Technology, Venture Capital, Private Equity

Perspectives from an Indian VC

Mobile internet – the new paradigm

Posted by Arun Uday on January 5, 2010

Morgan Stanley’s annual technology report has been released for the year that just passed i.e. 2009, downloadable here. This edition focuses on the mobile internet. I have been a regular reader of these reports for the past few years, and have to admit that the 2009 edition has been the best so far. The theme this year has been the mobile internet. The report throws up some very interesting statistics on the phenomenal growth of the mobile internet such as the following:
* The penetration of technology in every computing cycle has been 10x the previous one in the following pattern – Mainframes:1MM+ units, Mincomputers:10MM+ units, PC:100MM+ units, Desktop internet:1B+ units. Therefore, the anticipated adoption of mobile internet is expected to be 10B+ units.
* The cumulative wealth creation of the top 5 companies that dominate each era has been higher than the previous one
* Mobile internet adoption on iPhone has been 8x that of desktop internet adoption on AOL in 9 quarters since their respective launches
The report also goes on to sing praises of the phenomenal success of the iPhone and hints that it could become the dominant player of this era given the critical mass of voulmes and applications built on that platform with Google Android becoming a key challenger. As an aside this article by another research firm reports Android adoption to be picking up steam rapidly.
A couple of observations from my side:
a.  An interesting question that arises is whether Apple is making the same mistake with the mobile that it made during the PC era by adopting a closed approach for the iPhone as it did in the case of Mac. And therefore, by extension, could Google do to the iPhone, what Microsoft did to the Mac. This becomes especially pertinent given the reported uptick in Android adoption per the ChangeWave research report. The answer to that, in my view is that the mobile ecosystem is very unlikely to evolve the way the PC market did, and unlike the Windows/Intel (or Wintel as it is more popularly called), which became the dominant platform by far of the PC era, the mobile platform will be far more fragmented with Apple, Android, Symbian and the rest all cornering their slices of the cake. The reason for this is that the need for a standard format for applications is much lesser in the case of the internet than the PC. In the case of PCs, it is imperative that the documents that are created such as word docs, spreadsheets or presentations be readable across PCs, which results in enormous incentive for a standard sofwtare patform to emerge, which obviously got addressed by Windows. However, on the mobile, there is very little peer to peer exchange of documents and most activity is centered around either running native standalone applications such as games, music, multimedia etc or accessing the open internet. Therefore, any single propreitary platform is unlikely to become an industry standard a la Windows.
b.  The other interesting possibility is that the mobile could actually become a more viable monetization mechanism for services such as Facebook and YouTube rather than the advertising led model on the net. Most telcos these days have embedded applications of these popular services as a part of their offering and as the mobile internet grows, the revenues from fee sharing arrangments with telcos for these could surpass the ad dollars earned through the net.
c.  The last one is more a prediction from my side. Given all the activity that is happening on the cloud, I feel that it won’t be long before the “Mobile Cloud” becomes the new buzzword. The reason for this is that cloud applications such as Google Docs or Zoho are a natural fit with mobile since memory and processing resources are much more rationed on a mobile than a PC, which makes it ideal for thin client based services such as these to gain adoption on the mobile platform.

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