Can't Take Your Call, Using My Phone

Over the last three years, based on our analysis of data in a new report gathered from the ContentNext Media sites, $343 billion of capital has been invested in the mobile-phone industry between M&A, venture capital, IPOs and dedicated funds in 1,115 transactions.

Even after stripping out the large carrier-related deals, $40 billion has been committed, still a big figure. The greatest sums went into content and software and services. Interestingly, over half of the deals were done by strategic investors. There is no question that mobile phones are the next disruptive technology.

Thanks in large part to the June 2007 launch of the iPhone, imaginations are running wild as to what the phone can do. While some of this can be explained by the Apple "cool" factor, some of it is the improved consumer interface of the handset, a better browser, and the rapid deployment of over 27,000 applications. The latter has been facilitated in some large measure by the payment mechanism through the iTunes storefront. Using a phone to make a call seems more like an afterthought than the primary use of the phone.

As a result of the iPhone's success, as well as positive stories surrounding the application market, we sense a growing feeling among businesses that consumers are now willing to pay for content; we don't necessarily share this view, as there is a novelty factor at play as well.

While we don't doubt that the phone can become a mobile PC, we think it is a vision that will take years to be realized. The market is still incredibly fragmented as each carrier has separate handsets, browsers, service offerings, and that makes it difficult, today, to achieve scale. Mobile banking and mobile payments are two areas in which we are seeing greater interest but efforts are being thwarted in some respect by the same factor.

In our analysis of the mobile-content area, we think traditional content players will again be on the defensive as the business model is far from certain. In addition to a still-small mobile ad market, content providers need to produce content that is relevant on the go. There has been hype about mobile advertising for some time that has yet to be realized, although we believe a solid infrastructure is finally being put in place that should allow it to finally break out.

Near term, the text message-based ad/marketing arena is healthy, and there are an increasing number of success stories; text messaging is one of the few areas of the mobile industry where the technology is ubiquitous and it can scale. Location-based services (i.e. locally targeted) are exciting, albeit in early innings, as they will heighten the ability for marketers to target, could really open up the local ad market, and add a new dimension to social networking.

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