Mobile Commerce

In order to define the term m-commerce or mobile electronic commerce, electronic commerce (e-commerce) needs to be defined. Rayport and Jaworski define e-commerce as “technology-mediated exchanges between parties (individuals, organizations, or both) as well as the electronically based intra- or interorganizational activities that facilitate such exchanges”. Essentially e-commerce is concerned with the exchange of value through electronic means.
M-commerce (mobile commerce) is the buying and selling of goods and services through wireless handheld devices such as cellular telephone and personal digital assistants (PDAs). Known as next-generation e-commerce, m-commerce enables users to access the Internet without needing to find a place to plug in <http://searchmobilecomputing.techtarget.com/sDefinition/0,,sid40_gci214590,00.html>, April 2004.

Comparison of e-commerce to m-commerce

A distinguishment can be made between e-commerce and m-commerce by analysing devices, operating systems, presentation standards, tools and networks:

Technology	E-Commerce	M-Commerce
Device	PC	Smartphones, pagers, PDAs
Operating System	Windows, Unix, Linux	Symbian (EPOC), PalmOS, Pocket PC, proprietary platforms.
Presentation Standards	HTML HTML,	WML, HDML, i-Mode
Browser	Microsoft Explorer, Netscape	Phone.com UP Browser, Nokia browser, MS Mobile Explorer and other microbrowsers
Bearer Networks	TCP/IP & Fixed Wireline Internet	GSM, GSM/GPRS, TDMA, CDMA, CDPD, paging networks

<http://www.mobileinfo.com/Mcommerce/differences.htm>, April 2004
While m-commerce may be considered a sub-set of e-commerce there are two characteristics that distinguish them:

1. m-commerce relies on wireless telecommunication networks;
2. a number of additional communication protocols and presentation layer protocols;

M-commerce leverages many of the existing infrastructure provided by e-commerce initiatives such as payment gateways and transaction protocols. In addition to the existing infrastructure, m-commerce relies many wireless technologies and standards such as:

• Wireless Application Protocol (WAP) and Wireless Hypertext Mark-up Language (WHML);
• HDML;
• 2G, 2.5G and 3G;

While telecommuters using notebooks could be classified as mobile, the generally accepted definitions do not classify the use of notebooks within wireless LAN’s as mobile. The term m-commerce is restricted to include only those compact mobile devices such as PDA’s and mobile phones.

Mobile Commerce Applications

As content delivery over wireless devices becomes faster, more secure, and scalable, there is wide speculation that m-commerce will surpass wireline e-commerce as the method of choice for digital commerce transactions. The industries affected by m-commerce include:

• Financial services (mobile banking, brokerage services)
• Telecommunications, in which service changes, bill payment and account reviews can all be conducted from the same handheld device;
• Service/retail, as consumers are given the ability to place and pay for orders on-the-fly;
• Information products, (financial news, sports figures and traffic); and
• Secure transmission of information, allowing mobile payments.

<http://searchcrm.techtarget.com/gDefinition/0,294236,sid11_gci214590,00.html>, April 2004

Real Time Stock Brokering

Barclay stockbrokers’ offer a successful real-time m-commerce application that leverages the immediate nature of live trading to offer a valuable proposition to their clients. Clients access real-time information and execute live trades using Wireless Application Protocol (WAP) enabled devices. “The nature of trading – where time delays translate into loss of money – means that mobile transactions are highly valuable” (‘The M-commerce Road Map’ Yorulmaz 2002).
Yorlmaz offers a model to determining the value in exploring mobile applications, called ‘The M-commerce Road Map’ (right). The model identifies two key elements:

1. The scale of behaviour change required to adopt the proposed m-commerce application; and
2. The value proposition offered by the m-commerce application.

Business Value Proposition

Applications that have a high value proposition and low scale of behaviour change required are likely to be successful. While applications that offer a low value proposition and a high level of behaviour change are likely to be unsuccessful. The model explains why online trading applications, have been largely successful m-commerce applications while traditional interactions such as shopping have been largely unsuccessful.

Customer Value

For industries relying on the currency of information, the time of delivery for relevant and useful information has a direct impact on profits.

Information Products

Information products such as news, wether and horoscopes make a large percentage of content delivered to mobile subscribers. Subscribers have a choice of delivery platforms such as SMS, WAP, HTML and E-mail. Personalised information products can provide high customer value and a low scale behaviour change using existing mobile delivery mechanisms such as SMS.

Business Value Proposition

Ability to sell information in personalised chunks, enabling a greater understanding of the customer leading to the possibility of increased total sales.

Customer Benefit

Within the business environment timely knowledge elements can translate into dollars.

Mobile Retailing

Retail services offered are more likely to succeed where the scope behaviour change is low and the customer value proposition is high. Time and location are the two main customer value propositions offered by m-commerce, therefore retail categories that are likely to work include:

• Situation based scenarios:
  • Movie tickets (e.g. read reviews and viewing times during dinner);
  • Last minute travel reservations and/or re-adjustments;
• Impulse buying;
• New scenarios:
  • Location-based comparison shopping (e.g. restaurant selection);
  • Dial-a-coke; and
  • Location-based delivery (e.g. pizza, taxi).

Business Value proposition

Slow moving products can be promoted using proximity and behavioural profiling. Retails can reach potential customers who have purchased the product of concern regularly or purchased a similar product recently. Moreover, m-commerce provides another channel though which products and services may be sold.
Purchases made through m-commerce (as through e-commerce) channels require less sales staff, therefore retailers are able to reduce the proportion of transaction costs. Efficiencies can also be made through the value chain in relation to logistics an optimised delivery channels.

Customer Benefit

Avoid queues within retail stores. Use of intelligent filters to propose products and services that the user regularly purchases. Algorithms can be based on consumer decision patterns, current location and data-mining to ensure precise exposure to marketing materials.

Mobile Commerce Key Stakeholders

While aspects of the value chain are considered from an organisation perspective, generally speaking the mobile commerce value chain consists of seven groups:

Value Chain Element	Content origination	Application development	Content aggregation	Transaction management	Application hosting	Mobile service delivery	Transportation
Example stakeholders	CNN; Sony; NewsCorp;	Alcatel; Sun Java; Microsoft .NET	Yahoo; AOL; i-Mobile smartServ	Mastercard; Visa; Mistro;	Alcatel; Application Service Providers	Samsung Nokia Motorola	NTT DoCoMo; Vodafone; Bell Mobile; Orange

<http://www.gii.co.jp/press/an7901_en.shtml>, April 2004

Content originators

“Web content comes in many forms: news, entertainment, transactions and database information. Content originators own copyright to material they create and license and distribute it either directly to carriers and portal companies themselves or in partnership with a middleman” <http://www.ebstrategy.com/mobile/articles/mcomm_value_chn.htm>, April 2004.
Open standards such as XML have created weaknesses in the value chain for content originators, however it is the intricate partnerships and alliances that existing content originators such as CNN and News Corp. have that make the imitation of their services difficult.

CNN Mobile

Featuring breaking news, world news, regional news stories, wether temperatures and forecasts. CNN’s recent collaboration with telecom operator “mobilkon Austria” to stream live video, suggests that broadcasting companies are at least interested in exploring the capabilities of high bandwidth wireless communications <http://www.mobilkomaustria.com/fset>, April 2004

News Corp

The introduction of News Corp’s “Minority Report” (by default loaded on every Nokia 9290 model mobile phone sold in the U.S. features a host of market driven information products, including:

• Logos and ringtones;
• Horoscopes.

In July 2003 the service had served more than 300,000 horoscopes and has more than 30,000 regular subscribers (J.V. Tassel 2003).

Application Development

The key stakeholders within the application development industry include: Sun Java, Microsoft .NET and Qualcomm Brew.
Partnerships with transportation network providers and device manufacturers, application development companies can derive revenue from the following sources:

1. Charge to customer when software is downloaded;
2. Charge to customer when software is used; and/or
3. Charge to network provider or device manufacturer for inclusion of software into core offering.

Many mobile devices operate open systems such as XML and Java, this allows new market entrants to create and distribute software. While existing m-commerce application development companies such as Acatel have established partnerships with groups within the value chain so service of underlying infrastructure, software applications designed for the end consumer are vulnerable. End consumers are able to download and install software from the web onto their mobile devices from any source. Of course, agreements with large mobile device manufacturers and network providers make breaking into this market a little more difficult. Key to the continuing success of companies such as Acatel, is the ability to continually improve products and services based around customer value.

Content Aggregation

“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.” <http://www.ebstrategy.com/mobile/articles/mcomm_value_chn.htm>, April 2004.
Content aggregators can use the Internet to create sustainable advantage through cross-activity integration (Farhoomand 2004). Electronic integration with content originators and distribution channels that make it difficult for new market entrants.
Current leaders in this value chain group include Yahoo, AOL, MSN and Lycos (N. M. Sadeh, 2002).. However since the release of m-commerce there have been a number of new entrants including i3 Mobile and SmartServ. While Established content aggregators have large customer bases and customer databases and a broad network of content originators, new entrants have been able to quickly establish market share within this space.

Transaction Management

Essential to the operation of m-commerce is transaction management, particularly micro-payments for information products such as news, horoscopes, email and other mobile services. There are a number of stakeholders within the transaction management value chain element:

• Telecommunication companies (e.g. Orange, Bell, AT&T);
• Financial institutions (e.g. Visa, Mastercard, Mistro, Nordea); and
• Online payment service companies (e.g. Paypal).

Payment system stakeholders: banks, handset manufacturers and vendors (L.J. Martenez 2001)
According to the m-commerce roadmap, trust plays an essential role in the adoption of m-commerce applications. This is particularly true of payment systems. Customers scope of behaviour change, value proposition and trust combine to suggest that telecommunication companies and financial institutions will remain forerunners within this group. Technologically, however new market entrants are able to provide alternative payment methods such as tokens and electronic wallets. In order to defend this position, existing leaders will provide alternative payment methods, to strengthen their position.

Application Hosting

“Given it position as world leader in Asymmetric Digital Subscriber Line (ASDL) technology, Acatel is heavily involved in the development of applications and Application Programming Interfaces (API) for broadband” (P. Frene J. Hurel 2002).
Such systems are integrated into underlying services and are difficult to substitute once selected.

Mobile Service Delivery

Organisations such as Hewlett-Packard (HP), Microsoft and Palm are providing cost-effective Mobile Service Delivery Platforms (MSDP’s) that enable a large suite of applications that help differentiate and drive network traffic.

Transportation

• Network Providers (telecommunication companies and mobile communication companies); and
• Virtual mobile network providers (e.g. Virgin Mobile).

Agreements between other groups within the value chain and data transport providers enables data transport providers to collate charges from third party service providers into a single bill presented to the end consumer. It is the integration of systems across industries that make such positions difficult to imitate. In recent times however, MVNO’s have entered the market offering similar services often at reduced cost to the consumer.

Example: NTT DoCoMo

NTT DoCoMo is the most successful mobile high bandwidth provider; its origins are in Japan where 3G applications have 98% market penetration. According to Harney the success of Tsutaya’s can be attributed to three critical factors:

1. The adoption of existing open standards such as HTML, HTTP, MIDI and Java);
2. Japan’s cultural technology adoption rates; and
3. Focus on technology as an enabler and on customer value propositions.

Impact of 3G Networks on Mobile Commerce

Third generation (3G) communication systems and its ability to real time multimedia open the floor of opportunity for many industries (P. Fre’ne , J.L. Hurel 2002). Within the business environment the obvious impact lies in telecommuting, with access to corporate WAN, LAN, e-mail and intranet resources. Thus providing the teleworker with corporate support systems.
There are also a number of customer-oriented applications that are possible with the increased bandwidth available through the 3G networks; these are summaries below:

Classification of applications as seen by NTT DoCoMo

High Data Rates
Interactive	Point-to-point	One way	One way information services pull type	Multipoint	Multipoint broadcast push type
Video conferencing	Remote medical diagnostics	Video catalogue shopping	Video on demand		Mobile TV
Videophone	Mobile banking	Remote education	Mobile video player	Advanced car navigation
	Web		Karaoke	Digital info delivery	Mobile radio
	Email with attachment	Digital newspaper publishing	Mobile audio player
Telephony	Voice mail			Digital info delivery
	Short message
Low Data Rates

Source (‘New 3G mobile applications’ Fre’ne, Hurel 2002)

Successful 3G Applications

According to Strategy Analytics (Boston, England) there are four major user driven mobile applications:

Application	2001 percentage of interest	2003 percentage of interest
Multimedia Clips	10%	13%
Photo messaging	12%	30%
Pay for goods/services	23%	39%
Find directions	15%	45%

Yorulmaz 2002 outlines four general principles to m-commerce success:

Evaluation Criteria

Criteria/ Application Multimedia clips Photo Messaging Pay for Goods and Services Find Directions
Real customer value Value provided by businesses in the fields of:
Knowledge management and communications. Convenience Value can be added with location-based comparison. In unfamiliar surroundings location based directions provide real value
Minimise behaviour change Internet based music and video files, however little comparison to the real world. The growth of digital cameras have lead the way for photo messaging Online stores have provided the pre-cursor to mobile shopping Graphical map interface similar to web and paper based models
Industry momentum Requires synergies between content originators and network providers Requires synergies between payment gateways, banking and retailers.

As demonstrated by DoCoMo FOMA services, integration of the value chain is essential in the seamless delivery of high-bandwidth services. The success of applications is also reliant on underlying business strategies as demonstrated by Tsutaya’s ability to sample the populations pulse in real time (Harney 2002).

Example Mobile Music

In recent times the music industry has become aware of electronic distribution channels and is seriously considering 3G mobile technologies as a delivery system <http://www.mobilecontentworld.biz/Tmpl/SynLogin.aspx>, April 2004. There are two main environmental changes that will allow such applications to be delivered within a mobile infrastructure:

1. 3G transfer speeds of up to 384 kbit/s; and
2. M-commerce micro-payment systems.

The high bandwidth available within 3G systems allows streaming video and music to be delivered B2C and C2C. While m-commerce micro-payments enable customers to purchase inexpensive goods and services.
4.2.1.1 Sony Ericsson
In October 2003 Intel and Sony announced a partnership to enable users to access music, images, video and other Sony Music content on Intel-based cellular phones and PDAs (A. Newman October 2003). In addition to ring tones and games sounds 3G offers the capability to stream music with pictures or message through MMS <http://www.mobilecontentworld.biz/Tmpl/SynLogin.aspx>, April 2004
The cost of manufacturing, delivering and supporting traditional delivery channels is far higher in terms of staffing, logistics and manufacture than the process of delivery though electronic means. According to Farhoomand the success of business strategies in this industry will be dependent upon the following:

• Rapid and continuous innovation, identification of weak points within the value chain and resolution to mend points of attack rapidly;
• Dynamic coupling of processes so that they cannot be easily duplicated, integration with value chain elements to make it difficult for newcomers to enter the market; and
• Consumer value, ability to deliver valuable content to the consumer at a reasonable price.

Tsutaya leveraged a sizable customer database to reduce transaction costs in relation to finding and presenting useful marketing to buyers. Similarly, music content originators and aggregators can develop unique customer databases to develop one-to-one marketing campaigns.

Bibliography

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