From the December – January 2009 issue of PROFIT magazine
Searching for a recession-proof market? Look no further than the college student across from you on the subway. While maintaining a conversation with friends, she’s also staggeringly adept at using her cellphone to fire out text messages, browse photos and listen to music — seemingly all at once.
In a few years, the once rare — and expensive — cellphone has evolved into a more affordable, fully featured mini computer. What’s more, people are willing to pay for the plugged-in lifestyle these devices offer — and for all the bells and whistles, too. Nielsen SoundScan reports that U.S. consumers spent US$567 million on cellphone ringtones in 2007. And according to Gartner Research, 1.2 billion cellphones were sold worldwide in 2007; that’s a 16% increase from 2006, and even more are expected to move in 2008. “There are few areas that have growth potential because of the economic situation,” says Ted Anderson, a Toronto-based managing general partner with venture-capital firm Ventures West. “The mobile space is one of them.”
Big demand lies in developing applications and services rather than trying to crack the hardware side of the market, given the dominance of players such as Apple and RIM. Still in its infancy is the ability to interact with social-networking sites via a cellphone — the so-called Mobile 2.0. And many commonly paid-for services could be enhanced with a cellphone feature. Consumers could tie into their home-security system to be alerted via text message if there is an unexpected entry or if their dog strays, says Marc Choma, director of communications for the Ottawa-based Canadian Wireless Telecommunications Association.
Thanks to the inclusion of GPS capabilities in newer phones, location-based services (LBS) are another largely unexploited market. Dial “#taxi” on your cellphone, for instance, and you’ll be connected to the nearest cab. A small fee will appear on your next wireless bill, which highlights another attractive feature of the mobile market. “Getting paid couldn’t be easier, since payments are largely handled by wireless companies,” says Michael O’Farrell, chair of Dublin-based dotMobi Advisory Groupand co-author of Mobile Internet for Dummies.
Anderson believes LBS possibilities are endless; he’s working with a firm whose technology can track the speed a mobile device is moving. Parents could, say, have their older children’s cellphones shut down at a certain speed to prevent them from using their device while driving. The revenue could come from a subscription plan, which insurance companies might make more attractive by offering discounts to clients who use the technology.
With Forrester Research reporting that 54% of consumers who shop online still buy from a bricks-and-mortar store, another approach is to focus on cross-channel marketing, says Gary Schwartz, CEO of Toronto-based Impact Mobile. “It’s not about building the next cool application,” he says. “It’s about understanding how consumers behave and facilitating that in a more effective way.” The website of clothing retailer American Eagle, for instance, allows consumers to have an image of an item sent to their cellphone. That link then opens all sorts of doors. Beyond reminding consumers to complete their purchases when they’re at the mall, it could allow suggestions of other items, coupon offers or an invitation to enlist in a loyalty program. One caution is that consumers don’t want the whole Web on their phone, according to O’Farrell: “They want information designed for mobile, and that means simple and direct.”
If this all seems like so much pie in the sky, consider that the International Air Transport Association has decreed that passengers should be able to load their boarding pass onto a mobile device by 2010. Says Schwartz: “That will not only change people’s behaviour, but their perspective towards using — and all the possible uses for — cellphones.”