Vodafone embracing its destiny as a pipe

By September 28, 2010Mobile

There is an article on the front page of the Financial Times business section today which reports that the ‘architect of Vodafone‘s push into internet services is quitting amidst signs that the mobile phone operator is retreating in its battle with Apple and Google over the wireless web’. He follows a couple of other recent departures of high profile individuals who were involved in Voda’s push to add a software and services line to their network business, including e.g. Tommy Ahlers, founder of Zyb the mobile social network Voda bought a couple of years back.

I have been pleased to see that Vodafone is turning away from ambitions to compete with Google and Apple as well as the numerous startups in this space, although for many industry observers the shift has been a long time coming, maybe too long.

I say that for three reasons:

  1. They were never going to succeed in building great mobile web services – partly because they lacked capabilities and partly because they were hobbled by the fact that their services would only be used by the small fraction of the global population who are on their network.  This limitation of audience limits the amount of investment they can profitably make when compared with global competitors and it also undermines the quality of socially oriented services.
  2. Many of the global competitors I mentioned in (1) were startups who found themselves in competition with the owners of the networks they needed to use and with customer bases they wanted to access with the result that they found their businesses stymied.  Hopefully mobile operators will become better partners now.
  3. The operators will now focus on network quality and innovation which should enable startups to offer more new services.  In the title to this post I said Vodafone is embracing its destiny as a pipe without specifying what type of pipe.  Their opportunity now is to be a smart pipe and maintain margins by offering great APIs in areas like location and billing.

On the wired web the confusion between network operator and service provider disappeared a long time ago I think to the benefit of all parties.  It is good to see mobile going the same way.

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  • I never understood the problem with being a “low margin dumb pipe” and the need for mobile networks to be media/ service businesses. Utilities, telcos etc are massive businesses whereas media these days is in decline and no longer has the scale or the supposed fat margins the mobile networks were chasing.

  • There are plenty of good low margin businesses, but they are run by different people in a different way to businesses with large margins, usually with lower pay and less perks and also a very different self image. Hence the reluctance to shift.

  • I think this makes sense, tough I understand why these companies try out the more sexy side of their markets in the form of content. But I don’t think there are good examples of companies who pulled it off to have both well sorted out and being succesfull on both sides?

  • I guess AOL was successful… for a while, and traditional telcos like BT and France Telecom are to an extent, but it is tough to do, and key to being successful is to take the view that both sides of the business have to work independently, a view the mobile operators haven’t taken until now.

  • Nic, you’re partly right. I think Vodafone (and other operators) can succeed in building great services if they keep them simple and close to their core offering. If they want to be the complete suite of web-services it will be tough. If they build services like backup, group-sms, online management of phone etc. they will succeed, partly because they can do better and partly because no-one has succeeded in doing this. With the ZYB team at large still being at Vodafone I believe they also have the capabilities. Completely agree on the 3rd point.