Who Wins on the Wireless Web?

BARCELONA -- Mobile World Congress -- How will the rapid growth of the mobile Internet be funded? And who will reap the spoils from a wealth of new wireless data applications and services? Those questions have been vexing operators, vendors, and content providers here at the show, and it came bubbling to the surface in this morning's keynote session.

On one side was Masayoshi Son, CEO of Japanese wireless and mobile operator Softbank , who advocated a combination of micropayments and ad-funded content to derive revenue from wireless. On the other was Marco Boerries, head of connected life at Yahoo Inc. (Nasdaq: YHOO), who, while stressing the firm's carrier partnerships, argued that a consumer-driven, ad-funded, open-Internet-like model was the way. Somewhere in the middle was Research In Motion Ltd. (RIM) (Nasdaq: RIMM; Toronto: RIM) co-CEO Jim Basilie, who claimed that his company and others can help carriers to become "value-added platforms" in this colorful new world of mobile content.

Son's contention is that the wireless Internet is fundamentally unlike the wired Internet because classic Google (Nasdaq: GOOG)-style online advertising will not work on the smaller screen, and content downloads will always be limited by the amount of radio spectrum available to operators.

Son even suggests that, as more users get online wirelessly, the current hegemony of the Internet could change. "The glory of Google may not last another 20 years," he quipped. "With a small screen, if you have too many flashy ads, it is too noisy.

"For the PC, Internet advertising was 80 or 90 percent of the revenue," Son continued. "For the mobile Internet it will be maybe 20 percent."

High-value content, such as mobile video downloads, will be paid for by micropayments rather than funded by ads. This, suggested Son, will also help to ensure that willy-nilly "rich media" downloads don't take an operator by surprise.

"The rich media cannot come onto the mobile network without any control," Son said. "YouTube [downloads] are guaranteed to kill the network in the night-time."

Yahoo's Boerries, however, is favoring a far more open approach to drive up user numbers for the mobile Internet. "The ad market is all about scale," Boerries expounded. "If we don't get to millions of users and eventually billions of users using [social networking and other] services several times a day, then this model doesn't scale."

This necessarily requires open access to applications and services and an ad-driven model, Boerries claims, while acknowledging that micropayments may have a role to play. "We're trying to re-invent mobile advertising," he said, using uniquely mobile aspects like a user's location to make the marketeering "constantly relevant" to a user.

Borries acknowledged carrier fears that opening up networks would make them little more than a dumb pipe but claimed that Yahoo and others will add to an operator's revenue pot, not take away from it through revenue sharing deals. "They don't share their data plan revenue with us -- we're creating new mobile ad-revenue."

RIM co-head Basilie acted as something of a middle way between a carrier-driven mobile Internet and an ad-supported free and easy model. RIM and others, he suggested, can help carriers develop as a "value-added platform" and not be "disintermediated" on the new mobile frontier.

Basilie even had a helpful suggestion on how to ensure that mobile cellular networks aren't "killed" by a massive increase in video downloads. "You can also use WiFi for side-loading," he suggested. That is, if a user wants a video download immediately, then they make an additional micropayment for the privilege, or automatically wait until they are near a hotspot to pull down the clip, which is then cached in the phone's memory, ready to be played.

"That's a wonderful strategy," Basilie claimed.

Side-loading, however, was shot down by the Softbank CEO. "In the U.S., the networks are so slow that you need to use WiFi," Son stated to laughter from the crowd. "In Japan, our network is so fast people want to use it."

— Dan Jones, Site Editor, Unstrung