Google makes $18 a year for each unique visitor. Facebook makes roughly $3.

Three observations from the chart:

1)  Google is far ahead of the others in monetizing their visitors. A sign that search advertising is much better paid than display. Facebook will need to invent something to market their ads more valuable.

2) Recently a tier-1 telco CEO demanded that Google should pay telcos  for the business they do on their networks. The yearly revenues per broadband subscriber for a telco can reach $240-$400. What Google or Facebook gets from a single user is peanuts compared with what the telco gets. What portion of Google’s revenue they want to get?

3) By chance the revenue per user for Internet giants look in the same range as what a traditional  ad-funded broadcast TV channel makes per average viewer in a year.

It would be interesting to see how Hulu would do on this chart. According to Bloomberg, the Simpsons on Hulu command a $60 CPM, while on prime-time TV the same ad would cost $20-$40 per thousand viewers. If Bloomberg is right, considering that Hulu aggregates much more content than a single broadcast TV channel, with a higher CPM, we should see Hulu go off the chart!  Assuming it could reach $100-$200 revenue per user per year, that starts to look something on which the telcos might want to ask for a share…

It is more than one motnh ago that I was in CommunicAsia  for a Mobile TV panel. Here are the main points we discussed about how to make the business case for Mobile TV work.

• Free-to-Air channels are a must to drive adoption of Mobile TV into the mainstream, as Japan One Seg, Korea T-DMB and even the DVB-H Italian case show. More than 20 million Japanese watch TV on a phone. As of today, 85 % of the new handsets sold in Japan have a One Seg tuner. Even the iPhone has an One Seg tuner accesory (see picture)
• “Free” creates a large audience that can be monetized through subscriptions, advertisement and transactions (VOD, Catch-up TV, cross-selling). It is the economics of free, common in Internet and Software, applied to Mobile TV.
• There is a need for a next-gen Mobile TV that puts together Broadcast and Unicast technologies. Broadcast enables FTA channels at zero marginal cost (it is the same cost to serve one customer than one million) and it is efficient for premium mass audience channels like sports channels. Meantime, Unicast provides unlimited number of channels for premium, niche/long tail, VOD and catch-up TV that can be monetize as subscriptions or pay-per-download. The 3G network also enables interactive services, like EPGs, audience monitoring, interactive ads, or interactions with social network (see what my friend watch, or “watch and chat”), that give extra chance for monetization.
• Focus on high-end devices, like iPhone or ones with TV tuners. Early adopters of these devices are the same early adopters that will watch TV on a mobile. It is a waste to support a large number of mid-range or low-end devices. Mobile TV has not crossed the chasm yet.

Some other curious facts and learning from the Japanese One Seg: Mobile TV experience:

NHK Study: Where people watch mobile TV?
1) At home in a room wo TV 38%, 2) At work/school 26%, 3)While bathing 24% – On train goes in 7th place (17%) tied with at home in a room with a TV!
=>  There are more use cases than just watching TV on the train…

DIMSDRIVE research for Japan:
What people like about Mobile TV: 1) Anywhere, 2) free, 3) simple
What they do not like: 1) Battery, 2) don’t need to watch TV outside, 3) do not want to watch TV on a phone

The Silicon Alley Insider Chart of the Day (above) shows the great curve of DVR (Digital Video Recorders)  adoption in US, where almost one in three households already have one. This poses a threat to the advertising model of broadcast TVs, as DVRs are commonly used to fast-forward ads.

DVRs are clearly growing, but for how long? Take the analogy of answering machines. In the 80s and 90s, everyone had an answering machine at home. Then Voicemail Service arrived, managed by the telco, and now answering machines are not sold anymore.

Similarly network PVRs, or even further, Catch-Up TV, make the DVR at home irrelevant. Why program the DVR to record a show, when you can have it from the Catch-up catalog when you want and where you want, accessible from a laptop or a mobile handset?

And the good news for telcos and content owners: with a Catch-up TV service, you take back the control of ads.

It is the Hulu model taken to the three screens (TV, PC and mobile). If you have Hulu, why would you want to record a show in your DVR? why would you want a DVR at all if the content is always there available?

After a few weeks traveling I am back in KL after the Mobile World Congress in Barcelona. I was planning to link any comprehensive report  from the blog-sphere with the highlights from last week, but strangely enough I did not find any. So I will summarize my high level impressions from the show:

• The news with most press coverage was incredibly the handset that a pickpocket stole from a Telstra exec, with the yet-to-be-released Windows Mobile version 6.5, and loaded with “secret product information”. Is Microsoft using new viral marketing techniques? or was really the show lacking any more striking news?
• Where are the Android handsets? After more than one year of Android birth many were expecting 2009 MWC to unveil stunning new handsets. But Android devices were missing. HTC only showed  its T-Mobile’s G1. Are HTC, Motorola, Sony-Ericsson and others preserving their weapons for the Xmas season?
• Still some interesting devices, like LG’s Watch Phone also shown at CES, or the INQ Social Mobile Phone, a web-centric budget phone that got the best mobile phone award. This is a $50 mobile phone optimized to enjoy Facebook, Skype and IM from a mobile, in Om Malik’s words, “chasing what is going to be the biggest trend in the mobile industry: application-specific mobile phones”.  Also grabbed my attention the Texas Instruments’ pico-projectors embedded in mobile phones.
• There were also major annoucements of large Network contracts with less attention from the general public. The most significant was Verizon’s annoucenment for LTE deployments as early as 2009! Verizon also disclosed their selected vendors, with Alcatel-Lucent as the biggest winner, followed by Ericsson.

In general, less visitors than previous editions,  more sun, a few Lara Crofts in Hall 8, and occasional pickpockets making it into the headlines.

Koreans and Japanese enjoy today broadband connections at 100 Mbps. Not being enough, the Korean Communications Commission wants to boost the country broadband infrastructure to provide 1 Gbps service in 2012!!

That  is a tenfold increase from today’s speed and in only three years from now. If the objective is achieved, that increase in performance would even surpass Moore’s Law, initially forecasting doubling of computing performance every 18 months, and shortened by the industry to only 12 months. But Koreans would even go faster with this!

This aggressive objective makes the $6 billion broadband stimulus package of Obama’s administration quite shy, if we are to believe that broadband infrastructure is an asset for the economy to drive innovation and growth.

Quoting Om Malik:

Availability of such high-speed connections has allowed Korea to emerge as a leader in the MMO and online gaming industries. Even higher broadband speeds are going to unveil many new usage scenarios, which can lead to new company creation. [...] IPTV is another area of focus for KCC. [...]

The efforts are part of giving Korean IT infrastructure a boost, according to KCC. The plan is going to cost about $24.6 billion and will create 120,000 jobs. KCC was established because of the convergence of telecom, broadcast and broadband industries.

Image from JoongAng Daily.

We have seen recent announcement of job cuts in almost all Telecom and Tech companies, including Microsoft and Google only to name those that are new to those announcements.

GigaOm recently echoed a recruitment firm report that estimated almost 200,000 job cuts in the tech industry in 2008.

Still there are reasons for hope that the downturn will be less severe with the Telecom and Tech industries as with others:

1. On a global scale, the demand for communications and computing is far from decelerating. As can be seen in the chart above, the penetration of mobile subs is still low in regions such as China,  India or South East Asia that are adding an aggregate of 150 million new mobile subs each year!
2. The rise of netbooks should contribute to fulfilling the demand for affordable computing in emerging countries and also on Wireless Broadband penetration in mature markets, as netbooks are a great opportunity to bundle more 3G mobile data plans. Laptops will outsell desktops for the first time in 2009 and that is good news for mobile operators.
3. Broadband stimulus package. As President Obama said in the inauguration speech, it is time to “dust ourselves off” and begin the work  “to lay a new foundation for growth”, building “digital lines that feed our commerce and bind us together” [...] “to meet the demands of a new age”. Broadband infrastructure is a must to incentive innovation and competitiveness, and other countries are pursuing similar initiatives, including UK, Singapore and Malaysia to name a few.
4. Airlines should be worried about the slowdown, not telcos. Telcos have a great opportunity to sell more Telepresence and more Enterprise Communication tools to help enterprises save travel costs.
5. How can consumers save more than staying at home watching IPTV, facebooking or browsing the web? Purchasing online cheaper and better (more informed at least), can save a few dollars for families.
6. Telecom equipment vendors have not given yet prove of slowdown in telcos investment. Ericsson CEO said when announcing Q4 results “To date, our infrastructure business is hardly impacted at all”. Huawei even dares to predict 29% growth in 2009. Nortel filing bankruptcy is not a bad news for the surviving equipment makers, as one competitors disappears
7. It will not be worse than the Internet/UMTS licenses crash in 2001. The Economist says “It cannot defy gravity, but the technology industry is faring better than it did in the previous downturn.” The article explains why IT investment is no longer a luxury for enterprises and how innovations such as SaaS that make companies more efficient can only grow.

That the slowdown is affecting the Telecom and IT industries is out of  question, as the drama of thousands of people losing jobs demonstrates. But there are reasons to hope that these sectors will be the ones to lead the recovery, and we hope that will happen soon.

Some interesting reading and charts from The Economist:
Technology stimulus plans – Paved with good intentions
Computers per person per region in 2009 – Chart
The outlook of mobile phones in 2009 – Chart (Origin of  chart above)

Telefonica started its international expansion into Latin America in the 80s. Juan Villalonga continued it during the 90s. The bet on emerging markets, specially Brazil, and the long-term commitment to the region even after the Argentinian crisis in 99, is now paying off. After Cesar Alierta culminated Telefonica’s leadership in the area with the purchase of SBC operations in Latin America, Telefonica Group has now more than 250 million subscribers worldwide, and growing. Later, the acquisition of O2 operations put the Spanish telco in the European map, after the earlier disappointing ventures with the expensive UMTS licenses in Italy and Germany.

Beyond the impeccable execution of Telefonica’s top management, I have my own theory of what contributes to Telefonica being the biggest Spanish multinational: its people.

For years the telecom engineering schools in Spain have attracted the best students, with the promise of a secure job in a promising sector in a country where unemployment rates had 2 digits for decades, before construction boomed fuelled by the now bursting bubble.

For years telecom engineers in Spain, telecos, had a reputation of bright intelligent people. Telefonica has been the top choice for telecos, ahead of other multinationals like Alcatel, Lucent, Ericsson or IBM and HP. Talent well managed always pays back. Well done Telefonica! Good job Mr. Alierta!

Disclaimer: I am Spanish and teleco, so I could be biased

Year 2008 will be remembered for the financial crash but also as the year when

• iPhone 3G confirmed Apple’s revolution of mobile phones. RIM also strengthened their corporate position with new multimedia capable models and Android saw its first handset launched, the G1.
• Wireless broadband became a reality, with 3G/HSDPA/EVDO unlimited data plans widely available
• Netbooks went mainstream, led by the Asus Eee PC
• Cloud computing emerged as the new paradigm, inspiring new data center architectures, more powerful browsers and renewed offerings from Amazon, Google, Microsoft and others to run online apps.
• Online Video consolidated, with major broadcasters creating their own Internet TV platforms, such as Hulu.

And despite the gloomy economic outlook, Technology might be one of the sectors that suffer the less in 2009, as Governments are likely to incentive investments mainly on two axes: green tech and Internet infrastructure.

Making Internet access universal and reducing the carbon footprint of Information and Communications Technologies are tasks at hand in the coming years, and this is the right time for governments to stimulate the economy by committing to these goals.

Year 2008 saw a few ISPs trialling metered Internet access and opening a debate that I hope 2009 will close as government incentive investment in building a better and ubiquitous broadband access. Fiber in the developed world and wireless broadband (WiMAX and 3G) in the emerging markets where copper does not exist will bring a better Internet to more people.

Telcos should worry about stimulating demand for communications rather than capping it. Wouldn’t telcos be happier in a world where telepresence is used in all enterprises and HDTV is the standard for movies downloads? Telcos should not worry about over-the-top players like YouTube or iTunes making business on their infrastructure, but rather on how to better serve them by adding more value than pure connectivity.

My wish for 2009: Universal unlimited Internet everywhere.

Happy New Year. May the Net be with you.

An interesting analysis from Telco 2.0 compares the business of YouTube versus Hulu in 2008. The table summarizes the key data used in the analysis:

According to Telco 2.0, YouTube would be generating revenues of $118 million, versus $52 million for Hulu, while the low percentage of videos carrying ads in YouTube would make them lose $91m versus only $9m for Hulu.

Hulu business model is closer to that of broadcasters and it shows in a better margin. To make their disruptive model fly in the next years, YouTube will count on:

• decreasing costs of infrastructure: storage, processing, bandwidth and efficient data centers
• ability to place ads in clips from amateurs and semiprofessional creators
• agreements with media companies to become their online video platform in return of a share of ads

Meantime more players are coming to the party, like CBS betting on tv.com to compete with Hulu (NBC Universal and News Corporation’s online video joint venture).  But, in a crowded market, also others are getting weaker, like Joost giving up their P2P model and with few options to survive only as one more flash video site. Despite Joost’s announcement, do not discount P2P TV, that is far from dead in China.

As for IPTV, according to a report from Gartner in September:

“Worldwide subscriptions to internet Protocol television (IPTV) services are on pace to reach 19.6 million subscribers in 2008, a 64.1 per cent increase from 12 million subscribers in 2007, according to Gartner, Inc. Worldwide IPTV revenue is projected to total $4.5 billion in 2008, a 93.5 per cent increase from 2007 revenue of $2.3 billion.”

In 2008, no doubt Online Video got the headlines, but the IPTV Telcos still got the bucks.