Voice: Breaking free from the telecom business models

It’s very clear that software companies took the lead in innovation around voice communications. The telecom industry is lost in the woods arguing about standards, technology and regulation, while Facebook, WhatsApp, Google, WeChat and numerous startups are focused on new use cases and business model innovation.

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Telco is lost in the woods (again)

Telephony is considered a declining business, despite globally increasing dependence on communications. [tweetable]People are not communicating less – they just attribute less and less value to telephony[/tweetable]. Today, many everyday communication needs are better served by alternatives that don’t fall within the narrow definition of telephony.

We wrote about freeing voice from telephony almost 3 years ago in our Telco Innovation Toolbox. Today I’m excited to see the future of voice unfolding in full force in front of our eyes.

Facebook wants to take over the dialer

Did you notice how Facebook has become increasingly bold in everything related to voice and video services? Messenger’s 600 Million users can call each other using voice and video without leaving the app. Facebook-owned Whatsapp also allows its 800 Million users to speak with each other within the app. The huge scale of Facebook voice services surpasses any telco. Compare that with China Mobile, the number one telecom operator in the word, which had 808 Million subscribers as of January 2015.

Facebook understands that [tweetable]voice is central to human communication and will always remain so[/tweetable]. Therefore the company wants to make sure that people will speak with each other inside the walled gardens of the company’s social networks. Facebook doesn’t look at voice as a revenue source. Voice is a universal need and therefore it is an effective way to attract and engage users. David Marcus, who left the position of PayPal President to run Facebook Messenger, says:

“VOIP is just one way that the company hopes to use the messaging app as a platform for much bigger things, including online payments.”

Google Fi wants to take over the core network

Google trails behind still trying to break through with its Hangout platform. The recently announced Google Fi service is a shot in the direction of reinventing voice and video communications.

So far, most media and blogosphere attention is focused on Google Fi pricing and network switching technology. I believe that these are the least interesting aspects of the Google’s initiative. It’s pretty clear that Google has bigger plans in mind. Google Fi unbundles voice service from the telecom network turning Project Fi into a platform for innovation in communication services. Nick Fox, Google VP of Communications Products writes on the company blog:

“As mobile devices continually improve how you connect to people and information, it’s important that wireless connectivity and communication keep pace and be fast everywhere, easy to use, and accessible to everyone. That’s why today we’re introducing Project Fi, a program to explore this opportunity by introducing new ideas through a fast and easy wireless experience.”

Today Google uses pricing and network switching technology to attract an initial user base and seed Project Fi for the next stage. The next stage will be opening the platform to Google’s huge base of mobile and backend developers, together with an ever-growing number of Android handset makers. This is when Google Fi will become truly interesting allowing Google to “pull an Android” on the core business of telecom operators and create a credible competition to Facebook’s communication services.

Much like Facebook, Google is going into telecom not for wireless plan revenues, but to compete asymmetrically, transferring profits from the telecom industry to its core online ad business.

Twilio wants to take over the telecom API

Twilio has proven that developers have a genuine interest in telecommunication services. The company offers an API platform for programmatic access to voice telephony, SMS and now instant messaging. The company reports that 700,000 developers have already registered to use its platform.

Contrary to the many failed telco attempts at driving revenue with APIs, Twilio proves that telecom developers and APIs can be a good business too. The company is worth over $1 Billion. Twilio chief executive Jeff Lawson says the company hit an annual run rate of $100 million in revenue in 2014, and is adding $1 million in annualized revenue every seven days.

The company actively nurtures its main asset – the ecosystem of developers. Twilio teamed up with three well-known venture capital investors, Bessemer Venture Partners, DFJ and Redpoint Ventures to create a $50 Million investment fund to invest in companies using the Twilio API.

Twilio flourishes where telco failed: creating an attractive business by building a developer ecosystem on top of commodity telecom services. Developers can reinvent point-to-point telephony into thousands of use cases that telcos were unable to realise.

Microsoft wants to take over business services

Microsoft is about to join the fray as well. The first move was replacing Lync with Skype, a still hugely popular VoIP service, as a core of its suite of business communication services. For Microsoft, voice is a way to boost Office – its well-entrenched suite of business tools.

Exciting times ahead

Telephony may be in terminal decline, as most analysts agree. Voice and video will however remain a central part of human communication. These are very exciting times in telecoms for those who understand that [tweetable]”digital” is not a channel, but a new set of business models[/tweetable]. Software companies that use these new business models will use voice communication asymmetrically transferring profits from legacy telephony to their non-telecom business.

Droidcon is back in Tel Aviv!

The world’s largest Droid conference is back in sun&fun Israel! Two days in Tel Aviv gets you next to some of the best thought leaders, experts, and evangelists from the Android world. Our Strategy Director Michael Vakulenko will also be there, dropping the latest on smartphone strategy & competition. Get your sneak peek into new technologies/industry knowledge by registering below!

register here: http://il.droidcon.com/2015/registration/

Developer Economics 9th Edition Survey out now

VisionMobile just launched the 9th edition of the Developer Economics survey. This time around, our survey tracks sentiment not only from mobile developers, but also from desktop, Iot, and Cloud as well. The duration is 5 weeks, and we’ll be closing in early June. The key findings from the survey will be available as the free State of the Developer Nation Report in late July. If you’re a developer, then help give back to the community by contributing to our research.

Everyone will be a developer

We continue with a fourth and final installment of insights from our most recent publication, IoT Developer Megatrends – a short publication on the most important trends for IoT. It’s clear that the Internet of Things will be a big opportunity. But how exactly will we find that killer app? Or rather, how can we build an engine that turns out one killer app after another?

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Apps like Instagram, WeChat, Uber or even Angry Birds have created entirely new, multi-billion dollar markets that were not even imaginable before. We concluded in the previous trend that the consumer market is the bigger IoT opportunity because it similarly offers more opportunities to explore new and completely unexpected use cases: a crucial driver of demand for IoT products.

To find those opportunities, innovators need to be given free reign to experiment with unlikely ideas. They also need to get every opportunity to present their products to users, without having to get permission from a conservative gatekeeper. Only in this way can we collectively find the hidden gems.

Already we’re seeing IoT platforms emerge that consider developers as first-class ecosystem citizens. [tweetable]Developers are not your new customer, contractor or partner. They are your resellers[/tweetable]: they drive demand for your product.

Ford, for example, has attracted over 11,000 developers to its platform for car apps. Similarly, the advent of Apple’s CarPlay and Google’s Android Auto are awakening the desire to develop apps for cars in thousands of developers. This is a strong break with the current practice where only a handful of select partners can work with car makers on in-vehicle infotainment. Smart Watch platforms like Pebble, Razer, Android Wear or Apple’s WatchKit open up the wrist to new innovation. No longer do you need to develop the watch itself to provide the service. Already 25,000 developers flocked to the Pebble platform and created 6,000 apps. The same pattern emerges in the Smart Home, where platforms like SmartThings and Apple HomeKit enable developers to combine data from all the connected devices around the home into clever scenarios, which then attract more users.

And the winning platform is… (*drumroll*)

All these platforms enable developers to orchestrate data streams into valuable scenarios for users. Soon, this will become so easy that everyone can be a “developer”. Then, the true innovation potential of the Internet of Things will be unleashed.

Indeed, developer interest in the Internet of Things is picking up fast. Already, 53% of mobile developers are involved in IoT development. This data point from our Q1 2015 Developer Economics survey of 4,000+ IoT developers implies that there are well over 3 million IoT developers active today. All of those people are looking for new and interesting innovations. 45% of them are professionals, seeking to build or grow a business out of IoT.

The platform that succeeds best in empowering developers and connecting them with users will be more powerful than any single killer IoT app or product. That platform will have a solution for every need, and will therefore unlock consumer demand beyond its wildest dreams. Because every user and every developer will look at that platform first to find or market a solution – the much lauded network effects – it will be impossible for other platforms to compete. [tweetable]A winner-takes-all outcome – that’s what’s at stake in the Internet of Things[/tweetable].

We can get even more specific. We predict that by 2020, Apple, Google or both will have built a dominant IoT platform that makes head-on competition impossible.

Established technology companies like IBM, Cisco or GE, and incumbent IoT specialists like Jasper, PTC or Sierra understand the enterprise IoT market very well. But they are not specialists in connecting developers with users. Google and Apple on the other hand have built ecosystem empires with well over 5 million developers combined. Already both companies are active in every major IoT vertical. Our survey shows that their nascent platforms are the most popular and attractive to developers.

For Apple and Google, IoT is an extension of their current efforts, not the creation of an entirely new business. This puts them in pole position at the start of the IoT platform race.