Instant Messaging Concepts and Positioning
in Mobile 3G Markets
Author
Matti Vesterinen
Supervisor
Professor Heikki Hämmäinen
Instructor
Doctor Roland Wölker
Not That Confidential
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Contents
• Theoretical Frameworks
• Foundation of the study
• Industry scenarios
• Conclusions
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Introduction
• IM an extremely popular service in the Internet
• Mobile IM (MIM) still a niche service
• Voice services predicted to decline in the future
• Need for new revenue sources
• Problem:
• What will the future MIM industry look like?
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Theoretical Frameworks
•Industry scenarios:
•Five forces:
Identify the uncertainties that may affect
industry structure
Threat of
new entrants
Determine the causal factors driving them
Make a range of plausible assumptions about
each important causal factor
Rivalry among
existing firms
Bargaining power
of suppliers
Bargaining power
of buyers
Combine assumptions about individual factors
into internally consistent scenarios
Analyse the industry structure that would
prevail under each scenario
Threat of
substitute products
or services
•Thematic interview
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Determine the sources of competitive advantage
under each scenario
Predict competitor behaviour under each scenario
Positioning of MIM
• Big four IM providers Yahoo!, MSN, AOL and ICQ have proprietary services
• SMS used in some cases as a bearer for IM and email
• Solutions created to make services more real time: SMS chat, push email
Real time
(telephony)
MIM
t IM
e
Intern
Near real time
(file transfer)
SMS
Non real time
(attachments)
Email
Any file Video clip
format
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
MMS
Image
Text
Voice
Video
Overall delay decreases
Overview of Bearer Technologies
Internet services
Video Conferencing
File transfer
Video sharing
Browsing
PoC
Email
Online gaming
MMS
WAP browsing
CSD HSCSD
GPRS EDGE
Bandwidth increases
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
WCDMA HSDPA WIMAX
MIM Technologies
• SMS solutions
• Usage expensive, work in every phone
• IP Multimedia Subsystem
• 3GPP standardised, not everyone follow the standard
• Wireless Village
• Large device base, lack of running servers
• SIP/SIMPLE
• Still to come, SIP used mostly so far for VoIP
• XMPP
• Standard ready, Google first big supporter
• Java clients
• Difficult to make compelling UI, widely supported
• Proprietary solutions
• Big four and VoIP players emerge from the Internet
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Industry Scenarios – Identifying Uncertainties
List of uncertain elements of structure is constructed using Michael Porter’s five
forces analysis:
Entry Barriers
How big will the advantage be to have large volumes (savings in R&D, marketing,
distribution, etc.)?
…
Rivalry
What is the market balance between big four and / or between operators?
…
Substitutes
How popular will other mobile messaging services be (SMS, MMS, email, VIM)?
…
Buyers
How high will user demand be?
…
Suppliers
Will operators create MIM services in-house?
…
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Industry Scenarios – Scenario Variables
Scenario Variables are elements that are independent and are able to affect
industry structure:
SCENARIO VARIABLE
New proprietary solutions
Operator support
Terminal support
Network support
Interoperability
Commitment
Technical solutions
Service expandability
Provider incentives
User demand
Service description
Pricing model
Clientele
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
CORRESPONDING UNCERTAINTY
Would new proprietary solutions be able to offer
something that current solutions will not offer?
How difficult will it be to offer MIM service without
support from mobile operators?
How difficult will it be to offer MIM service without
support from terminal manufacturers?
How difficult will it be to offer MIM service without
support from network (P2P type of solutions)?
Will there be interoperability among different
communities?
Will Internet IM providers / mobile operators be
committed to MIM?
Will there be significant differences between MIM
services offered through different solutions (Wireless
Village, SIP/SIMPLE, XMPP-Jabber, proprietary,
etc.)?
How easy will it be to scale the service (geographically,
feature-wise)?
What are the incentives to offer MIM (e.g. big four vs.
operators)?
How high will user demand be?
Will there be significant differences between MIM
services of different providers (pricing, features,
advertisements, etc.)?
What kind of pricing models will be deployed?
How popular will enterprise MIM be?
Industry Scenarios – Causal Factors
Identifying causal factors is the way to verify that the uncertain elements are not
dependent elements.
Causal factors will also help in determining the range of assumptions that will be
made about each scenario variable.
SCENARIO VARIABLE
CAUSAL FACTORS
New proprietary solutions
External to the industry
Regulations
Internet solutions (proprietary or not)
Overall technology development
Internal to the industry
Capabilities / restrictions with available solutions
Selection and success of open standards
Number of available standards
Operator support
External to the industry
Regulations
Buying habits of end users
Popularity of service bundles
Popularity of subsidisation
Development of charging and billing methods
Internal to the industry
Policies of players
Technology development
Terminal support
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
External to the industry
Regulations
Usage habits of end users
Overall technology / service development
…
Industry Scenarios - Scenarios
SCENARIO VARIABLE
New proprietary solutions
Operator support
Terminal support
Network support
Interoperability
Commitment
Technical solutions
Service expandability
Provider incentives
User demand
Service description
Pricing model
Clientele
KASANEN RÄISÄNEN
X
X
LEHTI
1
2
X
X
OVERALL
X
X
X
X
2
1
1
Interviews were conducted in
order to find the most important
scenario variables
1
X
Terminal support
1
No
No
Yes
1
2
Among mobile
operators
3
Interoperability
A scenario should be an internally
consistent view of what future industry
structure could be
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Among Internet
communities
All
4
5
6
Industry Scenarios - Analysis
Each of the six
scenarios were analysed
in the same way:
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Discussion
• Geographical location of the market
Terminal support
• Phone price categories
No
• Evolution paths
No
Yes
1
2
Among mobile
operators
• Sustainability
3
Interoperability
• Persistent connectivity
• Minimal bandwidth
• Charging models
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Among Internet
communities
All
4
5
6
Conclusions
• The most important scenario variables affecting the future MIM industry:
• Terminal support
• Interoperability
• Role of big four likely to increase in relation to the amount of interoperability
• However, cooperation with Internet players is a source of competitive advantage for
mobile operators under certain industry structures
• Service usability and competitors highlighted as well
• Resulted scenarios can be used for constructing more specific strategies
• More extensive research by choosing more or different scenario variables
• How revenue from other mobile services, especially mobile messaging services,
would be affected under each of the six scenarios
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Questions?
Thank you!
Not That Confidential
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Industry Scenarios – Analysis
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Industry Scenarios – Analysis
SCENARIO 2
“Isolated islands”
Future
Industry
Structure
Terminal support creates entry barriers and consequently
economies of scale needed to enter the market.
New customers and more usage through cooperation - fierce
market share game.
Switching costs high if preinstalled services satisfactory.
Big four players powerful in case terminals support their
services.
Structural
Attractiveness
Low
Sources of
Competitive
Advantage
High initial market share.
National economies of scale.
Choosing target segment and differentiating accordingly.
Keeping cost of differentiation low.
Competitors serving different segments.
How aggressively will the big four
players target mobile domain?
Competitor
Behaviour
Aggressively
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Cautiously
S
3
Industry Scenarios – Analysis“Operator communities
dominate”
CENARIO
Future
Industry
Structure
Offering access to Internet communities an opportunity for
new entrants.
Especially acquisitions by Internet players possible.
Disruption through price competition and connecting to
Internet players.
Most users use preinstalled service.
The big four players have little power over mobile operators.
Structural
Attractiveness
Moderate
Sources of
Competitive
Advantage
Pricing.
National scale economies.
Usability on the level of SMS and MMS.
Common user interface for all messaging services.
Know-how from other mobile services.
Advertising benefits all operators on the market.
Will Mobile Virtual Network Operators
(MVNO) start a price war?
Competitor
Behaviour
Yes
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
No
Industry Scenarios – Analysis
SCENARIO 4
“Privilege of few”
Future
Industry
Structure
Exploitable potential in MIM.
Internet communities an opportunity for new entrants.
Disruption by connecting operator community to Internet
communities.
Substitute services offer chat service for cellular customers.
Low switching costs.
Structural
Attractiveness
High
Sources of
Competitive
Advantage
Usability.
Proprietary extra features.
Ability to communicate broadly also with Internet devices.
Low cost structure.
Operators’ can invest in substitute services or cooperate with
Internet players while keeping the customer lockup.
Will terminal manufacturers start large
scale cooperation with the big four players?
Competitor
Behaviour
Yes
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
No
Industry Scenarios – Analysis
SCENARIO 5
“Mobiles access Internet communities”
Future
Industry
Structure
High entry barrier.
MIM closely connected to operator’s other services.
User’s choice base on price and service characteristics.
The big four players powerful.
Structural
Attractiveness
Moderate
Sources of
Competitive
Advantage
Attractive pricing.
Usability.
Attaching MIM more closely to other services.
Massive community needed to connect it to the interoperable
domain.
Global coverage.
Will mobile operators and the big four
players have a charging agreement?
Competitor
Behaviour
Yes
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
No
Industry Scenarios – Analysis
SCENARIO 6
“All access”
Future
Industry
Structure
High entry barriers.
Rivalry shifts toward price war.
Active users search for the best overall offering.
Internet players become more powerful over time due to
service portability.
Structural
Attractiveness
Structural attractiveness is low in the long run
Sources of
Competitive
Advantage
Low cost structure.
High market share.
Global scale economies.
Blocking paths for new players to enter the industry.
Right target segment matching capabilities and overall strategy.
Innovative features – Call for skilled and motivated employees.
How aggressively the big four players try
to broaden their mobile service offering?
Competitor
Behaviour
Aggressively
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© 2006 Nokia
Thesis Seminar / 2006-02-16 / MVe
Cautiously