TIME EUROPE
FEBRUARY 7, 2000 VOL. 155 NO. 5
M-Commerce Online
Europe's high-tech start-ups have stolen a march on Silicon Valley by launching new mobile services
By JENNIFER L. SCHENKER
When venture capitalist Mikko-Jussi Suonenlahti showed up for a recent 7 a.m. board meeting at iobox's new Helsinki headquarters, the other board members were already there. In typical Silicon Valley fashion, they had never gone home the previous evening.
The similarity to the go-go ethic of U.S. Internet start-ups doesn't end with insanely long hours in the office. This Finnish company is racing against the clock to be first to market. To get there, it has plucked people from bigger companies willing to work long hours and take risks. Its two top executives come from Andersen Consulting and Credit Suisse First Boston, the engineers from Nokia and Sonera. And it has quickly raised venture capital: it closed the second round of funding in mid-December with $13 million of new equity funding from a syndicate of investors led by Morgan Stanley Dean Witter Capital Partners.
And iobox has an edge that Silicon Valley start-ups don't--Europe's estimated two-year market lead in digital mobile technology. Iobox is targeting the burgeoning market for "m-commerce," mobile Internet services that allow people to buy things, do their banking and receive text from websites devoted to such things as sports, stock, weather and news over wireless devices. As many as 100 new m-commerce companies launch in Europe every month, each looking to develop the type of "killer" applications that will drive this nascent market. These companies expect to leverage Europe's lead by exporting m-commerce services to America. "If wireless Internet is hot then Europe is on fire," says Falk Müller-Veerse, head of European research activities at Durlacher, a research and investment group. "While e-commerce is clearly run from Silicon Valley, mobile Internet commerce is being run by the wireless valley here in Europe."
On the basis of successful trials in its own backyard, iobox is launching pan-European e-mail and m-commerce services that work over both existing mobile phones and the new generation of Internet-ready mobile handsets that use the Wireless Application Protocol (WAP) standard. It has 350,000 users spread throughout Finland, Sweden, Germany and the U.K., and claims to add around 1,500 new subscribers every day. In addition to services for consumers, iobox is focusing on developing a platform which will allow partners--such as operators or media firms--to rapidly develop wireless services.
Other wireless Internet companies--like Finland's WapIT, which offers text-based mobile services such as sports results, museum and theater programs, Top 10 music charts, horoscopes and the joke of the day--are also rushing to expand across Europe and into the U.S. and Asia.
Before long, many of Europe's mobile phone users will be using mobile text services to order dinner, message friends, trade stocks, get their news and do just about everything they do on the Internet and more. In Germany alone some 1,500 new mobile text-based services are already available. Mobile banking is expected to become commonplace, with phones becoming an electronic "wallet." Banks like Finland's Merita were early pioneers. But the field is about to become crowded: Durlacher is predicting that European mobile operators will begin moving into the banking sector by acquiring banks or applying for banking licenses. German mobile operator Mannesmann was one of the first to apply.
By 2003 Europe will have over 200 million subscribers accessing information from the Internet with a mobile phone--a whopping 85% of total cell phone users, according to Durlacher. That growth is expected to cause mobile commerce revenues in Europe to surge from $325 million in 1998 to $23.7 billion by 2003.
U.S. high-tech firms have taken note and are scrambling to get in on the action in Europe. Phone.com, a California-based company that makes software to enable the delivery of Internet-based services to mass-market wireless telephones, has recently snapped up two European wireless Internet start-ups. And in the last two months Microsoft has teamed up with Ericsson, and U.S.-based Infospace has acquired 80% of Saraide, which specializes in designing wireless Internet services.
For the moment, though, m-commerce "is a European phenomenon," says Ken Blakeslee, vice president of wireless Internet solutions at Nortel, one of a number of manufacturers targeting the wireless equipment market. "The U.S. is two years behind in terms of penetration, usage and application." In Finland, a testing ground for many of the new wireless Internet services, customers of phone company Sonera are already using their phones to pay for soft drinks, passport photos, golf balls, kiddie rides, shoeshines and car washes.
The reason Europe has such a high concentration of mobile phones--89 million mobile phone users compared to 33 million Internet computer users at the end of 1998--is that a single standard, GSM, was adopted which works everywhere on the Continent. The U.S. has not been able to agree on a single standard for services or a generic type of terminal, which is retarding the introduction of new services. In contrast, Europe has a ready-made testing ground for the kind of two-way personalized "follow me everywhere" services that will be offered over the Internet. The challenge is to design services that work in the mobile environment. Constraints include small displays, minimal bandwidth, tiny keyboards and users who are constantly on the move.
Despite these drawbacks, text message services offered over existing GSM phones are astonishingly popular. Europe records 2 billion short message service (SMS) communications a month. SMS works like e-mail--users send a text message of 160 characters or fewer which can be read on the tiny screen of the recipient's mobile phone. In Finland, an estimated 65% of traffic over mobile phones is now data, rather than voice.
In the case of iobox, consumers sign up at the company's website (www.iobox.com) for a free and permanent mail address, which is accessible from any computer or mobile phone, as well as access to content and m-commerce offerings. Subscribers can have their mail messages forwarded to their mobile phones, and check and reply to them, at a cost of 6¢ per message. Soon iobox will have the capability to forward non-iobox mail to mobile phones so that users don't need an additional e-mail address for mobile communications.
There are business applications as well. Aspective, a U.K. start-up launched in December, now offers to manage mobile communications between sales forces and headquarters enabling firms to track customer purchasing habits and better forecast product management. But for the moment, the hottest services are those like the one offered by Swedish company Aspiro, which allow customers to check the current price level of a specific stock or view a personal stock portfolio over their mobiles. If projections are right, lots of European m-commerce companies will happily be tracking their own stocks as they ring up profits from wireless Internet services.
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