Happy birthday Mobile Content: 10 Years Old now and worth 71 Billion dollars

Mobile content. You might think of it as the news alert that arrives on your phone. Or the videogame that you may download to your phone, or the vote that you made in American Idol, or the MP3 song that you listen to on the MP3 player on your phone. Yes, cameraphone pictures, mobile blogs, user-generated videos, even advertising is appearing on our phones. There are so many different forms of mobile phone content, that it may be odd to think, that only ten years ago there was none. None.

It is exactly ten years from the first downloadable content that was made available to mobile phones. Before there was an iPhone, before there were N-Series and Walkman phones, before the Razr and the Blackberry. Before any of the operator portal services such as Vodafone Live and even before Japanese NTT DoCoMo's radical i-Mode. It was the autumn of 1998 when the first downloadable content was launched commerically for mobile phones. People laughed and most said it would never be a "real business". The first content was the humble ringing tone, launched by Saunalahti (now part of Elisa) and first downloaded on the Radiolinja (now also part of Elisa) network, onto only five models of only Nokia phones, that had that peculiar feature, that they accepted "user-installed" ringing tones. The mass-market phone model that was most popular at the time, was the Nokia 5110 and that phone was the most used to consume mobile content in its first year. I remember, I was there working for Nokia as a young executive, and used one such downloadable ringing tone as a surprise gift to a friend back then, in late 1998. I thought it was cool, but I never ever thought it would become a billion dollar business, nor that such ringing tones would be sold much beyond us mobile-crazy Scandinavians. I was imagining "real" music on phones some day, yes, but ringing tones as content.. cute but certainly only a fad, and not for all countries, was my gut feeling. How wrong I turned out to be.

MUSIC THE FIRST CONTENT

I spoke with Saunalahti (then re-named Jippii) CEO Harri Johannesdahl about the ringing tone business back at the time when we were setting up my Consulting Department for Nokia, and by then had changed my mind. The money was amazing. I discussed the business case very enthusastically in mobile internet conferences from Ft Lauderdale Florida to Singapore. The ringing tones were sold at 3 times the premium over person-to-person SMS text messages. So one ringing tone in 1998-2000 cost about 45 cents. The actual transmission cost - using SMS as the bearer - was about one penny, so even after the mobile network operator (carrier) took an enormous cut in its profit - something like 9 cents in bulk at the time, it still left a phenomenal profit margin of 78%...

The total costs of setting up the business was so modest, that Saunalahti broke even after 10,000 songs were sold. In fifteen months they had sold a million songs and for the internet service provider, that Saunalahti/Jippii was at the time, more than half of all of their revenues were generated by this "silly" mobile music concept. Like Japanese Cybird would become famous in 2001, when Wired Magazine told the world of the Japanese internet provider to turn profitable by making its money on the new mobile industry, actually the very first company to manage that was of course Saunalahti in Finland two years prior to that. As we would see, ringing tones would propel famed artists to enormous profits - such as 50 Cent with his hit In Da Club, which in 2003 earned more as ringing tone than all other music formats combined - and most annoyingly of course the Crazy Frog - to the tune of 500 million dollars of global sales of their ring tones and related services in 2005 - one ringing tone earning more than all of iTunes global sales that year.

We've been explaining here at our blog that mobile is the newest mass media channel (the seventh mass medium) and today it is no longer such a surprise that mobile has unique benefits, and is a powerful engine to drive revenues - so strong that internet companies (like Sulake, the owners of Habbo Hotel) and television broadcasters (like Britain's ITV) use mobile to drive extra revenues. So with hindsight, it is no surprise today that the ringing tone innovation made soon billions of dollars of revenues, and then spawned several other unique music formats that only mobile can provide (such as ringback tones, background tones and the mobile karaoke). Also it is no surprise that mobile also started to cannibalize other music formats, such as full-track MP3 song downloads and music videos. But still, the scale of the growth has been enormous. Music on mobile phones today, at the end of 2008, is passing the 11 billion dollar annual revenue level. When we bear in mind, that the total global music industry is only worth 30 billion dollars - it means that more than one in three dollars spent on music globally, is spent on the mobile phone. If you thought the iPod and iTunes was the future of music, sorry. iTunes globally is worth about 2 billion dollars annually. Mobile phone based music (including ringing tones obviously) is five time bigger than iTunes.

i-MODE TURNS TEN NEXT YEAR

As ringing tones were below the radar and spread very stealthily in Scandinavia, the second big innovation in mobile content was NTT DoCoMo's i-Mode, which launched in 1999 with a big splash. This was the prototypical mobile operator (carrier) portal service, and brought essentially every form of digital content to the Japanese market. There were news, games, music, pictures, games, jokes, horoscopes, games, puzzles, games, advertising, games, adver-games ...and did I remember to mention games? DoCoMo's i-Mode could have been a quirky "Only in Japan" phenomenon, had its content been all local domestic Japanese content - of which there is an abundance, naturally. What is very amazing, is that right from the start, NTT DoCoMo was able to entice several global media brands to launch on this weird mobile phone innovation in Japan. Disney was there on day 1. So was CNN. And MTV joined also on the first day of i-Mode in Japan. There were dozens of major Western brands on the launch of this weird Japanese experiment. And its nice to recognize my very dear friend - and also a friend of Alan's - Voytek Siewierski, the Polish-born, USA trained, "gaijin" (foreigner) who used to be an Executive Director at DoCoMo HQ in Tokyo, who managed to conduct these negotiations. Can you imagine how hard it would be to convince such USA-based media giants to bring their content to "cellphones?" a decade before the iPhone? Heroic job, Voytek !

Again, today, it is no surprise that of NTT DoCoMo's customers, almost all use i-Mode. More than half of Japanese mobile phone owners download games to their phones, etc. But back in 1999 there was no precedent to this. They built it, and hoped they would come. And boy did they come. The revenues to NTT DoCoMo out of only the Japanese domestic market for i-Mode, have been so enormous, that since 2001, DoCoMo has been the world's largest internet company by revenues (and the largest in profits by several orders of magnitude compared to any "traditional" internet companies). I believe this year 2008, Google will finally catch up with DoCoMo and become the biggest internet company on the planet, by revenues (but not by profits).

GAME ON

And yes, did the mobile phone games take off indeed. You might not have paid much attention, because up to last year, half of all mobile gaming revenues worldwide were generated in only two countries - Japan and South Korea (both videogaming-mad countries in general). But its not just the domestic market and mature customers with advanced gaming consoles. It was also the business model pioneered by i-Mode which drove the early success of all content in Japan and very much so gaming. NTT DoCoMo made a content revenue-sharing deal where they only took 9 cents out of every dollar. The Japanese rivals (KDDI and J-Phone, which is now Softbank) both soon copied the model and South Korea was the first foreign country to adopt a similar revenue-sharing level as Japan. For contrast, at the same time, most European and American mobile operators (carriers) talked of 50:50 deals in content. You can understand that content owners were far more eager to deploy onto the services in Japan (and South Korea) than the rest of the world, under those terms. But it was not just Japan, obviously. Gaming took off in many Asia countries very rapidly. In the Philippines for example they passed the half million game downloads milestone in 2001. Hong Kong based Artificial Life celebrated the sales of the four millionth download of the virtual girlfriend for your mobile phone, V-Girl, across the several countries where they offer the service.

While Japan innovated with the overall content revenue-sharing deal, South Korea took the next, even bigger step, for mobile phone gaming. They invented what EA (Electronic Arts, the world's largest videogaming producer) calls the "Asian Model" for gaming revenues. The Koreans offered the gaming experience for free, and offered personalization features at a premium cost. Even though typically only 10 percent of all gamers are willing to buy these premium content elements, the economics of mobile telecoms are such, that the numbers are so huge, that this is easily the most lucrative gaming model. I've chronicled some of these with for example the Kart Rider case study in my fifth book Digital Korea. EA now says they will base all their future multiplayer games on the "Asian Model" and have already launched some titles on this principle. But back to mobile gaming? Now as Taiwan and China and Singapore and Hong Kong and Malaysia and Thailand are getting heavily into mobile gaming; and as Europeans and Americans also are increasingly getting the mobile gaming bug, the total value of downloaded and networked videogames on mobile, are reaching the 10 billion dollar level globally in 2008.

THE ADVENT OF ADVERTISING

Well, as there is content, there is an audience. And where there is an audience, there is advertising. While NTT DoCoMo was still figuring out how to enable advertising onto its service (which they resolved by launching a joint venture with Japan's largest advertiser, Dentsu, to form D2 in June of 2000), the innovation switched back to Finland. The Finnish commercial TV broadcaster, MainosTV3, launched the first ad-funded and totally free news service to mobile phones in the spring of 2000. The daily news summary was provided via SMS text messaging, and the subscriber would also receive one SMS advertisement every day. By the time I was chairing the world's first mobile advertising conference in London a year later in February 2001, there were mobile advertising concepts already in many countries such as Germany, the UK, USA and Spain.

Where is mAd today? While many analysts suggested a slow-down in mobile advertising for this year, the reality turned out to be the opposite. The returns, the success rates of mobile campaigns, are so much greater on mobile than on any other advertising channels - good campaigns get 20% to 30% response rates (not click-through rates), and peak campaigns get 30% conversion rates, such as the BMW winter tyres campaign we talked about earlier at this blog. As the facts are seen, this is a one-way street. The advertising dollars come in, to trial mobile advertising, and then while other budgets might be cut in the economic downturn, not mobile. When you go mAd, you never go back.

While mAd is almost as old as gaming and music, it has had a slow and troubled growth. But this year 2008 mobile advertising will pass 3 billion dollars in total revenues. And a revealing number was given by Juniper, who said that 1.5 billion individual people will receive at least one mobile advertisement this year. Put it in context, there are under 500 million newspapers sold daily. There are 900 million personal computers connected to the internet. There are 1.3 billion internet users. And 1.4 billion TV sets. But 1.5 billion people will receive ads on phones this year. How many more will receive them next year? On the one hand, companies such as Admob report delivering over 4 billion mobile ads per month; while on the other hand companies such as Blyk are educating the advertising industry how to move beyond banner ads and SMS spam into true engagement marketing, as pioneered by our Alan Moore. And the innovation is not ending. In India of all places, they invented the adver-game, a fully advertising sponsored mobile game. Again this has been spreading like wildfire.

MOBILE, TV AND VIDEO

Then in 2001 another innovation happened in Europe, with simultaneous inventions. In the UK, MTV Networks Europe launched the world's first television programme that allowed live viewer voting. The show was Videoclash, and viewers were given the choice of two videos, and to pick which should be shown next. This is genesis to the concept of SMS-to-TV programming, and the very real parent to what then evolved into American Idol, Big Brother and all other reality TV voting on TV. The same principle then was evolved into all forms of real time live television gaming. How big? Just the SMS-to-TV programming is worth over 2 billion dollars today worldwide and many cable TV channels get from 80% to 100% of their income from SMS interactivity. In a very real sense, the convergence between broadcasting and mobile started with this innovation in the UK by MTV.

But most of us would tend to think, if "television" and "mobile" were put into the same sentence, that it means we are watching television on our mobile phones - as is today possible on almost all networks around the world. By coincidence, that too was launched in 2001, but in Finland. It was again innovative commercial television broadcaster MainosTV3 in Finland, who teamed up with a video transmission specialist company in Finland called Sopranos, who produced the world's first television clips, that could be viewed on a mobile phone. MainosTV3 offered highlight clips from the nightly TV news through this innovation. In 2001 there was exactly one phone model in the world, that had the colour screen and a powerful enough CPU to handle the tiny video clip - this was the brand new Nokia 9210 Communicator (the first colour Communictor) - and to watch a 30 second clip, would take about 2 minutes for the grainy poor quality and lousy sound clip to download over the fastest cellular technology of that time, called HSCSD (a technology that was called a "2.1G" technology, far slower than so-called 2.5G and 3G technologies we have in use today).

As the networks got faster, and other technologies came online like digital broadcasts to mobile phones from South Korea, more "true" and live TV became possible on mobile. Today mobile TV and video tends to be divided into four groups - video clips, streaming video, broadcast TV to mobile, and SMS-to-TV interactivity - and the four groups combined are worth about 10 billion dollars globally in 2008. And two other ways to look at it. There are 900 million personal computers, that can show television/video content. There are 1.4 billion TV sets in the world. But there are 2 billion mobile phones with a colour screen and at least 2.5G network connectivity, meaning they can display "streaming" ie live TV and video. Or to put it another way, this year we'll sell 300 "multimedia" mobile phones - phones with a colour screen and some media player such as Real Player. That is more multimedia phones sold than all TV sets sold this year (plasma screens and any others), and more than all PCs sold this year (laptops and desktops combined).

LIKE MERGING AN AIRPLANE WITH A SUBMARINE

Then back in Japan, 2001 saw yet another bizarre innovation. I remember myself doubting this when I first heard of it, but J-Phone (later Vodafone KK, now Softbank) decided to launch a mass-market series of cameraphones. The first resolution was less than VGA and the screens were of very modest quality, and the in-phone memory ability to store pictures was miniscule as well. In just over a year, 40% of J-Phone's customers had snapped up cameraphones. As we've seen, the cameraphone has been the biggest tech hit of this decade. Over 3 billion cameraphones have been sold since 2001 and about 2 billion are currently in use. Compare that with about 200 million iPods shipped since their launch in 2001, or under 30 million PSP's (Playstation Portables) and you get the scale of this pocket wonder. The big cameramakers misjudged this innovation, and of the four giants, only Canon and Nikon remain in the camera business, Konica and Minolta no longer exist in the camera market; and the world's bestselling camera brand, since 2004, has been Nokia.

Cameras are obviously not "mobile content", but pictures are. Again it was J-Phone, with its Sha-Mail, the pioneering picture messaging service, that led to what we now call MMS picture messaging, the global standard for multimedia messaging between mobile phones. Its easy to misunderstand the vastness of MMS, when it sits in the shadow of SMS text messaging (the most used data application on the planet, with 3 billion active users in the world at the end of 2008). But a third of the the mobile phone subscribers on the planet does send MMS picture messages - that is 1.3 billion people for those who are counting. Comparing that with 1.2 billion active users of email, and suddenly MMS is very interesting indeed (and one truly has to wonder about the mathematical abilities of those in charge at Apple, why has this simple software element not been added to the iPhone).

Here in Asia, MMS is used by 48% of all mobile phone owners and about a quarter of Europeans use it. Obviously we don't send picture messages every day like we do with SMS text messages; picture messages are sent at a rate of a few per month. But worldwide, you can reach a larger audience if you put your content (or advertising) on an MMS picture message, than if you put it into email. That should give many people pause. Email has been around for three decades, MMS is less than seven years old. Already bigger and growing much faster in user numbers. No wonder innovative companies such as Blyk are building "engagement marketing" on the MMS platform. And its not just person-to-person messaging or advertising with pictures. We also love to upload our pictures from our phones to social networking sites such as Flickr and Cyworld. The pictures content business on mobile phones (including buying pictures as screen savers etc) is worth over two billion dollars this year worldwide.

OTHER INCLUDING ADULT

Yes, there is lots more in mobile content. Yes, there are the jokes, cartoons, horoscopes, daily greetings and religous sayings; etc. There is a big billion-dollar industry in mobile gambling alone. Mobile education services are another that is nearing a billion dollars globally. Search is there on mobile phones. News services are another big category. The NTT DoCoMo innovations of sending "CNN News Ticker" style news feeds to the idle screen of the mobile phone was so popular that in its second year, it earned.. 160 million dollars in news content revenues. One service alone, in only one country. If I was a newspaper or radio station or 24 hour news broadcaster, I'd pay attention. (The DoCoMo news ticker is the first case study in my new book).

And yes, of course adult entertainment is there as well on mobile, but not that big as the music, gaming and TV sides of the business. Adult content is less than half those, at about 4 billion dollars worth worldwide. As many media analysts have said, any new mass media starts making money with adult content, and then becomes more mature when it discovers its own other opportunities. That mobile has so many larger media formats than adult entertainment, suggests that mobile is far more mature than the internet for example, where adult entertainment is still the second largest content revenue source after advertising revenues.

COMMUNITIES DOMINATE

There is still one more category I have to mention, when considering the ten year anniversary of mobile content. The youngest of this group, but the most exciting. It is "communities" or "mobile web 2.0" or "user-generated content" or "mobile social networking." As we say in Finland, a favoured child has many names. Yes, social networking on mobile phones. Anything from user-generated videos to dating services to chat to blogs to multiplayer online gaming to virtual worlds. This was first launched in South Korea in 2003 when SK Communication's recently-purchased Cyworld online social networking service launched its mobile version. From that fateful moment, the growth of mobile social networking has been breathtaking in all markets. We've talked about SeeMeTV and Itsmy and Flirtomatic and MyNuMo and Self Central and of course Cyworld here at the blog. Three year old Flirtomatic went from 200,000 subscribers last year to one million this year. Over half of those are mobile users. And like Mark Curtis says, on his mobile service they make so much money, that they have abandoned the monthly subscription as "unnecessary". On UK SeeMeTV the creator of just an average video earns 27 dollars in his "royalty" paid to his/her account, when others view his/her video. Top video creators earn literally thousands in income from a video shot on a mobile phone. Cyworld is a whole world in itself, as if on another planet, where instead of air, they breathe money. Cyworld earns 300,000 dollars every day - every day - out of just the personalization the users make inside the virtual world. (I was so proud and honoured to have SK Communciation CEO Dr Hyun-oh Yoo write the Foreword to my previous book Digital Korea). Note South Korea's population is smaller than that of Britain, and far less wealthy. Mobile social networking is a giant cow that milks money, honey.

How much money? In two years from launch, mobile social networking passed the billion dollar annual revenue level (a world record for a new billion-dollar industry). Just two years later, or four years from launch, it passed 5 billion dollars in annual revenues. This year it passed 9 billion and next year will easily cross the 10 billion dollar level of annual revenues. From zero to 10 billion dollars in six years. Mobile social networking is by far the fastest-growing billion dollar industry ever. For comparison, the online internet side of social networking is three times as old, and still hasn't passed a billion dollars in total revenues - where most of that is advertising revenues. Few internet-based online social networks have found profitable business models and the internet pundits regularly ponder about how will the MySpaces and YouTubes and Flickrs and Facebooks ever become profitable (or even survive in this economic downturn). But the mobile social networking sites are making oodles of cash, and many have already become profitable in this very short time. Like I say, its time to wake up, and to smell the cellphone.

71 BILLION IN TOTAL

The mobile content industry is now ten years old. In the past ten years, mobile content has turned into a global giant industry worth over 71 billion dollars of annual revenues. That is as big as all hollywood box office revenues, plus all global music revenues, and all videogaming software revenues - put together. Hollywood and music are 100 year old industries. Videogaming is a 30 year old industry. But mobile has already grown bigger than all three, combined, in only ten years. This is a juggernaut. Its a runaway train. Its the opportunity that will suck in every cliche that pundits can think of.

HOW NOW BROWN COW?

To succeed in this space, you should not copy your existing content formats and try to squeeze them onto the mobile phone. Yes, we can of course take the existing web page, and squeeze it to the phone screen. Yes, we can chop up movies into 5 minute clips and offer them on phones. Yes, we can do the headline news, and offer them on SMS alerts. But that is copying existing legacy mass media. Television did not succeed by showing "cinema" content on the TV screen. Yes, movies were always a part of television, but TV innovated and created. Talk shows, 24 hour news, Game shows, Music Videos, Reality TV. You can't do those in the cinema. They are not copies of an older media. They are content invented for TV. Now we have to do the same with mobile.

Mobile is a new mass media (the seventh). Not the dumb little brother of the internet. Mobile is a superior mass media platform, with seven unique benefits. And yes, it can be done. We have countless examples of true mobile content innovations, here at this blogsite and at my parallel blogsite www.7thmassmedia.com. Obviously I have 16 case studies in my latest book, Mobile as 7th of the Mass Media, to show how to go beyond the copy, and into the creative and innovative. Remember, mobile content is not a "struggling industry" like the internet, where content owners hope to find "eyeballs" and then desperately try to sell advertising. We get 71 billion dollars of revenues, and 68 billion of that - 96 percent of it - is content that is paid for by the end-users. We have a far healthier industry than the internet. You can make money in mobile.

NOW IT IS TIME FOR A FREEBIE

So, as my last free contribution to your success on this topic today, I have a nice early Christmas gift to you. My company TomiAhonen Consulting has just released a big industrial report on the full state of mobile as the 7th mass media channel. And as we like to do here at Communities Dominate, there is a real, useful free variant. I have a 20 page excerpt of that report, with tons of stats and numbers of the state of our industry today. So, if you'd like the free 20 page excerpt, send me an email to  tomi (at) tomiahonen (dot) com. I will send you the pdf file by return email.

For any fellow bloggers, press professionals, analysts etc, who want to quote a reference to any of the numbers in this blog posting - except for the few where I list a source, all others are source: 7th Mass Media Report, TomiAhonen Consulting, Dec 1, 2008. You may of course freely reference these numbers in your blogs, stories, white papers, reports etc. In fact, I hope you do, because it is good news, that this industry is so healthy, considering all the bad news coming out of Wall Street, Detroit, etc. But yes, its time to celebrate. Mobile content is ten years old today, and in that time, it has evolved into a giant industry worth 71 billion dollars in annual revenues globally. Nice job ! And thanks to the humble ringing tone (ha-ha, still makes me laugh, they were profitable after the first 10,000 downloads...).

UDATE Dec 10 - I've just published a companion blog, about the overall size of the mobile industry for end-of-year 2008. All new numbers so if you are interested in the "big picture", you may want to read this blog entitled Trillion with a T: Newest Giant Industry is Mobile

Comments

[Sam]

I am first? Haha, Best comments.

[Tomi T Ahonen]

Hi Sam

Yeah, you were first. I do kind of expect, that there may be more who will feel the urge to comment on this moment and those numbers ha-ha..

Tomi Ahonen :-)

[James]

It's a great tale. Thanks for recounting.

Often forgotten though: AT&T launched PocketNet (Unwired Planet's web-like service) in the US in... 1996!

I think there might have been some interesting USSD content services in Hong Kong that pre-date this too.

Anyway, it wasn't quite *all* mobile darkness prior to this pioneering service ;-)

[C. Enrique Ortiz]

Great summary from beginning to today... thanks.

"... as there is content, there is an audience. And where there is an audience, there is advertising"

the above is great; it captures the essence of content to people to advertising (to revenue from content)

ceo

[Sharon]

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.

Sharon

http://www.autoloans101.info

[Tomi T Ahonen]

Hi James, CEO and Sharon

Thank you for the comments. Will respond to each individually.

James, good points. I do look at primarily those areas that grew to "succeed" rather than some experimental attempts of which there are many. And you make a great point about USSD, I should also research that part and add into the story, but USSD is rather selectively available in relatively few markets, although I think it has a lot of opportunity to grow.

CEO - thanks :-)

Sharon - Thank you, very happy you left your comment, and we hope you'll find more value on the blog to keep returning.

Thank you all for writing

Tomi Ahonen :-)