The problem with the analysis set forth below is that the nifty apps don't work without the nifty technology. Anyway, here's another view, flawed as I think it is. Courtesy of DataRox at RB.:
Planet of the Aps
NOVEMBER 27, 2001
EURO-TECH
By Stephen Baker
Consumers appreciate nifty applications like Nokia's new photo-phone much more than the technology that makes such advances possible
I had it all wrong. I thought everyone else was like me. For months, I've been nursing a dying cell phone, waiting for new, so-called "2.5 Generation" phones to make their miraculous appearance. These marvels, I thought, would keep me and everybody else in Europe online all the time, just like my broadband connection at home.
What a fool I've been. Turns out no one else cares about 2.5G. True, the new system is slowly spreading across Europe, but few are talking about it. Why? Folks want easy, useful applications that work. And 2.5G simply promises an always-on connection that few people feel they need.
Finland's Nokia, the industry leader, has a simple response to this reaction. The company is downplaying 2.5G, the technology. Oh, Nokia still has high hopes for its new 2.5G products, all right. But this time round, the Finns aren't going to sell us zippy technology. They're going to sell an application -- one application that allows users to snap a digital picture with their photo-phone and send it instantly to family or friends as an e-mail.
TECH DOESN'T SELL. This strategy became clear at a Nokia conference on Nov. 20 in Barcelona. I had to scour the fine print in the brochures for the company's new 2.5G gear even to find a reference to this new standard (which is also known as general packet radio service, or GPRS). In his speech and a subsequent press conference, Nokia Chairman Jorma Ollila didn't even mention the higher-speed mobile Internet standard. And in an interview, he shook his head when asked about 2.5G. "It's just an enabling technology," he says.
What's happening? When the first generation of European Web-phones belly-flopped last year, Nokia execs learned an important lesson. The company had gone whole hog in marketing a new technology called WAP -- for wireless access protocol. That led to a new type of handset, the WAP-phone. Turned out, WAP delivered loads of technology -- but little of any practical value. Now, Nokia sees a continent of phone-users who are highly skeptical of newfangled technology. Skeptical, did I say? They hate it! "We should never have put WAP on the market," says Michel Windel, marketing director at Philips Semiconductors. "It's a negative advertisement."
So Nokia is now concentrating on machines that carry out specific tasks. The big splash in Barcelona was the 7650, Nokia's first camera-phone, which will hit the European market next spring and sell for about $525. It looks like a little phone with a big window (a key pad pulls down from behind). When you hit the photo option, the window turns into a view-finder. You then click a digital picture and either send it as a short message to a friend with a similarly-equipped phone or straight to someone's e-mail.
TOWARD 3G. The photo-phone requires the higher speed 2.5G network, which dispatches data in packets. This is far more efficient than the phone industry's traditional circuit switches. And truth is, 2.5G phones represent an important step toward the much higher-speed Third Generation (3G) phones that should hit the market in a couple of years. Early adopters in Scandinavia and Britain are slowly making the 2.5G migration, mostly on Motorola and Ericsson handsets. But this movement will generate no buzz. "People couldn't care less about 2.5G," says Geoffroy Roux de Bézieux, CEO of The Phone House, a major European phone retailer.
Nokia is determined to keep things simple. Two years ago, the company's WAP phones came with a whole manual packed with applications explained in tiny print. By contrast, the new photo-phones focus on what they do best. And by putting applications ahead of technology, I think Nokia is onto an important marketing trend.
Plenty of people across the world have little interest in the Internet (a technology) but are enthusiastic e-mailers (an application). I even have a friend in America who routinely trashes the mobile Internet but can't live without his BlackBerry, which relies on mobile Net communications to function. But, like the Nokia camera-phone, the BlackBerry sells what it does, not how it does it.
WISH YOU WERE HERE. Nokia's latest product demonstrates something else about the mobile market: Customers are creating gobs of valuable content on their own -- and phone makers want to capitalize on that trend. Cell-phone users dispatched 20 billion tiny text messages from phone to phone a year ago. This year, the GSM Industry Assn., representing the largest cell-phone standard, estimates that 250 billion such messages will be sent, including 30 billion in December, with 6 billion around Christmas Day. That comes to one message for every person on the planet.
Photo-phones build upon the messaging trend. Among other things, phone makers are betting that millions of tourists will send instant snapshots of vacation destinations. Just as e-mail invaded the mail business, now photo messages are taking on the postcard industry.
This, of course, is how new technology becomes popular. Customers start using applications, one by one. Gradually, the aps get faster, zippier. At some point, people wonder what happened to next-generation cell-phone technology, the costly revolution that once threatened to bury the telephone industry. Only when that happens, perhaps, will they realize that they use it every day. And if consumers are willing to pay for new applications like photo-phones -- the big "if" -- the industry's big bet on 3G may not look so bad after all.
Baker covers the European technology scene from BusinessWeek's Paris bureau
Edited by Thane Peterson
businessweek.com |
