Wireless Portals, ASPs Face Tough Road Ahead

Mobile portals and wireless Application Service Providers (ASPs) will find it difficult to dominate the mobile Internet services market in the same way that their fixed-line brethren such as Yahoo and AOL have done, according to a report by Analysys.

By 2005, Analysys forecasts that more than half of the predicted 1.1 billion mobile subscribers will be accessing Internet services from their handsets, with mobile portals earning more than $1 billion from advertising and commissions. Established and start-up companies alike are moving quickly to take advantage of this growth, but the report suggests there are no easy pickings.

“These are not huge numbers considering how many companies are targeting the market,” said Katrina Bond, lead author of the report. “Mobile portals and wireless ASPs will need to build their customer bases quickly because start-ups without substantial financial backing risk running out of cash reserves before sustainable revenues from transaction commissions and advertising can be achieved.”

A report by The Strategis Group predicted that there will be 25 million wireless portal users in the US in the next five years. Approximately 34 percent of wireless users surveyed by The Strategis Group expressed an interest in using a wireless portal service, and most of them expressed an interest in receiving advertising in exchange for a price discount.

Mobile portals provide an interface through which mobile users can access Internet content quickly and easily. Wireless ASPs (WASPs) give access to centrally hosted applications such as mobile staff-management software, email or games. In addition to advertising and commission revenues, applications targeted at individuals, many of which will be offered through portals, could generate additional revenues of $1.8 billion by 2005, according to Analysys. Business-focused WASPs could generate $2.1 billion in revenues by the same time.

The Analysys report suggests that market disappointment with services based on the wireless application protocol (WAP) has meant slower growth in mobile Internet users than many investors anticipated. It also points out that operator-independent mobile portals will not be able to rely on sharing traffic revenues for very long. To generate revenues in the longer term, mobile portals will need to find ways of enabling non-intrusive advertising and facilitating secure transactions. There will also be intense competition from companies with established customers, particularly the larger mobile operators and fixed-access portals such as Yahoo and AOL.

“Mobile operators and established Internet companies are not going to sit back and let mobile portal start-ups get a lead, but they do recognize the value that specialist start-ups can add as partners, or indeed as acquisitions,” said Bond.

The report also anticipates a rough ride for wireless ASPs, particularly since the ASP model for the fixed Internet market is yet unproven.

“Many wireless ASPs have been nervous about fully implementing the ASP model, in which upfront service fees are low and highly standardized applications are offered to multiple clients,” Bond said. “This is understandable since wireless ASPs are still trying to figure out what their market wants.”

The report warns that they must move quickly to standardize their applications instead of tailoring them for individual customers if they are to achieve the economies of scale necessary to maintain low monthly fees. Mobile portals and WASPs also face considerable technical challenges, which restrict the sophistication of services that can be offered. These include small handset screens, and the limitations of user interfaces and slow network speeds. However, the report points out that mobile portals and WASPs will be able to overcome these difficulties as networks and terminals improve and new standards are established.

One of the most important steps in this will be the move from WML-based WAP standards to XHTML-based standards. This will make it possible to deliver the same content to a variety of XML and HTML-compliant devices, both fixed and mobile, without having to adapt it to both.

“To be successful portals and ASPs will need to provide both fixed and mobile access to their services,” Bond said. “They will need to become device-agnostic, which means that they will be indistinguishable from their fixed counterparts in five years’ time.”

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