Cashing in on the Next Generation of Mobile Internet

by Graeme Newell

gnewell@602communications.com
http://www.602communications.com

Part 1 in a web series on the future of mobile video technology

Highlights:
-Mobile computing will light a fire of web revenue in the future.
-Form factor is driving computer innovation, not speed.
-Anticompetitive phone plans are fueling amazing hardware innovation
-The speed of 4G networks combined with the power of cloud computing will empower all new mobile services.

It was the biggest disappointment of the new millennium – internet revenue. Everyone from local bloggers to a huge media conglomerates dreamed of cashing in on the low-cost and low price-of-entry web publishing wave. Blogs proliferated. Huge websites launched. Then, everyone got a startling dose of reality when they added up the numbers and saw that the promised margins just weren’t there. Web sites were abandoned, and everyone settled back into the old media paradigm.

But quietly and methodically a brand new wave of web revenue possibility has been building for more than a decade. That wave is about to hit the shores and wash up a lot of new cash – but only for those who have taken the time to properly prepare. That wave is mobile devices.

Mobile phones hold the promise of a completely new way to use the Internet that shakes off the old traditions of the desktop. They will bring an entirely new functionality that most businesses have yet to fully understand. Over the next few weeks I will be writing about how some of the smartest minds think this new technology will grow and come to dominate the web. I’ll also be talking about ways that smart companies can get in on the game.

Mobile Web is King
We have seen the first steps of this tentative revolution over the past few years. ComScore reports that more than 40% of iPhone owners do more browsing on their phone than on PCs. Steve Jobs recently proclaimed that Apple is now a “mobile devices company” and not a computer company. Apple’s revenue from desktop computers is now only a third of the company total. Iphones, Ipods and Ipads now drive the company, not PCs.

A Computer for Every Situation
Fueling this fire is the trend toward lighter and smaller portable devices. Until recently, computers followed Moore’s law and customers purchased a new desktop PC every two or three years as the speed doubled. But now, desktop chip innovation has slowed down, and is less of a driver of computer purchasing Faster chips are tougher to do, so manufacturers have tried to keep pace by building processors with multiple “cores,” in essence, packing 4, 8 or 12 computers into a single box.

But the public isn’t buying it. Their tastes have changed. Now the focus is on multiple computers, each custom tailored to specific home and work environments. One computer for study and bills, another for the couch, and another for bedtime reading. Form factor becomes the main driver and not speed. Laptops are now the best selling type of computer. For the most part, notebook devices like the Apple Ipad are not replacing computers, they are supplementing them.

Anticompetitive Cell Plans Drive Innovation
These two trends of mobile web browsing and form-fitted computers are going to join forces and create exponential growth within the mobile phone market. Surprisingly, it is the American cell phone bureaucracy that is driving this amazing pace of innovation. Although a lot of us hate our cell phone company and its restrictive contracts, the structure of these confining plans provides the ideal breeding ground for hardware innovation.

US cell companies have skillfully maneuvered their customers into an anticompetitive business structure that moves the technology along at a breakneck speed. Most of us have firmly affixed the golden handcuffs to our own wrists, and locked ourselves into a two-year contract with our cell phone provider. This means that every two years, mobile companies lure their customers to purchase a new handset. They skillfully hide the full cost of the hardware within a less painful monthly fee that makes it seem quite reasonable and affordable.

Lightning Fast Hardware Churn
Because of this, 60% of the US market uses their mobile phone for less than 12 months, and most everyone replaces their phone on a regular two-year cycle. Almost no other hardware-reliant service has ever matched this sort of churn. Could you imagine buying a new cable box every one to two years? Or buying a new TV every one to two years. The technological innovation is moving so fast that the phones do not wear out, they just become obsolete.

This amazingly profitable walled garden of clever anticompetitive zeal means we will get no break from high prices for mobile services, but we can bask in the knowledge that our phones will have the most cutting-edge features in the world.

Your Phone Won’t be a Phone
In just a few years, the “phone” portion of a mobile phone will be an insignificant add-on, buried under an avalanche of location services, social applications, and information bots. These new devices will be running on lightning-fast 4G networks that do not have a separate voice channel. Your phone call will have more in common with Skype than with the current model of calling.

This bandwidth jump will enable cloud computing to take off, and functions that currently require a dedicated computer box will be easily handled through mobile devices. Your mobile device will be a portal that connects to powerful cloud-based backend computing systems that will do most of the processor heavy lifting off-site.

Think of your handheld device as a keyboard and monitor, and the computer it accesses lives in the cloud. Your phone’s job will be to effectively push out pretty pictures and allow you to interface with the powerful servers behind it. When the connectivity of 4G arrives, the power of a handheld device will grow exponentially because it no longer needs to do much actual processing. It can dedicate all of its processing power to effectively interfacing with the mother ship in the cloud.

Next week, things you need to do now to be ready for the next generation of mobile computing.