anywhere network phil

The media and communications industriesare in chaos. Traditional business models are being severely disrupted as newinnovations emerge and take advantage of the low market entry barriers created with Internet Protocol, MPEG and forinternet browser technology. AnywhereNetwork™ is a framework for navigating thedeveloping chaos and profitably deliveringservices to the Anywhere Consumer™ andAnywhere Enterprise™.

The Anywhere Network is Yankee Group’svision of a seamless and always-accessibleintelligent infrastructure that provides a connection for everyone to everything fromanywhere. Internet connectivity moved thiscontrol to companies such as eBay, Googleand Yahoo! The framework also encompassescommunity-led and user-centric solutions,which affords the users increased autonomy,service variety, flexibility and personalization.Exhibit 1 (on the next page) illustrates thevariety of existing and emerging businessmodels that could be affected by theevolution of the Anywhere Network towarduser-centric solutions.

In particular, the Anywhere Network:

• Will demand carriers implement solutions that

increase the intrinsic value derived from

distribution capabilities of their networks.

• Will drive commerce-centric solutions to

support an increased demand for ad-hoc

community and ultimately peer-to-peer

transactions.

www.yankeegroup.com

• Is destroying traditional media-centric

business models.

• Will demand interoperability between

competing solutions for VoIP and

instant messaging that will drive the

obsolescence of proprietary solutions.

• Has enabled search-centric solutions

to firmly establish themselves in the

early phase of the Anywhere Network

and garner significant success with

advertising revenue support. However,

it will see it become increasingly

commoditized with the increased

need for standardized search

capabilities throughout all facets of

the Anywhere Network.

• Will see the proliferation of community-

centric solutions as the Anywhere

Consumer seeks greater specificity and

control over the services delivered over

the Anywhere Networks.

© Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.

Profiting from the UncertainBusiness Models of theAnywhere Network

This Yankee Group Report is published for the sole use of Yankee Group clients. It may not be duplicated, reproduced or transmitted in whole or in part without the express permission ofYankee Group, 31 St. James Avenue, Boston, MA 02116. For more information, contact Yankee Group: [email protected]; phone: 617-956-5005.All rights reserved. All opinions and estimates herein constitute our judgment as of this date and are subject to change without notice.

March 2007

Executive Summary

Senior Vice President, EnablingTechnologies Service Provider

Philip Marshall, Ph.D., joined Yankee Group in 2000. He is seniorvice president of Yankee Group'sconsumer research group. He managesanalysts focused on service providers'perspective to investigate market andservice opportunities and trends fortelecommunication systems.

Before Yankee Group, Dr. Marshall workedin various engineering operations,software design, research, due diligenceand strategic planning roles in NewZealand, Mexico, Indonesia and Thailand.Dr. Marshall also cofounded a softwarecompany specializing in the development ofdatabase applications and was an electricalengineer at BHP New Zealand Steel.

By Philip Marshall,Ph.D., SMIEEE

Table of ContentsIntroduction 2

Business Model Uncertainty Arisesfrom Anywhere Network 3

Monetizing the Anywhere Network 4

Business Model Division Over the Anywhere Network 5Carrier-Centric Solutions 5Commerce-Centric Solutions 6Traditional and New Media-Centric 7Communications-Centric Solutions 8Community-Centric Solutions 9Search-Centric Solutions 9Connectivity-Centric Solutions 10

Conclusions 11

What Is the Anywhere Network? The Anywhere Network is Yankee Group’s vision of a seamless and always-accessible intelligent infrastructure that provides a connection for everyone to everything from anywhere.

The Executive Summary continues on next page.

The media and communications industriesappear to be in chaos. Traditionalcommunication service providers are fightingmarket decline with convergence strategies—attempting to fend off disintermediation frominternet upstarts like Skype. Internet and mediaplayers such as eBay, Google and News Corpare making lofty investments in unprofitablecompanies such as Skype, MySpace andYouTube. Apple recently made a big splashwith its overpriced iPhone, and companiesoffering media and social networkingapplication seem to be capable of achievingmassive market scale overnight, albeit withdubious standalone business models.

This chaos will accelerate and becomeincreasingly disruptive as players capitalizeon pervasive and open technologies suchas Internet Protocol (IP), internet browser,IT virtualization and media standards suchas MPEG.

Players across the value chain will bedisrupted as new industry models emerge.Telecom service providers and softwarevendors such as Microsoft are strugglingbecause it destroys the traditional value ofthe network and software lock-in techniquesthey have vigorously pursued. Google andSkype, beneficiaries of the early phases ofthe Anywhere Network, are under threatfrom later entrants that take can also

advantage of the low barrier to market entrythat is the hallmark of the transformation.

What is going on here? Yankee Group callsthis disruptive transformation the next globalconnectivity revolution as the world moves tothe Anywhere Network. The AnywhereNetwork is Yankee Group’s vision of aseamless and always-accessible intelligentinfrastructure that provides a connection foreveryone to everything from anywhere.

The Anywhere Network provides a guide forprofitably delivering media, communicationsand internet-based services in support of theever-increasing needs of the AnywhereConsumer and the Anywhere Enterprise. Its

2 © Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.

March 2007

Introduction

Media and communications industryregulators face the challenges of themarket conditions created by theAnywhere Network. Policy makers aregrappling with the migration of legacynetwork centric regulations, appropriateregimes to anticipate service evolutionand appropriately manage the efficientuse of scarce resources such as radiospectrum, and ensure that there issufficient market competition to benefitthe Anywhere Consumer.

Operators• Comcast• News

Corporation• Cablevision

Producers• Columbia• Viacom• Disney

TraditionalMedia-Centric

Community-Centric

• Plaxo• LinkedIn

• XING• Facebook

Search-Centric

• Quigo• Yahoo!• craigslist

• Wikipedia• Ask.com• Google

CE-Centric

• LGE• Sling Media• Sony

New Media-Centric

• BitTorrent• YouTube • Apple

• MySpace• Lime Wire

Carrier-Centric

• China Mobile

• Sprint

• Verizon Wireless

• Vodafone

Enterprise-Centric

• Microsoft• Avaya• Cisco

Connectivity-Centric

• wibiki• FON• Ozone

Commerce-Centric

• Amazon.com• eBay

Communications-Centric

• AIM• Skype• Vonage

User-Centric

Community Driven

Exhibit 1. Business Models Collide at the Intersection of Digital Media, Communicationsand Internet CommunitiesSource: Yankee Group, 2007

characteristics vary between markets andmarket segments. For example, solutionsthat enable low-cost basic communicationsservices in the short to medium term are thepriority in nascent emerging markets. Thiscontrasts with mature markets where basiccommunications are well established and theconvergence of media and communicationsis a more significant consideration foropportunities with the Anywhere Network.

This Yankee Group Report focuses primarilyon the evolution of the Anywhere Network inmature markets and segments of emergingmarkets where the convergence of mediacommunications and internet services isripe. An analysis for economically emergingmarkets, which focuses on the delivery oflow-cost communications, will be the topicof a future Yankee Group Report.

At the heart of the Anywhere Network arebusiness models emerging as a result of keytechnology and market innovations. Thisreport develops a framework for navigatingthe emerging variety of the business modelsillustrated in Exhibit 1 (on previous page),with particular emphasis on their currentand emerging characteristics.

3© Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.

March 2007

The Anywhere Network exposes existingbusiness models to disruption in theprocess of enabling new models to flourish.As the Anywhere Network evolves, itcontinuously liberates the AnywhereConsumer and Anywhere Enterprise frombusiness models that aim to profit fromexercising control over the user experience.Exhibit 2 shows that this liberation processprogresses from total through displaced tocommunity-driven and, ultimately, user-centric control. The Anywhere Networkenvironment encompasses the variousbusiness model phases that capitalize on theopen internet environment. Only with adeep understanding of the AnywhereNetwork and its effect on the AnywhereConsumer and Anywhere Enterprise willplayers escape the calamity and profit fromthe phases of ecosystem maturationillustrated in Exhibit 2.

During the Total control period, dominanttelecom and media companies benefitedfrom closed networks and captive usercommunities, for whom they controlled thedelivery of services. The unleashing of anopen internet and standardized browsertechnology allowed players like eBay,Google, Microsoft Skype and Yahoo! to offerDisplaced control services such as onlineauctions, internet search, infotainment andmessaging services with vertically integratedservice delivery platforms. These solutionsdisplace the control from the network to theservice delivery layer, using highlyproprietary and vertically integrated servicedelivery technology with sophisticatedportal-based user interfaces.

A hallmark of the Anywhere Network is thelow barrier to market entry that enables theproliferation of a seemingly infinite variety of

Business Model Uncertainty Arises from Anywhere Network

CommunityDriven

UserCentric

DisplacedControl

TotalControl

AppleeBay

GoogleMicrosoft

Yahoo!

CraigslistFacebookMySpaceWikipediaYouTube

Amazon EC2Google Desktop

Anywhere Network EnvironmentLegacy ClosedMedia and

Communications

Controlled Service

ControlledNetwork/

Distribution

Captive UserCommunity

Controlled Service

Open Network

NetworkedUser Community

Open Community-Driven Services

Open Network

Networked UserCommunities

Open User-Centric Driven

Service Delivery

Open Network

Networked User Communities

Ecos

yste

m M

atur

ity

Exhibit 2. The Anywhere Network Evolution Drives a Business Model RevolutionSource: Yankee Group, 2007

The emergence of the Anywhere Networkand the displacement of control fromtraditional media and communicationproviders also shifts the monetization ofservices and applications they offered.Although traditional providers continue toseek subscription funds, emerging businessmodels that derive revenue fromindependent sources, such as advertising,have emerged and continue to evolve.Players such as Google have mastered pay-per-click advertising, while others such asYahoo! have been more effective in brandedadvertising. Major players hope theemerging Anywhere Network businessmodels—and the associated convergencebetween media, communications and theinternet—will create revenue that willoffset subscriptions.

Although Google and Yahoo! see the lion’sshare of their growing revenue coming fromadvertising, upside opportunities foradvertising in other sectors of market areunclear. For example, the large MySpace andYouTube communities seem to be primetargets for advertising but these communitiesfilled with young members tend to be ficklewith limited disposable income—notnecessarily ideal advertising targets.

Because only 3% to 4% of total advertisingexpenditures globally are internet based,there appears to be significant upsidepotential. Communication providers hopethey can capitalize on personalization anduser behavioral characteristics to offertargeted advertising. But, to succeed,targeted advertising strategies require vastlyincreased sophistication, particularly in thecase of premium advertising.

services and applications. In the past, theseservices and applications were implementedusing vertically integrated service-deliverysilos. Vertical integration is necessary tosupport nascent services and applicationsthat standards-based architectures cannotsupport. However, these solutions presentchallenges for the Anywhere Consumer.

The Anywhere Consumers are now lockedinto the vertically integrated services. But asusers become more demanding and seek awider variety of offerings, the providers’challenge is to offer broad service deliveryapplications that are suited to the massmarket. The recent “Peanut ButterManifesto” article in the Wall Street Journalarticulates the challenges Yahoo facessupporting a wide variety of services with avertically integrated market strategy.

Community-driven solutions continue to besupported on vertically integrated servicedelivery infrastructure, but the media andservices delivered over this infrastructure arefacilitated by like-minded communities,typically with the service being essentiallyuser generated. Early communities, such ascraigslist, LinkedIn, Plaxo, Facebook,MySpace and YouTube, focus on managinglocal advertisements, contact details anduser-generated media. The acceleratedgrowth in these solutions shows the value that comes fromfederating services tol i k e - m i n d e dcommunities. Googleand News Corprecognize this valueand, with acquisitionsof YouTube and MySpace, respectively, arelooking to complement their existing offeringswith community-driven solutions.


March 2007

As Anywhere Consumers becomeincreasingly sophisticated, they will seekgreater autonomy and control over themanner in which media, services andapplications are delivered. This will drive theneed for services and applicationpersonalization of the user’s context andefficient management of the lifecycle ofservices and applications as needs change.This emerging User-centric category offersmassive upside market opportunities.

Early implementations of user-centricofferings such as Google Desktop andAmazon Elastic Compute Cloud (EC2)provide early (and relatively rudimentary)illustrations. Google’s Desktop applicationenables users to federate services andapplications in a single portal environment.Although there is some somepersonalization, the structure of the servicesand applications are relatively static.Amazon EC2 offers virtualized gridcomputing capabilities that offer flexible,user-provisioned computing capabilities.Others such as HP, IBM and Sun have offeredsimilar solutions. However, these are not asversatile and tend to be targeted at largeenterprises. The intrinsic value providersthat offer community-led and user-centricsolutions derive depends on the extent towhich they liberate the AnywhereConsumers’ experience.

Monetizing the AnywhereNetwork

As Anywhere Consumers become increasingly

sophisticated, they will seek greater autonomy

and control over the manner in which media,

services and applications are delivered.


March 2007

As disruptive business models continue toemerge under the Anywhere Networkumbrella, business models for monetizingservices will come and go. For example,Apple currently derives the lion’s share of itsmusic business profitability from iPoddevices. Apple cannot sustain this modelindefinitely. Similarly Google wasunprofitable before it launched itsadvertising-supported internet searchmodel. In general the effective monetizationof services, whether through directsubscriptions, ad-supported or campaign-type offerings, will depend primarily on thescale, consistency and reliability of theunderlying service offerings. Importantconsiderations when evaluating businessmodels include:

• Are there obvious direct and indirect

revenue streams that can be derived from

the service? For telephony, cable and

broadband services, for example, this

could mean revenue sharing associated

with e-commerce transactions or pay-per-

click type advertising models. These

revenue streams tend to be associated

with specific transactions as opposed to

less tangible brand-led initiatives.

• Is there a consistent service offering and

usage model that has intrinsic value and

can be monetized in its own right—or by

a third party with a parallel revenue—or

value-generating capability, such as

sophisticated indexing and cataloging of

existing offerings?

• Are the multiple identities and profiles of

the Anywhere Consumer managed in a

unique way? These might include a variety

of trusted party security solutions and

techniques for service brokering.

• To what extent can providers combine

profitable services with others that lack

standalone business models to magnify

the aggregate intrinsic value of the

service offered to the subscriber?

As Exhibit 1 illustrates, there are a widevariety of service offerings and associatedbusiness models emerging under in theAnywhere Network. To understand theevolution of the Anywhere Network throughthe various stages of development, we’llinvestigate the existing and emergingbusiness models associated with theAnywhere Network. In addition, we’ll look attheir traditional and emerging control pointsin the value chain, their prospect of survivalas a category, and the various technologyand market innovations that they mustimplement to capitalize on opportunitieswith displaced control and self-serviceparadigms. We will discuss the enterprise-and consumer electronics-centric businessmodels in subsequent Yankee Group reports.

Carrier-centric solutions provided by majortelecommunication providers that own andoperate massive facilities based networkinfrastructure, such as China Mobile, Sprint,Verizon and Vodafone, garner the bulk of theirpresent-day $2.7 trillion revenue fromtraditional circuit switched telephony services.

Carrier-centric business models rely on closednetworks and service delivery environmentsthat exert significant control on subscribers(i.e., the total control category in Exhibit 2).The Anywhere Network will ultimately destroythese business models. The internet hasalready created an open environment to allow the delivery of an abundance ofinternet-centric services, such as search ande-commerce, over the telecommunicationnetworks without carrier intervention

or control. More recently, peer-to-peerVoIP services, offered bycompanies such as Skype,have enabled the deliveryof voice telephonyservices over the internet

at a fraction of the price carriers traditionallycharged.

These innovate services achieve global reachwith relative ease and distribution over avariety of fixed and broadband networks. Untilrecently mobile networks had not enabled anopen internet environment because of networkperformance and difficulties in deliveringservices to mobile devices. Higher bandwidthnetworks, data-enabled laptops, devices withstandardized operating systems, fixed mobileand media convergence initiatives, and theemergence of access technologies such as 3Gand WiMAX, are enabling the mobilization ofthe internet.

Business Model Division Over theAnywhere Network

Carrier-Centric Solutions

Carrier-centric business models rely on closed

networks and service delivery environments

that exert significant control on subscribers.

The Anywhere Network will ultimately destroy

these business models.

March 2007

© Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.6

As the Anywhere Network evolves, carriersmust establish business models, deployassociated technologies and develop servicedistribution strategies to capitalize on thebusiness models that arise from displacedcontrol. The business models might focuson offering wholesale and retail networkconnectivity—relying on others to enableservices over the networks. Or they may playa greater role in the service enablingprocess. Because most carriers resist thenotion of being bit-pipe providers, theanalysis emphasizes their active role as aservice provider (or, more appropriately, aservice enabler).

The challenge for carriers is in profitablytransitioning their business models, marketstrategies, and capital and operationalinvestments. They must pay more attentionto areas where they can differentiate, suchas monitoring and managing servicedistribution, and complex and dynamicbusiness process management. Exhibit 3illustrates that transition.

To profit from the displaced control, carriersmust harness the existing and emergingcapabilities in their service delivery, networkand service distribution solutions. Carriersmust either optimize their business modelsfor wholesale network operations, oralternatively create an efficient means forfederating internet and other dedicatedthird-party (off-net) services andapplications while they drive cost down andadd advanced functionality to theirofferings. In both cases, carriers must focuson driving service offering beyond anintermediate displaced control approach toa completely user-centric orientation. Indoing so, carriers must capitalize on contextawareness, such as device and accessnetwork type, location and presence, mediacategory and subscriber profile.

To succeed, carriers must carefully prioritize their technology investments tosimultaneously deliver their traditionalservices economically and capitalize on theopportunities the Anywhere Network

creates. To achieve this, carriers areessentially serving two masters. One masterrequires that the traditional best-of-breedservices are delivered efficiently and isoptimally addressed with verticallyintegrated service delivery solutions. Theother requires the federation of a breadth ofservices, which requires horizontallyintegrated service delivery solutions.

Companies such as eBay and Amazon, whichprovide online e-commerce portals for thirdparties to buy and sell merchandise, supportcommerce-centric solutions. Thesecompanies capitalize on the global reach ofthe internet and extend the span ofdistribution they can manage and control.The persistent fragmentation in the e-commerce market coupled with intensecompetition from specialized e-commerceand brick and mortar companies, and thecontinued need for managing logistics,provoke players such as Amazon and eBay tocontinue developing solutions that extendthe variety of merchandise they offer,improve communication and businessprocess capabilities, and lower overalltransaction friction. See Exhibit 4 (on thenext page) for an illustration of the areas ofstrategic importance in the e-commercevalue chain:

• Third-party plug-ins facilitate integration

with existing customers, managed

e-commerce services, and enable new

transaction orientated applications to be

efficiently implemented in A2P, P2G and

P2P environments.

• Transaction management capabilities

aimed at managing electronic transactions

over the Anywhere internet. Transaction

management capabilities will evolve in

lockstep with functionality created by

third-party plug-ins.

Total Control

Services andApplications

Network

DisplacedControl


IP

Network

Displaced Controland Beyond


IP

Network

SDP IMS

DedicatedNetwork

Open NetworkDistribution

Context-Aware,Open Distribution


Devices Services andApplications

Devices andAppliances


Devices andAppliances

To Be DeterminedGoogle Yahoo!Amazon.com eBayAT&T Bell BT

Exhibit 3. Anywhere Creates Opportunities for Openness in the Process ofDestroying Closed Carrier SilosSource: Yankee Group, 2007

Commerce-Centric Solutions

• Integration between Anywhere

Network and bricks and mortar

includes logistical functions, such as the

delivery of merchandise, and must

incorporate both business process and

communications capabilities (such as

Skype and instant messaging),

particularly as transactions become

increasingly ad hoc.


March 2007

Traditional media-centric businesses cover abroad range, including: Dow Jones and News Corp, which offer print and onlineinformation centric media; cable companiessuch as Comcast; and media contentpublishers and distributors such as Disney and Time Warner. These playershistorically enjoyed significant control

over the development,aggregation, renderingand distribution of mediaand entertainmentservices. Leveragingtheir market controlin conjunction withthe quality of theircontent, brand and

they audience developed lucrative revenuestreams from subscriptions and advertising.These models are under considerablepressure as the Anywhere Network begins totake hold.

The combination of ubiquitous communications,access-independent service delivery, low-costand diverse media aggregation and distributionmethods has spawned competitive mediasources. These range from community-basedsolutions such as MySpace, YouTube andblogs to music-sharing sites such asLimeWire and media-sharing solutions suchas BitTorrent. Apple capitalized on the earlydigital content distribution solution offeredby Napster and disintermediated the musicindustry with its vertically integrated iTunessolution. Because the lion’s share of Apple’sprofitability in this area comes from sellingiPod devices rather than the musiccontent—it is not beholden to revenueshare arrangements with content providers,and disrupted traditional content-centricbusiness models for music distribution thatwere based on the physical distribution ofdigital content on compact discs. As largemedia providers lose control over theirtraditionally captive markets, revenue fromsubscriptions and advertising have fallensignificantly. The Anywhere Consumer isspoiled by choice and at the same timeoverwhelmed by the variety of media andentertainment services and the excess ofinformation available on the AnywhereNetwork. In some cases, consumers areopting for solutions that were notdeveloped for monetary purposes.

Virtually every service and applicationdelivered over the Anywhere Networkincorporates digital media of some kind. Thissignificantly disrupts media-focused playersand has pushed the entire value chain todevelop innovative solutions that encompassmedia in some shape or form. Google focuseson harvesting digital and video content,combining the content with its robust searchcapabilities and communities to broaden itsadvertising revenue. Carriers are implementingsolutions such as IPTV, mobile TV andpartnering with companies such as Apple todeliver content and video services over their

Third-PartyPlug-Ins Device

InternetBrowserInterface

TransactionManagement

PortalInterface

Logistics, Business and Operational Support Systems

Integration between Anywhere

Network and Bricks and Mortar

TransactionManagement

Services (e.g., eBay,

PayPal)

Third-PartyFederation

Exhibit 4. Strategic E-Commerce Hooks in the Face of Stiff CompetitionSource: Yankee Group, 2007

Traditional and New Media-Centric

Virtually every service and application delivered

over the Anywhere Network incorporates digital

media of some kind. This significantly disrupts

media-focused players and has pushed the entire

value chain to develop innovative solutions that

encompass media in some shape or form.


March 2007

networks. Sling Media and others arecapitalizing on their ability to redirect videomedia from set-top boxes to the internet. Andcompanies such as Amazon have extensivecatalogs of digital media that they distributefrom their e-commerce portal. News Corpmade a series of strategic acquisitions,including MySpace, expanding its portfoliofrom the traditional to the new mediadomains. News Corp, in conjunction with keypartners such as Google is also exploiting theMySpace community to bolster its mediadistribution and advertising capabilities.

New media will infiltrate the variety of servicesand applications enabled by the AnywhereNetwork. Traditional and new media playersmust aggressively integrate sophisticatedmedia search, management, integration andpersonalization capabilities, user-generatedand premium content, communication andtransaction capabilities that rival those offeredby specialist providers. The AnywhereConsumer will utilize an ever-increasing volumeof media and benefit from its integration withother complementary functionality. At thesame time, the market will be surprised howusers consume these integrated services. Forexample, the vast majority of music videodownloads from Apple’s iTunes are viewed onPCs and laptops rather than an iPod.According to Nielsen Media Research, VideoiPod users consume video 11% of the time.

Digital rights management (DRM) andcopyright continue to be major issue as mediais unleashed over the Anywhere Network.Media distribution through social networksand peer-to-peer connectivity will taxtraditional approaches to DRM and copyrightmanagement. It will drive careful evaluation ofthe intrinsic value of the underlying media andcontent versus the manner in which it isdelivered. Because the social networks tend todisrupt traditional subscription-baseddistribution models, indirect revenue sourcesfrom advertising, e-commerce and othertransactions will become critical.

Communications will continue to be an integralfunction of the Anywhere Network. Socialnetworks and communities have shown thepotential of peer-to-peer connectivity andcommunications. Communications was oncethe sole domain of telecom network operatorswith carrier-centric business models. The openness of the internet, the proliferationof VoIP and instant messaging technologiespaved the way for a new breed ofcommunications to emerge in the internetenvironment. Companies such as Vonage have a very similar business model to traditional carriers, but designed theirtechnology and operations from the outset for VoIP. These companies offer competitiveplans and packages similar to traditional telcosand more recentlycablecos that offeringbundled telephonyservices. Players suchas Skype and Yahoo!offer peer-to-peer VoIPsolutions, which, byoffering low-costservices that capitalizeon global internetconnectivity, significantly disrupt theunderlying business models of the traditionalcarriers. Through viral adoption, Skype reached136 million subscribers at the end of the third quarter of 2006, less than 5 years afterbeing established.

The communications solutions offered by playerssuch as Skype illustrate the benefit of bringingcommunications and messaging capabilities tocaptive communities. As the Anywhere Networkcontinues to mature, personalized and access-neutral communications capabilities will becamestandard within the Anywhere Network businessmodels. As this occurs, Anywhere Networkusers will come to expect the availability ofinteroperable peer-to-peer VoIP and IMcapabilities, leading to the eventualcommoditization of technologies that supportthem. With Skype, eBay has a powerfulcommunications-centric asset that provides acompetitive differentiator for the near term.Skype functionality, which eBay acquired for$2.5 billion in 2005, will be commoditizedwithin the next 24 to 36 months.

Communications-CentricSolutions

The Anywhere Consumer will utilize an

ever-increasing volume of media and benefit

from its integration with other complementary

functionality. At the same time, the market will

be surprised how users consume these

integrated services.


March 2007

Community-centric solutions incorporateofferings ranging from blogs to a variety ofstructured social and commercial networkingapplications where much of the content isuser generated. Blogs are the most widelyadopted community-centric solutions today.They are easily applied to the traditionalinternet allowing ad-hoc interactivity. Othercommunity-centric solutions offered byLinkedIn, Facebook, Plaxo and XING, enablesubscribers to coordinate and expand theircontact networks for personal or businesspurposes. These solutions help membersidentify and contact former college friendsor previous work colleagues. Solutionssupport personal-generated content such aspictures and videos, and other functionalityincluding targeted jobadvertisement outreach. Thesecompanies create viral networksof like-minded individuals byallowing friends and businessacquaintances to share contactinformation. Facebook has morethan 40,000 virtual networks inwhich users affiliate with aparticular community. MySpaceand YouTube have emerged from community-centric origins, but captured greater mindshare by applying user-generated content tointerested groups with both direct and indirectrelationships with the content authors.

Services and applications that offer communityare a natural evolution of the AnywhereNetwork. They enable much-needed servicesegmentation to better manage the seeminglyinfinite variety of potential services andapplications. Furthermore, players will combinecommunity-centric services and applicationswith powerful search and discovery capabilities,which will demand a degree of personalizationand ultimately drive the Anywhere Networktowards the delivery of user-centric solutionsillustrated in Exhibit 2. In addition, thecoordination of like-minded parties will createviral peer-to-group (P2G) and peer-to-peerinteractions that capitalize on the integration ofseamless communications, media distributionand ad-hoc transaction capabilities that willemerge from the commerce-centric capabilities.

Google and Yahoo! made search and ad-supported search-centric business modelshugely successful. Google mastered a businessmodel well suited to non-premium advertising;Yahoo! has focused more on premiumadvertising, such as complex brand-focusedcampaigns run by ad agencies. Non-premiumadvertising opportunistically drives users toparticular company sites based on complexprioritization algorithms, and premiumadvertising is focused on the subtle activitiesassociated with bolstering company brands.

Both Google and Yahoo! aggressively pursueexpansion strategies to implementcomplementary solutions, such as instantmessaging, e-mail, video and other types ofmedia services, partnerships with telecomservice providers, and a variety of infotainmentsolutions. Although diversification is critical forthese players, they run the risk of diluting thevalue of their core solutions by spreadingthemselves too thin. Vertically integratedtechnologies and approaches will challengethem to move beyond highly complementaryofferings, such as the storage and indexing ofmedia and search capabilities.

Both players are known for their dictatorialapproach to the market, which does notposition them as particularly good ecosystempartners. Their current search capabilitiesneed to evolve to offer greater granularity andsearch accuracy with the increased marketdemands for personalization, service discoveryand ubiquitous capabilities. A slew of startupsaspire to be the next Google with improvedsearch capabilities. Chances are that Googlewill acquire one or more of them, particularlywhile it still enjoys a lofty enterprise valuation.

Community-Centric Solutions Search-Centric Solutions

Services and applications that offer

community are a natural evolution of the

Anywhere Network. They enable much-

needed service segmentation to better

manage the seemingly infinite variety of

potential services and applications.


March 2007

Craigslist and Wikipedia are among the othersearch-centric business models. Wikipedia is anonprofit and relies on user-generated contentfor its electronic encyclopedia. Craigslistclassified advertisement service operates withmodest revenue essentially to cover its costs.The approach that craigslist and Wikipedia areadopting disrupts ad-supported search-centric models. It dilutes usage of sites such asGoogle and Yahoo! and offers search anddiscovery capabilities without beingencumbered by advertising.

The Anywhere Network is enabling thecommoditization of traditional searchcapabilities, requiring major players such asAsk, Google and Yahoo! continuouslybroaden their capabilities. Although theseplayers have well-known brands, they run therisk of losing their market positions if theylag in innovation. The key drivers for thecommoditization in traditional internetsearch include:

• Increased demands of Anywhere Consumers

as their usage of the Anywhere Network

becomes more specialized, personalized and

sophisticated.

• The emergence of companies with limited

revenue aspirations, such as craigslist

interest groups, rely on user-generated

content such as Wikipedia, and other

companies that offer compelling substitute

internet search capabilities.

• Increased variety of online advertising,

and increased sophistication and

expectations of advertising agencies.

• Increased integration of search capabilities in

other Anywhere Network service offerings,

including media and service-centric social

networks that seemingly emerge overnight,

such as MySpace and YouTube.

Traditional internet search providers mustinnovate to broaden the scope of theirofferings. In the process of doing so, theywill face challenges in migrating beyondcomplementary service offerings, withoutdramatically changing their verticallyintegrated approaches to technologyinnovation. Yahoo! has already confrontedthis challenge—one of its senior executivesacknowledged that it has spread itself toothin in the marketplace in a memo leaked tothe Wall Street Journal (the so-called“Peanut Butter Manifesto”).

Throughout the Anywhere Network,residences, enterprises and municipalities aredeploying private networks to meet specificrequirements (such as Wi-Fi in the home or inhot spots throughout a community). Thesewireless solutions typically rely on unlicensedradio spectrum, operate independently ofother networks and use rudimentarymanagement systems. These are in contrast tothe highly coordinated networks offered bybroadband, media and communicationcompanies, which leverage dedicated resources

such as licensed radiospectrum and operate overwide coverage areas. Lackingcoordination between localnetworks and challenged byusing shared resources suchas unlicensed radio spectrum,the private residential,enterprise and municipalnetworks have traditionally

been unable to scale beyond local and metro-wide network area solutions.

Companies such as Wibiki, FON and Ozoneoffer connectivity-centric solutions thatcapitalize on the widespread adoption ofprivate residential Wi-Fi technology. Theseplayers give owners of residential Wi-Fi theopportunity to opt into community-widenetworks of consenting residential access-point owners. These companies aggregateand manage the residential Wi-Fi accesspoints into a patchwork of wireless coverageoffered to those consenting parties. Thisnascent market’s success will depend largelyon the level of service ubiquity and networkcoverage it can achieve with the earlyadopting market and the extent to which itcan incorporate networks with broadercoverage into the initial patchwork. BritishTelecom signed an agreement with FON tocreate an integrated wireless network as an

Connectivity-Centric Solutions

Non-premium advertising opportunistically

drives users to particular company sites

based on complex prioritization algorithms,

and premium advertising is focused on the

subtle activities associated with bolstering

company brands.


March 2007

extension of its FusionOne fixed-mobilenetwork offering. In the interim, this approachrequires hybrid solutions, perhaps based onleast-cost routing algorithms in the devices,to enable adequate service coverage. Successof connectivity solutions will accelerateimprovements in the performance ofunlicensed systems, including low-costtransmission solutions and low-cost smartantennas and cognitive radios.

The creation of ad-hoc consumer networksholds promise in creating significantAnywhere Network communities that couldsupport business models. If they succeed,these networks will dramatically change thedelivery of media and communicationservices to the Anywhere Consumer. Even asthe provisioning of fixed network capacitycontinues, wireless and mobile resources willbe deployed in an ad-hoc manner andminimize the role of mobile service providersin network operations.

The media and communications industriesare in apparent chaos as they try to meet theever-increasing demands of the AnywhereConsumer and Anywhere Enterprise. Assolutions drive support for community-ledand user-centric control, they disruptexisting and emerging business models andcontinuously create opportunities for newentrants. Although it’s clear how existingbusiness models must evolve to capture theemerging Anywhere Network opportunities,there are a variety of unanswered questionsthat will be investigated in future YankeeGroup publications. In particular:

• What are the technological underpinnings

that will enable the proliferation of the

Anywhere Network?

• How will the Anywhere Consumer and

Anywhere Enterprise respond to the

opportunities afforded to them by the

Anywhere Network and its associated

service offerings?

• How must vendors and service providers

prioritize and appropriately time their

investments to maximize their revenue

opportunities?

• What innovations and business models are

likely to act as change agents and how can

industry players position themselves to

capitalize on these change agents?

• What appropriate transition strategies

must vendors and service providers use to

capitalize on the evolution of Anywhere?

• What are the primary anchors and major

technical and commercial sensitivities

associated with the various solutions

enabled by Anywhere?

Yankee Group’s Anywhere Network researchagenda will tackle these topics withinterviews, primary research and analysisduring the next 24 months. UpcomingYankee Group Reports include:

• Next Trillion Dollars for the Anywhere Telco• Anywhere Networking in Economically

Emerging Markets• Regulatory Rights and Risks on the Road

to the Anywhere Network • Navigating the Anywhere Network

Technology

Conclusions

The media and communications

industries are in apparent

chaos as they try to meet the

ever-increasing demands of

the Anywhere Consumer and

Anywhere Enterprise.

© Copyright 1997-2007. Yankee Group Research, Inc. All rights reserved.

www.yankeegroup.com The people of Yankee Group are the global connectivity experts™— the leading source of insight and counsel for builders, operators and users of connectivity solutions.

For more than 35 years, Yankee Group has conducted primary research that charts the pace of technology change and its effect on networks, consumers and enterprises.

Headquartered in Boston, Yankee Group has a global presence including operations in North America, Europe, the Middle East, Africa, Latin America and Asia-Pacific.

Yankee Group has research and sales stafflocated in North America, Europe, the MiddleEast, Africa, Latin America and Asia-Pacific. For more information, please contact one ofthe sales offices listed below.

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