy: Throughout 2007, Nokia has been very active in pushing to add a services strategy, and breakout from its handset dependency. The acquisition of mobile ad player, Enpocket, and the widely covered Navteq acquisition were tangible moves in this direction. Today, Nokia continued its push toward services by announcing a number of new services, including a "Maps 2.0" offering. This appears to be the beginning of integrating Navteq data into Nokia services and handsets. The announcement also suggests Nokia will roll this into their mass-market Series 40 line of handsets, expanding the reach of this integrated navigation service. Nokia has long been suspicious of Internet/PC industry players such as Microsoft, and appears serious about this new services strategy. If this succeeds, they will be an important force in the off-deck economy, and a important new kingmaker in the industry.

Rich Wong is a partner at venture capital firm, Accel Partners, and an investor in mobile and software startups.