An Investor’s Take On The Mobile World Congress

Editor’s Note: Joe Medved joined SoftBank Capital in 2005 and has been investing in digital media companies for over nine years, from seed through growth stage, with special interests including consumer and enterprise mobile, gaming, and social marketing.

Mobile World Congress in Barcelona has become the world’s largest mobile conference. The colorful city that Gaudi built provides a perfect backdrop for showcasing innovation and this year’s event drew 93,000 attendees representing every major mobile market on the planet.

Startup and Advertising Representation on the Rise

The conference is dominated by mobile operators, device manufacturers and related technology vendors. They’re primarily a suit and tie crowd, but the jacket and jeans contingent is growing.

As part of that jacket-and-jeans sartorial growth, the startup community has become increasingly engaged, culminating this year with 4YFN. The 4FYN event is a sub-conference held to connect startups from all over the world with investors and corporations. MWC has become a valuable forum to meet with mobile hardware and software innovators, many of which are exhibiting with large partners at the show or behind closed doors as they seek new avenues to access markets.

The conference reinforces the global influence of Android.

MWC, like CES, has also become a destination for the advertising community, with increasing attendance from agencies and brands. Agencies take their key clients on tours of the conference and connect them with emerging mobile vendors. The overwhelming size of the event helps drive home the point that mobile must be taken seriously as an advertising medium.

Android’s Global Presence

With Apple skipping MWC each year, the conference reinforces the global influence of Android. It highlights Android’s biggest manufacturing partners, a number of which have forked their own versions of the operating system and built proprietary app stores, particularly in the Chinese market.

Samsung is typically the dominant handset maker at the show, and the unveiling of their Galaxy S6 garnered plenty of attention. However, you could sense the growing influence of Chinese manufacturers and the stylish designs they are bringing to the Android device landscape, including Huawei, which has become the third largest smartphone player, and Xiaomi, whose loyal followers in China match the fervent adoration of Apple fanboys.

Huawei had a big presence at the show, where it unveiled its luxurious smartwatch, which is rumored to retail at $1,000. Xiaomi did not have the same physical presence, but their Global VP, former Googler Hugo Barra, spoke on stage about the international strategy for its beautiful but affordable handsets and accessories. The US will be in their long term plans.

Less Focus on New Health Trackers…

Fitbit (a SoftBank portfolio company) has maintained a dominant position within the health-centric wearables space. In last year’s show, there appeared to be a new health tracker at every turn. While most major manufacturers now have a health tracker as a staple in their product suite, there appeared to be far less floor space dedicated to the segment than last year.

…With Shift to Smartwatches

R&D for health trackers appears to have shifted to more fully functioning smartwatches, which were one of the most noticeable rising trends at the show. While most of the new watches looked better in the marketing materials than they felt or functioned, you can see smartwatch design progressing towards the mainstream. The form factors are improving, including luxurious materials and an aesthetic more akin to traditional watches.

R&D for health trackers appears to have shifted to more fully functioning smartwatches, which were one of the most noticeable rising trends at the show.

Once you click through the traditional watch face, the navigation around smart apps still feels like a stunted experience, but it is improving. The Apple Watch will push the envelope around navigation and design within the smartwatch interface. We should see a critical mass of smartwatch penetration within the near term that will open up opportunities for startups on the platform. A number of top mobile developers at the show were already working on smartwatch extensions of their apps. I expect to see an emergence of wrist first developers over the next few years.

Connected Cars Driving the Show

Alongside the rise in smartwatches this year was the introduction of connected car platforms. Every hall seemed to have connected vehicles, from Fords to Maseratis. Functionality ranged from wifi access to full app stores embedded in the dashboard. Until those app stores have significant penetration on the road, which is likely many years away, innovation within the connected car will be fueled primarily by larger corporations as opposed to startups.

Typical hardware startups face a big enough challenge finding traditional shelf space, but innovators in the connected car space need the patience and capital to work their way into a 5+ year manufacturing cycle within an oligopoly system. One opening for startups could be via aftermarket devices, providing stopgap functionality as Garmin and TomTom did before GPS became a practical standard with new vehicles.

Virtual Reality Headsets Galore

If there is one thing that MWC proved about Virtual Reality, it is that VR has an opportunity to be the dominant exhibition tool at conferences. There were people lined up in nearly every hall not only to demo the VR platforms themselves, but to use the headsets to take visual tours of other new products, such as the inner workings of network infrastructure.

The prevalence of the helmets would suggest, as with smartwatches, that the platform could open up in the next few years for startup developers. However, smartwatches will be built primarily on two, or possibly three platforms, with Android, iOS and potentially Samsung’s Tizen. The variety of VR platforms, many of which are new to the market, will take longer to educate a broad base of developers.

The form factor will also need to improve to help mainstream users get over the odd social dynamic of experiencing the devices in public. Vanity has become an advantage for smartwatches given advances in design, whereas it is still clearly a detriment to VR headsets. VR is most likely to be utilized in early days by premium game developers and content creators.

Candidates for Next Year’s Emerging Trends

A few categories popular in the startup community that were shown more behind closed doors than at exhibits included i) smart home applications, which were present but not as prominent as you would expect based on the buzz in the startup community, ii) next generation wearables that are moving beyond the wrist, iii) enterprise-centric wearables, including smartglasses, and iv) robotics, which could become more of a connected platform over the long term.