CES 2010 – Las Vegas, NV
A day does not go by at CES without a new connected device being launched and the analyst community having a feast on its feature/ functionality comparison vis-à-vis other benchmarks (i.e.: Kindle vs. Nook vs. Que; Acer Aspire vs. Asus Eee; iPhone vs. Nexus One).
Like many others, in the recent Nexus One case, Mossberg and Pogue dived into a feature-by-feature comparison and drilled down on minutia such as the capacity of user accessible memory of these new connected devices (yawn – who cares?) . It is surprising that few if any journalists/analysts (Frommer excluded) have highlighted the enormous and disruptive shift that the value chain buy flow is experiencing and the implications it will have in the broader ecosystem.
What is Changing?
American consumers have been accustomed to purchasing their devices AND service plans directly from mobile network operators (MNOs). That is, if you wanted a particular wireless service, you first had to decide which operator, and then only AFTER you made this decision, could you select a phone.
In its connected devices go-to–market, Google with its Nexus One and Amazon with the Kindle have inverted this buy flow process. Specifically, if you want a Nexus One or a Kindle you first have to go to their Websites (Google.com or Amazon.com) and ONLY THEN would you be able select an operator (i.e.: T-Mobile, Verizon Wireless, Vodafone, etc.). To be clear and to make a stronger point you don’t select a carrier in the Kindle case (i.e.: the end user is oblivious to the transport).
This model has existed in a few European countries for some time now and was pioneered by Car Phone Warehouse, now co-owned by Best Buy Mobile. Also In 2007, the Apple iPhone introduced a shift to this model by requiring buyers to first register their phone with iTunes, and only then could they request a plan by AT&T. For full disclosure purposes, Synchronoss supported this go–to-market.
How Will This Impact the Industry? Is it a Better Model?
The shakeup of the status quo will undoubtedly cause friction in the ecosystem, however it will result in a model that a) drives market efficiencies, b) balances power in the ecosystem and c) optimizes the customer experience. Let’s take a closer look.
Driving Market Efficiencies
It’s become pretty obvious that there are clear efficiencies for the online distribution model. Best of breed service providers claim to have a subscriber acquisition cost of $260 in the online channel versus $450 in traditional retail (i.e.: extra overhead for real estate operations).
Furthermore, one could argue that by allowing consumers to first choose the device and then select an operator , this will create a healthy competition among operators to increase subsidies.
Balancing the Power Distribution in the Ecosystem
It goes without saying that this value chain shift substantially alters the ecosystem dynamics and power. As OEMs create a robust destination to their own stores, one can envision operators becoming more persuasive to become a preferred carrier for their devices. When was the last time an operator pleaded to an OEM for this?
Optimizing the Customer Experience
Giving customers the choice to select their phones and devices along with the appropriate service plan and carrier will definitely improve the shopping experience. Optimizing this experience online, and subsequently avoiding a trip and a 1.5 hour in store activation, is priceless.
As more connected devices and wireless solutions get brought to market, we should have very little doubt that this is the “beginning of the end” of the world as we know it today. What an exciting opportunity for all.
