You can find my 2007 and 2008 trends reviewed here and here.
Don’t expect me to jump for juicy headlines: “2009, the year of mobile commerce” or “2009, the year of mobile advertising”. At best it could be “2009, another year of transition”. Those who follow me regularly know I try not to overhype trends that are the results of complex forces and non-linear processes.
Anyway, here’s how I (again, this is only my personal take) view 2009 in the mobile space in Europe, summarized in 3 main trends:
1) The impact of the crisis will increase polarization of the mobile market but regulation issues will be at least as important if not more
Several big players have already expressed their concerns and revised downwards their 2009 forecast. Traffic in mobile shops was reduced during the holiday season and handset renewal cycles will be longer. As a consequence uptake of mobile services in general will be lower than expected.
Of course, mobile is now too important in consumers’ daily lives for them to cancel their lines. A majority of consumers and particularly those who top-up, will be more cautious and will try to reduce their budget, focusing on the basic services (voice/SMS). Sim-only sales and no-frill MVNOs will gain traction. Spending on non-core telecom services such as mobile entertainment (games, music, TV) will be impacted.
However, a minority of users will continue to be interested in services, to acquire latest multimedia devices / smartphones, to access the mobile Internet and the amazing flow of mobile innovation. 3g dongles, mobile media consumption, mobile browsing, mobile widgets, mobile utilities (banking, payment, commerce, travel, health, location-based services…) will continue to grow significantly starting however from a low base.
The net result will be a greater polarization of the market between early adopters / innovators and the mass-market. Mobile services will continue to grow and to generate revenues but may take longer than expected to reach critical mass beyond geeks, business users and the younger generation.
At the end of the day, growth in data/services may not compensate the tough economic conditions on commodities (voice/SMS). So operators will reduce costs and put pressure on their suppliers. They can adjust their budgets by deciding to postpone network investments (many did so in the early 2000s): I personally am not a big believer in Wimax (see my post here) but LTE (and to a lesser extent HSUPA) may take more time to take off. More importantly, I think Fiber will be delayed. This is too high an investment and too nebulous a regulatory environment to expect any massive commercial deployment anytime soon.
I think operators are fearing regulation issues much more than they fear limited consumer spend. Per se, mobile will probably be relatively less impacted by the crisis than other industries (see here the reasons why). However, it is heavily dependent on political and regulation issues: pressure from the EU on roaming tariffs, decrease in termination rates, FTTH decisions, pressure from environmental issues, new taxes on smartphones,…just take the example of France: which decision will be made about a potential 4th 3G entrant? …
2) Acceleration of existing disruption forces, in favor of new entrants.
Consolidation seems to be a never-ending game in the mobile industry. Companies who have low financial debt and lots of cash will be interested in making new acquisitions. That’s true for large operators willing to buy regional ones in emerging countries. That’s true for companies having raised funds before the financial crisis (think of Zed and its 92,5M€ raised in July). That’s true for handset manufacturers (remember Motorola handset division is officially for sale). That’s true for big online players and e-commerce one willing to enter the mobile space. Bear in mind there are many medium-sized players and lots of start-ups with innovative ideas and technologies that may go bankrupt this year because they rely on long-term advertising business models. Low-cost Chinese players (the likes of ZTE, Huawei) will continue to gain market share in Europe.
Yes, Apple will launch new devices. Still tricky to say whether this will be a nano or something else. Yes, it highlights the changes in the industry and the strength of a new entrant. I actually think this is still the early days of mobile merchandizing (see my previous post here). Expect lots of improvement in mobile merchandizing and expect a bunch of operators to launch widgets and equivalent of application stores.
Major handset manufacturers will launch Android-based handsets and we’ll now discuss millions of phones (and not only of a Google Phone who by the way was a HTC device distributed via a single operator), clearly beyond the hundreds of thousands of G1 sold in Europe. That being said, I still believe it won’t change the game in 09. The industry will stop talking about a Google Phone and realize that launching an OS is a long-term play that depends on your manufacturer partners. The final aim of the Open Handset Alliance is to reduce costs and that’s a volume game. The difference here is that Google is probably and surprisingly (see their online heritage) perceived as one of the most “open” (what does that mean those days?) players in the mobile space. I think I also should mention Flash and the to be launched Java FX by Sun in the mobile environment.
As a consequence, there will be a great focus on communities of mobile developers. That’s really a tech issue but I think it will really foster innovation. Online/web developers are only really starting to be interested in the mobile space and this will change the pace of innovation and the quality of execution. That being said, it won’t change the fact that the market will remain by very far dominated by the traditional players (e.g, Nokia / Symbian), that the device landscape will be extremely fragmented and that creating a compelling user-experience will remain a challenge.
3) Web/mobile convergence will really start emerging but despite growing revenues, mobile advertising will still remain in a transition/education phase.
This is a natural consequence of the previous trend. Web developers are joining the dance and this will lead to a constant flow of innovation around widgets, mobile social computing, IM, VoIP, RSS feeds and the whole 2.0 ecosystem. Another key trend will be the integration of location into services. Not location-based services per se but simply services with location features built in. I do buy Rudy De Waele’s prediction when he says “location becomes obsolete”. This may take time but that’s really mobile DNA. Just look at the power of mash-ups in the online space and at the current interest around mapping applications.
There will be lots of hype around applications but sooner or later the ROI issue will be raised. Due to the fragmentation nature of the mobile space, you need a solid installed based to generate significant revenues. Some downloadable applications provide comparatively better interactions with core OS and phone functionalities (e.g., address books, GPS chipsets, camera features) or a relatively better rich media look and feel. However, such advantages will be reduced in the future due to mobile browsing technology improvements. Basic rules of creating a mobile website and driving traffic to it will start to apply. Mobile search engine optimization is a very simple and often-forgotten way to drive traffic. Adding the right code when building the mobile site to make sure the site will rank among the first answers in mobile search queries should be a no-brainer.
That being said, most of those services will remain niche since several barriers need to be removed. For example, it takes time to build an installed base of all-you-can eat data plans. Many of those services are still in beta and most of them rely on advertising models. Despite growth, mobile audiences will lack reach and independent measurement tools to really attract advertisers. Inventory will grow and prices will continue to decline. Higher click-through rates on mobile vs online do not mean much today and will decline. In times of recession, when Maurice Levy (CEO of Publicis) expects a contraction of the ad market, I see no reason why advertisers would all of sudden invest massively on a nascent and immature platform. I am quite sure that mobile advertising will enter a more realistic phase as stated here. Don’t get me wrong, I am not saying there won’t be growth, excellent marketing campaigns, innovation, more and more mobile advertisers, I am just saying budgets will on average remain limited. I actually do believe marketers should test the channel to engage with specific audiences.
No doubt forthcoming posts will be much shorter! Feel free to add your own ideas / predictions, disagree with this long take!
For those of you willing to know Forrester collective thinking, backed by consumer and executive data, check out reports and forecast published here. You can also follow me on the newly-launched Forrester Blog for Consumer Product Startegy Professionals here.
Posted by Thomas Husson 
