Communications, Media, and Technology

The Mobile Internet Opportunity:

Capturing Context and Creating Value
By
Lorenzo Miláns del Bosch
Rafael Asensio

“The medium is the message.”

– Marshall McLuhan
Canadian communications theorist

“I am myself and my circumstance.”

– José Ortega y Gasset

Spanish philosopher
I n 1964, Marshall McLuhan, the Canadian com-
munications theorist, coined his celebrated
statement, “The medium is the message.” To grasp
McLuhan’s idea was that, as a medium develops
an identity, it shapes society not because of the
content delivered, but rather through the defining
the idea, consider how a new medium develops in characteristics of the medium. New media create
three phases new ways of human and social interaction, and
enable new cultural patterns to form and spread
Phase 1. In its infancy, the new medium is used as across society.
an extension of existing media. Cinema resembled
theater; TV was radio with images; the Internet The specific way in which a new medium acquires
was like a typical point-to-point communication its own personality is hardly predictable; personal-
or broadcast medium. ity emerges from the dynamic interaction of the
involved forces and agents. As social and economic
Phase 2. Each medium generates its own specific phenomena, Google, Facebook, “Who Wants to Be a
personality: special effects, color, sound, and spe- Millionaire?,” and even text messaging were neither
cific narrative in cinema; new formats and reality rightly predicted nor really predictable.
re-creation in TV; social communities interacting
over a multimedia network of virtual links in the What is predictable is that once a new medium
Internet. achieves enough diffusion, it will acquire a well-
defined, specific personality, create its own usage
Phase 3. Each medium shapes the social web, or patterns, and influence the social structure. At
at least contributes to doing so. A recent example that point, it will have created medium-specific
is Web 2.0, which has created new ways of social ways to generate value for users. That opens the
interchange for leisure, entertainment, work, and door for unique business designs that allow com-
even love. McLuhan’s statement applies to this panies to capture part of that value.
third phase.

Exhibit 1 The three phases of the Internet

Stage 2:
Stage 3:
Stage 1: Infancy Adopting its
Shaping the world
own personality
The Internet starts with a The Internet develops its own People turn away from
Behavior in a “printed page” paradigm: personality: newspapers and TV toward
medium Internet news—or create their
• Email as an electronic post mail • Search, news groups, alterna- own media outlets
tive news feeds, and blogs
• Web pages as printed pages

User dynamics Usage patterns mirror those Companies exploit their ability to Users build communities and
from older media—except users collect vast amounts of data and re-shape the ways in which
interact with the medium and connect users to it with powerful they interact with each other
other users impact

Representative Amazon Google Facebook

players
Netscape eBay Meetic

Source: Oliver Wyman

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Mobile Internet as a New Medium media that eventually exert significant social
Many of the defining characteristics the mobile changes.
Internet will acquire are inherited from mobile
voice communications and the fixed-line Internet. In our view, the key element of mobile Internet’s
For example, mobile voice communications future personality lies in the fact that, as a medi-
enabled new social behaviors based on the abil- um, it carries much more information about the
ity to help people stay connected anytime, any- individual consumer and her context than other
where. New ways of working and social patterns media to date. The mobile Internet system (includ-
started to emerge, such as the blurring distinction ing devices, services, applications, networks) will
between work and leisure time. But clearly the be able to take a sort of “X-ray image” of the con-
mobile Internet is also quite different from basic sumer to discern her context.
mobile communications and fixed-line Internet,
both of which feed its emergence. Mobile Internet versus Other Media
To illustrate, compare mobile Internet with more
The mobile Internet is already well into the second established media:
phase, creating its own personality, and approach-
ing the third phase. Commercial TV is a mass medium. TV execu-
tives and advertisers know which programs cer-
Phase 1. Mobile Internet can be traced to the tain segments of the audience are watching at
first wireless application protocol (WAP) ser- a given time. Beyond this, only statistical infer-
vices and applications for mobile phones. Mobile ence, applied to audience—tracking schemes
Internet was then a poor copy of its fixed-line developed over many years, allows advertisers to
cousin: Operators’ walled networks, inadequate make a hypothesis about the audience.
bandwidth, and handsets incapable of rendering
high-quality graphics all contributed to a poor The fixed-line or PC Internet goes a step further,
customer experience. gathering information about individual consum-
ers and their behaviors while online. This makes
Phase 2. With the deployment of 3G networks, the Internet a richer medium than TV in terms
mobile Internet begins to emerge with its own of integrating information about the consumer
personality and attract widespread industry and her context. Billions of interactions occur,
interest: but they are primarily one-to-one rather than
one-to-many interactions, with the individual
– Internet and consumer electronics giants always reachable. In addition, because of user
enter the mobile space, offering services, interactivity, the Internet is a richer medium
platforms, and devices. than TV in terms of the information that can be
collected about individuals and their behavior,
– Operators try mixed strategies, with walled which is the basis for contextual advertising.
networks being part of the value proposition,
but they also ensure a good customer experi- Now let’s go another step further, as the multime-
ence when surfing the open Internet. dia, Internet-enabled mobile phone can capture
even more information about consumers and
– Services and applications are designed their context (Exhibit 2). Mobile communications
specifically for the new medium’s defining allow for a high degree of personalization, from
characteristics, such as personalization and the device and its features to the ways and places
location. those devices are used. Because the mobile phone
is ubiquitous, this personalization can be updated
Phase 3. As networks expand and access in a variety of situations. The mobile is almost
improves, more powerful and user-friendly always turned on, and is almost always in the con-
devices and services will fully exploit the medi- sumer’s pocket, used in a wide range of settings.
um’s potential. Exactly how this third phase Mobile Internet usage thus reflects, in every situa-
develops is unpredictable, as with other new tion, an image of the user and her context.

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Exhibit 2 Capturing the user’s context

Television
Smartphones

Landline xt
telephone conte
’s
u ser
the
Ubiquity

re
tu Email
ap
Newspapers
rt oc
e
P ow
IPTV

Source: Oliver Wyman

– Personalization potential +

In the 1920s, José Ortega y Gasset, a Spanish phi- Now

losopher who stressed the importance of one’s
context in determining one’s self, coined his Value of the consumer (her ARPU history), with
famous phrase, “I am myself and my circum- value a good proxy to wealth and class (for post-
stance.” Ultimately, this means that a person paid consumers)
behaves differently when placed in different situ-
ations. Consider, for example, how a consumer’s Sex, age, place of residence, and other demo-
buying behavior changes when the context graphics (for postpaid consumers)
changes. He is much more likely to shop when
walking through an airport on the way home from Handset brand, range, and cost, another proxy
a business trip than when walking home after a for wealth. In a recent project, Oliver Wyman built
day at the office. The context is different, and only a mobile-handset-demand segmentation model,
his mobile device can capture this richness about linking handsets’ characteristics with consumers’
the context and convey information about his cir- preferences and psycho-demographic profiles.
cumstance (and, if we believe Ortega, even about
who he is at a given moment). It is this potential Usage patterns for voice, data, and Internet
for contextualization that transforms the mobile activity
Internet into a new medium with its own rules
and patterns. Location, so far the most valuable contextual
element that mobile can capture, which gives
Capturing the Context and Creating rise to location-based services
Value from It
The types of contextual information that the Soon
mobile Internet is, in principle, able to capture and
convey are very rich. Among the different types of Short- and long-distance journey patterns, which
information available now or soon are these: provide information about how the user moves

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 about; coupled with local information databases, Mood. Twitter (“Broadcast yourself…at every
this will provide a wealth of contextual data. instant”) permanently connects users to their
social networks, affording instantaneous aware-
Individual perspective, instant by instant. Each ness of their friends’ activities and moods.
user brings her own view of the surrounding
world: what is visible, what is important, and As these examples show, contextual information
how she feels about it. Through text, multimedia channeled through the mobile Internet medium
messages, and social community platforms, this can indeed change the way people behave, from
instantaneous (and changing) perspective of the gaming to consumption of goods and services to
world can be captured. flirting. At the same time, contextual information
changes the way marketers target their potential
Buying information, to the extent that mobile customers.
devices provide a means of paying for goods and
services: What does the consumer buy, when, A New Game for Mobile Operators
and where? The nature of the mobile data business suggests
that a two-tier game will likely be established once
This information about the user’s context provides the mobile Internet fully emerges as a new medi-
an opportunity to create value for her1, by provid- um in its third phase.
ing services, applications, information, or content
that are relevant, useful, attractive, or fun given An innovation game will flourish, played by compa-
her context. nies developing new services, applications, and
content. The unpredictability of the new medium
Value-creation mechanisms can leverage the will lead to the failure of most of these new servic-
user’s contextual information in various ways: es, but many will thrive. Already, applications are
proliferating for Apple’s iPhone handset through
Exclusivity. Oliver Wyman helped a telecoms the company’s AppStore shop; similarly, at Nokia’s
company develop advertising campaigns for website for developers, applications by third-party
brands positioned as “exclusive,” targeted at developers range from text translation to gaming
users with top-range handsets. to video-sharing.

Situational behavior. Some advertisers, linking At the same time, other agents will play a platform
payment information with an SMS platform, game, competing to host as many successful new
launch one-to-one marketing actions targeted applications and services as possible. This will be
at potential customers in a given situation (for a game of infrastructure and reach, based more on
example, travel insurance companies marketing economies of scale and network effects than on
to people detected to be traveling when they pure service innovation. As in any two-sided mar-
pay for their fuel using a credit card). ket, agents try to attract both developers and final
clients, boosting cross-network economies. Thus, the
Location. In another project, we helped a bigger a platform becomes, the greater its appeal to
mobile operator assess the feasibility of a new developers. For players in this platform game, knowl-
business model wherein some retail chains edge of every detail in the innovation game and
planned to send SMS messages with targeted methods for hosting new applications will be critical.
promotions to shoppers whose presence was
detected within each store. Different players are currently trying to occupy the
platform space, including mobile operators, hand-
Mobility, which enhances contextual informa- set vendors, and Internet giants. All are trying to
tion. Imagine a dating application that places attract innovative applications and services to host
users on a map as they move and communicate. and monetize. The winners will be those platforms
that achieve enough scale to reach a tipping point
that can attract both future users and innovators.

1 It also opens up an opportunity of violating her privacy, a critical subject for the real potential of the mobile as a new medium, but which we will not explore in this article.

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 4 Freedom of use
Exhibit 3 Two linked ecosystems

Content Content
Clients Communications
consumption production

Commercial assets
Client Application Concept
management design invention Innovators
• Innovators will be dynamic
companies inventing con-
Commercial assets
Network design Platform Client
Handsets cepts for the mobile
and operation operation management
Internet

Platform providers • Competition will be based

on value creation and
• Providers will be established companies,
time to market
extending platforms to host applications
from innovators
Google Maps
• Competition will be “two sided,” with Twitter
players trying to attract clients and in-
Navento
novators

Windows
Vodafone
Apple
Nokia
Google Android Source: Oliver Wyman

Players in the mobile and online value chains will, Mobile operators look well positioned to com-
therefore, compete against one another by adopt- pete in this new space. Although operators won’t
ing new business models around users’ contextual be leaders in the innovation game, their power
information. Each company will need to evaluate derives from direct access to their users’ contex-
its relevant assets and how to leverage them to tual information.
take the largest possible share of the newly cre-
ated value. Key assets include: However, as noted before, operators have serious
competition. Location-based services, traditionally
The ability to identify, analyze, and screen considered the domain of operators, are currently
information about innovations in other steps of under attack from big players such as Google and
the value chain small innovators such as Navento. Other threats
for operators come from device manufacturers try-
The agility to make and implement decisions ing to control ownership of the end user. The suc-
in a highly dynamic environment, where a new cess of the iPhone shows the extent of this threat.
service can achieve widespread adoption in a
few months To be successful, operators now need to devise ways
to leverage their assets to compete and collaborate
The flexibility to establish partnerships in a with more innovative agents. In preparation for
value chain that will be far less integrated than hosting innovative applications that the new mobile
the classic mobile-industry chain Internet medium is already spawning, mobile opera-
tors should decisively position themselves by:
The flexibility to embrace multiple technology
platforms, to allow for the co-existence of as Adapting technology platforms to ensure that
many new services as possible they can enable new services and applications,

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including those marketed by third parties, and * * *
host them while capturing some value
The mobile Internet will soon emerge as a totally
Adapting cultures to promote innovation. new medium, which will re-shape the way in which
Traditionally, the operator’s culture has been users work, play, and communicate. This new medi-
based on the need to deliver predictable and scal- um will have two different families of suppliers—
able services, thus avoiding risk to ensure a good small innovators and platform providers—that will
customer experience. Now, risk-avoidance needs drive a transformation of the mobile-industry value
to co-exist with risk-taking in new services. chain and a new split of the generated economic
value. The end result? A flourishing ecosystem of
Adapting processes to a much more dynamic many innovators, with a rapid birth-death cycle,
environment, in which time to market will be a hosted on a limited number of platforms.
key success factor
In this scenario, successful mobile operators can
Establishing partnerships in short time frames, leverage a set of powerful assets, such as knowl-
and, while sharing part of the value created with edge and control of their customers. But they will
third parties, maintaining control of their posi- find strong competition, and have to adapt to a
tion in the value chain much more open and fast-changing environment.

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About Oliver Wyman
With more than 2,900 professionals in over 40 cities around the globe, Oliver Wyman is an
international management consulting firm that combines deep industry knowledge with
specialized expertise in strategy, operations, risk management, organizational transformation,
and leadership development. The firm helps clients optimize their businesses, improve their
operations and risk profile, and accelerate their organizational performance to seize the most
attractive opportunities. Oliver Wyman is part of Marsh & McLennan Companies [NYSE: MMC].

Lorenzo Miláns del Bosch and Rafael Asensio are Madrid-based partners of
Oliver Wyman. They can be reached at [email protected]
and [email protected]

www.oliverwyman.com

Copyright © Oliver Wyman. All rights reserved.