Monday, May 3, 2010

...Of Trojan Horses

Thank you for those that took the time to read my initial post - I appreciate it.

In my first post, I indicated that traditional information vendors Bloomberg and Dow Jones have taken a lead position in expanding their footprint through mobile computing. I also noted that both are breaking down the walls they have built up around their content, they have opened the doors to expanding their user base. However, I also noted there is a catch - a Trojan horse - in mobile computing. I'll explain:

If information vendors continue to focus on delivery at the edge to mobile devices, they will run into issues with the following: a) the device manufacturers and their unique standards and demands; b) the pace of innovation at the user/device level to increasingly devote limited resources into mobile computing solutions and away from core competencies; c) address the the ever-increasing combinations of browser, operating systems and devices by diverting even more resources into mobile computing solutions.

The net result is a firm either becomes 'locked in' to a mobile device ecosystem, and effectively cuts itself off from the others or they become trapped in an money pit of development, testing and QA to maintain a strong presence on each device/browser combination.

It could be argued that by adopting standards, a firm can play the field and rely on standards and user tastes to dictate the direction of what devices to invest in. As we've seen with Apple, many device manufacturers and mobile OS providers aren't necessarily interested in standards - other than their own - unless of course it strengthens their grip on the device market (more on Apple another time).

With Microsoft now making a serious play into the mobile market, you have at least 3 or 4 dominate operating systems and device platforms, plus an equal amount of browsers to contend with. So singular adoption of a leading manufacturer and platform isn't going to happen any time soon (plus I doubt the EC and DOJ will allow a single player without stepping in anyway, but that's another discussion too).

One escape for information vendors might be to build devices themselves - not a bad proposition, but unlikely. By building devices, they would by building another walled garden and perpetuate their exiting business model. Also, they would run into adoption risks due to the fact their existing user base has already adopted Apple or Blackberry or other mobile devices, and getting these users to switch to an unknown commodity would be near impossible. I wouldn't put it by at least one to try this strategy. Who knows, it might work - but I doubt it.

Most so far have chosen to build applications serving each mobile platform and ecosystem. The result is either a nice app but not one that generates any revenue, or one that replicates to some degree the desktop experience which is a fee service or bundled with their desktop service.

It will be seen how long they can sustain this approach, especially as users require more and more capability/functionality at the device level but have become accustomed to getting their 'app' for free. I've always questioned the value of the free services by companies like Bloomberg and Thomson Reuters. Free isn't a model they are familiar with and in my experience, they've shown a tendency with their pay products to put more and more content and functionality without corresponding fee increases. My suspicion is they will follow their same tendency and put more content into their free apps to maintain a presence.

This is the true trap of the mobile Trojan Horse. Unless there is a sound commercial strategy behind the freemium model, they will feel the pinch on their fee-based services. Customers will start to ask - why am I paying for something which I can get for free. Once this happens, that will spell the end of their walled gardens and they will need to figure out how to get those pesky Greeks out of Troy.....


One final note - I think Bloomberg might understand this trap and has demonstrated such through a partnership with Major League Baseball.

They've created a Fantasy Baseball service through which leverages some of the Bloomberg analytics to baseball stats to help Rotisserie players better manage their teams - a brilliant use of existing capabilities. Given a good percentage of traders - Bloomberg's core customers - play Rotisserie baseball, they've secured another way to keep their customers happy and attached to the Bloomberg brand. This is a fee-based service, and clearly they are showing value of their analytics outside of financial data - which strengthens their financial information desktops and differentiates it from their free services. Good move all around.

More on the implications of this another time.....