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Google and Yahoo look to mobile (USA)

June 25th, 2008
3:01 pm

Charles Darwin famously declared that “natural selection” was Mother Nature’s way of improving a species so it could advance.

Internet search engines are locked in their own Darwinian drama. Depending how it turns out, desktop brands such as Google (GOOG) and Yahoo (YHOO) could become sturdier versions of themselves, ensuring survival as more people bolt for the mobile Web. Or they could become the Dodo birds of the Net — outclassed by a new generation of rivals.

Born in the early days of the Internet, Google, Yahoo and smaller competitors help billions of people navigate the Web each day. Now, they’re scrambling to adapt their desktop services for the hard realities of the wireless world.

Today, about 1 billion people have PCs; about 3 billion have mobile phones, growing to 4 billion by 2010. A major driver is the growing popularity of Web-enabled devices such as the Apple (AAPL) iPhone.

One of the biggest challenges: dealing with the matchbox-size screens of cellphones and other devices, which aren’t hospitable to the ads that are the lifeblood of traditional search engines. Billions in potential ad revenue are at stake as social networks, location-based services and wireless search deliver instant answers to wireless users on the go.

“As hot as they are right now, Google and the others could become dinosaurs if they simply try to use their old business models,” says Roger Entner, a senior vice president at IAG Research in Boston. But if they can adapt, he says, they could extend their dominance.

Microsoft (MSFT) has been pushing its Windows Mobile operating system for years. Today, it’s available from 50 handset makers and more than 160 mobile operators worldwide.

Even so, it’s been tough slogging, says Phil Holden, director of online services for Microsoft.

“What we’ve learned is that loyalty on the PC doesn’t necessarily transfer to the mobile phone,” he says. The wireless world, he adds, “has a lot of different dynamics.”

One thing everybody agrees on: The mobile Web is an advertising gold mine just waiting to happen.

The fledgling mobile search industry generated about $700 million in ad revenue in 2007, JupiterResearch estimates. By 2012, revenue is expected to hit $2.2 billion and keep rising. Jupiter analyst Julie Ask says mobile search could eventually eclipse the traditional Web, which currently generates about $20 billion in ad revenue.

No matter how things shake out, consumers will benefit, predicts Ford Cavallari of Monitor Group, a consulting firm in Boston that specializes in technology. Search rankings based on factors that have little relation to the quality of a product or service, such as the number of daily “hits” a website gets, or a paid advertisement placement, are about to become history, he says.

Soon, word-of-mouth referrals from social-networking sites (think Facebook and MySpace(NWS)) and customized data made possible by instant messaging and other instant communications will rule, he says.

The upshot: In the near future, a restaurant “might actually have to be high quality and offer value” to patrons to draw customers from the Web, Cavallari says.

“In the next 12 to 18 months we’re going to see a growing segment of (consumers) using wireless services as the way to get on the Internet 95% of the time,” says Imad Mouline, chief technology officer of Gomez, which helps Facebook, Expedia (EXPE) and other companies improve the quality of their Web presence. Currently, about 16% of cellphone owners use handheld devices to access the mobile Web, Jupiter says.

Entner, for one, thinks the mobile Web could produce a mighty rival to traditional desktop engines, one whose core strengths are rooted in the unique world of wireless. Such a newcomer, he says, “could wind up doing to Google what Google did to Yahoo” and other PC-based search engines. Namely, it could trump them in the marketplace.

To be sure, Google, a Web monster with a market value of more than $200 billion, would be tough to topple. But it’s not impossible.

If it’s not careful, Entner says, Google could wind up following in AOL’s famous footsteps. AOL in the ’90s was an online juggernaut with a gold-plated brand name and more than 30 million subscribers. Today, it’s a free service with a dwindling base of about 8.7 million customers.

“Google is trying to replicate a 20-inch experience on a 2-inch screen, and that’s leaving them, inevitably, about 90% short,” he says.

Too much information

Making the leap to wireless is a lot trickier than it might appear.

For starters, there are those tiny screens. Internet search was designed for PC screens, which can easily accommodate loads of advertisements. The latter is critical, because search engines depend on ads for their financial survival.

In the PC environment, ads are abundant and constant. Paid advertisements are typically stripped along the right side of the PC screen, with premium spots at the top reserved for the biggest spenders.

Try that on a wireless device, and you’d quickly run out of room for anything else.

Similarly, the basic act of rendering searches also gets tough on a tiny screen.

In the online world, a single search request can result in a dozen or more pages of results. If results aren’t specific enough, you simply resubmit a query. After a few tries, you usually find what you’re looking for.

That entire process is a total non-starter in the wireless environment, says Sameer Mithal, a senior principal with IBB Consulting in Princeton, N.J.

Mobile consumers are typically on the run, he says, with little time or patience for typing on pint-size keypads. As for pages of search results — forget about it. There isn’t nearly enough screen space for that, Mithal says.

And advertisements? Approach with care; otherwise, you may offend customers and lose them for good, Gomez’s Mouline warns. “Not doing it thoughtfully can get you to a point where customers will abandon your entire brand.”

Traditional search engines, to some extent, are victims of their own success. Basic search algorithms are designed to do a massive Web “crawl” each time a search request is received.

In the mobile environment, however, such thoroughness can be the digital equivalent of using a shotgun to take out a housefly — way too much firepower for the task at hand.

“The desktop search engines are what they are,” Mithal shrugs. Even if you’re only asking for a very specific thing — a sports score, for example — “they still have to search overall Web content.”

Search engines, angling to win over mobile customers early, are racing to solve these problems. Their solutions, in some cases, are wildly different.

Yahoo’s solution is a nod to the social-networking craze. Its OneConnect service, which makes its debut this summer, integrates messaging and social-networking updates from Facebook, MySpace and the like in one spot on the phone. OneConnect ties directly to a user’s address book, letting people share information, social-networking updates and messages on the fly.

“On the phone, time is limited, so you really need to provide highly relevant and useful information,” says Marc Davis, chief scientist for Connected Life, the Yahoo unit responsible for non-PC services, including mobile.

That philosophy is the force behind “OneSearch with Voice,” which integrates voice-recognition technology with traditional search. The service allows users to simply speak their request into a cellphone — “Where’s the best craps table in Las Vegas?” — in plain English. Responses are sent back in text form, as in any other search.

The voice-recognition technology is “so good, it’s shocking,” Davis says, handling accents, continuous speech and verbal affectations with ease.

While all searches, mobile and otherwise, use the same search algorithm, there is one big difference: Yahoo says mobile search responses are provided strictly on the basis of relevancy, with no preferential treatment for ad-supported products and services. “This is about providing answers, not links,” Davis says.

Google says it sees no reason to change what it does just because it’s moving into the wireless arena. “We think that what we do is highly transferable to the mobile device,” says Matt Waddell, chief of mobile and developer products for Google.

The tiny screen isn’t a problem, he says. “It’s still as easy as typing.”

That said, Google is making a few accommodations. Instead of giving wireless users pages of search results, for example, it only offers “snippets” — Google-speak for the first few search results that appear at the top of the page. It’s also limiting the number of ads to one or two per search.

Waddell says the advertising opportunities in wireless are huge. One example: Say you’re in San Francisco, and you suddenly get an urge for pasta. Provided your device has Global Positioning System location technology, Waddell says, Google can offer up a list of Italian restaurants within a five-minute walk.

“Advertisers would probably be willing to pay more money for such an ad, because it would be much more targeted,” he says.

While such an approach might seem to subjugate the interests of consumers to advertisers, Waddell says that’s not the case at all. “We never think of advertising first,” he says, adding, “We won’t touch an ad with a 10-foot pole unless we think it delivers a better search experience.”

Google on the go

Google is taking other steps to make sure it doesn’t get iced out of wireless opportunities. The Web giant is pushing development of an open wireless operating system — dubbed Android — that would make it easier for consumers to use Google’s mobile services. Android-loaded devices are expected to hit the market later this year.

While the big incumbents duke it out, start-ups are nipping at their heels. That includes Medio, a Seattle-based company that hopes to turn itself into the Google of mobile.

Like Google, Medio’s service is geared around a simple “search box” format. That’s where the similarity ends, CEO Brian Lent says. Medio “was designed as a pure-play company for the mobile industry.”

Unlike Google, he says, Medio’s patented algorithm hones in on “mobile discovery,” producing far more relevant answers for users. Example: A search for a Madonna ring tone might also result in links to a CNN article about the singer, as well as V Cast, the mobile music channel offered by Verizon.

“That’s a lot different than crawling the Web” as Google does every time a query is received, Lent says.

Another difference: Medio is a “white label” company that works directly with big carriers such as Verizon and T-Mobile. Carriers, in turn, rebrand Medio’s service under their own names.

Lent has a very personal view of the Web’s biggest search engine. A data-mining expert, Lent was part of the academic team that worked on Google when it was still a lab project at Stanford. He left to take a job at Amazon a month before Google was incorporated.

Lent, who remains friends with Google co-founder Sergey Brin, says he’s hugely admiring of Google’s pioneering efforts. The Web giant, now a Medio partner, almost single-handedly raised the online search category to a new level, he says, introducing billions of people to the wonders of the Web.

But now it’s a new world, he says — a wireless world. “Everyone wants to bash the incumbent, but I’d rather take a playbook out of judo and leverage the strengths that they have” and build on top of that, Lent says.

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Virgin Mobile USA Offers Unlimited Wireless Plan

June 25th, 2008
2:50 pm

Virgin Mobile USA made a move Tuesday to undercut other mobile providers offering unlimited rate plans. Mobile providers like T-Mobile and Sprint are currently offering customers an unlimited rate plan, with about $100 being the price customers can expect. Virgin Mobile USA cuts the price by $20 — except for customers who also want unlimited text and messaging, with texting, IM, email and picture messages, who will have to pony up another $10.
The plan, called Totally Unlimited, is billed by Virgin Mobile as the “lowest priced and first unlimited nationwide calling plan.” Users on the plan are not subject to roaming and are not necessarily tied to a two-year commitment.

Totally Unlimited gives users who purchase the plan the option to pay with credit or debit cards and not necessarily sign a long-term contract. Avoiding getting locked into a long-term contract may be an option that appeals to a large number of users fed up with their current mobile carrier and looking to make a switch.

The Totally Unlimited plan is another option mobile plan that Virgin Mobile is offering customers. The unlimited plan joins a Pay As You Go and Monthly model that Virgin debuted earlier in 2008.

The by from Virgin comes several months after other nationwide carries rolled out unlimited use rate plans to their customers. Sprint’s Simply Everything plan costs customers $99.99. An one line, unlimited plan from Verizon Wireless also starts at $99, but runs all the way up to $139, depending on what type of unlimited service a customer wants. T-Mobile’s offering also comes in at $99.

Whether or not mobile customers will move to Virgin Mobile remains to be seen. But a less expensive price point and the option to change carrier at any time will likely attract a fair number of mobile subscribers.

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Virgin Mobile joins Sprint, T-Mobile and others in wireless unlimited party (USA)

June 24th, 2008
2:43 pm

Virgin Mobile, the offspring sprung from Sprint and sent off on its own into the wireless world, isn’t showing much respect for its parent.

Well that’s one way to look at Virgin’s brand new “Totally Everything” unlimited calling plans for $79.99 a month. An extra $10 a month adds unlimited text messaging.

Hmmm. That sounds familiar. Oh yeah, Sprint has a “Simply Everything” unlimited calling and messaging plan for…$89.99. Sprint, of course, also has a much more expansive flagship unlimited plan for $99.99 a month that lets a subscriber enjoy “Everything your phone, PDA or smartphone can do nationwide — text, surf, email, listen, watch, find and, of course, talk — on one simple plan.”

Adam Fendelman at About.com noticed the similarities. “What’s perhaps most interesting is that Virgin Mobile, which itself is a reseller of Sprint mobile service, is even undercutting Sprint,” he wrote.

So what drove Virgin to make this move?

“Unlimited is the buzzword in the wireless world right now,”
Bob Stohrer, chief marketing officer at Virgin Mobile, said in this Marketwatch report. “We think that the plan and the value on its own will resonate with consumers. As importantly, we think it provides an important halo for all of our products.”

The carrier that began as a joint venture between Sprint and Richard Branson’s Virgin Group announced today that starting July 1 it would join the wireless industry’s unlimited party. Virgin sells its own brand of service over Sprint’s network, contributing more than 5 million wholesale subscribes to Sprint’s overall customer count.

Sprint is betting big that its expansive and relatively fast “now network” will make it stand out from rivals and return it to a growth track. The newly launched Samsung Instinct phones are whizzes at navigating the ‘Net, watching TV, listening to music and doing other data-oriented functions.

In an effort to avoid any nasty, or at least annoyingly surprising, extra charges on a subscriber’s monthly bill, Sprint is requiring that Instinct purchasers also sign up for one of its Simply Everything unlimited or other data plans.

All the calls, all the data, all the Simply Everything for one don’t-worry-about-any-extra-charges price.

Verizon Wireless, T-Mobile and other carriers also have unlimited calling plans, though most of them charge extra for data services.

It will be interesting to see whether this unlimited gambit brings a much-needed surge for Virgin. The carrier primarily reaches out to the youth market, relying primarily at least in the past on its no-contract prepaid services.

Some wireless analysts see this new plan as possible competition on the edges for Sprint, though others see it hitting a carrier such as T-Mobile more directly.

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Verizon/Alltel deal could complete this year (USA)

June 11th, 2008
2:06 pm

Verizon Wireless says its planned acquisition of Alltel Corp has been on the cards for years and that the buy will not be a ‘game changer’ for Verizon. Referring to how Sprint’s fortunes have dipped after its acquisition of Nextel in 2005, Verizon Communications president and chief operating officer Dennis Strigl says Alltel represents a good fit for Verizon Wireless, Dow Jones reports. Strigl is hoping the purchase can be closed by the end of this year, pointing to the quick completion of AT&T’s recent buyout of Dobson as an example of how a large deal can be pushed through in a matter of months rather than years. The combined Verizon Wireless and Alltel would leapfrog AT&T to become the nation’s largest cellular carrier, with a total of more than 80.3 million customers at the end of March, ahead of AT&T which had 71.4 million at the same date.

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Mobile, USA, Sprint, Verizon, AT&T, Dobson
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Alltel US customers worry about Verizon deal (USA)

June 6th, 2008
2:36 pm

Verizon Wireless’ deal to buy Alltel for €3.7 billion (US$5.9 billion) was applauded by investors and should mean a greater range of choices for Alltel subscribers, but some worried that Alltel’s commitment to rural coverage will get lost, an Associated Press report said.

The report quoted several customers expressing worry over the deal.

Dan Yahro in Bishop, Calif., close to the border with Nevada, has two options for wireless service: Alltel and Verizon Wireless. Now that one is buying the other, he wonders what will happen.

“Alltel has twice the coverage of Verizon here. When you get into Death Valley National Park, which is where I spend a lot of time, Alltel is the only game out there,” Yahro said.

Alltel’s wide-ranging rural coverage in 35 states has given it 13.2 million subscribers and plenty of fans. In its area, mainly in the interior of the country and in the Southeast, it provides an alternative to the four big national carriers: Verizon Wireless, AT&T, Sprint Nextel, and T-Mobile USA.

John Wilfong, 29, of Alexander, Ark., said he had service on his Alltel phone everywhere when he worked as a deliveryman.

“When I used to go into a lot of fringe areas, it got a better signal,” Wilfong said. “When I was living at home before I got married, my dad had Cingular and he couldn’t get a signal in the house, but I could.”

Having the No. 2 carrier, Verizon Wireless, swallow the No. 5 carrier, Alltel, would catapult it beyond 80 million subscribers and past AT&T to become the largest carrier in the country. It could also reduce competition in areas where Verizon Wireless and Alltel overlap.

A Justice Department spokeswoman said the agency “would be interested in looking at the proposed transaction.”

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Mobile, USA, T-Mobile, Sprint Nextel, Alltel, Verizon, AT&T
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Verizon Wireless in talks to buy Alltel (USA)

June 5th, 2008
2:39 pm

Verizon Wireless is in talks to buy Alltel Communications, the country’s fifth-largest wireless carrier by subscribers, for $27 billion (€17.5 billion), according to news reports.

If consummated, an acquisition would be the biggest telecom deal since AT&T bought BellSouth at the end of 2006. Adding Alltel’s 13.2 million subscribers to Verizon Wireless’ 67.2 million would create the largest wireless carrier in the country, far ahead of AT&T with 71.4 million customers.

Talks are at a sensitive stage, according to CNBC and The Wall Street Journal. Both reports cited unnamed sources close to the discussions. Representatives of Verizon Communications and Alltel had no comment Wednesday.

Shares of Verizon Communications, the controlling parent of Verizon Wireless, dipped after the report, closing down 38 cents, or 1 percent, to $36.98 (€24). Verizon Wireless’ other parent is Vodafone Group of Britain, with a 45% share of the joint venture.

Little Rock, Ark.-based Alltel was a public company until it was bought out by TPG Capital and GS Capital Partners in November for $24.7 billion (€16 billion). It has a wide-ranging network covering parts of 35 states, mainly in the middle of the country.

A deal could save Verizon Wireless more than $1.0 billion (€650 million) per year, according to analyst Christopher King at Stifel Nicolaus. Verizon Wireless now pays hundreds of millions in roaming charges every year to Alltel, he estimated.

King also remarked that Alltel’s private-equity owners would likely jump at a chance to sell, since tight credit markets could make it difficult to wrest a profit from the highly leveraged company. He expects a deal would pass regulatory review, but Verizon Wireless may have to divest radio licenses in some areas.

Verizon Wireless uses the same network technology as the majority of Alltel’s network. That makes Verizon Wireless a more likely acquirer than AT&T, which uses an incompatible technology. Regulatory scrutiny of an AT&T deal would also be tougher, since AT&T is the largest carrier.

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Sarin leaves Vodafone after five years in charge

May 27th, 2008
1:38 pm

Arun Sarin is to step down as Vodafone’s CEO after five years of leading the world’s largest mobile phone operator by revenue. The 53 year old will leave the company on 29 July and will be succeeded by 46 year old Vittorio Colao, currently the operator’s deputy CEO and head of European operations.

It’s been a bumpy ride for Sarin, who has had to face down share holders’ revolts, but he is leaving on a high note: Vodafone has just reported a 14% rise in revenue over the last financial year. Income rose to £35.5 billion (€44 billion) for 2007-2008, producing an adjusted operating profit of £10.1 billion (€12.57 billion) and free cash flow of £5.5 billion (€6.8 billion).

This perhaps explains his apparent change of heart. Earlier he had striven to quell any suggestion that he would leave his post this year.

“We have made strong progress over the past year with our strategy and met or exceeded our stated financial expectations in all areas,” Mr Sarin said in a statement, reported in the Financial Times, highlighting an 11% increase in adjusted earnings per share.

The article also quoted Sarin saying, “I felt the time was right for me to hand over at this time… I have achieved what I set out to achieve on becoming CEO and therefore felt the timing was right now.”

Sarin claimed to be “delighted” that Colao would succeed him. The challenges confronting Colao, he said, would include the global economic slowdown, regulatory pressures and new entrants seeking to exploit the mobile internet, according to the Financial Times.

Others include Vodafone’s ongoing struggle to gain total control of the Vodacom, South Africa’s largest mobile operator. Vodafone already owns 50%, but the rest is held by Telkom, South Africa’s leading fixed line operator, which in turn is controlled by the state. Vodafone’s stake in US operator Verizon is also a source of contention among some shareholders who want Vodafone to divest itself of its holding.

Colao has been Vodafone’s deputy chief executive since September 2006. He was a partner at McKinsey before joining Omnitel, Italy’s second-largest mobile phone operator, which Vodafone acquired in 2000. He left Vodafone briefly to become CEO of Italian publishing group RCS MediaGroup, the Italian publishing company.

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Mobile, South Africa, USA, Vodafone, UK, Vodacom, Verizon
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Verizon to introduce Linux phones

May 16th, 2008
12:34 pm

Verizon Wireless is backing a free operating system that competes with programs from Microsoft, Google, and Qualcomm, a Canadian Press report said.

The report said Verizon will the first US carrier to join the LiMo Foundation, which aims to unite handset makers, software companies and carriers on a software platform that will make it easier and cheaper to create a wide variety of phones.

The carrier’s endorsement is an important boost to the stature of LiMo, or Linux Mobile, and its prospects in the US. It already has the backing of large Asian and European carriers, as well as handset makers like Motorola, Samsung Electronics and LG Electronics.

Kyle Malady, vice president of network for Verizon, said he expects the company to sell both simple and “smart'’ phones using LiMo next year.

That’s a potential blow to Qualcomm, which supplies the software for most of Verizon’s phones, excluding smart phones.

But the company is not adopting LiMo to the exclusion of other operating systems, he added, as it now sells phones with a variety of operating systems, and expects to continue doing so.

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Virgin USA in Talks Over Mobile Operator Helio

May 15th, 2008
2:36 pm

Virgin Mobile USA is in talks with SK Telecom over a possible deal involving Helio, the U.S. mobile operator that gears itself toward affluent youngsters but has struggled to make a profit since its launch.

The talks, which could potentially lead to an acquisition or an investment, are in the early stages, and Virgin said Wednesday that it didn’t expect to comment further unless an agreement is reached.

Helio was founded by SK Telecom and EarthLink in 2005 and launched the following year. It is known as a mobile virtual network operator (MVNO) because it rents capacity from a third party rather than owning its own network. SK Telecom became the majority owner after EarthLink reduced its ownership to 22 percent last year.

Both SK Telecom and EarthLink have sunk hundreds of millions of dollars into Helio, which continues to post losses despite boasting some of the best customer spending and usage metrics in the mobile industry.

At the end of last year, Helio said its users spent more than US$85 per month, compared with an industry average of $50. Helio customers send an average of 550 text messages per month, and 95 percent of Helio users access the Web from their phones, the company said at the time.

Still, EarthLink expected Helio to report a year-end loss for 2007 of as much as $360 million on revenue of as much as $170 million. That’s after SK Telecom and EarthLink started the company with a combined $440 million. Since then, both companies have made additional investments in Helio.

Virgin Mobile USA’s earnings for the first quarter were down from the same period a year earlier. It had 5.1 million subscribers in the first quarter, compared to Helio’s 200,000 at the end of 2007. Like Helio, Virgin Mobile USA is also an MVNO, and both use Sprint’s network to deliver their service.

The companies have different types of customers, however. While Helio is after big-spending mobile users, Virgin offers only prepaid services and targets people looking for a lower-cost service. Combining the companies could allow the new entity to offer both pre- and post-paid service and attract a wider spectrum of the market.

Helio and Virgin aren’t the only struggling MVNOs. Amp’d, which was also geared toward young mobile users, filed for bankruptcy and then shut down last year. Other MVNOs such as ESPN Mobile and Disney Mobile have suffered similar fates. In addition, Qwest dealt a blow to the concept of MVNOs earlier this month when it decided to stop selling its own branded mobile service, using Sprint’s network, and begin selling service branded by Verizon.

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Mobile, USA, SK Telecom, Virgin, Verizon, Disney mobile, Helio
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Sprint Nextel CEO faces tough questions from investors

May 14th, 2008
2:28 pm

Dan Hesse, CEO at Sprint Nextel for less than five months, faced tough questions about the company’s continued trouble keeping wireless subscribers, an Associated Press report said.

Sprint, the third-largest US wireless provider, lost about a million customers in 2007 and reported that it lost 1.07 million more in the first quarter of 2008 alone, the report said.

Investor Carlos Roberts of McLean, Virginia, told Hesse at the company’s annual shareholder meeting was quoted by the report saying that “over the last year, AT&T and Verizon have really been eating our lunch, particularly in terms of high-value customers.”

Roberts asked Hesse what he was doing about that problem.

Hesse, hired in December after the company’s board ousted former CEO Gary Forsee, told Roberts and other shareholders that Sprint Nextel is taking the appropriate steps to regain momentum on subscriber numbers.

But he cautioned that shareholders shouldn’t expect significant improvement in the company’s finances until the end of 2008.

Chairman James Hance Jr. placed the blame where many already have, on Sprint’s struggle to integrate Nextel Communications’s network and corporate culture with its own after it bought Nextel in 2005.

Hesse said the company will focus on retaining high-quality customers through improved customer service and special offers for existing customers. For example, it plans to roll out a device like Apple’s iPhone, called the Instinct, in June and sell it initially only to existing customers.

Sprint also continues to weed out subscribers who have trouble paying their bills and don’t spend much on lucrative data services such as internet surfing or video.

Hesse said Sprint is seeking devices and services that will distinguish its brand from those of rivals AT&T Mobility and Verizon Wireless.

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