M&A Implications of the move from content to applications to widgets

Historically, operators have tried to control not only data revenues but also content monetization by enabling easy reach and navigation to content via the mobile idle screen or via their self branded on-device portals. In the former, links to mobile applications and content are provided on the idle screen of the mobile handset providing one-click access to the user. However this space is increasingly giving way to downloads from the handset vendor’s app store (more on this later). In the latter i.e ODPs, a client application resides on the user handset providing access to content whether the user is online or offline. Content is synchronised at regular intervals with the operator’s portal website in line with user preferences.

However, as the availability of open web content tailored for the mobile handset increased, the importance of mobile browsers grew as well. Users have moved away from the boundaries of the operator portal on to the web which is no longer in the domain of the operator. A multitude of browsers are pre-installed on mobile handsets with their own search engines and functionalities.

Operators are gradually coming to the realisation that while they cannot stem the tide of users away from their portals, improving the user experience on the portal will certainly increase its monetisation capability. It can also serve to generate data on user behaviour and consumption patterns leading to a higher bang for the buck in advertising revenues.

One of the added functionalities for operators was to install IM clients within the ODPs to control advertising and the various sources of information that a user would frequently visit. This led to partnerships between ODP and IM vendors rather than cross acquisitions as may have been anticipated (other than Action Engine).

Another feature was to embed a search function within the ODP itself. Via the search engine (e.g. Google search box, Taptu), operators could control the rendering and branding of websites browsed through their network. However, in some cases, operators as well as web-to-mobile content adapters (e.g. Novarra, Infogin) faced a strong backlash from users due to the intrusive and non-relevant branding inserted while navigating the web on the mobile.

Gradually the move is towards embedding widgets within the ODP giving the user the freedom of personalisation. The user can now decide the content, applications and updates they would like to provision within the ODP on their handset. A small icon or widget on the on device portal will launch various websites, feeds etc. However, while ODP vendors like Surfkitchen have launched their own mobile internet platform aimed at providing operators with an application storefront, application launcher and a service creation environment, they do not have the range and ease of widget downloads as provided by an Ikivo or Qualcomm’s Plaza, for example. But will operators be willing to maintain two portals or storefronts to provision internet widgets and mobile content? Or will the integration be initiated by the portal developer? The same holds true for the ad serving platform. Operators like Orange are currently maintaining their own ad server to monetise the content on their portal. Can this be integrated within the services of the on device portal vendor?

Another factor which will structure the direction of integration is security. In the case of the application store, the security of the applications is monitored by the app store vendor. In the case of the operator, the responsibility is distributed. The ODP vendor can only integrate the ability to provision widgets in their platform. However, the widgets will need to be monitored by the operators or the third party provider they outsource the services to e.g. Plaza.

Fig. 1: The Mobile Operator’ Eco-System

These trends also apply to the mobile browser industry. Mobile browsers were traditionally focused on rendering websites for the handset. This area is still seeing a lot of innovation with start-ups like Skyfire not only improving the browsing experience but also allowing web page and page area bookmarking to ease frequent usage. Some search engines such as Taptu are tailored for the usage patterns on the mobile handset. Browser vendors are also increasingly provisioning widgets to be run via the browser which may become the first window of access for the mobile user. The early forerunners are Opera and Access. The aim is to provide users with access to frequently viewed and personalised content with a click. Will this entail integration with a widget serving platform or will the browser loose out between:

- the operator-focused ODP with search engine leading to the web or

- the handset/OS vendor focused application store which is invariably integrated with the in-house browser.

In this entire play, the only performer not mentioned yet is the handset vendor wanting to capture the ubiquitous nature of the mobile in the hands of the user – irrespective of place and presence. The first player to initiate the move into services and applications was Nokia – whether security, mobile wallet, music on the move, location based services, news and a range of other services. This was followed by Apple with their iStore and suddenly there was a storm in the development of third party applications for the mobile handset. Each application is represented by an icon aka widget on the handset idle screen which will launch a run-time instance of the application.

One of the first markets that the handset vendor app store will cannibalise is the idle screen content provisioning by operators.

However, initially, this may be a trend only in the smartphone category. Java phones in developing markets continue to be a target market for idle screen content and applications. To widen the value proposition, idle screen vendors are also upping the ante by providing an ad server platform integrated with their server to capture audiences across the geographies they cover.

In conclusion, there are two main channels of content delivery to the end user – the operator and the handset vendor. The various other players in the eco-system are only easing the delivery of content from the content publisher to the end-user – of content relevant to the user at the right time and the right place. For handset vendors, the selected path is the app store. For mobile operators, it has traditionally been the ODP. But for the ODP to continue to be the answer to the handset vendors app store, it will need to integrate with:

- Mobile application/ widget serving engine or platform providers

- Behaviour monitoring tool providers

- Ad serving platform companies

And these may be the integration trends to look out for.