Carrier provision of personal clouds for consumers has gained some traction in various geographic markets, however, major issues loom over this area. The overriding uncertainty about the carrier personal cloud market relates to the difficulties in motivating carriers to devote heavy marketing resources to the product area.
We recently got an update from Hal Steger of Funambol about this issue, as well as other aspects of the white-label cloud provider business. Steger makes a pointed general distinction between: 1) registered or provisioned users, and 2) active users.
While Apple may have as many as 450-550 million iCloud users and Dropbox claims over 300 million users, not all are active. With respect to carrier-supplied clouds, Steger estimates that active user numbers vary widely. While they may reach a high of 80% for some carriers in some countries, Funambol has stated that, “Across our customer base, 25% is the approximate average” (a number which they state has been constantly on the rise.)
Even with users that are not active, the cloud is operating in the background, for example, synching photos in a situation such as the Verizon cloud offered on an Android phone, for example. The user may never make active use of the cloud, unless they lose their phone.
Steger asserts that he believes the carrier cloud market is at an inflection point, with carriers “working on how to educate users so it’s more than just backup.” Rosier statements have come from Synchronoss whose CEO stated that in the past year most major operators have “moved cloud from a nice-to-have offer to a centerpiece to their core communication strategies.” CEO Stephen Waldis claims that this is happening largely because it has been shown that “churn rates are dramatically lower on these customers, they’re signing up multiple connected devices. They’re buying the most lucrative 4G data plans.”
Steger appears to be somewhat more conservative. Funambol issued a paper estimating, based on the experience of some of its carriers, that personal clouds may increase customer retention rates by 5% or more, with respect to active users.
Steger also acknowledges that some developments are “turning back the clock” for carrier clouds. One such is the July 2014 announcement that Deutsche Telekom was partnering with Dropbox and would “preload Dropbox onto most of their Android devices in select Central and Eastern European countries (excluding Germany)” and also promote Dropbox to existing iOS and Android users.
Steger states that Funambol had 75 million personal cloud users as of August 2014 and expected to reach 100 million by year-end. Of these about 5% are paying customers, the rest just receive the free storage offering of the carriers. In order to monetize the user base, advertising would be a logical step. However, they estimate that any individual carrier would require about 1 million registered users to justify the cost of an advertising program. He states that about a dozen carriers have achieved this threshold.
Synchronoss has also been achieving high percentage growth in carrier-based cloud users, from a smaller base – Synchronoss claimed 12 million users as of December 31, 2013, versus 50 million for Funambol. Although the company doesn’t release its growth figures during the year, there are hints that suggest that it must have passed the 30 million mark some time ago, and could well be approaching or above 50 million. Synchronoss attributes this growth momentum to three primary factors: 1) carriers who are “embedding the software in the setup process of newer devices” – it claims that over 60% of customers take the cloud when it is embedded in the setup process; 2) generous free storage offerings by carriers, often in the 25-50GB range (versus 5-15GB for Apple, Google); and 3) inclusion of the cloud as a core part of family plans.
Funambol has a major initiative to acquire and achieve analytics about their user bases. They integrated Capptain’s (owned by Microsoft) solution into their service, to analyze customer behavior and also to push messages to users, such as, for example, in the case of Orange: “You can use Orange cloud to do more than store pictures.”
Steger reports that Funambol’s cloud is achieving “wild growth” in Brazil with Vivo (Telefonica Brasil). (Telefonica also has a large venture investment in Box.)
With all of the hopeful signs that carrier clouds will grow, there are still nagging doubts. In our view, carriers are very cumbersome partners in the personal cloud area. While partners such as Funambol and Synchronoss may be able to provide a certain amount of the product development and upgrading – skills that the carriers so glaringly lack – there are major issues in motivating a marketing partner to push a product that in most cases produces zero incremental revenue to the carrier.
Secondary types of incentives are all well and good – such as estimated improvements in churn reduction – but in most cases, in the past, secondary inducements don’t carry very far with carriers.
It is apparent in both the cases of Funambol and Synchronoss, notwithstanding the understandable cheerleading with regard to carrier clouds, that the companies are looking into other business models as well.
Funambol, for example, in July announced its OneBizHub product, which it describes as a “white-label cloud storage solution for enterprises.” When asked whether this enterprise product could exceed its OneMediaHub carrier product in growth, Steger estimated that it could do so in revenues, although not likely in number of users. While carriers could offer the OneBizHub product (Steger says that Telefonica is doing so in some places) it is not tied to carriers and could be hosted on virtually any cloud infrastructure.
We had also highlighted in our earlier article on Synchronoss (“Synchronoss: Carrier Personal Clouds … and More” 4/25/14) several initiatives the company was taking to enter new market areas that leveraged their software and other assets and represented potential diversifications away from their historic carrier-centric business.
Funambol has always been outstanding as a research-driven company, providing excellent analyses of its major market, white label clouds for carriers. A recent paper issued by the company put its finger on the issue that we have highlighted and strongly believe is crucial to the future of personal clouds.
The paper points out that the challenge is to get the user engaged and motivated to use the cloud on an ongoing basis. It cites Apple (as we have) as the outstanding proponent and exemplar in the personal cloud area, and concludes: “As an Apple user, chances are good that you will use iCloud in one form or another. In other words, it is tightly integrated into the Apple ecosystem, with iTunes and other components.” It is this key point – developing an ecosystem that the cloud fits into that is particularly critical, in our view as well, to realizing the massive potential of consumer personal clouds.
Visit their website: www.funambol.com
Podcast Narration by Gene Guerrero
Podcast Music “On the Ground” Kevin MacLeod (incompetech.com) Licensed under Creative Commons: By Attribution 3.0