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New Mobile Regulations in Indonesia Pave the Way for M-Commerce Growth

November 18, 2011 Leave a comment
By K.F. Lai, BuzzCity CEO

The government of Indonesia has effectively ‘reset’ the mobile subscriptions market. It shut down all mobile subscriptions in mid-October and required content providers who wish to resubscribe their users to do so in compliance with tougher rules.

Consumer agencies have been pushing for this action against a small minority of mobile advertisers whose fraudulent actions tarnished the whole industry, for some time.

The result is good news for the whole industry (well, everyone except those fraudsters) and it took place not a moment too late. Regulators around the world are starting to recognise the importance of their role in protecting the value chain. By re-establishing much-needed trust between businesses and consumers, this paves the way for the emergence of solid m-commerce markets.

Read more…

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Mobile Entertainment Comes of Age, Revealing a Treasure Trove of Opportunities for Brand Engagement

September 8, 2011 Leave a comment
By KF Lai, CEO

Anyone who still believes that mobile gaming is the domain of the spotty teenage boy urgently needs to update their thinking. All age groups are now engaging in regular and immersive mobile entertainment activity on their mobile phones, and the proportion of women playing mobile games is rising fast. Those agencies and brands that understand the new dynamics of mobile entertainment can take advantage of this powerful channel to reach mainstream consumers with “byte size” commercial or branded messages.
Read more…
Categories: Lai Kok Fung

Good Pipe v. Bad Pipe

By Lai Kok Fung, BuzzCity CEO

Telecom carriers and some advertising companies are at it again. Instead of focusing on whether a carrier provides fast reliable high-quality connectivity, they’ve resurrected a false debate, posing the question “is a mobile carrier a ‘dumb’ or ‘smart’ pipe?” In the hope of securing an additional revenue stream, they make Orwellian promises of better user experiences, when in fact all they want to do is hijack a user’s mobile browser and insert ads where they shouldn’t appear.

The real focus shouldn’t be on “dumb v. smart” but rather whether a carrier is a good pipe or bad pipe.

Let me share with you an analogy.

Suppose the government wishes to privatise the postal delivery service and invites companies to place a bid for a three-year contract. How would it determine if the vendor would be a good provider?


Well, I suppose a good postal service is one that

  • charges reasonable postage rates and

  • delivers the post to the intended recipients on time, all the time.

Moving up the value chain, an extremely good service provider can provide differentiated services:

  • guaranteeing delivery within a certain time frame at affordable rates for standard parcels and

  • charging a premium to deliver faster, provide tracking services and notification of receipt for urgent items.

A bad postal service, on the other hand, misplaces your letters or delivers them late.

Now, suppose that the postal service

  • opens your letters and parcels en route

  • inserts leaflets and advertisements based on the content of these materials

  • and, on top of that, boasts that it’s a “smart” postal service because it is providing users with relevant content in addition to the letters that they were tasked with delivering.

As a consumer, how would you feel about this? How about as a government regulator? In many countries, this “value added service” would be illegal, not to mention unethical.

Now, let’s bring the analogy back to the delivery of mobile internet services.

A good pipe

  • provides a reasonable quality of service at a fair price, ie good connection speeds at rates consumers can afford

  • provides premium services (dedicated lines, faster connection speeds) for an additional fee.

Yet, some carriers in the name of being a ‘smart’ pipe act instead like the postal company that tampers with your mail. They intercept communications and interupt a mobile surfer’s online experience by breaking mobile web pages into two or three parts and inserting advertisements.

We call this “browser hijacking” and a number of communication platforms offer this functionality as part of a “holistic” solution to mobile carriers. For example:

  • Bytemobile – a company that provides mobile platforms to more than 100 telecom carriers – promotes a service “to drive advertising revenues from off-portal browsing traffic.” Translation: the service enables carriers to insert ads onto web pages that they do not own. Bytemobile goes on to say that the ads have high click-through rates because “they are tied to browsing context (site category, URL) and past browsing behavior.”

  • In a brochure called “A Win-Win-Win Solution for All Players”, Comverse says “off-portal interstitial” and “off-portal header/footer” should be part of a telecom operator’s advertising inventory.

  • Mobixell announced late last year that it had won a contract with a leading tier-one Asian operator. Mobixell’s ad solution enables operators to insert adverts into a variety of platforms, including off-deck mobile internet sites (again – pages published by someone other than the telecom company). It adds that ads can be location-based to create “immediate commercial opportunities.”

Consumer profiles and location information, used intelligently, enable advertisers to target relevant offers to consumers. Targeted advertising is an acceptable industry practice, as long as it is done in a manner consistent with consumer privacy protections.

However, interrupting a user’s browsing experience, manipulating browser settings and the displays seen by end-users, should not be tolerated. This practice is even more deplorable in the mobile world, where display screens are small.

Take a look. Here’s an image, captured by a user, of a normal mobile website:




And here’s what it looks like after it’s been hijacked by a carrier:



Two years ago, we reported that M1 in Singapore was practicing browser hijacking. Consumers were outraged and M1 quietly stopped doing it after a few months.

Some of the companies that offer this service have spoken to BuzzCity and offered to “white list” our sites, ie we would be placed on a short list of mobile internet sites that would not be affected by an operator’s ad insertions.

That’s not good enough.

Browser hijacking infringes on copyrights, violates user privacy and adds unnecessary data costs to a consumer’s bill.

Some telecom carriers argue that they “own” the pipe and should be able to do as they wish. But the truth is they have purchased a license to run a service. In any country, there are a limited number of licenses issued. The carriers build infrastructure and have a right to a return on their investment. But this return is supposed to come from data costs and voice calls. Telecom carriers must refrain from any practices that infringe on the rights of others and concentrate instead on providing quality transmission services at affordable rates.

Industry players meanwhile must now firmly state that browser hijacking is completely unacceptable.

Categories: Lai Kok Fung

APPLICATIONS ARE NOT MEDIA

August 12, 2009 Leave a comment

By Lai Kok Fung, BuzzCity CEO

Mobile companies are placing their bets now on whether applications or browsers will be the cornerstone of your mobile experience. Discussion within the industry is intense as carriers, developers, phone makers and internet giants like Google and Microsoft vie for market share and a spot at the top of your mobile speed dial list.
Most of the media – and indeed, industry – focus so far has been on applications, though, fueled by the popularity of Apple’s App Store. Since launching one year ago in July 2008, consumers have downloaded more than 1.5 billion applications from Apple’s store. Apple advertises that there are apps for everything — games, recipes, photo editors and more. Apple takes a cut from every sale, but from its perspective, the App Store doesn’t need to turn a profit – as long as it provides another reason for consumers to purchase iPhones.

Developers love the App Store. The iPhone platform provides great developer support and has proven itself to be a good commercial channel for end users.

Afraid of being left out, carriers and other phone manufacturers – including LG, O2, Nokia, RIM (BlackBerry) and Vodafone — have opened their own App Stores. Digital media companies are also getting into the act by serving ads that appear inside applications, potentially giving a revenue stream to the makers of free apps. For example:

  • Google has launched a beta product for serving ads to mobile applications, Google AdSense.

Yet, there is a fundamental misconception here. Applications are not media. They are not mobile websites that generate sufficient traffic to warrant advertisements.

Application developers have two possible sources of income: ad revenue and consumer receipts. Most free applications are not viewed enough times to generate significant ad receipts:

  • AdMob served advertisements to 2300 mobile applications in May.
  • More than half of these apps (54%) had fewer than 1000 users.
  • Assume that each user sees 10 ads per month and that the going ad rate is US$1 – 2 per thousand views , the application is likely generating about US$10-20 per month in ad revenue.

In addition, consumers spend less than ten minutes using a free downloaded application. They use the free apps about 20 times on average, then get bored and look for something else, according to a Greystripe survey conducted in the first quarter of the year.

Defining coherent ad units for applications meanwhile is a nightmare. How do you measure or verify the number of times that a user views an ad? Picture for a moment a mobile game. Players move up and down the screen; an ad might be embedded in the picture, but how often is it in the frame of view – and for how long? The fallback option is to simply use the most common internet ad unit – banners – which in turn likely click to a mobile website. The user experience is far from ideal — clicking the banner takes the user out of the application and launches a browser — so it’s not surprising that many users hate ads in their applications and games. (Here’s a post that describes how to remove annoying ads from mobile games.)

This brings us to the topic of consumer receipts. For many, this simply means, more downloads, more money. But as there are many makes of cell phones and a variety of platforms, this also means re-tooling applications for the different phones out there. So, many developers tend to focus on a few platforms to improve distribution so that their products are downloaded — and bought — more often. In many cases, this distribution is further supported by some form of try-n-buy package.

So while in session ads are unlikely to work for applications, a clearer path to monetization may be through consumer receipts.

However, as developers of ad-supported mobile media properties, our services need to support a wide audience. Despite the reported growth of apps stores, information and entertainment consumed on mobile devices are primarily supported by the mobile browser. Even as we continue to enhance our services to advertisers, we are unlikely to develop tools (SDKs) to deliver ads on smartphone applications.

Our sentiments are echoed elsewhere; even Google is “not rich enough to support individual smartphones,” according to Vic Gundotra, Google Engineering VP. “What we clearly see happening, ” Gundotra told the Mobilebeat conference in San Francisco “is a move to incredibly powerful browsers. Many, many applications can be delivered through the browser and what that does for our costs is stunning.”

For us the answer is also clear. Consumers will overwhelmingly access the mobile internet using the browser that comes pre-installed on their phone. The mobile internet is media. The app stores themselves are media, but the applications are not.

Categories: Lai Kok Fung

FIVE MEDIA TRENDS

By Lai Kok Fung, BuzzCity CEO

Whether you work in the industry – or just enjoy good content – it’s clear that the media landscape is undergoing a transformation. Newspapers are going out of business, music is sold piecemeal over the internet, and Twitter has become a household name. Mobile meanwhile continues to grow even while other sectors contract.

As BuzzCity celebrates its 10th anniversary, I find myself reflecting on these changes and I’ve noticed five industry trends that I would like to share with you today.
1. BANKERS ARE OUT, INNOVATION IS ALWAYS IN
For those of us who endured the internet crash, there is some sense of relief seeing bankers take the heat this time. While the credit crunch has hurt businesses across the board, there is a silver lining for companies with strong reserves. Over the past few years, credit was overly-abundant. VCs chasing high returns funded companies with poor business models, companies that offered services below-cost and sometimes for free. While consumers might like this in the short-term, these companies eventually go bust. It then takes awhile for consumers to get used to paying again. However, I believe this is the time for those of us that are still standing to innovate, to introduce new products, new services at prices that reflect reality. Then we can truly gauge the degree to which consumers embrace – or reject – what we have to offer.

2. MOBILE OVERTAKING PCs
More consumers access the internet from a mobile phone than from a computer in markets from India to South Africa.

  • In India, there are more than 400 million mobile phone users. PC internet penetration is less than 50 million. Another ten million Indians buy a mobile handset every month.
  • In South Africa, more people search Google from a mobile phone than from a PC.
  • Indonesia is the largest market for the BuzzCity mobile ad network. We serve 1.5 billion ads a month there, thanks in large part to the introduction of flat rate pricing by the dominant carrier there, Indosat.

3. THE LEAST DEVELOPED MOBILE MARKET MAKES THE MOST NOISE
Read the US media – or follow American bloggers, particularly those from Silicon Valley – and you could easily believe that the iPhone is the end-all and be-all of mobile.

But, please, take a look at reality. The US mobile industry is light years behind Japan and trailing the rest of us by several years. Smartphones (mainly Blackberries and iPhones) account for just five percent of worldwide shipments. Nearly one-third of all phones shipped are feature phones. Device Fragmentation is here to stay. No one company – as much as they may still dream about it — will control mobile OS. And it won’t be long before every mobile phone has a pre-installed internet browser.

You certainly wouldn’t know this, though, by listening to the Americans. The I.T. world is saturated by US media and practically still worships Silicon Valley. With all the noise they make, it’s easy to think that they know what they’re talking about. But in this case, they don’t.

By the way, Christine Gonzales has written two interesting pieces on Venture Beat recently. The first article is accompanied by an illustration of a Pied Piper (Steve Jobs?) followed by a throng of people (silicon valley developers?). The second provides Silicon Valley’s rebuttal – a young child giving Nokia the finger because their platform is more difficult to work with.


4. SOCIAL NETWORKING MAY NOT BE A STANDALONE BUSINESS
This might seem like an odd statement for the head of a mobile social network to make, but let’s take a look at some recent headlines from our industry:

  • Hi5 – one of the most popular social networking sites outside the US, with more than 60 million unique monthly visitors – has laid off half of its staff (about 50 employees) after apparently failing to close a new round of funding. Hi5 is now going to base its business model on micropayments — the sale of virtual items and casual gaming (arcade, cards, sports and strategy). Companies like Tencent and Habbo Hotel have been successful in this area, but they have a lot of experience in the gaming sector. I question whether Hi5 can make this transition.
  • mySpace – in 2006, Google agreed to pay US$900 million per year to be the exclusive search and keyword ads provider on mySpace. This contract has made mySpace seem profitable, but when the deal comes up for renewal next year, it’s unlikely that Google will take the bait again. Analysts say its clear that Google is losing money on the investment.
  • YouTube — can’t cover its bandwidth and storage costs. According to Credit Suisse, it appears to be losing about US$1.5 million a day, which means that YouTube’s parent company – Google – is basically paying you to watch videos on the site.
  • There have been ramblings in the industry that some weaker mobile social networks are closing down or being put on the block for sale.

At BuzzCity, we view our social network myGamma as an integral part of the BuzzCity mobile advertising network. In addition to the obvious benefits of providing inventory for the ad network, myGamma allows us to consistently learn from our user base and gain insights from demographic data and anecdotal feedback. We’ve used these insights to launch new services, like click analytics and regional targeting, which differentiate BuzzCity from stand-alone ad networks.

5. WHO PAYS FOR CONTENT? WHO WATCHES ADS?
The pillars of media monetisation – premium content and paid advertising – are undergoing a seachange.

First, there’s not a lot of content that people will pay for anymore. Even the porn industry is suffering – there are just too many free videos online now. The only content that consistently attracts paying subscribers appears to be sports. ESPN.com charges for access to live and on-demand web broadcasts. Cricket and football matchers are often broadcast for pay-per-view audiences.

Second, it’s becoming tougher for brands to effectively reach consumers through traditional avenues. A media executive recently lamented to me that TV’s golden age of advertising is over. TV content is created with commercials in mind: just when you are about to find out who garnered the most votes on Idol or who shot J.R., there’s a commercial break. But television advertising is based on the premise of controlled delivery in a “safe” environment. With technological advances like online streaming, concurrent windows in a TV screen and an almost unlimited choice of channels, consumers have more control over their viewing and are less likely than before to passively watch ads.

How will the advertising industry react to this challenge? How do advertisers invent new formats that engage and entertain users? We are still searching for answers.

OUR RESPONSE
The growth of online advertising over the last ten years clearly demonstrates that ad spend follows consumer eyeballs. As consumers spend more and more time surfing the internet from cellphones, the mobile component of total ad spend will only increase. While it’s hard to predict how fast this will happen (will it take 5 years or 10 for mobile to account for ten percent of total ad spend?), we believe this increase will be more than sufficient to support tremendous growth of a handful of major players in this space.

We have also always observed that a new “unwired” class of consumers is emerging. Companies that can help advertisers understand and reach this audience will do well over the next decade.

What do we need to do at BuzzCity?

We simply must execute our business model in a disciplined manner on the mobile ad network and provide excellent service to advertisers and publishers. Our clients meanwhile demand better reporting and a higher quality inventory. We must listen to them and meet these needs. At the same time, BuzzCity will continue its groundbreaking work on myGamma to stay in touch with the Unwired audience. By keeping our focus on both sides of the industry, I am confident BuzzCity will be well-positioned to thrive amidst a changing media world.

Categories: Lai Kok Fung

INNOVATION

November 7, 2008 Leave a comment

By Lai Kok Fung, BuzzCity CEO

I have a confession to make. It won’t come as much of a surprise, though, to my friends, family and colleagues:

I’m a Geek.
In fact, I’m proud of being a Geek. For me, a great day is one when I spend hours coding. Now this may seem a bit strange to some. BuzzCity is an international company. Last month, we sold mobile advertising in more than 100 countries. The ads we sold were viewed more than 2 billion times. As CEO, I am responsible for directing our growth, which requires allocating resources and meeting with clients and investors. We hire engineers to design and upgrade our products and systems. So, why should I, a CEO, still get my hands dirty with programming?

In many places – including my home here in Singapore where BuzzCity is based – culture dictates that engineers with career ambitions become managers and VPs. They should take on positions where they no longer utilise their core skill sets and where business models and marketing displace innovation.

At BuzzCity, though, we foster an environment where engineers can still be engineers and where innovation is valued. And I think that’s one of the reasons why we have done so well.

INFOCOMM AWARDS

BuzzCity’s innovative approach was recently recognised at Singapore’s National Infocomm Awards, where we won top prize for having the “Most Innovative Infocomm Product/Service”. Nominees were judged primarily on the innovative use of infocomm technologies or development of infocomm product/service. Other criteria included overall business strategy, business impact created and regional/international market presence.

At times, though, it feels like we are swimming upstream. Despite calls by our government to encourage creative thought and entrepreneurship, Singapore does not really provide a good climate for innovation. And it’s not just Singapore. This is true for many of the markets where we do business.

WHAT IS INNOVATION?
How do you define innovation? What exactly is it?

It’s like what the US Supreme Court once said about pornography. I don’t know how to define it, but I know it when I see it.

We’re not talking about “improvements” or “inventions”. We strive to perform better – to improve – every day. We make improvements to existing processes and products. Innovation is something different.

I believe innovation is about addressing problems in a new way. It’s about successfully applying new ideas. Often, this can even be in a way that no one saw or thought of before.

In our business, a question that often spurs innovation is “how else will people use a mobile device?”

WHAT HINDERS INNOVATION?

1. The biggest problem is money. But it’s not a lack of funding. Rather it’s that innovation is measured and motivated by financial rewards. Innovation is viewed by business executives, journalists and governments as a means to an end. Companies that innovate are only admired when their innovation increases revenue, raises profits, leads to a public listing or large payout. This does not encourage a culture of innovation or a workplace where employee creativity is valued. By contrast, take a look at Google or Yahoo! Google began as an intellectual exercise by two Ph.D. students at Stanford University; the Yahoo! search engine started off as a hobby of Jerry Yang. (Yang may be out of favour in business circles at the moment, but his design of the Yahoo! search engine revolutionised the Internet.)

2. I.T. meanwhile is sold to students as a career where they can find stable employment and income. Of course, if there are sectors that pay more – like finance, prior to the recent crisis – then youth are encouraged by their parents, peers and professors to follow these routes instead.

3. I.T. takes a backseat to other parts of a company. It’s expected to play a supporting role and is not seen as integral to the process of business. Take the criteria for Singapore’s National Infocomm Awards, for example. Nominees are judged on how innovation improves productivity and processes. The key for the judges was how innovation assists other parts of the business.

HOW IS BUZZCITY DIFFERENT?

1. We consistently hire people who enjoy what they do.

2. We provide time for employees to work on personal projects.

3. The tech team works closely with other departments (sales, marketing, business development). Together, we read the market signals, discuss consumer demands and come up with solutions to meet these needs.

4. We encourage people who like to code to keep on doing it.

REFLECTIONS

I went through a phase in my career when my peers told me not to be too concerned with product development or technology. I was advised to focus on building partnerships and power lunches. After all, I was told, that was the best way to both build a company and advance my own career.

My message to our staff – and future employees – now is “it’s OK to be a geek.” Despite what your parents, boyfriend, girlfriend, husband or wife may say, you can be proud of being a techie even after the age of 30 or 40.

In fact, if you want to have a career as a Geek, call. We could use you at BuzzCity.

Categories: Lai Kok Fung

THE BUZZ

September 24, 2008 Leave a comment

By Lai Kok Fung, BuzzCity CEO

The vibe in the mobile industry now is completely different from the tone emanating from Wall Street (and financial districts worldwide for that matter). In fact the mobile internet feels more vibrant now than it did just six months ago. Let me explain.
A BULLISH INDUSTRY
I was recently in Silicon Valley to speak at CTIA Wireless and participate in an MIH strategic conference. While in the Bay Area, I also visited two games makers – EA and Guitar Hero – as well as made a trip to Facebook’s headquarters. These were the impressions I was left with:

  1. The hype surrounding the iPhone’s launch has led more cellphone users to surf the mobile internet. People are venturing beyond social networking sites to find useful applications and information.
  2. More people surfing have led to more people publishing. That’s a no-brainer. Major sites like Peperoni are still experiencing increased traffic, but their share of the market is falling as more and more content, much of it free, comes online.
  3. The “publisher crunch” that had characterised the mobile internet is over. Earlier this year, a few major sites dominated mobile traffic. These publishers – and the telecom carriers — were able to dictate advertising rates. No more.
  4. Advertising rates for the mobile internet are starting to settle at a healthy sustainable level. Six months ago, mobile ads were begin sold on the idea that the cellphone screen is personal and that carriers can share profile information. Nokia’s CPM rate, for example, was 40 euros. (40 euros per thousand ad impressions.) The comparable price on the internet was less than one dollar. So at 40 euros, marketing campaigns needed a much higher – and unrealistic – conversion rate. Today the effective CPM rate is as low as 50 US cents in India and between US$1 – US$2 in South Africa.  (FYI, falling CPM rates are good news for ad networks like BuzzCity.)
  5. Games companies are taking interactivity, user-generated content and online communities to a new level. They create platforms – backdrops, context, rules, controls. But users drive the experience. The skills of a games company are similar to movie making, where you need to know how to “tell a story”. But the games company goes one-step further to allow users to participate in the story telling. The latest version of Guitar Hero, for example, allows users to create music and share it with the Guitar Hero community. 
  6. More than half of Facebook’s new users are coming from outside the United States. Friendster is enjoying a surge in its mobile traffic in Southeast Asia.  Even Silicon Valley is beginning to understand that there’s life outside the US.  Most “overseas” mobile internet surfers, by the way, use normal mass-market phones.

DO CARRIERS SEE THE WRITING ON THE WALL?
As overall mobile internet traffic is on the rise, the percentage of users visiting sites built by telecom carriers is falling. Telecom companies are still trying to “control” mobile devices, but the sooner they learn that they’re a PIPE, the better.

Carriers can be stubborn though.

Unfettered access would be a pretty bad experiment”, T-mobile chairman and President Robert Dobson told a CTIA audience. “There needs to be some stewardship or control.”

Huh?!

During that same panel discussion, the audience erupted into cheers when asked if they would like to see open access.

Unfortunately some telecom companies still use dubious techniques – like browser hijacking – to direct consumers to their sites. South African carrier Vodacom, for example, recently launched a mobile internet service that it claims enhances user experience. Their service is being widely condemned by consumers and industry participants though. In fact, online services from internet banking to messaging to YouTube have been rendered inactive by Vodacom’s meddling. The South African chapter of the Internet Society (ISOC-ZA) says Vodacom is “breaking the Internet for millions of customers.” The carrier counters that it allows content publishers to opt out of their service.

I wrote about browser hijacking a few months ago and showed how Singapore-carrier M1 was altering our mobile web pages. Well, I’m happy to note that M1 has quietly removed their branded header and significantly scaled down their footer. This isn’t the complete withdrawal we’ve sought, but it’s clear they’ve gotten the message that users don’t want their interference.

BE A GOOD PIPE
As a business consumer, I do have a suggestion for how the telecoms could maximise revenue AND provide a better service. Differentiate between business users who need better service and retail consumers who are more price-sensitive. Provide businesses with Quality of Service agreements and charge a higher price for reliable, always-on network coverage. Charge a low flat fee to retail consumers who don’t mind the occasional spotty coverage. It’s like the difference between flying economy and business class. The carriers should also dedicate resources to provide better indoor coverage and consistent high-speed connections.

Carriers’ insistence on providing content reminds me of an article I recently read in the International Herald Tribune about the online adult entertainment industry. Subscription-based porn sites are suffering a downturn in their business for the first time. There’s just too much free content online so consumers aren’t spending what they used to on the product. Porn producers are trying to turn the situation around by producing better quality movies. One company even said they built an impressive waterfall as a backdrop. I broke out laughing when I read this. People watching porn don’t care about waterfalls!

Similarly, telecom carriers should provide customers with what they want. Don’t sell us bundled products with bells, whistles and portals we don’t need. Sell us what we want – unfettered data transmission!

Categories: Lai Kok Fung