I’ve had several people talking to me about how the mobile internet is the next wealth creation cycle, a new category of equal importance to the creation of the internet.  When I respond with, ‘There is no such thing as the mobile internet, only mobile access to the internet.  Calling it the mobile internet is a bit like saying the ubiquitous ubiquity.  I’ve been able to access the internet from my laptop all round the world for over a decade so how is this category new?’  I’m treated like an apostate, i.e. someone who directly attacks a belief system, which is even worse than a heretic, who only dares to question.

When I then start questioning, digging into what is meant, I then find at work the self-interested hand of investment analysts.  Whose sole purpose is to over-inflate a category that inevitably causes its crash so they can make money through those irrational cycles; they do not create value only leech upon the industries’ that create value.  Given the bad M&A deals, the dot com bust, and the current fiasco; I remain perplexed why these analysts are held in any esteem.  So I thought I’d set out why I disagree with the argument that the mobile internet is the next wealth creation cycle.

In their analysis Japan is often cited as a leading example of where the market will go.  It is a special case,  i-mode did not work outside Japan because the model is broken for the rest of the world.  Its important to understand the history of a market.  Back in the ’90s, when we used dial-up to access the internet, Japan was in a sorry state with respect to internet access.  Most young people did not have a fixed phone line at home because it required a large deposit to NTT, so they did not access the internet.  i-mode (NTT DoCoMo) provided a convenient way to access Japanese content, email and did not require a big deposit.  In addition, NTT DoCoMo controls the value chain in Japan unlike any other operator in the World, even Verizon.  So they could define the handsets, the software, the business models and had a hungry market.  This is an example of local market factors creating a unique situation.  I think we’ve seen enough i-mode failures outside Japan to realize it is specific to the Japanese market.

Then iPhone sales data is presented with an unusual spin.  Firstly, operators have been selling content and apps for phones on their portals for years, it was a $30B business that’s now on the decline as people are no longer willing to pay for ring tones or even games. The iPhone is about selling consumer electronics, the iPhone app store is simply about generating customer value to buy the device.  I’ve discussed developer frustration on the race to zero in the crApp store in previous articles; so we’re seeing overall value destruction not creation.

Another point raised with the iPhone is the speed of adoption of this ‘new’ category, compared to desktop internet.  But this is comparing apples and oranges to make pears.  The desktop internet was creating a category, Apple’s iPhone moved into an existing category of smart phones and handset apps; and with a closed proprietary system with a great user experience was able to fulfill the stifled demand.  So the ‘urgency’ with which this new mobile internet is going to overtake us appears a little over stated.

Most of the analysis I see quoted is from a US perspective.  Many developing markets are taking a quite different route to the US.  China Mobile’s revenue is $65B while Vodafone is $67B, China Mobile’s valuation is much greater than Vodafone’s.  Given growth is with China Mobile, India and many other developing markets (e.g. LATAM), its a mistake to assume what happens in the US happens everywhere else and not treat developing markets as an equally important category in their own right.  For example, India is taking a distinctly different path to the US, just look at Bharti Airtel’s approach and success with its version of the app store, or the struggles of the iPhone App Store in China.

Companies the investment analysts put in the ‘mobile internet’ category are consumer electronics, operators and web service providers.  Google is extending its value from the desktop to the handset, which increases the amount of time eyeballs spend at their site, but there are few ‘new’ eyeballs.  Most people with an iPhone or Blackberry also have PC access.  An exception is in some developing countries where it becomes their ‘laptop,’ but even in those cases they still use internet cafes.  So where are the new value creators in this mobile internet category such as Google for the desktop internet and Microsoft of the PC era?

In the investment analyst definition of mobile internet, it doesn’t mean only mobile networks, it means any internet connected device as they include all the devices in the home.  So the mobile label is rather misleading.  Really they’re talking about the internet being accessible by most consumer and enterprise electronics, the internet of things.  So let’s look at an example, TVs becoming internet connected.  Essentially content owners can now have a direct relationship with customers, Disney’s dream for many decades.  This bypasses the TV networks and payTV providers.  So two industries potentially face a tough future, but its going to take people to change their behavior from channel to programmatic consumption for this to come about.

In summary, a lack of experience of working in the industries they track, a lack of understanding of specific market’s history, a US bias, comparing apples and oranges to make pears, and not digging into the specifics of what happens when most consumer electronics gets internet access means false categories are created which actually may have as much value destruction and creation.  Perhaps what their talking about is really the next phase of the internet’s evolution, which is not really a wealth creation cycle rather the evolution of an existing industry.  So beware the self-interested hand of investment analysts talking about future wealth creation cycles – they’re only after your retirement funds!