Carriers Buy into Startups to Boost Their Networks

Lest they be seen as "dumb pipes," wireless network operators are investing in startups to gain a proprietary technological edge with data users

By Stacey Higginbotham

As consumers increasingly pick up smartphones rather than feature phones, wireless carriers are investing more cash in startups, hoping to make such devices more useful—and their networks more profitable. The uptick in carrier investments has been particularly pronounced over the last few months as wireless operators try to boost data revenueand differentiate their services by getting access to new technology first.

Just this week, Eventful, a location-based calendar service, announced a $10 million round that included money from Telefonica. In September, two firms announced deals with carrier participation: social calendaring service Zvents, which raised $24 million, some of it from AT&T, and femtocell systems maker Percello, which raised $12 million, including money from T-Mobile.

"In my opinion the operators are becoming a little more aggressive and the equipment folks are less aggressive, with less to spend on R&D," said Matthew Fix, a principal at Vodafone Ventures, the investment arm of the British network operator. "Carriers are more aggressive because there's a lot of uncertainty around their business models."

PAYING NOT TO BE A "DUMB PIPE"

Operators spent the last decade focused on growing their business through building out new 3G networks and gaining subscribers, but as markets become saturated the only way to boost revenue is to get people to use the network for data. In some countries the only way to gain market share is to steal customers, rendering the differences among the services being offered by carriers—and exclusive access to those services—more consequential. As Fix observes, operators don't want to become dumb pipes for data, delivering services that only enrich others. They want to own their destiny. And they want to charge for it.

Driven by flat-rate plans, more widespread 3G coverage, and the iPhone, data spending in the U.S. reached $8.2 billion in the second quarter of 2008, or about 21% of total wireless-services revenue. This compares to spending of $5.85 billion, or 17% of total services, for the same period in 2007. The boost in wireless services increased average revenue per user by 5%, to 50¢, offsetting a 5¢ decline in voice ARPU, according to data released in August by Chetan Sharma Consulting. So to avoid becoming the dreaded dumb pipes, carriers are funding startups to get exclusive access to services, and possibly technology.

As one venture investor at a large European carrier noted to me, buying exclusivity from established vendors isn't cheap. Still, the carrier he works for, which doesn't allow him to talk to the press, has ramped up its investments to about a dozen from just one or two in prior years. His increased investment also puts him in the path of many fundraising companies, meaning he and his employer get a first look at new technology—and interesting startups—even if they don't choose to fund them. Russ Shaw, global innovation manager for Telefonica, said the Spanish telecommunications firm created a venture fund for similar reasons a year ago. The fund had 20 million euros to spend in the past year, and another 20 million euros is authorized for the coming year.

WHY WAIT FOR NOKIA?

Aside from gaining access to exclusive features, or getting in early on the innovation curve, Eric Zimits, a general partner at Granite Venture Capital, predicts that carrier investments in hardware might become more common as carriers seek to exert added control over the component side of their business. He points to investments in femtocells as well as NTT DoCoMo's recent decision to invest in Quantance, which offers a handset component to increase battery life. Zimits is an investor in Quantance and Percello, the T-Mobile-backed femtocell company.

"It just seems to me that as carriers—especially wireless operators—look for a competitive advantage in the market, they should try to get proprietary access to key technologies instead of waiting for Nokia to take two to three years to figure it out and then sell it to all comers," Zimits said. "The big change for the startup is they have to sell to the operators from Day One. They are hard organizations to navigate, but the payoff can be enormous if you get them to specify your technology."

Back during the telecom bubble in the late '90s, carriers made investments in some of their suppliers, too. But for the most part, this turned out badly; the industry was soon beset by a glut of capacity—and too many me-too startups selling gear. This time around, carriers appear to be investing in silicon and software that can differentiate their services in a way they can market to the end user. Maybe it's access to a cool calendar feature or a longer battery life, but the efforts to fund startups this time around are all about making each carrier unique.

Provided by GigaOm—

Yahoo! oneSearch Gets More Knowledgeable

Today we're integrating Yahoo! Answers content into our mobile search service, oneSearch, and launching it globally in 18+ countries.
We're rolling this out today to Argentina, Australia, Brazil, Canada, France, Germany, India, Indonesia, Italy, Malaysia, Mexico, the Philippines, Singapore, Spain, Thailand, the United Kingdom, the United States, and Vietnam.
Yahoo! oneSearch and Yahoo! Answers both offer platforms for searching -- oneSearch with instant results to your queries from your mobile phone and Answers with the content of 350 million answers from over 95 million users worldwide. We wanted to integrate these two methods of searching because we know that sometimes you need to tap people who are "in the know" when you're trying to find a quick answer on the go.
Starting today, when you use oneSearch to conduct queries for advice or reference topics, the search results you'll receive will include relevant answers from other Yahoo! Answers users all over the world, as well as the usual news headlines, images, business listings, etc. When you search for opinions or recommendations from others, such as 'What is the best apartment dog?,' you'll see a cluster of Yahoo! Answers results. And for factual queries like '2008 Summer Olympics,' your oneSearch results will show content from Wikipedia as well to give you a little something extra to chew on.
The oneSearch team also rolled out flight information search today, so flight status, times, gates, etc. are all accessible from your mobile phone. Here's how it works: If you search 'United Airlines 90' or 'UA 90' (or any other airline and flight) through oneSearch, you're presented with a quick snapshot of the flight information. You can try it out here or text the query to 92466 (spells YAHOO) and we'll return a text message with the same information.
Ultimately, oneSearch's goal is to get you instant answers from a variety of sources and Yahoo! properties so you have the right information when you're mobile. By adding sources like Yahoo! Answers, Wikipedia and flight info, we'll be able to help users find opinions, suggestions and facts quickly and on the go.
Enjoy!

Making Mobile Content Personal and Relevant

If you build it they will come. While this approach may have worked in the movie "Field of Dreams," wireless carriers understand that faster networks, more robust data devices and even a broad selection of content choices won't guarantee consumers will actively jump into the much-hyped world of mobile data.

In research recently conducted by Ovum, the consulting company observed that as much as 40 percent of mobile content revenue in the U.S. was driven from outside the operator's own portal. For Europe, the estimate is even higher. The increase in content-branded mobile portals is one possible reason behind this trend as these portals simply provide more competition to carriers. But even that phenomenon doesn't explain clearly the positive consumer response to brand-supplied content.

Mobile content from carriers has generally been provided in a catch-all fashion, with the hope that a range of content is somehow relevant to nearly everyone. But the majority of mobile subscribers don't reach out to look for and then access content via their mobile device. This contrasts sharply with the growing direct-to-consumer offerings from content providers, who know their customers and want to provide the same level of quality and experience to them that they have from a PC.

Today's carriers face a choice. They can continue to cede an ever-greater share of subscriber interest in and related revenues from mobile content to the direct-to-consumer marketplace. Or those carriers can provide their own compelling portals, effectively delivering content and making it more attractive to users.

While the mobile industry appeals to the needs of many for convenience, there hasn't yet been significant segmentation in terms of data offerings to subscribers that ensures meaningful value for each and every user. Part of this lack of segmentation can be attributed to historically slower networks and underpowered mobile devices delivering and playing content at speeds that were frustratingly slow. With such limited performance, carriers simply had their hands full getting any data offerings to market. It was perhaps too ambitious for them to consider how to provide optimal content for each and every user. Instead, 3G networks are now deployed and the wireless industry is expected to be more focused on customer satisfaction.

Now that the networks have evolved to better support wireless data services, simply providing additional content options that may be palatable is just the beginning. Subscribers do not know how to find web content using a mobile device and lose patience in the process. To realize true success, information must easily reach subscribers. By pushing compelling information to any device and personalizing it according to the unique preferences of each subscriber, mobile data is easier to access and more actionable. This approach enables greater context, immediacy, and personalization of relevant business news, entertainment, stock updates and even weather forecasts. Reducing the search time and search process including the number of clicks it takes to obtain relevant information, can drive mobile data use and increase consumer familiarity with mobile devices as a dependable and compelling data platform.

Several steps will help to ensure success.

Make the mobile screen the "Home Screen."

Mobile devices should serve as the ultimate platform for accessing information, because they're always with us. But subscribers generally perceive this convenient tool as still too distant from the information source they'd otherwise love to use. Two, three or perhaps four clicks may be too many to get to the data that a subscriber wants on his or her mobile device. This may result in the subscriber waiting to use their home PC to search for a favorite song, information on a football team or stock performance. It is critical to bring the information people want to the mobile screen so that the experience mimics that of a PC.

Make the content "My Content."

One size has never fit all and mobile content is no exception. Like the wired world, what is of interest to some wireless consumers is of little concern to others. Some carriers intuitively understand that a critical key to delivering a meaningful mobile data experience is ensuring that information is personalized. Information that is more relevant is reacted to more positively. And such a positive reaction drives higher usage, greater advertising activity and revenue--just like on a PC.

Empower users to decide what level of interaction they should have with the information.

Depending on the situation and the content, subscribers may be looking for detailed information through a thorough search while other times they may simply want to be entertained in a more passive exchange. Personalized information selected to appear on the "Home Screen" should afford users the opportunity to digest it immediately or dive in and investigate further--just like on a PC.

The mobile phone provides a unique opportunity to reach people. For carriers to capitalize on this, they must supply subscribers with personalized information that is pertinent and encourages further usage.

John Beale is VP of marketing at Volantis Systems.

THE sky is falling. The sky is falling. The ground is rising!!

Subprime Fallout Could Help Venture Capitalists

Could the subprime problems that have fouled the public market be a mixed blessing for Silicon Valley’s high-technology investors?
Highly out of favor in recent years, public offerings of technology start-ups are enjoying a mild resurgence. And some venture capitalists are arguing that the fragile momentum could be bolstered by the problems that mortgage-related securities have caused in the stock and credit markets.
The rationale is that technology investments, because they are far removed from credit-centric securities, could look relatively enticing.
“People are being scared away from other investment strategies,” said Keith Benjamin, a partner at Levensohn Venture Partners, a San Francisco firm that focuses on technology investments.
“The credit crunch can help venture,” he wrote on his blog. “One man’s ceiling is another man’s floor.”
The logic is being echoed in Silicon Valley, albeit somewhat sheepishly given the self-interest involved and the fact that there is but one major data point. That point is the initial offering of VMware, a company that makes software for servers. It went public on Aug. 14 at $29, and its shares surged 76 percent. VMware shares closed yesterday at $70.20, up $3.35.
The sharp rise of VMware, while the markets have been so volatile, punctuates what appears to be the end of the technology drought for initial public offerings. In the second quarter, 26 venture-backed offerings raised $4.3 billion, compared with 19 such companies raising $2 billion in the period last year.
Venture capitalists now hope that the disfavor technology companies engendered during the dot-com collapse is being more quickly erased — or put into perspective — by the risks evident in the struggling hedge-fund investment strategy.
But, that said, venture capitalists said the subprime-spawned troubles could be a mixed blessing — given that those troubles could take a negative toll, though an indirect one, on the seeding and growing of high-tech companies.
On the downside, venture investors said, they could have a tougher time raising investment funds from big financial institutions and other limited partners. The concern among some venture investors is that those institutions have less money because of recent declines in the market and also that they are distracted by all the fallout.
In addition, limited partners tend to some extent to lump together venture firms and hedge funds as alternative investment options. That means that as hedge funds come under scrutiny, some venture firms may get less money, said Paul Kedrosky, a venture capitalist in San Diego and author of the blog Infectious Greed.
Another concern is that tighter credit, by making it harder to borrow debt, could sap the ability of some larger companies to pay for and acquire start-ups. While technology investors would rather take their investments public than have them acquired, a potential dip in the mergers sector could hurt one of venture capital’s primary strategies for selling investments.
More indirect still could be the impact the credit crunch has on the ability of venture-backed technology companies to attract and retain talent. Yogen Dalal, a managing partner at Mayfield Fund, said his biggest concern was the inflated housing market in Silicon Valley.
The credit crunch “may not affect the engineers and others who are well paid, but it may affect the labor and service people who keep the machinery of the valley humming,” Mr. Dalal said, noting that the added new pressure could create an exodus of people who do essential jobs in the valley.
One venture capitalist who is experiencing the mixed blessing of the market shake-up is Sunil Dhaliwal, a partner with Battery Ventures, which is in Waltham, Mass., and Menlo Park, Calif.
On July 25, a company backed by Battery, Blade Logic, which makes software to automate data centers, went public. It was initially priced at $17, rose to $27, and has settled in around $25 — a healthy run that Mr. Dhaliwal said reflected in part the renewed embrace of technology investments.
But the broader market dip has brought challenges for a different company that Battery has supported.
That company, which operates landline telephone businesses but which Mr. Dhaliwal declined to name, needs $50 million to $100 million to make acquisitions. The trouble is that banks are not in a lending mood, and so Battery and the other backers are dipping into their own coffers to finance the acquisitions.
“I’m having to put more equity at risk,” Mr. Dhaliwal said. “With a normal debt market, that’s one more risk I wouldn’t have to take.”
But Mr. Benjamin, the venture capitalist with Levensohn, and a former technology industry analyst with Robertson Stephens, is bullish about the overall impact on the venture business of that latest market dynamics.
He said he was hearing from investment bankers who focus on the technology sector that they were finding themselves not just coming back into favor, but freed of comparison to and pressure from hedge funds, which have held sway in the market in recent years.
“When the credit crunch happened, it almost immediately led to a better mood for tech bankers,” Mr. Benjamin argued. He added that the latest events will create critical momentum for the investors tempted to return to technology start-ups. “The credit crunch pushes these people over the edge.”

Mobile content future???

The Moconomics of Mooga

The "Long Tail" in the content universe

"Popular" or mainstream content offerings are profitable, yes. But they have a limited shelf life. Once they are felt to no longer fit the mainstream genre they are slowly and repetitively moved down the already limited product scale and then banished completely. Fact is: Mainstream is NOT the majority!
The current mentality is that if a content item is deemed to be out of date then it should be moved out of circulation. It's time for the marketing think tank to move into gear and "wow" the consumer with a fresh batch of popular and up to date content right? And so the cycle continues...
What of the so called "old" content? Is it no longer profitable? Well how could anyone possibly know? It has been moved further and further down the chain and then been removed completely. Out of sight and out of mind. But keep in mind that this is not just the case for the operator or service provider; this becomes the case for the consumer as well. Their ongoing loyalty will change along with the content.
This is where the niche market providers step in. By catering to the non-mainstream requirements, specialist markets emerge. Yes, a core following of consumer's is achieved and they are more than likely loyal. But once again, this does not address the market as a whole.
What if operators were to address both worlds? Embracing both the popular and the niche markets? Does it not make strong economic sense to have not just a market of consumer's downloading 1,000,000 of a popular ring tone but also 1,000,000 individual consumer's downloading two or three so called "out of date" ring tones? If these one million "unique" subscribers are catered to, will they not return again and again? This translates into a significant revenue stream for content that would normally be discarded. This content is just sitting on a server... Why not profit from it?
Take these facts into consideration...
The top 400,000 tracks of Rhapsody's 750,000 are streamed at least once a month¹
Niche advertisers provide Google with over 60% of their Ad Words revenues¹
A quarter of Amazon's book sales come from outside of its top 130,000 titles¹
100,000 Bollywood movies are rented out every month on Netflix, averaging 7 rentals a month... Three times as high as Brick and Mortar stores¹
Why are these companies so successful? Because they make everything available and help the customer find it with a strong focus on search functionality. By not just catering to the mainstream consumer but also embracing the niche market consumer, revenue streams beyond the "popular realms" are constant and profitable. But how do you address the limitations on the mobile handset? Placing a strong focus on search without addressing mass market tastes will only allow a user to find already limited content items faster. The answer is adaptation.
What does this mean for an Operator or Service Provider? All content WILL sell. The use of Mooga's artificial intelligence methodologies allow profit to be made from the whole portfolio. All content remains relevant. NO content has a shelf life. The tried and true practice of marketing constantly reinvented popular content continues but rather than the constant addition and removal of content items to keep current, the portfolio continues to grow. Relevant items are placed within the reach of every end user via their adaptive storefront. Give a consumer infinite choice and they will make infinite choices
The ongoing effect of Mooga uncovering and empowering the long tail:
Increased unique subscriber base - Not just mainstream but niche market content is always available. The TRUE mass market!
Increased customer longevity - Always provides the customer with what they want when they want it. The right content to the right customer at the right time.
Increased customer profitability - A customer spending less time searching will spend more time downloading content - It is there for the taking!
Increased content profitability - Content has NO shelf life. It is always available to the customer and will be recommended to them if it complements their tastes.
Operator's take back control - No longer a "pipe" for content provider items. It is the operator's customer and operator's infrastructure. If everything is on portal will the end user go off portal?
Mooga's constantly evolving and constantly learning artificial intelligence methodologies identify niche markets within the consumer space and content universe. These are markets that would otherwise be unidentifiable using normal data mining methods. Catering to multiple niche markets not only provides a means of generating revenue from so called "dead"content items; it also ensures repeat business by giving unique consumers content of interest that would usually be impossible to find. They WILL return because of it.
The AI functions and "Wisdom of Crowds"approach is used to not only determine an individual's tastes but recommend items to them based on similar individuals' habits. Mooga does not discriminate against content type, content category, customer storefront or the current popularity of the content. If it is contextually relevant, it will be offered. The consumer's choice, based on this offering will then determine Mooga's next plan of action. Context, not content is king!
Mooga is a personal account manager, butler, recommender and friend to each and every customer. Don't give consumer's what you think they need. Give them what they want! Mooga-Unleashing the power of the TRUE mass market.

Google Plans Search Service for Mobile Content

Google Inc. is developing a new search service for cellphones that will help consumers find and buy ringtones, games and other mobile content as the Internet company pushes more deeply into wireless, people familiar with the matter say.
Google already offers cellphone users a version of its popular engine for searching the Web. Now the company wants to go beyond just looking up Web pages, effectively becoming a gateway for finding and paying for mobile media content.
With the new system, users would search for a piece of content -- say, a U2 ringtone -- and get back a list of providers as well as links enabling them to easily purchase the material. Eventually, Google would charge companies for high placement in the search results, much the way it offers "sponsored links" on computer Web searches, the people familiar with the plans say.
The company has been working for months with content providers -- including large entertainment companies and smaller mobile-media aggregators -- to index their material and make it available via mobile search. But the project has been marred by a series of technical delays, people familiar with the matter say, illustrating that there's a learning curve as Internet giants adjust to the peculiarities of the mobile world. It isn't clear how soon Google plans to launch the service.
The Internet company has considered including a social-networking component that would let users of the company's Gmail email service exchange content, a person familiar with the initiative says. Overall, the service would work much like the Google Product Search service, formerly known as Froogle, people familiar with the situation say. A spokeswoman for Google declines to comment.
Google's plans to broker the sale of mobile content like ringtones and games could become a threat to large cellphone operators like Verizon Wireless and AT&T Inc., especially if Google enables customer payment through eBay Inc.'s PayPal or its own online Checkout service. The operators have built their own storefronts to sell such material, and they would prefer to hold on to consumers' attention and spending. If billing goes through the carriers instead, appearing on customers' monthly bills, carriers could actually benefit because they usually get a significant cut of such transactions.
Though mobile content is still a small market, it is growing quickly. Global sales of music, video, ringtones and other content reached $27.4 billion last year, and they are expected to grow to $59.3 billion by 2011, according to the technology-research and consulting firm Yankee Group.
Google has lately been sparring with Verizon and other operators in Washington over Google's proposal to have regulators open up wireless networks to more services from Internet companies and others. Google has also made a series of moves lately to beef up its presence on cellphones. The company recently began testing a service -- similar to its AdSense platform on the Internet -- that will broker ads for other mobile Web sites. Last month, its YouTube unit made a version of its video-sharing Web site available for Apple Inc.'s iPhone. And the company has said it's working on new software applications for cellphones as well as a software platform for such devices on which other developers could build.
Other Internet companies have also been pushing into mobile lately. In June, Yahoo Inc. launched a partnership with the U.K.-based carrier Vodafone Group PLC to show banner ads on cellphones for such companies as Ford and Nissan. In a small deal it didn't announce publicly, Yahoo also recently acquired a small company called Actionality that brokers ads for applications and games that can be downloaded to cellphones. Time Warner Inc.'s AOL, meanwhile, acquired mobile advertising provider Third Screen Media in May.
When it comes to searches on cellphones, Internet companies like Google and Yahoo have been competing with start-ups like Medio Systems Inc. and JumpTap Inc. The lure for all providers is the potential ad revenue that could be generated by sponsored links alongside search results. Revenue from search ads is still tiny, but Google and others see it growing down the road.
The start-ups have snagged early deals with U.S. wireless operators like Verizon Wireless, Deutsche Telekom AG's T-Mobile USA and Alltel Corp. The carriers integrate the start-ups' search tools into their handsets to make it easier for consumers to find content in the carriers' mobile storefronts and to look up local businesses. Microsoft Corp. is the only major Internet company to land such a partnership with a U.S. carrier, a pact with Sprint Nextel that provides a search bar customers can use to find everything from ringtones on Sprint's storefront to local restaurants.
Translating Internet search to the cellphone screen isn't trivial. While consumers search the Web for just about everything on PCs, cellphone users are usually interested in a much narrower universe of information, such as sports scores, the phone numbers of local businesses and media downloads like games and wallpaper.
The small cellphone screen limits the space to display results, so search providers have to be as precise as possible in determining what a user wants.
Google's mobile search isn't promoted by carriers, but consumers are beginning to discover it. Google has a separate search service that lets users send a text message to "googl," or 46645, to look up a local business.

Yahoo research uses artificial intelligence everywhere

Artificial Intelligence (AI), the study of methods by which a computer can simulate aspects of human intelligence, is fast emerging as a major research trend among the scientific community. A major focus area is to design a computer that might be able to reason for itself. Facilitating the research at Yahoo! Research is Ronald J Brachman, vice-president of Worldwide Research Operations. He has developed cornerstone ideas with a number of contributions in the area of AI. While the company’s main laboratory is based out of Santa Clara, Brachman has founded another lab in New York. A Fellow of the Association for Computing Machinery, he was recently awarded the Donald E Walker Distinguished Service Award for 2007. Explaining the growing trends for AI in various applications, Brachman stresses that this form of science can be used for long-term aspirations. Excerpts from a recent interview with BV Mahalakshmi:
Why is there is so much talk on artificial intelligence (AI) globally? How does this system of learning help in developing intelligent systems?
Artificial intelligence is about understanding intelligent behaviour in machines and converting them to natural languages. We want to produce PCs that can perform natural language conversations. Moreover, it helps in planning ahead for the human activities in various applications. Indeed, it is not as simple as cracking a human genome as we don’t understand intelligence as the human brain is so complex. But, we do have desires to build systems with AI, which is a futuristic vision. AI is a form of science having a potential for long-term aspirations like making computers more intelligent.
How did the study of AI originate? What is its history ?
It started during the ages of great philosophers such as Aristotle, Descartes and Bertrand Russel, while thinking about Mathematics along with reasoning. During the 20th century, digital computers were used, which had a thinking program followed by development of an ideal test to test computers if they were intelligent or not.
In 1956, the term AI was used. In fact, we are celebrating 50 years for AI research that has made mind a central processor. In the mid 60s, considerable research was initiated in the field. It was an year of idealism of vision and creating a robot was very big. Initially, researchers were very naïve about AI. A lot of technical work had to be done and the 90s saw a rich kind of technical science. However, there are still ambiguities with a lot of probabilities.
How do you propose to develop your India R&D centre? What will be its focus area?
Yahoo! R&D provides innovative technologies, global product platforms and evolves new market initiatives to create new business advantages for Yahoo! Inc. While the Product Engineering Group builds global platforms and applications, the Technology Research Group builds high value technologies that improve or change user behaviour using newer technology platforms that can be leveraged across the board. The Market Innovation Group aims at establishing value propositions prototyping, market testing and channeling new technologies.
AI is being used in every part of Yahoo’s research especially since we collect over 12 terabytes of data everyday. The company tries to use this available data to make the user experience more meaningful without violating users’ privacy. The activities of the Bangalore R&D centre are centered on building global internet applications. The key focus areas are: vertical search applications—image search, desktop search, audio search, job search and mobile search; community focused applications—blogs, avatars, message boards, youth; enterprise class applications—advertising platform and hot jobs; data mining applications.
What is the AI’s future and how does your company propose to capitalise on this ?
Internet is important in people’s life. We want to improve customers’ experience using AI science. In Asia, the research is on for machine learning and trying to learn programs or better tools to support a community. We deal with 12 terabytes a day in our company and our main source is advertising. Similarly, we want to create a package deal for advertisers as it is impossible to do it manually and can be done with intelligent machines.
AI has a broad impact on the worldly needs. It helps in improving healthcare delivery, disaster and rescue management, language translation, building robots, etc. Above all, it helps you plan better.