Solving the startup problem in Western mobile Internet markets

This paper describes the evolution of the mobile Internet in terms of three concepts: the startup problem, standard setting, and mental models. Products in which there is little or no value to the first users due to the existence of strong direct (e.g., telephone) or indirect (complementary products) network effects face a large startup problem. This paper divides the startup problem for the mobile Internet into two stages. Japanese and later other service providers solved the first startup problem with entertainment content that was supported by a micro-payment system (service providers collect and pass on content fees to content providers) and custom phones that displayed this content in a consistent manner. Western service providers were slow to introduce micro-payment systems and entertainment content due to their initial focus on business users, which reflected their mental models. Mental models, which can also be thought of as shared beliefs or values, are typically based on historical experience as opposed to current knowledge of the environment and often prevent the development of new business models or new perceptions of foreign markets. Western service providers were slow to obtain phones that display content in a consistent manner because manufacturers were unable to agree on content and other standards in the wireless application protocol (WAP) Forum and subsequently have been slow to provide service providers with custom phones. Japanese service providers are the only ones to have solved the second startup problem with Internet mail that is modified for the small screens, slow speeds, and low processing power of phones (called "push-based Internet mail") and non-entertainment sites that are formatted for the small screen of the phone and easily accessed via universal resource locators (URLs), which can get embedded in this mail. Push-based Internet mail is similar to short message services (SMS) except that it is perfectly compatible with the Internet. Like SMS, it is automatically "pushed" to phones after it arrives on a service provider's servers and it is restricted in size. The mail's arrival on the phone causes the phone to beep and display an icon on the screen. Users merely click on the icon to access the mail and it is not necessary for them to open their mail clients or browsers as most people do when they access mail on their personal computer (PC).Western service providers are now moving slowly to introduce "push-based Internet mail" and promote site access via URLs in order to avoid cannibalizing their SMS revenues; this also reflects their mental models.