Mobile Behavior: an Omnicom Group Company

In Brazil, a country with a population of 190 million, there were 173.9 million mobile phones by the end of 2009 -- that means 9 out of 10 people have one. While Brazil is only the world’s 10^th largest economy, it has a higher cell phone penetration rate than that of the United States.

While pre-paid phones dominate the market--82.55% of the market, vs 17.45% post-paid--the iPhone has become an object of desire  in Brazil and is increasingly in popularity. It's also changing mobile behavior. Of the total number of mobile web hits in Brazil in February, almost half of them were made by the Apple phones, according to a recent survey.

The most awaited phone of recent times, the iPhone draws the attention of Brazilian consumers primarily because of the media player and web browsing. While those features are common in most modern cell phones, the difference is in how they work. Songs, pictures and videos are accessed through an interface similar to the iPod, one of the most popular players in the world and in Brazil. The web access interface is similar to that of computers, so it's a more robust experience for users. For the Brazilian advertiser Tomas Prado Felicio, who bought his iPhone in November 2010 through the Claro carrier, the number of applications available, the touch screen, the built-in iPod and web access through a larger screen are the main qualities of the device.

There isn’t an official survey tracing the iPhone's  Brazilian user profile so far. But in an informal consultation with some executives from operators Vivo, Claro and TIM, we learned that the majority are likely male-- about 70% --aged 20 to 40 that love technology and make more than USD $30,000 per year.

According to a list released by Apple, the top three apps in the Brazilian App Store last year are all utility-focused. The most downloaded was Sygic Mobile Brazil, the first turn-by-turn GPS to come with domestic maps. The office document editor was Quickoffice Mobile, which publishes and creates Word and Excel documents directly on the iPhone. Not surprisingly, eight of the apps on the list are mobile games, which many people play during pockets of down time.

As a result advertisers of this growing popularity, advertisers in the Brazilian market  are investing in creating iPhone applications.

Centauro, a large network of sporting goods stores in Brazil, created an app with customized running tips as part of its customer acquisition strategy. The company hired Marcos Paulo Reis, a famous Brazilian Triathlon coach, to provide the tips, and the app has turned out to be a great branding tool for the company.

The Brazilian subsidiary of Pizza Hut also launched an iPhone application that demonstrates how a well-designed campaign can generate significant revenue. It offers a video game in addition to an order function. This app allows users to build and place their orders, choosing from many choices of pizzas, pasta and chicken wings. The user can choose the size of the dish, add ingredients through a drag and drop function and even shake the iPhone in order to add seasoning to the order. Using the locator function of the iPhone, the app automatically sends the order to the nearest store. In only three months, the application was responsible for over one million dollars in sales. McDonald's in Brazil has followed suit with their own iPhone app.

There is an obvious hunger for this new technology that will grow the market in coming years.

More than one year before being officially launched and available for sale in Brazil, iPhones already accounted for half of the mobile internet traffic in the networks of Brazilian mobile carriers. Now Brazilian consumers can buy an iPhone--unlocked or subsidized, with a contract--from any of the four major carriers that operate in the country. But prices can be steep: A 32GB iPhone 3GS can cost upwards of $1,500 Brazilian Real (USD $885), and an unlimited voice and data plan will cost roughly $270 per month or USD $150. To be fair, monthly plans and cell phone handsets tend to be much more expensive in Brazil than in the U.S. because of heavy government taxation. Consumers choosing other smartphones will likely only find the same pricey options for unlimited voice and data.

But despite this price barrier, the iPhone market will surely grow. In addition to the better user experience it provides and the growing number of applications, there is an economic incentive. Since it is possible to provide content to be accessed for offline, without an Internet connection, data traffic can be less expensive. Mobile broadband is also becoming more popular in Brazil, and prices will become increasingly more accessible.

This article was contributed by Edvaldo Acir, who does Business Development for FOX Latin American Channels in Brazil, and Andre Bodowski, a Brazilian-American Marketing Manager who lives in New York and São Paulo.

In Brazil, there is now a huge opportunity for mobile TV services. The biggest country in South America, Brazil has a population of 191 million people. Of those, 168 million have mobile phones, compared to 70 million with TVs.

Why Video?

According Michel Castaldelli, Business Consulting Director at Ericsson, the ringtone and wallpaper sales are way down. This is forcing a migration towards new revenue generating products. Video fits the bill properly as it is experiencing a boom on the Internet and catching the attention of the mobile user as well. Since video quality has improved, it’s often the main selling feature for new high-end devices. Users want quality and only nowadays mobile devices are delivering it.

Why Mobile?

The Brazilian market is growing exponentially due to the fact Brazilians are in love with TV and with gadgetry, says Barbara Gurjão, former Media & Content Manager (VAS) at the Oi carrier and now the TV & Media Business Manager at Ericsson. Mobile infrastructure has experienced a boost with the launch of 3G, mainly due to the lack of competing fixed broadband access in some areas. Even if broadband is available, low income customers often cannot afford both and will opt for mobile only. Plus, the digital TV standard chosen for Brazil, ISDB-T, offers videos meant for mobile viewing at a price tag Brazilians can afford (i.e., free of charge).

With this in mind, some of the biggest Brazilian media and telecommunications groups are investing in mobile TV:

• The Brazilian TV Group Bandeirantes will launch Bandnews Mobile, a news channel with exclusive mobile content. They will start with short clips on demand and later offer live broadcasting. The service, which will offer national coverage, will start free-of-charge in January 2010 and later a monthly fee will be charged.

• M1ND, the Brazilian company that developed Oi's and TIM's carriers mobile TV platforms, will also invest more in mobile TV. M1ND will create its two own channels to be launched commercially in 2010. One of them will be targeted to the female audience—an attempt to attract women to mobile TV. Currently 63% of Brazilian Mobile TV users are men between 15 and 36, according M1ND. The other channel will be called M1ND TV and will be featured by humor programming.
• The Claro Video Maker is an interesting mobile video product launched by America Movil Group and produced by Compera nTime Yavox. People can create their own videos and send them to friends via MMS or their web site, where any user of the service can download it and video's creator earns ten cents for each download. The most viewed videos of the month go to a special gallery on the site, which will further catapult the sales of its video makers.
• Terra, owned by the Spanish telecom company Telefonica and the biggest internet provider and web portal in Latin America, will offer 20th Century FOX new series and movies to Blackberry users. They will have access to Terra Web, which will give users access to a wide variety of news, sports, entertainment and lifestyle contents.

Challenges

The consumers in Brazil are already using videos on their mobile phones and on the wired web, both for viewing premium content and sharing UGC. Offering the right content the way consumers want it is a challenge to all providers. Michel Castaldelli told us that Brazilians tend to prefer not being tied to a monthly commitment for any services. The price of mobile data traffic is also a barrier.

A Hybrid Model

Experts in this market say that the Mobile TV business success in Brazil depends on a hybrid system in which the offer includes open channels, interactivity, subscriptions and pay channels. The hybrid model plays a key role because the free model attracts the audience but it’s pay TV that can sustain the business.

Not IF, but WHEN
Ultimately, though, the mobile videos industry in Brazil is definitely on the rise and being successful is not a question of IF, but a question of WHEN. Users are currently changing their TV viewing habits towards a much more mobile, on-demand, ad-hoc experience instead of traditional linear TV. As more and more content becomes available in this format every day, both legal and pirated, it’s up to content providers to seize this opportunity to the fullest.

- Edvaldo Acir

Edvaldo Acir is currently Head of Business Development at FOX Latin American Channels and works with digital media since 1998. Has a Master degree in progress at UNICAMP (research about mobile market) and a Post Graduation degree at ECA/USP in Advertising and Marketing (research about internet and mobile market). Contact: edvaldoacir [at] uol.com.br

Nokia recently announced their latest marketing strategy to boost US sales: Branded Handsets. According to AdAge, the cell phone maker is partnering with brands to skin their devices with logos and preload them with themed content in order to build loyalty, boost brand awareness or create buzz around a product. Nokia has launched co-branded handsets before, and in fact did so with great success in Brazil in late 2007. Unilever's Seda Shampoo sold 200,000 branded Nokia 5200s in 9 months. The limited edition handset, equipped with mobile themes, advertisements, games and mp3 tracks, came in teenybopper pink, retailed for $100 and included sample packets of a new shampoo. Now, does this sound like something a U.S. teen would buy?

My Cell, Myself

To answer this question, we need to look at how people in each culture use and relate to their mobile phones. Everyone who’s ever owned a mobile phone will say that they can’t live without one, so what makes Brazil different? How they view their phones, for one. Utility and connectivity, the main reasons we here in the US have a mobile phone in the first place, fade into the background in Brazil because mobile call charges are prohibitively expensive for many of the country’s 120 million pay-as-you-go users. Payphones are in fact preferred for voice calls, and it’s still pretty common to see payphone users, receiver in hand, looking up a contact’s telephone number on their mobile.

For Brazil’s mobile subscribers, their cell phone reflects their identity and is, at some level, a measure of who they are. Sandra Rubia, a PhD student in Brazil, writes about how Brazilians feel a ‘shared identity’ with their phones:

“Those who do own a mobile phone are ‘modern, part of their times, are in the world’ and those who do not, or possess an older model… are often looked down at, or subject to questions such as ‘Aren’t you ashamed of having such a phone?’"

She goes on to talk about Gabriela, a 24-year old fashion designer who leaves her battered, older-model phone ringing in her bag because she’s too ashamed of what other people would say about it were she to bring it out in public.

The link between Brazilian identity and the mobile handset is further expressed through the personalization of phones. Business is good for phone accessory dealers and customization kiosks that spruce up handsets and help make them stand out in a crowd. Handsets with stickers, custom covers or even adorned with Swarovsky crystals is a frequent sight in Sao Paulo.

Yet perhaps the biggest – and most profitable – expression of one’s identity through the mobile phone in Brazil is music. Brazil, the birthplace of samba and bossa nova, places a premium on local music, and record labels have taken measures to digitize their content to take advantage of the demand. According to IFPI, the global association of the recording industry, the Brazilian digital music market is the largest in Latin America, having doubled in size from 2007 to 2008, and accounts for 10% of all music sales in the country. 80% of these digital sales are through mobile – an astounding feat for a country that only launched 3G services last year.

Aside from downloading full tracks or ringtones, Brazilian subscribers also have the option of purchasing handsets that come preloaded with music. This is why a branded Nokia-Unilever phone worked so well: It tapped into an existing market. In late 2007, Sony Ericsson, seeking to replicate Nokia’s success, partnered with a popular local act called Jota Quest to launch the Sony Ericsson Walkman phone. Preloaded with the band’s latest album and other band content, the handset sold an amazing 800,000 units within the first few months. Most recently, Coke Zero worked with Nokia to launch a version of the Nokia 5310 music phone embedded with Coke Zero-themed songs by two local artists. The special edition phone screamed Coke Zero – on the box, its sleeve, headsets and phone jewelry - and even came with four different types of Coke Zero themes. It sold 30,000 units, helping to solidify Coke’s music credentials in the Brazilian market.

Lost in Translation?

Now, compare that to the U.S. market. Blinging out phones hasn't really caught on here--no charms, no rhinestones. Most people listen to music on their iPod or MP3 player. And why get pre-loaded music when you can download new songs and games every week from iTunes, app stores and torrents?

Also consider the differences in the local mobile industry. As AdAge notes that, in Brazil, handsets are sold independently of the carriers. This allowed Nokia to sell their (unlocked) Seda Teens handset to everyone regardless of their service. In the US, Nokia and its brand partners will have to go through the carriers, who typically have a lot of user interface requirements for new handset introductions. This may make launching a co-branded handset cumbersome and costly.

Apple and Sony have used co-branding strategies in the past, with somewhat mixed results. We doubt that Nokia will fare much better. The cost to launch a handset loaded with enough content to satisfy a very sophisticated US consumer and to ensure widespread distribution across the major US carriers might just make it too expensive to work. However, it’s certainly a winner of a concept in Brazil, and Nokia would probably have the most success in other BRIC markets.

- David Zarraga