Two very different takes on the future of the mobile web have been published on the web today.
Stating the case against a Free Mobile Web is TechCrunch’s Sarah Lacy:
“I’ve often wondered if the early Web pioneers had it all to do over again if Web companies would have put less of an emphasis on free… But on the mobile Web it’s a do-over, and it’s a totally different playbook from FREE!” – Sarah Lacy So Much For FREE!: Apple Will Sell $2B in Apps in 2011
Stating the case for A Free Mobile Web is Union Square Venture’s Fred Wilson.
“I do not believe that Apple’s model is going away.. But their period of being “the mobile platform” is ending and it is important to understand what that means… the mobile is slowly but surely moving to a web model… Lots of devices means billions of devices accessing largely free content and applications with advertising and freemium and commerce and virtual goods.” – Fred Wilson Mobile Economics Will Trend Toward Web Economics
So is the Mobile Web destined to be Freemium’s next frontier? The stats I have mashed together over the past week or so suggest it already is. The mobile web is growing 5x faster than the Mobile Apps Economy but the problem is the available Mobile Web inventory is already 10x to 15x larger than what the online Advertising industry can support today. Even if all the web’s advertising went mobile tomorrow there wouldn’t be enough revenues to support the ecosystem today… never mind in the future.
MobCon theory suggests that convergence across the Media, IT, Telecoms and Banking sectors will inevitably lead to consumers benefiting from free Wireless Devices offering free Media, Rich Apps being delivered across free wireless networks. Why? Simply because convergence means that each of these industries, through its need to attract and retain market share, will drive the value of the products and service provided by other three industries to $0.00.
This of course is a very different idea to the concept of Freemium. However the outcome is pretty much the same. The market leaders in each sector are disrupted by new entrants who drive the cost of services and goods to zero by providing their goods and services for free to secure more and more market share.
Historically it has been extremely difficult for a new entrant to fund the Freemium strategy beyond the initial product launch (Say 6-12 weeks). This was primarily because no Banker in their right mind would lend you money against market share or – even less likely – the opportunity to acquire an increase in your market share of “freeloaders”. Historically the only Free thing your Banker was interested was amount for Free Cash Flow available to replay the loan.
Chris Anderson in his book FREE argues that the downward trend in the cost basis of delivering digital goods and services over the web and wireless networks has now created a fundamentally a new economic paradigm.
The root cause of this new economic paradigm that first emerged during the original dot com boom wasn’t just the technology. It was also the explosion in funds available to fuel the explosion in Freemium business. Firstly we had the VC industry that provided the seed capital to kick-start these Freemium experiments and then we had the Banks factoring the debts of the IT hardware manufacturers that supplied the servers and the switches that allowed these Freemium businesses to grow as quickly as their traffic exploded.
Put simply there would be no Free if it was up to the Bankers to provide the funds directly to the Entrepreneurs seeking to sustain these zero revenue experiments in free market disruption. Free only happens when the Bankers and Funds Managers finance these market experiments through third parties.
Today The New York Times is reporting the financial markets are anticipating “a blockbuster, multibillion dollar offering from a major Internet company” in the next 12 months (See Is 2011 the Year of the Blockbuster Tech I.P.O.?). Thanks to the spectacular growth in Freemium traffic of the SoMe generation of web start-ups (Think Facebook, Zynga and Twitter) investors are once again excited about investing in the Free web.
All this excitement will only fuel further speculation in the “Green Fields” growth opportunity that is the Mobile Web.
The only question I would ask is just how sustainable over the long-term will these Freemium business models prove to be? After all if the only revenue model on the table is putting Ads on the menu and we already know there isn’t enough Ad Spend to go round isn’t there just a faint hint of Deju Vu about all this for anyone older than 30?
Further Reading
Posted on December 31, 2010
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