Practically every adult on earth is a customer. How many industries can put that in their sales brochures?
The global mobile industry is a few years away from being one of them. Handsets weren’t even around a generation ago; now, more than 6 billion of the world’s 7 billion people have access to them, according to the United Nations, more than have working toilets. For the time being, the richer countries tend to have iPhone-style “smartphones,” with their larger displays and more powerful microprocessors, while citizens of developing nations are still using more rudimentary “feature phones.” But thanks to the relentless progress made possible by the phenomenon known as Moore’s Law, that technology gap is rapidly narrowing; in the first quarter of 2013, global shipments of smartphones exceeded feature phones for the first time.
So widespread is the ascent of mobile computing that it is the common denominator in scores of seemingly disparate headlines from the business pages. Consider Apple Inc., whose shares reached just above $700 in September 2012, largely because of iPhone sales, making it the most valuable company on the planet. Their subsequent dramatic decline, to below $400 in April 2013, was attributed to ferocious competition from Korea’s Samsung, especially for smartphone sales in the developing world.
All that makes mobile one of the most important technological, social and business trends of our age; epic fortunes are being made, wagered, lost and transformed. Mobile may be the most “disruptive” technology the world has ever seen, and everywhere you look, Wharton graduates are on the front lines of ushering in this new mobile world.
“It’s is a very, very big deal,” says Santo Politi, WG’97, whose Boston-based Spark Capital makes venture investments in mobile companies. “Mobile is becoming the way we interact with the world, and we are only at the very beginning of what we can do with the technology. Today, only a few companies, like Facebook, have close to a billion users. But in 10 years, there will be thousands of them.”
Joe Meyer, WG’97
Social networks such as Twitter and Foursquare thrive on mobile because of something that nearly every new iPhone, Lumia or Galaxy owner realizes very early on, which is: Once you begin living with a mobile phone, it’s hard to imagine life without it.The main reason for that forecast is the simple scale at which mobile phones are being used, Politi explains, and very soon almost everyone on the planet will have one. Along with the fact that it gets easier every year to run a big, Facebook-style data center, the result will be more companies operating at Facebook’s scale. Politi’s own track record of investing indicates he’s doing his part to run up those numbers; he’s been involved with such massive successes as Twitter, Tumblr and Foursquare.
“It’s always on, and it’s always with you,” says Joe Meyer, WG’97, president and CEO of HopStop.com Inc., whose app provides mass transit and walking directions in more than 500 cities throughout the world. “It sometimes becomes very hard to dis-attach from the digital world, and that can be a bad thing. But mobile has also brought so much convenience and utility into our lives that the good of being always on far outweighs the bad.”
The Mobile Manager
The manner in which mobile phones are reshuffling business fundamentals is evident in the daily calendars of one of the managerial class’ newest job titles: director of mobile business development. Virtually every company of any size has one now.
Justin Overdorff, WG’11
Justin Overdorff, WG’11, fills that role for Yelp, the “crowdsourced” local review site that is especially popular in cities.
“Mobile has become the most important part of our business,” he says, adding that 60 percent of all searches on Yelp come from mobile as well as 40 percent of ad impressions.
So Overdorff spends most of his time putting together deals with carriers like AT &T and Verizon to have them preinstall Yelp’s mobile app and integrate Yelp’s local content on the handsets the carriers provide to their customers. Yelp makes its money from ads, Overdorff says, and its deals with carriers usually involve revenue-sharing in return for Yelp being preloaded.
It’s a case study in how mobile is rewriting the rules of a major industry. On account of mobile, according to Overdorff, carriers are increasingly worried about becoming “dumb pipes” that supply a commodity service— while companies like Apple, Samsung and Google make all the profits. Carriers are now especially interested in developing new revenue sources, including striking up deals with the Yelps of the world.
In the Enterprise
Meanwhile, virtually every established brand that interacts with consumers has developed a mobile app, and more likely than not has an ever-expanding team of programmers adding to the app’s functionality. Consumer-oriented companies are finding themselves being forced to adapt to life in a mobile-enabled world. But it’s striking how much mobile is also affecting companies ordinarily considered far-removed from the consumer marketplace—say, a firm in the $300 billion enterprise software market that sells products for internal use at big corporations.
Narinder Singh, WG’04
These companies, too, are remaking themselves to take mobile into account, says Narinder Singh, WG’04, co-founder of Appirio Inc., a seven-year-old firm that provides technology to enable big companies to take advantage of cloud computing. Originally, Singh says, virtually all of Appirio’s products, like those used to keep track of human resources data, were designed for users sitting at traditional desktop computers.
“But now, more than half of what we do has a significant mobile component,” he reports. “If we build something for a company’s sales department, they are going to make sure it’s available to their mobile users.”
In fact, Singh says, many companies are now developing smartphone versions of their enterprise programs first, adding support for traditional desktop computers only after they are available via mobile.
“A huge percentage of people are mobile first,” he says.
There may be no better evidence for the “mobilization” of the world than the experience of Andrew Clark, W’84, who helps run a Houston-based tech “accelerator” called Surge that helps startups in the energy field get off the ground. Houston is a global energy capital, and its world of offshore oil rigs and horizontal natural gas drilling is about as far away from Silicon Valley as one could imagine.
But, Clark says, nearly every one of his startup companies in the energy field need to take mobile into account in coming up with their business plans. Consider Dynamo Micropower, founded by a group of MIT students. The company makes a new breed of microturbine portable electrical generators that can run off unrefined natural gas. It is designing mobile sensors into its products so they can be monitored from far off-site, and so all its user documentation and service manuals can be accessed from iPads and smartphones. Then there’s Skynet Labs, which helps oil prospectors calculate the exact composition of the “mud” that is used as a lubricant in the drilling process.How does Skynet provide the service? Through a mobile app, of course.
An App Developer for That
Skynet is but one example of the literally hundreds of thousands of companies taking advantage of the new app stores, where iOS or Android platform customers download new programs for their devices. The mobile app market is often written about as a source of boundless wealth for entrepreneurially minded programmers willing to quit their day jobs to develop the next “Angry Birds” hit.
The truth is another matter entirely; virtually every single category of mobile apps is crowded with scores of competing products, and only a few of them garner enough sales to make the undertaking worthwhile.
Jing Chen, W’07, ENG’07
This is a phenomenon that Jing Chen, W’07, ENG’07, knows all too well. Her six-year- old San Francisco company, K-Factor Media, supplied an analytics app used in corporate planning. But seeing where the action was moving, the company switched to games and other mobile apps. Now, its most popular product is one that reminds users of their friends’ birthdays. There are, Chen admits, dozens like it, but her company has been able to stand out, reaching both profitability and 100 million monthly active users through the savvy use of big data analytics.
“We weren’t the first birthday reminder site, but we got to be one of the biggest because we are very good at marketing and distribution,” Chen says. “We track everything. Where people come from, and what they do on our sites once they get there. If users keep getting stuck on one level of our game, we’ll see that, and then redesign the game to prevent that from happening.”
Gordon Su, W’08, ENG’08
Gordon Su, W’08, ENG’08, is also tackling the game market, but from an entirely different angle. His startup, PennyPop, is developing a hybrid breed of games that allow different people to play together at the same time on the same team, as happens with “massively multiplayer” games like “World of Narinder Singh, WG’04, Warcraft.” But rather than engage in virtual combat, with guns and swords, PennyPop’s customers work in teams on puzzle games, like “Bejeweled,” a brightly colored pattern matching game that has been one of the mobile gaming world’s smash hits; it’s been downloaded more than 150 million times, and has inspired a legion of copycat games. “Bejeweled” was one of the first games to attract attention for its considerable following among women; at one point, 70 percent of the people buying it were female.
The expanding demographics of mobile gaming are one reason that Su thinks the market is enormous. “Everyone now is gaming enabled,” he says.
PennyPop makes its money by charging users for “in-app purchases.” Players might pay to advance to a new level, or to acquire extra abilities for their on-screen characters. Purchases can be in nickels and dimes, but they add up. Su estimates that his ARPDAU, or average revenue per daily active user, is 50 cents, which is five to 10 times the industry average, he says.
“Our average users play over an hour a day,” he says. “Their engagement with the game is through the roof.”
Their one game, only in beta on iOS in select countries, generates enough revenue to make the entire company profitable, he explains.
Anton Bernstein, W’08, who uses Su’s PennyPop graphics engine for his own gaming company, says one of the biggest challenges for the mobile gaming industry is to keep the attention of its customers with games that are clever and compelling to play, rather than games that are simply compulsive and addictive.
“Some of the biggest companies in the game business got that way by feeding a gaming addiction, and not by feeding any gaming joy,” he adds. Those companies, Bernstein continues, end up having very short half-lives, because users eventually tire of being manipulated by the game’s design and abandon it. (His own game, “Pocketz,” is particularly popular with teenage girls.)
The model Bernstein aspires to with his own gaming company? Disney. “The first Disney was built around movies. But the Disney of the next 15 years is going to be built around games. Games are the perfect vehicle to build a quality brand around, one that gets people excited in the first place and keeps them coming back,” he says.
Through the Hype
For all its explosive potential, the mobile market has the reputation for being difficult to make money in. Mobile screens simply don’t have the space for the sorts of advertisements that regularly fill up web pages. Indeed, one reason that Facebook’s share price hit a rough patch after the highs of its first few days of trading last year is the perception that the company can’t monetize its growing number of mobile users as easily it could those with personal computers.
Mobile entrepreneurs say the secret lies in designing business models that take advantage of the unique characteristics of the mobile experience, especially the fact that advertisers can often know a user’s exact whereabouts. For example, the HopStop app, which tells users when the next bus is due, might also suggest a nearby coffee shop where they can grab an espresso while they are waiting.
HopStop’s Meyer calls these pushes “geo-targeted calls to action.” It’s a practice his company is able to hone on account of the success it’s achieved to date in powering greater than 1 billion direction searches. HopStop’s mobile apps have been downloaded nearly 4 million times. An impressive figure, enough, as it turns out, to bring the company to the attention of none other than Apple, which bought HopStop in July 2013 for an undisclosed sum.
At the moment, the word “mobile” is associated with handsets like smartphones and tablets, but new kinds of mobile devices are just around the corner. They could fuel even more industry growth. Google has generated a lot of attention for its Google Glasses, which embed a tiny computer display on a special headset that users can glance up at. The device is expected to be used initially in specific industries. Health care organizations, for example, are considering the eyeglasses for doctors and nurses because they can see a patient’s data, and the actual patient, in front of them at the same time. But the glasses could be popular with general consumers too. Much the same could be said about Apple’s rumored watch, a wristband with a matchbook-sized, built-in screen that might display not only the time, but also text messages, emails and anything else a user might want to see.
These new intelligent devices may well proliferate on a scale to rival smartphones someday, says investor Politi. If you think you can never get away from a computer now, just wait. “We are going to start seeing mobile computers everywhere,” he says.
