The Good The Bad & The Ugly In The Mobile Content Ecosystem May 2010

This segment, which covers my current perception of the state of select companies and business sectors in mobile entertainment, will be a recurring feature on Cabana Mobile. You'll notice dynamism in terms of the companies covered and where they fall within these categories, over time, as my inputs change. Let me know if you agree or disagree with my opinion... and tell me what other companies/categories you'd like to see on this list.

THE GOOD

• DeNA - Japanese powerhouse, fueled by the uber-successful Mobage-town social mobile games portal, has over $500mil in annual revenue, $125mil in profits and over $350mil in cash. These guys could roll-up several major western games publishers in a heartbeat if they were so inclined.
• Gameloft - the French publisher, always a high quality player, has been on its iPhone game from the start and now derives a full 21% of their revenues come from the AppStore... which is (for better or worse) the only game in town in terms of paid mobile content. Gameloft is proof that you can turn a super-tanker in rough seas.
• GAMEVIL - South Korean game publisher has 2 things going for it... great capabilities with micropayment model games in its home market and a focus on high-quality builds that are conducive to smartphones. These guys regularly deliver solid profits and have a market cap that must make many of their bigger competitors very envious.
• Millennial Media - It's no secret that I've always had a healthy level of skepticism about the value of the mobile ad networks. That said, there ain't no denying that the biggest, and one of the best managed, of the independents is in a super-sweet spot in light of Google's $750mil acquisition of AdMob and Apple's $275mil acquisition of much smaller Quattro. Rumors have been swirling for months that Microsoft is in the hunt.
• Firemint - smart, lean Australian games developer, turned iPhone publisher, is one of my favorite content success stories of the smartphone revolution. Flight Control and Real Racing have been true phenomena on both the iPhone & iPad. The big question is, of course... what's next?

THE BAD

• Glu Mobile - this quality mobile games publisher, that I once called the "barometer of the health of the mobile entertainment space", has been struggling to evolve from a carrier-focused, licensed IP based company, into a smartphone savvy developer of original game franchises. They're currently going through a painful right-sizing process and experiencing declining quarter over quarter revenues. Cash is a severe pain point and their market cap (under $40mil) is currently 11% of rival Gameloft's.
• Carrier Decks - remember way back when (2years ago) when Get It Now! and MEdia Mall (and their ilk) used to be like WalMart and Target for mobile content? Well unfortunately the smartphone revolution and Apple's retail smarts have shifted that paradigm... big time. Publishers now routinely report alarming declines in their carrier-based revenue. I doubt the tide will turn back, unless operators focus their efforts on curating and facilitating billing for paid Android apps... 'cause that's a growing mess they're in a position to fix.
• Motricity - back in January this veteran, Bellvue, WA based, carrier content platform management company made its intentions known to the SEC that it wanted to go public. Lots of folks in the industry were shocked by the timing, considering the the general state of the IPO market, current conditions in the carrier deck business, the very substantial losses Motricity has racked up over the last few years and the fact that 74% of its revenues come from 2 companies.

THE UGLY

• GetFugu - when your stock price is under a penny, you have to take a bridge loan for $170k & after 6 months your one app has only 333 mostly poor ratings in the AppStore, that's kinda ugly. Even the micro-cap day trader crowd is way over it. It's hard to believe that this company will survive the summer.
• NeuMedia (f/k/a Mandalay Media) - the owner of Twistbox & AMV has always had an identity crisis; is it an adult entertainment or a games company? Recent exec & board defections and a cash-balance triggered notice of default indicate to me that they may not have to struggle with this issue too much longer.
• Off-Deck Mobile Portals - before the smartphone revolution this was a red hot space, with power-players like Thumbplay, Flycell & Jamba/Jamster vending recurring ringtone & graphics subscriptions, to under-supervised kids. After paying $120 bucks over a year for those 3 Young Jeezy tones and a blingy pot leaf screensaver, most suckers (or their parents) got a clue.

THE QUESTION MARKS

• Zed - the Spanish personalization giant has been like The Borg for the last couple of years, sucking up companies left & right, and diversifying into myriad content plays... including TV production. Though privately held, they used to brag about being the biggest mobile content company in the world, claiming revenues over $800mil!... but I haven't heard a lot of bragging recently.
• Buongiorno - this Italian mobile personalization & services goliath still has revenues in the $300mil range, but their revenue has been on a downward trajectory as the company's content offerings get a little long on the tooth and it tries to figure out how to be relevant in a smartphone world.
• Index - this longtime Japanese content powerhouse, whose mobile group is perennially in my Top 5 by revenue, seems to be faltering a bit. Their one time bid to be a global player, by virtue of a North American & European buying spree, flamed out and now they're fighting to stay relevant in a home market where the iPhone and Android are gaining traction.
• Android Paid Apps - as I alluded to earlier, this is a mess. Considering how quickly Android handsets (and soon to be tablets) are proliferating across carriers, this should be a huge opportunity. However, Google's disinterest in managing their store & consumer resistance to setting up Google Checkout accounts, have really stifled Android's paid app potential. I think it'll be up to the carriers to fix this problem.
• Ovi - Considering Nokia's 2.7% marketshare in the US this won't be a factor here for a long time. In the rest of the world there's more hope, especially considering some recently promising download numbers, and the appointment of industry vet Bryan Biniak (a guy who I know understands content) to run Ovi Publish. Frankly I'm more bullish on Ovi now than anytime in the last year.
• Augmented Reality - Boy, I was really excited about this space for awhile, particularly apps like Layar... but I'm definitely not feelin' it right now. AR still seems more like a novelty than a necessity.

10 Takeaways From Mobile Games Earnings Season

1. iPhone performance is the success driver at the moment
2. Android, Ovi, WinMo & BlackBerry are still super-tiny businesses
3. The carrier-based feature phone gaming business is declining much more rapidly than anyone had anticipated
4. Publishers are scrambling to add social networking features to their games
5. It's inadvisable to go through a protracted CEO search/transition during a paradigm shift in your industry
6. No one talks about their China strategy anymore
7. Zynga and Playfish envy is pervasive... everyone wants a piece of the Facebook game app action
8. Margins are still razor thin to non-existent
9. There's a lot of exuberance around new revenue streams from iPad games
10. Overall, the mobile games business is flat

Feel free to add your own in the comments...

Nokia Preempting Apple Hypefest With Jan 21st Ovi Press Event in London

I hope there's more to this than a platform announcement about Ovi 2.0 and a pre-recorded greeting from Dave Stewart or Spike Lee.

Will Ovi 2.0 Help Nokia Catch The App Store?

Earlier today I read Stuart Dredge's extensive, candid interview with Nokia's George Linardos about the Ovi store debacle, in which the VP of Product, Media & Games was refreshingly self-deprecating and obviously keenly aware that the store has deeply disappointed consumers and mobile content publishers. “We have screens in the office with the Twitter feeds running all day long, and it’s like constantly getting punched in the face!” he says... I probably threw a few of those punches and I have to admit it's kinda satisfying to know they landed (nothing personal, George). To the extent that awareness of a problem is half the battle to finding a solution, this is good stuff. In addition, the fact Nokia is in the final stages of building an all new infrastructure for Ovi, that will replace the current tape and glue version this Spring, is positively inspiring.

This interview confirms what we've all suspected for many months... that Nokia vastly underestimated Apple's ability to rapidly establish the iTunes App Store as the benchmark of mobile content retailing. But, despite the Finn's efforts to step it up a bit with a technologically enhanced Ovi 2.0, I feel pretty confident that Apple will continue to kick Ovi's ass for the foreseeable future. The "fruit company from Cupertino" accelerated out the gate like a bullet on a rail, and shows no sign of slowing, while Nokia hobbled onto the track and is just beginning to trot. Ovi claims almost 1mil app downloads per day with a 100% monthly growth rate, but as impressive as that sounds it's gonna be a herculean task for them to meaningfully compete with the App Store beast... with its 2bil downloads lifetime and 6.6mil per day, from a catalog of 110k Apps that's getting 10k new submissions per week. And then there's Nokia's crappy (and getting crappier) footprint in the US which, frankly, will make the job so much tougher. I recognize that Nokia has dominant share in much of the world ex US, particularly in some of the fastest growing markets. But, from a practical perspective the US market is really an ideal base from which to build a digital retail empire by virtue of its population, common language, developer community and culture of consumerism. That means Nokia will have to continue to build scale the hard way, from disparate territories with their own language/cultural issues that require multiple marketing and retail strategies, that are expensive and labor intensive to execute. This model creates a negative side-effect for publishers (especially those smaller shops that have benefited Apple)... who'll need to be convinced that it makes sense to deploy apps in 20+ languages before there's any meaningful sales volume. So bonne chance with that Nokia, and if you have the chops to successfully build scale this way you can shift your agida to Apple's other huge advantage... iTunes billing.

Unhappy Ovi Customer Gets Animated

Retailers know that satisfied customers generally tell 5 people about their positive shopping experience, but that 85% of dissatisfied customers tell 9 people about their poor experience, 13% tell 20 and, I guess, every now and again one gets so frustrated he makes a cartoon about it and posts it on YouTube to tell the whole world about it. Kudos to Ben Smith at The Really Mobile Project for creating this and MobileGamesBlog.com for making me aware of this gem.

Ovi Store US Top 25 Paid Mobile Games

I have to admit something. I ♥ Nokia. I think they make a lot of cool devices (likey N-series a lot), I admire their willingness to experiment and I've met legions of smart, charming people (whose names I can't pronounce) from the company. Now this admission may come as a surprise to y'all given my propensity to regularly take the stuffing out of them in my posts. Well, that's only because I believe that Nokia is failing to live up to its potential in terms of the content services they've created and in terms of their current US marketshare. Let's call it tough love.

OK, now that that's out of the way... as you've probably noticed I've recently been running a series of surveys of the top mobile games titles in the various app stores. Thursday evening I decided to take a gander at Nokia's Ovi Store. I told the online version of the store that my handset was an N95, figuring I'd go with a top-end handset that's been around for a while (one for which I knew there were lots of available games). Within the store I selected Games > Most Popular > Paid. If I had to use one word to describe the result it would have to be... random! To begin with, how is it possible in the US version of this store that the 7th & 8th most popular titles are cricket games? Also, why are the top-tier publishers so poorly represented (EA...Tetris....Bueller)? These guys have games available on the site (Gameloft has 43), but with a couple of exceptions (notably PopCap's Bejeweled), they're not showing up on the top of the Most Popular list. Three of the most prominently featured companies are names I've literally never come across before, like Kooky Panda (#2 game), Mobi2Fun (5 games!) and ZingMagic (10 games!)... and most of their titles look kinda bootleg (though Omar Sharif Bridge has gotta be the shiznit). I have three theories about what's going on here: 1) The numbers are so small that ranking is meaningless; 2) Everyone who owns an N95 in the US is a cricket-mad expat that wants to play cards with Omar Sharif; 3) Data fail. Any other theories out there?

Ovi Actually Means Hot Mess In Finnish

MocoNews.net ran a great piece this morning entitled Nokia Only Had 10 Million Ovi Downloads In First Three Months (that's not the store client folks, it's total pieces of content!), which featured several gems from EVP of Services Niklas Savander:

1) Re: Ovi's launch he said, “We totally underestimated demand on the first day. We had an outage on the first day which was not our plan.” Sooo...Nokia didn't plan for the service to be popular? Frankly, I think they should congratulate themselves, because with the exception of those pesky first few days, they clearly planned appropriately.

2) After admitting that the service was clunky & not comparable to the sleek interface of iPhone he suggested that, “When we have 100 countries, that’s when we’ll see the true potential in full swing.” OK...so if you have a non-competitive, crap service the best strategy is to roll it out to every corner of the globe, in a whole bunch of languages, before getting it right in the launch territories? Well, of course it is, if you want to leverage your lack of popularity worldwide.

3) ...and finally, “It looks promising and it is meeting the aggressive plans we have.” Indeed.

Mission accomplished.

Mo'Bullet Snacks

• Mobile Industry cognoscenti continue to discuss the catastrophic launch of Nokia's Ovi Store
• Verizon Wireless announces it will start supporting Java for smartphones on its network
• KongZhong (KONG) hits 52 week high & announces new focus on mobile games
• Twistbox/Mandalay Media (MNDL) CFO Jay Wolfe steps down abruptly & is replaced by Russell Burke
• Multiple reports about depleted inventories of the current iPhone model fan rumors/speculation that Apple will announce a new model next week
• D7 demo of the Palm Pre, the announcement of iTunes support & concerns over June 6th launch-day inventory levels further enhance the hotness factor of this device
• Mobile Streams (MOS) continues to enhance it's porn portfolio with the launch of new UK D2C site Porncasa.mobi

Ovi Is Too Sexy For Its Site

The moblogosphere has been buzzing all day about myriad difficulties Nokia has been experiencing as they rolled out their online & downloadable on-device Ovi mobile applications stores in over 100 countries starting this weekend. The oft-delayed service, originally announced in the Summer of 2007, has been highly anticipated within the mobile entertainment community. Personally, I haven't had any issues accessing their very on trend looking (Apple/Hulu-esque) website...however, many must have because Nokia has openly acknowledged problems and attributed them to "extraordinarily high spikes of traffic." Gotta love it when a company uses an apology as an opportunity to pay itself a compliment...in this case, attributing problems to too much success (must be a core tenet of Spin 101 class at Publicity U). That's nice, but to quickly effectively mitigate criticism Nokia must immediately fix site performance issues, continually add cool apps (like daily), demonstrate some early sales success AND get Ovi into & keep it in the public consciousness (unlike BlackBerry App World...which an absolute consumer non-event).

Buh-Bye MOSH, We Hardly Knew Ye

MocoNews is reporting that Nokia (NOK) is shutting down its MOSH WAP and online mobile content sharing portal. I'm always very suspicious when a company shuts down a service that it characterizes as "popular". My guess is that the site was a "popular" money pit for the handset manufacturer. Furthermore, as the site began to gain some traction amongst Nokia owners (mostly outside the US), as a destination for a bunch of free softcore and bootleg content, the more it threatened the fee for download business model of the upcoming (May) Ovi content service...AND the more it became a potential liability with the same IP owners it will rely upon for Ovi content.

Not @MWC & Apparently Not Missing Much

OK I'm a little bitter that I'm not in Barcelona...but until my Adsense revenues turn into Adollar$ I am just not going to be flying, hoteling, conventioning and wine/dining/dancing like fool in Spain on my own dime...CTIA in Vegas, maybe. That being said the news out of the show has been pretty unspectacular donchathink?:

• Nokia (NOK) announced it's widely anticipated Ovi Store for applications and announced that it would preload Skype on to upcoming N-Series devices (a move sure to piss off carriers)
• Microsoft (MSFT) announced it's new Windows Marketplace for Mobile available with its new Windows Mobile 6.5 OS (does anyone aspire to have a Windows Mobile device?)
• Besides a new HTC handset for Vodafone, Google's Android has been a total bust.
• RealNetworks (RNWK) took over the backend of Verizon Wireless's V Cast streaming video service from thePlatform
• Qualcomm's (QCOM) MediaFlo is sucking wind in the US and they vow to do things differently in Europe
• Acer and maybe Dell are entering the smartphone fray
• And the biggest story of all...the GSMA announced that 17 carriers and handset manufacturers were going to create a universal phone charger by 2012 (cue Kool & the Gang)
• btw -- where hell has RIM/BlackBerry (RIMM) been hiding?...did they purposely keep a low profile at MWC because of their SEC issues?

Anything else I'm missing?