Walled Gardens - not the best way to make money

I've been discussing the evolution of our Mobile Applications business with operators in the US and the EU.  A key issue in most conversations is how the operator will maintain control of their customers.  This is very different than the approach in Japan or China.

In Japan, NTT DoCoMo is famous for the success of their i-mode service, but for i-mode they chose to enlist partners -- tens of thousands of partners.  DoCoMo gets 100 % of the transport revenue, but only takes 11% of the value-added service revenue (in exchange for billing) while their partners get to keep 89%.

A similar scheme exists in China, where most value-added services are hosted by external service providers and the mobile operators focus on transport and billing.  Recently a well connected analyst, who virtually commutes between China and the US, told me Chinese 3rd party value-added services are now a $800M industry.

China and Japan are extremely different -- different cultures, different demographics, different business climates.  But in both cases their mobile operators have chosen to open up their networks to as many 3rd parties as possible, with significant positive impact!  DoCoMo leads Europe and US operators in data revenues. I don't have reliable numbers for data revenues in China, but mobile data usage is soaring.

In recent years, most breakthrough mobile applications start in Asia.  Why haven't US & EU operators noticed Asian business models?

 

Comments

[neal]

Arent Social Networking sites like MySpace, Facebook walled gardens? So, what do you think is their future?

[brough]

I recognize that MySpace, Facebook and most instant messengers are proprietary communities where users establish a service-specific identity (at Skype, I'm "brough"; at AIM, I'm "broughturner") that is only useful when interacting with others on that specific service. However, there is no coupling between Internet connectivity and these applications. If I'm connected to the Internet, I can run separate clients and simultaneously participate in MySpace, Facebook, Skype, AIM and GoogleTalk.

A walled garden arises when a mobile operator talks about the "mobile Internet" but limits their connectivity service to a few applications, blocking access to the rest of the Internet.

I do expect those community applications that offer APIs and other means for their users to do mashups will prosper compared to those that operate closed communities.