Nokia is trying hard, really hard, to become an internet company

When CEO Olli Pekka Kallasvuo decided to call Nokia an internet company people around the world thought he was stark mad. With 1 in 3 mobile phones consistently being purchased quarter after quarter by consumers around the world, healthy margins even on low end devices and over 4 billion Euros in the bank, why would a company on top of its game decide to do a back flip? The press release detailing the companies reorganization plans in 2008 published in June and then the Ovi launch in August made things clear as crystal, services.The title of internet company didn’t settle with me the first time I heard it and it has yet to even click today; the appropriate designation of what Nokia would like to be in the future is a hardware+services company. Currently, as a hardware company, Nokia can sell you a device and they make money off that purchase only once. This is working very well, but the goal of every corporation is to maximize profits and this is where services come into play. If Nokia created a service that can make 1 euro a month off only 1 percent of the users to purchase their devices than that would equal a little under 42 million Euros a year according to 2006 sales reports (PDF link). Pennies for a multibillion dollar corporation, but that is where the business model of services comes in to play. That 500 Euro device in your pocket keeps on making Nokia money, even after they sold it to you. In the mobile telecommunications space hardware designers break out a bottle of champagne if they can shave a few cents off the bill of materials for that single purchase you as a consumer make once every 2 years. What happens when a company removes itself from that close minded way of creating revenue and essentially turns that little thing in your pocket into a continues profit creator? That is what Google is doing with Android, but more on that later.

We are just at the early stages of Ovi and it is already going through a rough patch. N-Gage was delayed by a month due to extended testing and Warner Music Group decided to remove their catalog from the Nokia Music Store due to the fact that MOSH users, a Nokia operated service, pirate music. Change takes time and the most important change no one is talking about is the transformation Nokia employees have to make within the company. One such employee, Stephen Johnston, recently documented in a blog post how that metamorphosis is happening from within corporate walls. He solidifies the fact that Nokia is not trying to dominate your mobile internet experiance, but instead be the creator of the best mobile internet experiance available. The Valley, and anyone following the “Web 2.0″ space in general, cringes when they hear a Nokia employee on stage proclaiming that the Finnish company will be bringing the Web 2.0 experiance to mobile, but how are those people so quick to judge when they don’t even know what that means?

It took a while for me to understand, but the release of an application made me to get it. Share Online 3.0 is currently in Beta, it is essentially Flickr in your pocket with tight integration to your device thanks to the open API’s; it gives you a better experiance than even the mobile Flickr website. In the future when that application is shipping on every single Nokia equipped with a camera how powerful will that business relationship with Yahoo be? If a user has never even heard of Flickr or Zoomr or whatever, what happens when an option in that application is “Create a Nokia Photos Account?” Achieving this balance of bringing the services a user is already using, but at the same time giving them an option to sign up to a new Nokia developed service will be the challenge for Ovi. Americans sit in an ivory tower as the country with the highest PC penetration, but for a lot of people experiencing the internet for the first time will happen via a mobile phone and many people today enjoy a majority of their digital lifestyle on their mobile. They’re going to want to sign up for the services that give them the best mobile experiance. Ovi will hopefully be that.

I choose to highlight Stephen’s post because he is one of the people at Nokia I know that get it. The virality of his words will undoubtedly be spread due to his popular internal blog, but it is important to highlight that before Nokia can become the leading mobile services company in the world, first their employees need to understand why mobile services are important. Google gets search and they get services, tomorrows release of Android should give us a hint as to how well they get the operating system side of things. They decided to skip hardware all together and are hoping enough people build devices with their OS and their applications that just happen to tie into their online services. Let Motorola fight Samsung in devices, Google still gets paid. It is a risky move, but if successful could be one of the most brilliant business decisions of this very early mobile Web 2.0 era. Apple gets hardware and they get services, but they are closed and don’t want to play nice. February will see the release of their iPhone SDK, but more importantly we will find out how developers are going to be allowed to offer their applications to consumers, many are predicting it will be through Apple which would be very foolish. Microsoft is starting to get it and if anyone can claw away at the success of Nokia it is definitely them, but they’ve just failed to focus on mobile. I’m positive this will change sooner rather than later.

Nokia has been in the mobile game longer than anyone. Their employees have every reason in the world to be complacent and ignorant of the world around them. The stock is at a six year high. Records in terms of revenue and profit are being set year after year. Why should they have to worry about this whole Web 2.0 thing happening? Stephen tells the world and his fellow employees why they should care, because frankly these next few years will be responsible for not only the next chapter of Nokia’s story, but for how current companies working in the mobile space will be writing theirs.

Read the complete post at http://feeds.feedburner.com/~r/IntoMobile/~3/183290826/nokia-is-trying-hard-really-hard-to-become-an-internet-company.html