The M-Commerce Value Chain

As we analyzed the new business opportunities presented by the mobile Internet, we were surprised to find many different companies in the portal space, each with a slightly different approach. In order to simplify this complexity, we have grouped the different value-chain participants into several categories across a broad continuum from creators, aggregators, and distributors to portals and customers.

Participants in the value chain perform a well-defined role, taking inputs from upstream participants, adding value, and then delivering their output to a downstream contributor. The following groups participate in the m-commercel value chain:

• Content creators. News, database information sources, products, and entertainment
• Content aggregators. Content syndication and enhancement, content development, and hosting
• Content distributors. Content fulfillment and optimization services, synchronization services, assurance, and security services
• Access portals. Network operators, wireless Internet service providers, portal operators, and pure-play mobile portals

Content creators, such as CNN, develop new content, products, or services. Aggregators, such as Infospace, package the work of creators into packages or bundles for distribution. Distributors, such as Yahoo!, then take the content packages or bundles and deliver them to buyers. Access portals, such as AOL, are where the buyers and sellers actually conduct their transactions. Each of these definitions is rather fluid in the sense that some extremely large players - like AOL Time Warner - may actually have divisions that perform several of these functions.

Content Creators
Web content comes in many forms: news, entertainment, transactions, and database information. Content originators own copyrights to the material they create and license and distribute it either directly to carriers and portal companies themselves or in partnership with a middleman.

CNN Mobile exemplifies news content creation. It features breaking news, world news, and regional news stories, weather temperatures and forecasts, market updates, currency rates, world sports news and scores, entertainment news, and city travel guides. CNN Interactive commercially licenses and markets CNN Mobile. Cellular operators can customize the service based on their market and their subscribers' interests. CNN Interactive worked closely with Nokia to develop the platforms needed for accessing the content using multiple devices and formats.

Entertainment content must also be accessible across device types. Companies such as Indiqu create wireless content, and in some cases, take content developed for other media and make it wireless-ready. Music content is a typical media conversion example. Transaction content ranges from stock quotes to auction bids. For example, at eBay, users can track auction progress and change their bid wherever they are. Database content typically includes reference materials such as restaurant guides like Zagat.com, maps like those provided by MapQuest, and white pages.

Content Aggregators
Content aggregators function as middlemen between the content originators and the distributors. Aggregators license local, regional, national, and global content from its creators, then package, house, and format it for use by specific devices and networks. Aggregators provide value to the content originators by negotiating intricate and time-consuming distribution deals with individual carriers, resulting in wider content distribution. For the carriers, content aggregators create turnkey mobile data applications by combining content from numerous sources and integrating it into a single interface.

For example, i3 Mobile takes information from approximately sixty-five different content providers and uses its proprietary XML-based servers to pull out and format the personalized content subscribers have requested. It then distributes this content to the subscriber's mobile device through a carrier's network. Currently, the company works with twenty-seven carriers. While aggregators such as i3 Mobile emphasize the broad availability of content, other aggregators such as SmartServ Online bundle content together solely to drive transaction processing.

Content Distributors
To generate revenues, content aggregators must deliver the content they provide through new distribution channels. Content distributors provide the aggregators with the ability to publish their content on different networks, devices, and operating systems. Distributors support and develop applications for a wide variety of wireless protocols. Examples include cHTML and WAP applications, which use different programming standards to enable mobile devices to display Internet-based information.

The content distributor InfoSpace provides the aggregator companies with access to the wireless network operators and portals it uses to distribute content. Infospace has direct relationships with a number of leading wireless network operators representing more than 50 percent of the market for wireless phone users in North America. In addition, their technology can also provide digital content providers with the means to repackage their content for delivery through a wide variety of wireless data protocols such as SMS applications, WAP, microbrowser applications, and various voice applications.

Content distributors also offer content delivery services, which help to enrich the end user's wireless experience. Content delivery capabilities include:

• Synchronization services that enable data transfers over unreliable networks
• Optimization services, which compress data and thus speed the delivery to users in a bandwidth-constrained environment
• Security services that encrypt information as it travels over the network and authenticates users before granting them permission to access various content assets

Access Portals
Access portals are the windows into the mobile world through which customers access the content. Access portals are of three types: wireless operators like Verizon Wireless, Internet service providers like AOL Time Warner and MSN, and hybrid operators such as Yahoo!.

Most access portals give away basic services as an enticement to get customers to pay for premium services. This model often results in very exorbitant customer-acquisition costs. As result, the access portal landscape is littered with companies that are spending too much money developing services that not enough customers are willing to pay for. Perhaps many failures can be averted if companies slow down and get a better understanding of their customers.