May 11, 2009


By Lai Kok Fung, BuzzCity CEO

Whether you work in the industry – or just enjoy good content – it's clear that the media landscape is undergoing a transformation. Newspapers are going out of business, music is sold piecemeal over the internet, and Twitter has become a household name. Mobile meanwhile continues to grow even while other sectors contract.

As BuzzCity celebrates its 10th anniversary, I find myself reflecting on these changes and I've noticed five industry trends that I would like to share with you today.

For those of us who endured the internet crash, there is some sense of relief seeing bankers take the heat this time. While the credit crunch has hurt businesses across the board, there is a silver lining for companies with strong reserves. Over the past few years, credit was overly-abundant. VCs chasing high returns funded companies with poor business models, companies that offered services below-cost and sometimes for free. While consumers might like this in the short-term, these companies eventually go bust. It then takes awhile for consumers to get used to paying again. However, I believe this is the time for those of us that are still standing to innovate, to introduce new products, new services at prices that reflect reality. Then we can truly gauge the degree to which consumers embrace – or reject – what we have to offer.

More consumers access the internet from a mobile phone than from a computer in markets from India to South Africa.

  • In India, there are more than 400 million mobile phone users. PC internet penetration is less than 50 million. Another ten million Indians buy a mobile handset every month.

  • In South Africa, more people search Google from a mobile phone than from a PC.

  • Indonesia is the largest market for the BuzzCity mobile ad network. We serve 1.5 billion ads a month there, thanks in large part to the introduction of flat rate pricing by the dominant carrier there, Indosat.
Read the US media – or follow American bloggers, particularly those from Silicon Valley – and you could easily believe that the iPhone is the end-all and be-all of mobile.

But, please, take a look at reality. The US mobile industry is light years behind Japan and trailing the rest of us by several years. Smartphones (mainly Blackberries and iPhones) account for just five percent of worldwide shipments. Nearly one-third of all phones shipped are feature phones. Device Fragmentation is here to stay. No one company – as much as they may still dream about it -- will control mobile OS. And it won't be long before every mobile phone has a pre-installed internet browser.

You certainly wouldn't know this, though, by listening to the Americans. The I.T. world is saturated by US media and practically still worships Silicon Valley. With all the noise they make, it's easy to think that they know what they're talking about. But in this case, they don't.

By the way, Christine Gonzales has written two interesting pieces on Venture Beat recently. The first article is accompanied by an illustration of a Pied Piper (Steve Jobs?) followed by a throng of people (silicon valley developers?). The second provides Silicon Valley's rebuttal – a young child giving Nokia the finger because their platform is more difficult to work with.

This might seem like an odd statement for the head of a mobile social network to make, but let's take a look at some recent headlines from our industry:

  • Hi5 – one of the most popular social networking sites outside the US, with more than 60 million unique monthly visitors – has laid off half of its staff (about 50 employees) after apparently failing to close a new round of funding. Hi5 is now going to base its business model on micropayments -- the sale of virtual items and casual gaming (arcade, cards, sports and strategy). Companies like Tencent and Habbo Hotel have been successful in this area, but they have a lot of experience in the gaming sector. I question whether Hi5 can make this transition.

  • mySpace – in 2006, Google agreed to pay US$900 million per year to be the exclusive search and keyword ads provider on mySpace. This contract has made mySpace seem profitable, but when the deal comes up for renewal next year, it's unlikely that Google will take the bait again. Analysts say its clear that Google is losing money on the investment.

  • YouTube -- can't cover its bandwidth and storage costs. According to Credit Suisse, it appears to be losing about US$1.5 million a day, which means that YouTube's parent company – Google – is basically paying you to watch videos on the site.

  • There have been ramblings in the industry that some weaker mobile social networks are closing down or being put on the block for sale.
At BuzzCity, we view our social network myGamma as an integral part of the BuzzCity mobile advertising network. In addition to the obvious benefits of providing inventory for the ad network, myGamma allows us to consistently learn from our user base and gain insights from demographic data and anecdotal feedback. We've used these insights to launch new services, like click analytics and regional targeting, which differentiate BuzzCity from stand-alone ad networks.

The pillars of media monetisation – premium content and paid advertising – are undergoing a seachange.

First, there's not a lot of content that people will pay for anymore. Even the porn industry is suffering – there are just too many free videos online now. The only content that consistently attracts paying subscribers appears to be sports. charges for access to live and on-demand web broadcasts. Cricket and football matchers are often broadcast for pay-per-view audiences.

Second, it's becoming tougher for brands to effectively reach consumers through traditional avenues. A media executive recently lamented to me that TV's golden age of advertising is over. TV content is created with commercials in mind: just when you are about to find out who garnered the most votes on Idol or who shot J.R., there's a commercial break. But television advertising is based on the premise of controlled delivery in a “safe” environment. With technological advances like online streaming, concurrent windows in a TV screen and an almost unlimited choice of channels, consumers have more control over their viewing and are less likely than before to passively watch ads.

How will the advertising industry react to this challenge? How do advertisers invent new formats that engage and entertain users? We are still searching for answers.

The growth of online advertising over the last ten years clearly demonstrates that ad spend follows consumer eyeballs. As consumers spend more and more time surfing the internet from cellphones, the mobile component of total ad spend will only increase. While it's hard to predict how fast this will happen (will it take 5 years or 10 for mobile to account for ten percent of total ad spend?), we believe this increase will be more than sufficient to support tremendous growth of a handful of major players in this space.

We have also always observed that a new “unwired” class of consumers is emerging. Companies that can help advertisers understand and reach this audience will do well over the next decade.

What do we need to do at BuzzCity?

We simply must execute our business model in a disciplined manner on the mobile ad network and provide excellent service to advertisers and publishers. Our clients meanwhile demand better reporting and a higher quality inventory. We must listen to them and meet these needs. At the same time, BuzzCity will continue its groundbreaking work on myGamma to stay in touch with the Unwired audience. By keeping our focus on both sides of the industry, I am confident BuzzCity will be well-positioned to thrive amidst a changing media world.