Some thoughts on Netflix

After our class discussion regarding Netflix and its success, I became interested in learning more about Netflix business strategy. In this short analysis, I will discuss Netflix current status, how Netflix may respond to the challenges of Blockbuster’s reaction to its popularity, and how it is adapting to the growth in popularity of streaming video websites.

Netflix Summary

Netflix was created after Reed Hastings, the founder, had to pay $ 40 in Blockbuster late fees for Apollo 13. The company was launched in September 23, 1999 (Raman, 2009). In 2000, Netflix offered to sell a majority stake in the company for a US$ 50 million investment from Blockbuster. The Blockbuster executives rejected the offer, and instead signed a 20-year exclusive deal on video on demand with Enron (Harris, 2008).

In 2003, Netflix patent was granted and it began functioning on a new business model.  Chang (2008) explains that in the conventional model customers go to the store, select movies, take them home, and have to return them by a particular date or be charged a late fee. The Netflix model allows customers to pay a fixed monthly fee, create a queue, and order from the Internet.  According to the researchers Sunil Kumar, Achal Bassamboo, and Singh Randhawa, who studied this type of rental system through a mathematical model, Netflix became a great success because it didn’t create deadlines for the movies.  They also found out that the company needs to stock only a small quantity of the total demand for any video and offer a good service. The success of the model depends on the fact that Netflix customers cannot rent another movie if they don’t return one. The researchers also point out that the customers’ wish lists give the company real insight of the movies that the customers want.

In 2008, the company was worth US$ 1.9 billion while Blockbuster was valued at US$ 345 million (Harris, 2008). Presently its 10th year, Netfilx has delivered 2 billion movies and it has approximately 10 million subscribers. Besides the now traditional online rental and paid delivery, the company is also streaming videos on its website, through Xbox 360, TiVo, and Samsung Blu-ray disc players (Raman, 2009). According to the company’s website, Netflix has approximately 100,000 titles while a neighborhood video store has only 3,000.

Blockbuster after Netflix

As Netflix expanded, Blockbuster decided to drop late fees, but it had a tremendous impact on profitability because those fees accounted for 16% of its revenue (Harris, 2008). Blockbuster has a storefront business model, which requires the company to rent relatively expensive locations in strategic neighborhoods, while Netflix can utilize distribution centers in industrial areas. As competition became more intense Blockbuster had to close approximately 2,300 stores between 2005 and 2008.

In 2009, Blockbuster announced its plans to partner with 7-Eleven, the United States’ largest convenience store chain.  The goal of the partnership was to create “destinations”, where everybody could rent a DVD and even buy electronics gear, while at the same time Blockbuster.com begin featuring plenty of content to be downloaded or streamed. Staff at those destinations would also help customers learn how to download a movie or stream a video. What Blockbuster did was diversify sales to compete with Netflix (Nash, 2009).

In addition to the competition with Netflix, Blockbuster also has to worry with the growing trend of video on demand, file-sharing services, Wal-Mart, which is responsible for 37% of all U.S. DVD sales, and also cable companies that are promoting Personal Video Recorders.

Netflix and the future

In an article in Business Week, Albretch (2009) mentions that more people are watching streaming videos on Netflix during the American economic crisis. The CEO Reed Hastings affirmed that millions of subscribers are utilizing this service and renting fewer movies; they called it the “substitution effect.” Hastings emphasized that with streaming videos subscribers have instant gratification, and he was very positive about it.

We already know that there is a trend in favor streaming videos with the success of YouTube, Hulu, Vimeo and other streaming video websites. According to a study released by comScore in January 2009, US internet users viewed 12.7 billion online videos during November 2008 alone. Can the streaming video business ruin the perfect mail delivery business of Netflix, and what is Netflix doing to adapt its own business model?

On the positive side, Netflix subscribers need to pay at least the minimum subscription plan to be able to access the streaming videos catalogue. Besides, the transition to streaming video will be gradual. Even though the United States have a high percentage of Internet users – if I am not mistaken, it accounts for over 70% of the population, many people, including myself still have problems watching long streaming videos: the Internet connection may be too slow, ISPs don’t provide reliable service, and technical glitches and compatibility issues can be very irritating. There are some infrastructural problems that restrain the substitution of online videos for DVDs.

On the negative side, Netflix has built a very complex and efficient mailing system, as we discussed in class, with its perfect envelopes that costs the minimum postage price and made with a color that called people’s attention to minimize losses. By introducing and increasing the number of online titles, they are making their own primary business obsolete. One may argue that Netflix business would become obsolete anyway, as far as streaming video continues to grow.  However, Netflix is not fully adapting its business in a way it would allow it to maintain its profit if it transitions entirely to streaming videos. Netflix is allowing users that pay cheaper subscription plans to watch as much content as they want, making their tiered pricing model unworkable. Also, although Netflix is driving more and more people to its website, it does not make good use of the page views: there are no ads on the website or in the videos, and there is no access control – you could definitely give your username and password to your mom and she could watch videos without paying the subscription.

I believe that Netflix will continue to lead the video rental market until other streaming video sites, such as Hulu, become more compelling competitors. Although Blockbuster is launching several initiatives to attract more consumers to the “destination kiosks”, I don’t see how a physical fixed location can be more convenient than the Internet and why Netflix subscribers would switch to this model. I also think that people pay Netflix because of the convenience of the mailing system, no late fees, and because many titles are not available for free on websites that offer the service. If other websites are able to add more titles supported by ad revenues, people who seek instant gratification will definitely go there. Of course Netflix will have great opportunities to profit using the information it has been gathering on its queues and its customers’ habits, which is another advantage over Blockbuster. They could use that information to create more engagement on its website and earn revenue with ads, or add features to allow friends to watch the same movie simultaneously and share comments, they could perhaps create online movie sessions with more people, they could charge for these private online movie events, and of course they could guarantee satisfaction by having pretty much any title that people want to see.  I truly believe Netflix has been a tremendously innovative company, but I have not yet seen evidence that they are adapting to switch to streaming online content. It would be sad to see a company like Netflix become another lost website on the Internet.

References:

Albretch, C. (2009, February 6). Netflix: It Feels Like the First Time. Business Week. Retrieved from http://www.businessweek.com/technology/content/feb2009/tc2009025_446813.htm

Caddell, J. (2009, February 11). Frontiers of innovation – Netflix demolishes own business model. Message posted to http://caddellinsightgroup.com/blog2/2009/02/frontiers-of-innovation-netflix-demolishes-own-business-model/

Chang, H. (2008, April 16). Netflix Broke the Rules and Won According to Stanford Business School Research. Reuters. Retrieved August 3, 2009, from http://www.reuters.com/article/pressRelease/idUS218079+16-Apr-2008+BW20080416

Emarketer. (2009, January 15). Online Video Growth Continues. Retrieved August 3, 2009, from http://www.emarketer.com/Article.aspx?R=1006868

Harris, J. (2008, July 10). A Blockbuster no more. Backbone Magazine. Retrieved from http://www.backbonemag.com/Magazine/Big_Ideas_07100801.asp

Nash, K. (2009, February 11). How Blockbuster Plans to Beat Netflix. CIO News. Retrieved August 3, 2009, from http://www.cio.com/article/480474/How_Blockbuster_Plans_to_Beat_Netflix

Raman, R. (2009, April 2). Netflix Net Numbers: 10 Years, 2 Billion Movies. Message posted to http://myfunbox.wordpress.com/2009/04/02/netflix-net-numbers-10-years-2-billion-movies/

Rappa, M. (May 2008). Case Study: Netflix. Retrieved August 3, 2009, from http://digitalenterprise.org/cases/netflix.html

Reflection on Journalism

I graduated from a four year program in Social Communication, major in Journalism, in Brazil. I worked for a newspaper that had the highest readership in Rio Grande do Sul, in the state where I lived, and the fifth highest readership in the country. I had reporter credentials and would ride through the city in the newspaper’s cars, and everyone would think that there was some element of glamour to my job. I worked with very experienced reporters who had years and years of experience interviewing, reporting, fact checking, editing, and publishing. They had many journalism awards, and I could foresee a bright career for myself reflected in their experience. I could feel a spark when I dug into a filthy story, a flash when I heard that perfect sentence in an interview that would fit the outline I had planned, and I would absolutely love to be with people, talk to people, and learn with people every single day.

I decided to study online journalism because I started seeing changes with the Web 2.0, and then Web 3.0, but at that time I could only think that journalism was getting better, and that we were more successfully communicating with our audience – all thanks to the technology. I ended up writing my thesis on newsworthiness criteria in Second Life, forecasting our virtual world reporting, and our lives in the abstract definition of virtual from the cyber theorist Pierre Levy. However, going back to the reality in our virtual world I realized that not only I was a blogger but so were all of my friends – even the engineers. I also noticed that the newspaper that employed me was laying off more and more people, that they had started seeking for different ways to make money, and that they even had created a tabloid with nude women on the front page and numerous pages about soccer and crimes. Some of the bloggers became very popular, and suddenly we were all on Orkut, the Google social network that is extremely popular in Brazil. The newspaper went through a massive restructuring- they wanted to have a more serious online news site, they wanted to have immediate news – oh, they would not think of Twitter at that time, and they wanted to get more ad revenue from the website. The website started losing value because it became packed with ads. All of this happened in a period of three years.

I quit my job, I abandoned my hopes of being a journalist – at least the way I thought that I would be when I went to college, and I decided to look for a Masters in Digital Media. I needed to understand these changes. When I finally got into the masters program at UW the director said: Raquel, journalism is dead.

So then last class we were discussing examples of good hyperlocal journalism, and one of my classmates brought up the fact that our guest speaker, Cory Bergman, from myballard.com was valuing the experience and quality of his journalists, and for a moment I didn’t feel that I had spent so many years of my life doing something that was disappearing. Journalism is worth it, I thought. And then, couple of minutes after that, we went back to the discussion that “we are all journalists now”, that we don’t need to go to college to write well, that many good journalists were not trained is a small market niche. I can see news saturation in a short period of time when more than two media organizations cover the same neighborhood. Even though the newsworthiness criteria change in hyperlocal journalism –even the cute puppy you see on the street becomes news – people do not have time to check more than one news source and they do not have patience to see the same bike accident twice, although they may have patience to see the puppy twice.

In the other part of the class we discussed journalism being publicly funded, and I just felt bad thinking of journalism as a non-profit organization. It felt like news was some sort of deep and serious problem in the society, analogous to disease, poverty, and environmental degradation, for which we would have to raise money to help alleviate. Do I see future in that matter? No, I don’t. Thinking especially of the third world, I can’t imagine a person who is going to donate a cent to news when you walk out your door and see children begging for money. You don’t need the news to see the problems in your country. If you want to support a cause, you are not going to help someone to write about the problem.

So what now? I ask how scribes felt on those days when they were seeing their profession disappear with the emergence of printing. Those scribes that one day were so important, that would spend so many hours of their lives enhancing their calligraphy with more practice, that would be improving fonts to increase readability, that were so necessary to spread information, knowledge and culture, they were gone. At the end of the day, what did they do? According to the Wikipedia, “later the profession developed into public servants, journalists, accountants and lawyers.” I always thought that people disliked lawyers more than journalists, but apparently all the glamour of the journalism profession made everyone else to find their own shinny light and sparks.  And now we are just waiting for our extinction.

Location-based services

I don’t necessarily think that location-based services will be the next big thing for the mobile market, as Mark Lowenstein discusses in his short report on Fierce Wireless. At least not those that try to sell items to cell phone users.

First of all, it will take a long time for a reasonable number of cell phone users replace their devices with those with Internet and GPS-capability, as well as adopt plans with data services, and if you have a GPS-capable cell phone it doesn’t necessarily mean that the carrier will always enable it.  Also, because if there are no users to “locate”, there will not be incentives for companies to invest in these applications. Another reason is that not all cell phone users may feel comfortable with these ads, which in most cases will target impulse buyers.

However, a non-commercial location-based application type that I think it could be very beneficial for its users is security functions.  An example of this kind of application is “SafetyNet”, as reported about in Inside the GPS Revolution in the edition of Wired published last February (2009-02-27). The app has a map of bad neighborhoods and it goes into a “watchdog” mode if the user enters potentially dangerous locations. If something bad happens, the only thing that the user needs to do is to shake his or her device, and it will send alerts to friends and family, take a picture of the location, turn on its speaker, and dial 911.

 

Questions:

1.      Is there any location-based application that is becoming increasingly popular among cell phone users? If so, what is attracting more attention to it than others?

2.      What are the main challenges for application developers when building a location-based app?  

Signs of change in Kenya

In a country where basic living necessities are not fulfilled, where people survive on scarce food and water and struggle to have a decent home, dreaming about real democracy, they will probably be better off with cell phones. This is the main point of Paul Mason’s BCC short report on his journey to Kenya. The correspondent traveled through the country following the mobile phone networks and emphasized changes in the economy and democracy brought by these networks.
Mason describes the importance of the creation of M-Pesa, a mobile application built by Celtel and Safaricom that allows users to transfer money. In a place where most of the people don’t have bank accounts and barely use plastic money, this simple innovation can make Africa a more liquid economy. He also explains how the use of cell phone is already benefiting the population in terms of democratic actions. In Kibera, Africa’s biggest slum, people are using cell phones to fight evictions. He reports: “They used what we would call flashmobbing to call people from across the many different and rival settlements together where big evictions were planned, and threatened to sit down in front of the bulldozers.”
Even though the changes seem very small, Kenyans who own a cell phone consider it massive. Not that all the problems will suddenly disappear, but as Mason wrote on his report, they will give African people more power, and a bigger voice. It is definitely something for those who have never had anything.

Questions:

1. What other countries besides Kenya are using similar systems to M-Pesa? What are the security risks associated with the financial transaction?  

2. Could the Kenyan government shut down the mobile phone networks if it considered “dangerous” for political purposes?

Digital Natives

A good example of a digital native is the little girl that Microsoft recently brought on its ads, Kylie. She is 4 years-old and she knows how to upload pictures, color correct them, and e-mail them to her family. In addition to her cuteness, the ad is compelling because presents a very plausible circumstance: yes, a four-year-old could easily execute the same tasks as Kylie – if growing up in the same technological environment, naturally. It would not necessarily happen because of the usability of the Windows Gallery Interface, but because kids like her are born digital.

Palfrey and Gasser’s book encompasses different aspects of the digital natives’ lives, ranging from construction of their online identities to their role as political activists inside the society. The 375 page work employes diversified research methodologies drawn from social science, psychology, neuroscience, developmental pediatrics, and information sciences fields, as well as the application of focus groups and interviews with digital natives. The book ‘s goal is “to present the good and the bad in context and to suggest things that all of us – parents, teachers, leaders of companies, and lawmakers – can do to manage this extraordinary transition to a globally connected society without shutting the whole thing down” (p.9). Born Digital is divided into 13 chapters and 12 topics. For a more succinct division I will group these topics into three main parts: digital identities, digital native’s roles, and digital information.

Digital Identities
To the authors, new technologies bring changes to our understanding of identity, and as a consequence it is necessary to distinguish personal identity from social identity. On one hand, digital natives – those born after 1980 – have several personal identities spread over different profiles, which can be constantly updated. However, their social identities can be seen from different perspectives and contexts, leading to more risks associated with the formation of this social identity. The main point here is that the social identity may not represent the personal identity of these young people.

According to psychologists, the reason why teenagers share a lot of information about themselves on the Internet stems from the “disclosure decision model” and reciprocity. The disclosure model emphasizes that the way a person shares information is based on the evaluation of rewards and risks. The revelation of information is projected to reach goals, such as social approval, intimacy, or relief of distress. The idea of reciprocity is that if a teenager shares information with others she imagines others will also reciprocate and share information with her. The authors emphasize that the difficulties of forming an identity in a digital age are especially related instability, because teenagers have less ability to control how others perceive them, and insecurity, because they cannot control who access their digital identities in a given moment.

It is important to point out that the authors differentiate between digital identity and digital dossier. Digital identity is composed of elements that the individual contributes voluntarily and elements other people contribute about him or her, and digital dossier is information associated with a name, which can be disclosed to third parties or not. All entries in search engines and in online retailers’ sites, and other digital data that is not necessarily accessible – like medical exams, are “personally identifiable information” and part of their dossiers. The authors’ main concern is that every connected person has a digital dossier, and those who were born digital have a complete digital dossier. As the authors note: “The information is held in many different hands, and every part that has access to it is subject to its own rules about what can be done with it. Young people are not asked to make informed decisions about the data collected and stored about them, and even if they were, they would be in no position to make those decisions” (p.42-43).

Another worry related to this immense online exposure is privacy and safety. According to Palfrey and Gasser, “most young people are extremely likely to leave something behind in cyberspace that will become a lot like a tattoo – something connected to them that they cannot get rid of later in life, even if they want to, without a great deal of difficulty” (p. 53). Besides giving too much information to other people, who will make their own judgments on their identities, digital natives also give their information to corporations and institutions, and these entities do not always protect their privacy. The authors suggest that companies that host services used by many people should build secure systems, and teachers and parents should try to teach digital natives how to behave in online environments.

Regarding safety, the authors affirm that one of the greatest harms of the online environment is psychological, i.e., exposure to something that children are not ready to see, such as graphic violence and sex. Children usually go online without adult supervision, so they are less likely to have an adult nearby to help them understand disturbing material. Another common problem is cyberbulling or the intentional use of any digital medium to harm others. Palfrey and Gasser write that the Internet facilitates this because children in the early learning stage of social interaction often use visual and auditory cues to guide their behavior, and they don’t necessarily have these cues online. They also point out that some children and even adults are influenced by the “disinhibition effect” caused by an imagined absent identity. To mitigate these problems, the authors recommend better digital media literacy for children, teachers, and parents, as well as more incentives to technology companies and law-enforcement to keep these kids safer.

Digital Natives’ Roles
Just as digital natives have several online identities, they also have the opportunity to play diversified roles online. The book touches on how they are creating, innovating, learning, acting, and perhaps – not so proudly, aggressing and pirating.

From this population, Mark Zuckerberg (Facebook), Shawn Fanning (Napster), and Chad Hurley (YouTube) were responsible for the creation of great online successes. However, most of the content produced by other digital natives is of the “unspectacular sort” (p.113). Kids are mostly engaged in blogging, online game-playing, instant messaging, and online social networks. To the authors, the importance of these activities is not only their uniqueness, but also the opportunity for learning, expressing emotions, creating autonomy, and even in changing their political views.

In some cases, digital natives get involved in political campaigns and, most commonly, social services. Some critics argue that participation in online social networks’ groups doesn’t necessarily mean anything. For those critics this kind of attitude “is nothing more than a convenient way to make a statement, the digital equivalent of a “Save the Whales” bumper sticker” (p.263). Nonetheless, the authors mention TakingIT-Global, a famous action group that organizes over 200,000 young people to take action in their local communities, not only online.

Another important factor of this creation process is the teens’ new possibility for reflecting on the news through comments and blogging. The Internet enables citizens to criticize the news, and also modify the way public events are told. The authors reference Terry Fisher’s article “Semiotic Democracy,” which stated that “in a semiotic democracy, a greater number of people are able to tell the stories of their times. This broader group of people participate in the ‘recoding’ and ‘reworking’ of cultural meaning” (p.266).

Unfortunately, not all activities in the virtual environment are beneficial to young people. One negative role they play is the aggressor. The authors observe that violent images in our society are not only present on the Internet but also in television, movies, and games. The sole difference is that the Internet is used as an outlet to express aggressive thoughts. The authors explore the General Aggression Model (GAM), a theoretical model studied by several disciplines that tries to explain why violence seen through media increases violence in real lives. According to this model, mimicking of aggressive behaviors increases if the executor the child observes is similar or attractive to him. Also, a stimulus in the environment can trigger an existing set of violent thoughts and make these emotions a long-lasting part of the child’s regular mental state. The third aspect considered in this model is that violence on screen is arousing for kids. All of this applies to the Internet and the superrealistic scenes of violence in online games.

The last role that I will describe in this section is the pirate. Many digital natives don’t know that file-sharing is illegal and those who know often continue doing it because they don’t see any harm. According to the authors, 66% of the peer to peer users originate from the US and about 76% of the surveyed American college students believe that piracy of music or movies was acceptable in some or all instances. The solutions proposed by the authors for the piracy problem include less intervention of judges and lawmakers to facilitate resolution through market competition, more positive use of law (example: use of Creative Commons), better alignment of incentives (YouTube could make deals with content owners) and, more significantly, children’s education.

Digital Information
The authors observe that in 2007, 161 billion gigabytes of digital content were created. It is equivalent of 3 million times the amount of information all books ever written. Information overload is one of their main concerns about the Internet. “There are limits, in cognitive terms, to how much information people can process. A person’s short-term memory, for instance, can hold roughly seven items at once. Our minds have an estimated maximum processing capacity of 126 bits per second” (p.186). They go on to assert that information overload is considered one of the psychological diseases of digital age. Symptoms of this disease include increased heart rates, increased cholesterol, migraines, retarded reading skills, and restlessness. Psychologists affirm that when information cannot be processed, it causes confusion, frustration, panic, or even paralysis.

Specialists also assert that multi-tasking is not necessarily advantageous because kids learn better if they pay full attention to what they want to remember. The authors’ recommendations to alleviate this problem include better selection of websites (better design and color choices), more effective search engines, use of RSS feeds, and use of recommendation systems. They also advise technology companies to create tools to help everyone to better manage information, and government to work with technologists to generate better navigation and filtering systems.

An additional problem is that children have greater difficulty to distinguish between good and bad information than adults. Specialists affirm that it is because their brains are not fully developed, they usually have shorter attention span, and they have fewer experiences comparing the information they are assessing. Palfrey and Gasser suggest some actions to deal with this problem: creation of social norms within communities to promote quality of information (example: Wikipedia user norms), well designed code that help digital natives judge information quality (examples: kid-friendly browsers, filters, search engine for kids), enhancement of education programs and strategies for children by the government, and parent and teacher tutoring.

Conclusion
Born Digital explains broad concerns about the use of the Internet by digital natives and presents recommendations for parents, teachers, companies, and governments to address this problematic period of transition. Even though the authors suggest an extended number of measures for different parties to protect children, encourage their creativity, and increase respect for copyrights, they emphasize the importance of parents and teachers to educate them regarding the “right ways” to navigate the Internet. To me, the greatest contradiction of this book is that it appears not to have been made primarily to understand those who were born digital, but to teach those who were not born digital. It didactically explains the concepts of social networks, blogging, RSS feeds, file-sharing, online games, and other Internet activities. If you still remember Kylie in the Microsoft ad, she was presented as doing everything by herself. And it seemed very natural.

Palfrey, J.; Gasser, U. (2008). Born Digital: Understanding the first generation of digital natives. New York: Basic Books.

Mobile Web Best Practices

The Mobile Web Best Practices 1.0 is a useful and detailed guide directed toward Web Site owners, developers, and operators, who intend to improve the user experience when accessing the Web by mobile devices.  The document was prepared by the Best Practices Working Group (BPWG) and it is part of the World Wide Web Consortium (W3C) Recommendations.

I was most impressed by the amount of restrictions that website developers have to cope with in order to create a pleasing user experience. Some examples of these limitations – or recommendations, presented in the document are: minimal navigation at the top of the page, identification of target links, limitation of scrolling to one direction, use of sufficiently contrasting colors, and division of pages into usable but limited size portions. The document emphasizes the importance of readable content in different types of devices and the need of creating an optimal user experience, considering screen size and users’ difficulty to enter text into their cell phones.

The Mobile Web Best Practices guide is interesting because it explains what the best alternatives are, how to configure a web page for mobile use, and what to test. The document provides very good insights of what to stress and what to leave out when creating a page that may be visited by mobile users.

 

Questions:

1. In the 5.4.6 Image Size topic (p.21), the authors suggest the resizing of images on the server because it reduces the amount of data transferred and the amount of processing the device has to carry out. How does this process occur?

2. New application markets have been emerging recently and, consequently, more independent and amateur applications and content are available for cell phones. Do amateur pages usually respect the mobile best practices? Is there also a Mobile Applications Best Practices’ guide?  

Privacy Issues

In the paper “Direct Marketing: Mobile Phones, and Consumer Privacy: Ensuring Adequate Disclosure and Consent Mechanisms for Emerging Mobile Advertising Practices” Nancy King discusses the companies’ necessity to inform mobile phone users about disclosure privacy, and argues that current federal and state regulations are inadequate and don’t protect consumers’ privacy in mobile advertising. King suggests that one solution is to oblige companies to have a more transparent approach and notify consumers about the company’s privacy practices. Among several recommendations, she also suggests the use of privacy enhancing technologies (PETs) to protect consumer’s identity.

On the other side, James Nehlf criticizes King’s suggestions, alleging that consumers don’t have the capacity to judge whether to opt in or opt out of a proposed privacy-reducing transaction. He explains that consumers cannot make an informed choice because they don’t know “what is at stake” (p.54). As the Jamster case shows, the lack of a coherent mobile advertising policy and the lack of a better understanding of disclosure practices are allowing companies to take advantages of consumers indiscriminately.

 To me, the problems regarding privacy in mobile advertising are occurring for a simple reason: technologies are evolving in such a fast pace that they give legislators no time to rebuild every paragraph of regulations. Similarly, mobile technologies are being developed much faster than the consumers’ capacity to judge whether they are beneficial or not. I believe that King’s approach would probably not solve all the privacy issues, but it would help mobile users to start reflecting on this matter and might influence them to investigate regulations before exposing their private data.

Questions:

1.       Is there any wireless carrier that is taking a more transparent approach in regards to consumers’ privacy disclosure?

2.       Are there other public known cases of irregular mobile selling practices? If so, what were the measures taken to punish those that committed infractions?

Shared Phone Use

Visiting the Personal Democracy Forum I was happy to encounter several articles on mobile phone use all over the world. As we think about mobile technologies, high tech devices, applications, market places, deals among wireless carriers, and so on usually come to mind.  It was definitely refreshing to see something else.

An article I found especially interesting was “Nokia Anthropologist Shares Thoughts on Mobile Sharing” and then the related paper “Shared Phone Use.” It encompasses the shared phone practices in Uganda, as reported by Jan Chipchase, a Nokia anthropologist.

Chipchase interviewed people in a farming community, a fishing village and a small town in 2006 and found unique phone practices in those places. Among others, Chipchase revealed an informal practice of sending and receiving money through phone kiosks and networks. As the author (Chipchase, 2007, p.3) explains:

Joe lives in Kampala and wants to send his sister Vicky 10,000 Ugandan Shillings – about 4 Euros. He buys a pre-paid top up card for that amount but instead of topping up his own phone calls the local phone kiosk operator in Vicky’s village. The phone kiosk operator uses the credit to top up his own phone, takes a commission of anywhere between 10 and 30% and passes the rest onto Vicky in cash. The kiosk operator then resells the airtime at a profit (it is after all his business).   

Another very common practice in Uganda that is uncommon worldwide is “Step Messaging”, i.e., delivering text or verbal messages via shared cell phone or kiosk where the message is delivered the last mile on foot.  In Uganda it is socially acceptable to leave messages with someone else (a neighbor or kiosk operator), and by using the social hub people can connect to others without having individual devices.

 

Questions:

1.       Chipchase affirms that people prefer to have their own mobile phone rather than borrow one and that the cost of buying one is the main barrier. If manufacturers created specific devices for shared use that somehow could have some “individual” features, i.e., people could set their devices in different ways and log in and log off, would it change consumers in Uganda’s stated preference to have an individual phone?

2.       What other research was conducted in emerging markets regarding shared phone use? Is it not economically viable?

SkyMarket

Reading this article for the Mobile and Communication class, I found interesting that several companies (Google, T-Mobile, Microsoft, Rimm) are focusing on wireless applications market places. It seems that with the organization of these markets, opportunities in the mobile industry will expand even faster, especially for mobile application developers. For Microsoft, that “presents a philosophical dilemma” according to the article’s author, Skymarket may represent a new and completely different strategy, which “embraces the democratization of software revenues with 3rd party providers”. As we know, Windows Mobile has been struggling for years with customer experience, so I believe that a neat, democratic, and profitable change will be more than welcome.

Questions:
1. Apple iPhones have been working well with several Google applications, such as the YouTube channel and Google maps. How are things changing with a fiercer competition between Google phone and iPhone?
2. Microsoft Live Search is being used as search engine on all Verizon phones, including BlackBerry (RIM) models. Is it likely that Rim will utilize Skymarket? Or will they prefer to develop their own applications market place?

Growth in Mobile Services

“Understanding the Mobile Ecosystem”, a white paper written by Strategy Analytics, explains in detail the roles of the key players in the mobile industry. The paper emphasizes the rapid growth of the use of mobile phones all over the world, and especially the continuous development of technologies to provide users with data services and content. The report also examines the market opportunities for content owners, designers and developers, publishers and aggregators, hosting partners, and delivery agents. I will briefly comment on two topics discussed in this paper: the mobile phone as the most widely-used electronic device and the distinct uses of cell phones world-wide.

The numbers shown in the report are not surprising: there are approximately 3.5 times as many mobile devices in use as there are PCs. Mobile phones are cheaper than computers, even though used computers may be cheaper than high tech brand new mobile devices. Nowadays, mobile phones encompass several functions that only online computers were able to offer in the past. They are being used as aggregators, and they are making us put many other tech gadgets aside. Cell phones are not only used for voice communication; they are mp3 players, video cameras, televisions, radios, GPSs, and, of course additional Internet navigation portals. One of the charts presented in the report shows that 800-900 million phones equipped with cameras and/or music are expected to be sold in North America, Western Europe, and the Asia Pacific by the end of 2010.

Another interesting topic in the paper is the diversified uses of cell phones in distinct parts of the world. The report mentions that Japan and Korea are globally known for use of data services. In these countries users spend twice as much per month on data than users in Western Europe and North America. In Brazil, for example, the data service opportunities are still pretty small. The 3G technology has already arrived, but the price of smart phones and other technological devices are still very high. The iPhone was released in Brazil last year at seven times more its price in the US for prepaid plans. In my opinion, the level of technology penetration in a country is a decisive factor for the success of data services business. Another barrier for the expansion of data services is piracy and lack of control of illegal downloads.

Questions:

1.      How does an international channel such as CNN produce mobile content having to take into account regional differences of data service use, and many other variables such as diverse types of content consumption, device storage capacity, platforms, sizes of screen, etc?

2.      One of the advertising delivery options presented in the report is “display space on websites accessed by mobile users (p.11).”Smart phones users, for instance the iPhone users can zoom in and zoom out parts of the navigation page to facilitate their reading. However, having this option, will they not skip the ads in those pages? And in the case of users with devices that don’t have this option, will the ads placed on websites not be too small?