Mobile World Congress (MWC) is the world’s largest conference focused on
mobile technologies with over 70,000 attendees
The conference marks a unique opportunity to get a truly global
perspective on the trends that will shape the growth of the industry in the coming
year. This was my fifth year attending
as part of Trident Capital and below are some of the takeaways that I had from
meetings with attendees from various carriers, handset manufacturers and
software vendors.
No News Can Be Good News
The most noteworthy news to come out of MWC ’13 was a lack of
noteworthy announcements. Past years
have almost universally included some announcement about a seemingly major
change to the mobile ecosystem. Last
year was the release of Windows 8, the previous year it was really the coming
out party for Android as it ramped from an upstart to the leading mobile OS
provider. Yes, there was an announcement
of the Firefox OS and yes there was some sabre rattling from Intel/Samsung over
Tizen, but for the most part, there was a notable lack of notable news. While the lack of sea change might seem like
a net negative, I would argue that the maturation of the market is a net
positive for players in the ecosystem.
Carriers, handset providers and software / app developers are all more
likely to allocate significant resources behind longer term R&D efforts and
true innovation with the improved visibility in the mobile landscape.
Impact For Investing: App developers (both consumer and enterprise)
are getting more comfortable with supporting two OSs for at least the near
term. We view this as a net negative for
app development platforms that have been solely focused on solving
fragmentation problems but a positive for other enablers of the app ecosystem
(app security vendors like Mocanaand Arxan, API management vendors, developers of vertical
market apps).
Reaching the Next Billion
Subscribers
Lots of discussion from carriers and handset makers about the
opportunity to capitalize on further penetrating developing markets. Manoj Kohli, CEO of Bharti Airtel (4th
largest carrier in the world) told his audience at MWC that the next billion
mobile subscribers are going to come from markets like Asia and Africa. Kohli and others pointed to the increased
penetration of 3G networks and the dramatic drop in smartphone prices (as low
as $30). This was a theme that was
opened by the announcement by Safaricom leading up to MWC that they have
started to phase out feature phones altogether. While the penetration of smartphones in
developed markets like the US and Europe (the penetration rate in both of these
markets surpassed 50% last year) has been an important one, the penetration in
developing markets has the potential to be much more disruptive. Access to smartphones and mobile broadband represents
the first opportunity for many of these individuals to have any access to
computers or the Internet. The potential
impact for how goods and services are bought, sold and delivered will be massive.
Impact for Investing: This
should be a positive across the board as consumer focused app developers see
continued 30%+ organic growth. Secondary
markets like mobile advertising (Appia, mBlox, Brightroll) that enable this expansion are also likely to
see continued growth. Look also for apps that “hack” heretofore
analog processes in developing markets (bill pay, government services,
workforce management).
Rise of the Phablet / Handset
Makers Continue to Try To Break Into Content
A Huawei banner at Barcelona’s airport proudly announced that they were
the manufacturer of the “World’s Largest Smartphone”. While it is worth taking a moment to
appreciate the irony of this announcement from an industry that spent the last
20 years trying to shrink the size of phones, it does imply an interesting
trend as more and more manufacturers release crossover “Phablets” or hybrid
tablet / phones. These supersized phones
reflect an increased interest from mobile subscribers in consuming media,
shopping and richer mobile apps.
Carriers, recognizing the importance of this (and the increasing
difficulty in differentiating through hardware) to consumers are working hard
to find content deals or applications that appeal to consumers. Both of these themes were highlighted in
January in Evangelos’ blog posting on the Consumer Electronics
Show (CES) in Las Vegas.
Impact for Investing: This
may mark a (relative) return in importance for content providers as goliaths
like Samsung, Google and Apple look to drive handset sales through content
deals. This is also a continuing
positive for online retailers and the t-commerce market. Companies like CatalogSpree and Revel Touchthat drive great tablet experiences for
consumers will likely see the benefits of the continued rise in the
market. Second order benefits will
likely include players who help monetize the rich video experiences that are
being consumed on tablets (Brightroll) as well as driving mobile app downloads
(Appia).
Game On For the Mobile Security
Market
One of the news items most talked about in the hallways of MWC was the
$200M in capital raised by Airwatch and the reported $5M that they spent on
their booth (which was almost as large as Samsung’s). There has been significant speculation both
last year and this year that consolidation is coming in the MDM / mobile
security market as the market matures and vendors start to shake out. This announcement of Airwatch raising a
massive war chest (while IPO / other fundraising rumors for Good and Mobile
Iron also swirl) may mark the start of this consolidation.
Impact for Investing: There is a tremendous amount of noise in the
mobile security space (Trident tracks over 75 vendors in the space). Consolidation in this market and a focus on
best in class solutions may be just what the market needs to allow the leading
vendors to break out. We view this as a
positive for our investments in Mocana, Arxan and Airwatch who are leaders in their respective markets.
Internet of Things
Over the last five years, “The Internet of Things” is likely only
rivaled by mobile payments in terms of a meager reality vs hype ratio. Last year featured Vodafone’s connected house
and this year was MWC’s Connected City.
The big announcements in this space were Qualcomm’s AllJoyn open framework for
connected devices (hoping to facilitate discoverability, interoperability and
security) and GM’s decision to embed LTE modules in cars starting in 2014
(powered by AT&T). Rajeev Chand at
Rutberg gives
a good summary of both of these in his research note, but the takeaways can be
summarized as: 1) Still a lack of clarity around business model for M2M - until
this and consumer willingness to pay is clarified I remain skeptical on the
potential for this market 2) GM’s
announcement was impressive in that it involves clear guidance on timing of the
roll out and which cars would be involved (including lower end models like the
Malibu). To me the GM announcement was
the most interesting. There is lots of
potential for app distributors like Pandora and Yelp as in car apps represent a
real opportunity to create value for consumers - which is core to successful
mobile deployments. GM’s Vice Chairman
Steve Girsky was on stage to make the announcement but his discussion with
moderator Rajeev Change seemed to lack an understanding of the full potential
of the business opportunity around connected cars. Girsky all but wrote off the opportunity,
saying that GM generates $150B in revenues and this “would not move the needle
for them.” Steve should note that GM’s EBIT was only $2.8B for 2012 and the
potential to get a piece of the profits from reselling broadband connectivity
or access to mobile apps through advertising could very easily move the needle
at the bottom line.
Impact for Investing: It is likely best to take a “wait and see”
approach in this market. While companies
like Nest have made tremendous strides in this
market, there are many others who are stuck in the starting gates.
Trident Mobile Investment
Initiative
Our investment thesis for the mobile space focuses on mobile as a
disruptive force- rather than looking at mobility as a vertical market, we look
at it is a medium for delivery of information and applications that has the
potential to change how business is conducted across the enterprise. This change is both internal (impacting how
employees access information and improve productivity through mobile applications)
as well as external (how the enterprise interacts with consumers and engages in
marketing). We break these opportunities
for disruption down into vertical markets and horizontal markets. The vertical markets include Education,
Healthcare, Adtech, Retail / e-Commerce and Logistics / Workforce
Management. The horizontal markets include
CRM, HR Tech, Collaboration, Security and Mobilization of Enterprise Apps. While this list is by no means inclusive (and
we expect it to evolve over time), these are the markets we believe are most
prone for disruption within our investment horizon of 4-6 years. A more thorough overview of our investment thesis
can be reviewed in a subsequent post that includes a presentation at the SEVC
Conference that I gave in March (link to follow).
Several of the MWC themes discussed above are important for our
investment initiatives and support the opportunities we are pursuing:
Vertical Market Applications - the stabilization
of the ecosystem should have a very positive impact on vertical apps. The ability to focus on two OSs significantly
decreases the complexity and cost of developing and maintaining apps. We also believe that the further penetration
of mobile into developing countries will also drive global companies like P&G
and Citi to further extend productivity tools into the workforce.
Retail / e-Commerce - the decreasing price of
tablets lowers the bar for putting these tools into the hands of retail
employees. We are already seeing tablets
displace the traditional POS in stores like Nordstrom and JC Penney. Retailers are also increasingly focused on
developing apps that drive consumers into retail locations (clicks to bricks
strategies) and then help them in their decisioning process while in the
store. Companies like Walgreens have
been leaders in this market with mobile apps that allow consumers to refill
prescriptions and see specials going on in stores. We are excited about companies that are giving
retailers the tools they need to compete against e-commerce.
Adtech - The rise in rich media devices and the
further penetration of emerging markets both represent strong tailwinds for the
adtech space. Improved monetization of
mobile users is grist for the mobile advertising mill. We are focused on companies in the mobile
adtech space that understand how to leverage the mobile medium to deliver
effective ads that consumers find to be valuable rather than intrusive. We are also focused on companies that are
effective across multiple platforms.
With individuals now consuming media across multiple devices (tablets,
laptops, phones and computers) it is more important than ever to be able to
understand the consumer’s behavior across these devices and the most effective
way to reach those consumers.
Horizontal Enterprise Applications - The same
trends that apply for vertical market applications also apply for horizontal
markets within the enterprise like HR, Collaboration and CRM. We view the opportunity for investment here
as both companies that develop apps for these markets with a “mobile first”
approach as well as companies that help enterprises manage the process of
managing the integration of new mobile apps with legacy apps and systems of
record. Companies in the later space are
typically grouped into either BaaS (backend as a service) or API management.
Trident Portfolio Companies See
Tremendous Opportunity
Trident was well represented at MWC by portfolio companies mBlox, Appia,
Brightroll, Turn www.turn.com and Bytemobile (as part of
Citrix). mBlox enjoyed lots of buzz from
the launch of their Engage product which is focused on broadening their mobile
messaging platform to include in-app messaging.
The Company received great response from customers and ecosystem
partners that were interested in broadening their mobile customer outreach to
include in-app messaging and the targeting / tracking capabilities that the
Engage product offers.
Bytemobile was front and center as Citrix made a big push to expand
their footprint into the mobile carrier market.
The $430M acquisition was announced in June of last year following a
partnership between the two companies that allowed Bytemobile to integrate
Citrix’s load balancers into its mobile solution that was deployed across its
130 operator customers. The merger looks
to be a rousing success as evidenced by the Bytemobile signage in the Citrix
booth and the amount of foot traffic.
Mobile advertising continued to be a big part of
the conference and Trident portfolio companies Appia, BrightRoll and Turn were no
exceptions. Turn has enjoyed strong
traction in the mobile space since their announcement last year of a
partnership with AT&T to combine Turn’s DSP with AT&T’s AdWorks ad
network. Appia has also been the beneficiary of telco
carrier partnerships, powering app stores for AMX across 18 countries as well
as deployments with Vodafone and Airtel. All three of these companies continue to
enjoy triple digit growth in mobile advertising in 2012 and 2013.
