| Mobile
Commerce Report
Mobile commerce (m-commerce) has been described
as a lucrative (indeed potentially vital) source of revenue
for mobile phone companies, merchants and network operators.
Given the amount of money invested, they cannot afford to
ignore any money-making opportunity.
European mobile network operators have already spent more
than £100 billion on licences to operate so-called third
generation mobile services. Third generation services carry
the promise of constant connections to mobile information
and faster access to services such as e-mail while on the
move and are therefore expected to increase the amount of
time (and money) people spend while using their mobile phone.
Unfortunately for many operators, they will need to invest
roughly the same amount again to build the networks to handle
these faster, more accessible mobile services. This burden
has already proved prohibitive for several companies who are
struggling to cope with massive debts, which makes it essential
that they develop services and products that can generate
revenue as soon as possible. Many mobile communications industry
observers believe that these operators can generate sufficient
business to meet the costs of the licences and the cost of
building the infrastructure to deliver them. However, this
will only be achieved by developing services that customers
really want to use.
According to a recent report on the UMTS (third generation)
market, in order to recoup their investments operators will
have to push more advanced, revenue-generating services to
the market. These operators can take other steps to ensure
their survival - such as keeping staff levels to a minimum
- but they will only succeed by developing and delivering
useful applications.
In the meantime operators cannot afford to ignore current
or second generation mobile technology and the services that
can be delivered over the handsets we use today. It will be
the middle of next year at the earliest before large numbers
of customers will have access to third generation technology
and the initial limitations in handsets and data transfer
speeds mean the most successful applications will be relatively
simple.
This is why many operators are so excited about the potential
of mobile gaming and gambling. Current research does not point
to a single service that will generate the necessary revenues
or a 'killer application' - for example, there will always
be a strong demand for simple voice services while services
based on the location of the phone user have potential.
Enthusiasm for mobile gaming and gambling is based on analyst
forecasts such as that issued by financial institution Merrill
Lynch recently, which suggested that one per cent of total
global consumer spending in 2000 (about £107 billion)
was accounted for by gambling. As well as targeting regular
gamblers, operators are also aiming to attract a whole new
market of 'fun' gamblers who are just looking for a few minutes
of entertainment. Some of these casual gamblers could be enticed
by the prospect of placing bets on a sporting event at which
they are present, so a phone user watching a Liverpool match
might be offered a special bet on the scorer of the first
goal. The hook is that because the customer is at the event,
they might feel they have an advantage over other interested
parties. These potential gamblers might also be offered specific
information on sporting events, such as detailed local weather
reports for a rugby match or cloud forecasts for a game of
cricket that they feel might give them an edge when placing
a bet.
Looking
further ahead it is very likely that location based data will
spur the development of new types of gambling. In this scenario
users could be offered bets on the location of the prize in
a treasure hunt.
Location could also determine the ability to gamble. For example,
in the US it is legal to gamble in certain locations such
as the state of Nevada and location identification is a powerful
tool to verify that the wireless user is within the state
boundary and therefore eligible to play games of chance for
money.
|
|
|
The
convenience of buying a lottery ticket through a mobile phone
without needing to queue or search for change at a newsagent
is another selling point for mobile gambling. The one proviso
for the operator is that since fixed odds gambling is illegal
for those under 18 and those under 16 cannot buy a lottery ticket,
it is important that prepaid account users have provided proof
of age. One of the possible drawbacks to gambling over a mobile
phone is that if the customer places a successful bet he or
she will probably want access to those winnings. The answer
might be to create an account (with a minimum balance to cover
bets placed) where winnings can be lodged. Alternatively, the
mobile phone company might store the credit balance on the customer's
bill and use it to tempt the customer to purchase other products
and services while their 'account' is in credit.
Industry analysts also claim that mobile gaming is going to
be big business. A recent report from research firm Datamonitor
claimed that the wireless gaming market in western Europe and
the US would be worth $6 billion by 2005. In 2000, revenues
from wireless gaming were minimal - within three years the company
says they will have soared to $1.6 billion. According to Datamonitor
analysts, western Europe's current lead in the mobile industry
will have direct repercussions for the wireless games market.
High market penetration of mobile phones will result in market
leadership in wireless games over the US.
Five years on, Datamonitor predicts that western Europe will
continue to lead and account for over 50 per cent of wireless
gaming revenues. Germany and the UK will the largest markets
for wireless games while due to its fragmented market, the US
will experience slow take-off. Gamers have traditionally been
categorised as teenage enthusiasts. While this consumer segment
still represents a valuable customer base for the gaming industry
(since they often act as trendsetters), the market has moved
towards the mass market and a broader demographic of customer.
For example, end-user research estimates that 49 per cent of
adult consumers playing online in the US and Europe are female.
Being faced with a widening audience means the industry has
to adapt. While established industry players have long known
their traditional customers, they must now discover who their
new users are and tailor their offerings accordingly.
A widening audience means a large array of consumer interests.
While traditional genres such as sport simulations, shoot'em-ups
and platform games remain a core offering for many publishers,
new varieties have surfaced to satisfy this new breed of gamers.
However, such a wide audience means bigger spend as well as
bigger revenues - a mass audience means mass marketing and that
does not come cheap. Generating revenues from advertising has
the advantage of being a painless method of making money from
consumers who can play for free. However, traffic is crucial
for this type of business model and the majority of medium-sized
sites will find it increasingly hard to sustain it. Detractors
of mobile gaming have criticised the small screens of devices
and text based games as being a barrier to consumer acceptance
as they are simply not sufficiently appealing to prospective
gamers. However, the fact that Nintendo has sold 100 million
Game Boys around the world sold shows that consumers will pay
for mobile entertainment on devices with small screens.
Japan's largest mobile phone operator NTT DoCoMo and Sony recently
agreed to develop games for mobile phones. Unfortunately, the
Game Boy-style action games that the deal promises require handsets
with GPRS network technology, colour screens and downloadable
code and these will not be available in sufficient numbers for
a while yet. Gaming-on-demand is another option, but again it
hinges on the technical ability to provide digital distribution.
Games companies will have to be able to adopt a flexible business
model, such as downloading games for a limited period of time,
level-by-level download or pay-as-you-go. Already, Telia in
Sweden offers games-on-demand to consumers through its broadband
network. In the UK, Blockbuster has announced its intention
to offer games-on-demand internationally early this year. US
online game channel Pure has been breaking down its games into
10 Mb chunks for ease of download and to maintain stickiness.
Pure makes its games available free of charge but in order to
download more games and levels, users must complete a detailed
questionnaire that opens them up to targeted advertising and
promotions.
Despite the degree of uncertainty over network and handset development,
industry watchers and participants are confident that a booming
mobile gaming market will happen because it has to happen -
it is simply one of the best ways for 3G licence holders to
get their money back quickly.
John Whelan is a director of Alatto Technologies, which provides
a range of 2.5 and 3G services from strategic advice through
to development of revenue generating mobile applications - email:
john.whelan@alatto.com
|
|
