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January 05, 2010

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Comments

Jason Grigsby

Hi Tomi,

Looks like a good article. Similar tack on something I was planning on blogging about in the near future. Thankfully, you didn't make my post irrelevant. I still have something to say. :-)

I'm going to finish reading a bit later, but wanted to drop you a quick note that Segway is spelled incorrectly in the article. http://www.segway.com

ARJWright

Me thinks you were a bit more perturbed than I've been about the app store phenomena ;)

Graham Brown

Telecoms is always going to try pick the lock rather than discover the keys to long term success. Appstores are one such short-cut that appeals to our inherently unimaginative (read lazy) mindset in seeking that elusive silver bullet/magic wand etc. For the most part, as you note Tomi, they are of no consequence to 90% of the customers.

It's worth noting that the game has shifted away from top line revenues now and that the more astute players are looking for services that reduce churn rates across the network. On that basis, there is mileage in the belief that an Appstore of sorts will address the attrition issue.

Jan Ole Suhr

Hei Tomi,

just curious, but where did you get those numbers from!? They don't seem to make sense at first glance. Checking via Google, I found a prediction by the Yankee Group of those US$ 342 million but only for the U.S. and only for the Apple App Store, Android and Palm Pre. The same reference predicts $4.2 billion in revenue for the U.S. only by 2013.

While I personally don't care about predictions, I was just wondering if your numbers (comparing app sales and ringtone revs) were correct.

Tomi Ahonen

Hi Jason, ARJ,. Graham and Jan

Thank you all for the comments, boy these came fast haha.. I'll reply to all individually.

Jason, thanks. I corrected it and thanked you.

ARJ haha, what makes you think so. The really funny part was, that about an hour after I Twittered about this blog, I found a Tweet about a news article that said something like 'at 3B downloads, Apple forgets to mention 75% are not used after 3 months' - ie suggesting the 3B number is over-inflated. I went over, read the article, and then Twittered - with a straight face - after this rant haha - that yes, 75% of apps still used on iPhones is not bad news, it is very good result... I am feeling so schitzophrenic today (and so am I)

Graham - haha, so very true! Going for the silver bullet.. And how much has this industry managed to waste with that thinking haha.. But yeah, the churn/loyalty factor is very relevant. I do think, any operator for example (many now launching apps stores) would get FAR better bang for their buck, in churn/loyalty, in some more direct methods to make customers satisfied and loyal, but thats just me and my wishful thinking, eh?

Jan - thanks. I understand yea, the numbers seem staggering and its easy to think I must have mis-scribed the numbers, placed the decimal place in the wrong place or something. So yeah. I am totally confident the scale is right for all those numbers. Take ringing tones (basic) were about half a billion dollars in 2001, passed a billon in 2002, hit 2.5 billion in 2003, passed 4 billion in 2004 etc. Source Informa and other such sources. I monitor these numbers weekly and report on at least some industry stats here monthly and do a big annual industry review (all free) annually. And my nine books all are loaded with stats from the industry from Ovum, Gartner, IDC, Yankee, Informa, ITU etc. They call me the 'stats police' for the industry, so I am totally not a hobbyist in this space, I am deeply passionate about my numbers. So yeah, is the exact number 5 billion for ringing tones in 2009 or perhaps 4.5 billion or 6 billion, pick your analyst. It is several billions. TOTAL mobile music is in the magnitude of 10B to 14B dollars in 2009 including more advanced ringing tones, so-called true tones, plus MP3 downloads, plus ringback tones, plus subscription music services plus other smaller music categories. All major analysts say basic ringtones are still the biggest category of music. So just on the ringing tones, is totally consistent and give me +/- half a billion, all major analysts agree on the scale.

I could do the same for SMS and VAS data and MMS etc etc etc. I trust you'll take it on reasonable face value that the scale is right for these numbers. I have tracked every one of them for the whole decade and am quoted in the FInancial Times and Business Week and Economist etc on the stats so its not sudden one-time weird numbers pulled out of thin air haha...

Thank you all for writing

Tomi Ahonen :-)

Romain Criton

Wow, Tomi, what a rant ! How much coffee did you sip today ? ;-)
Well I've commented in the past on one of your previous post on this subject, and whereas I agree on several myths you're taking aim at, I don't really agree on the conclusion that apps and app stores are just "irrelevant".
So yes I'm with you when you say nobody chooses their phone based on its App Store shelf space: as you say, most people buy a phone because of its looks, its features, its brand strength... Then app developer simply rush to the most popular phones. The particular strength of the Apple App Store, is that it lets you address in one shot a significant number of people (don't forget it's not just about the iPhone, but also the iPod Touch) with 1) deep pockets and 2) a device homogeneity not found elsewhere (limited number of different devices, same OS, same screen resolutions, same input methods, binary compatibility...)
Despite that, yes the App Store "Gold Mine" is a Myth. But if you put the App Store in the perspective of the whole consumer software market, the App Store is no different: it's not easier to strike it rich selling PC software than it is selling iPhone or Android apps.
The whole software industry is undergoing a painful transition these last years, with the advent of Open Source software, web apps and in general new business models where the software is provided for free.
So my point is that apps should not be considered only as content that is directly monetized like ring tones, they should be considered as a "bearer" (like SMS, MMS, mobile web or WAP...) that a brand, a company, a non-profit organization, can use to reach its users or consumers, whether it is to provide a service, extend features of their other products, or provide a product per se.
And right now, apps are the "bearer" providing the richest, most interactive experience to the user, with full access to hardware capabilities, connectivity, etc.

Also, there is more to mobile apps than the iPhone, and smartphones in general. Many many basic phones are Java-capable, so also app-capable.
As you point it out, mobile apps are nothing new, and so are App Stores.
If you set aside games (downloadable Java games have done pretty well for years), the handset manufacturer and mobile carriers are a bit slow to provide an "App Store" offering beyond the iPhone that could attract as many developers, but I really believe they'll eventually find the right mix and generalize app stores and apps on almost all phones, even so-called "dumb" ones
Actually, what I think is irrelevant is really the whole "smartphone" vs. "non-smartphone" segregation.
As you point it, the iPhone wasn't really a smartphone according to many criteria when it was released.
And what will we call the upcoming line of Samsung phones sporting their new "bada" OS ? Are they smartphones or not ?
And don't get me started on today's attempt by Google to coin a new "superphone" sub-category...

Henry Sinn

....As per a previous reply to another post....
Who needs an app if you have a browser?

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Daniel Perry

I have enjoyed your blog and your e-books! Apps are frequently of little practical utility. I would never pick a smartphone based on what apps were available. I need a phone to be the best phone I can use - I have steered clear of the iPhone because of the negative reviews of its voice quality. I am amazed that it took the iPhone so long to be able to do some of the most basic tasks that older smartphones have been able to do for some time.

I like your advice encouraging developers to develop for the iPhone first but seems to me that your "Pearls" e-books and your hard-copy books point to a better approach: Develop an "app" that provides value at the most basic level - SMS - and you win at scale. As an attorney, I have had to fundamentally revise my own view of such a business model. It is an exciting ... and MOBILE, future awaiting us all.

Daniel Perry
http://twitter.com/danielperry

kevin

@Henry:
For many multi-step tasks, doing it through a dedicated app is significantly easier and quicker and nicer than going through the browser. Of course, it depends on the quality of the app. But those who get it right, stand to make a BRAND for themselves.

Zarko

Hi Tomi,
a related article came out online today so it's worth making a small comparison on numbers.

One of your statements above is:
"Yankee Group measured in 2009 that the total value of all apps sold in all Apps Stores, not just the Apple iPhone App Store was worth 343 million dollars..."

The GigaOM guys today published this: http://gigaom.com/2010/01/12/the-apple-app-store-economy/
according to which the Apple app store alone generates 550 million dollars in total, per month.

For me that's a very big comparison mismatch but could I be missing out on something here or?

Cheers!

Douglas Smith

Hi Tomi
I have worked for Nokia for 7 years. And while I completely agree with you about the apps business. It really is not apps that sell phones. I know journa's love going on about apps as it's really low hanging fruit and gives them something else to talk about as hardware innovations seem slow in coming.

The battle the mobile industry faces today is the UI wars and related haptic technologies, offered at affordable price points. Apple's great game changer was not apps, or even a good phone. It was what they do best, UI and haptics! Nokia, Samsung, LG, Blackberry (especially them) are all struggling to catch up. But Apple's and Nokia's price points are still absurdly high. Samsung is planning to bring these price points down to the far more reasonable 150 USD price point, though Apple is already churning out mass market pricing for its phones.

I think the future of apps will be like the camera, a must have that you quickly take for granted as part of people's desire to endlessly personalise and customise their phones. I suspect that nobody will be talking about this in 2011 once the newness wears off and instead they will all be talking about augmented reality and real 3D, or some other more relevant development. Or then perhaps MIT's SixSense project will get designed and turned into a nice product and change the game for everybody.

Sean

"Ringtones' requiem"

"U.S. ringtone revenue this year will reach about $750 million, down from $881 million in 2007 — and the business will be nonexistent in 2016, says IBIS World, a consumer analyst group"

FORTUNE
http://brainstormtech.blogs.fortune.cnn.com/2010/01/18/ringtones-requiem/

Tomi Ahonen

Hi Romain, Henry, Auto, Daniel, Kevin, Zarko, Douglas and Sean

Thanks for the comments. I will respond to each individually

Romain - we do mostly agree. Yes, I'm a bit provocative in the blog and I am serious in that the hype currently around apps and app stores is totally beyond any reason. But yes, there is a place for apps, of course, and their role will grow and Apple did a good job re-inventing the apps market opportunity. But I hold my ground that current hype about apps is beyond any reason.

Henry - haha yes. Good one.

Auto - thanks, you are welcome.

Daniel - thank you so much and yes, you get the point exactly. We can prototype on the iPhone (or other smartphones) and hopefully if the idea is good, we can even make some money (most apps developers do not turn a profit). But to really make money in mobile, we need SMS, MMS or WAP or Java.. Thats not easy, but that is where the billions are. 250 Billion is the level we hit in 2009 according to my latest projections..

kevin - good point, it can be done and there is the branding opportunity in an app - but that does not mean we cannot have a branding opportunity on a browser based solution - look at Google, eBay, Amazon, etc. They all did their branding purely as a browser-based solution on the web. Can be done..

Zarko - the GigaOm stats you refer to were totally messed up. GigaOm themselves went back and corrected some of their basic math errors haha. I gave an analysis here then on this blog about the faults that GigaOm still had with their math. I came to the number of 171 million for December based on their reported numbers and 'realistic' assumptions. A far cry from what GigaOm initially published. Even that number 171 million is not consistent with the industry overall, and is likely too high.

Douglas - great points and we mostly agree. Yes, the battle is a lot about haptics (ie how we touch and feel that phone and get it to work, in terms of its user interface). I would point out that if your primary use of a phone is text messaging - thats 3.5 Billion people literally twice the number of internet users at 1.7 Billion people - then the haptic need is a qwerty keyboard first introduced by Nokia 12 years ago and mastered by Blackberry. So while I agree the battle is going more to haptics and Apple totally revolutionized the touch and UI aspects of - internet browsing (and media consumption such as looking at photos) - they are not as good at messaging as a Blackberry or E-Series Nokia is today with full QWERTY. And still in 2009 more QWERTY phones were sold than touch screen phones.. Nokia is rolling QWERTY keypads even to non-smartphone feature phones. But thats a 'detail' distinction. I totally agree on your main point.

Then about the Apple pricing. I am amused how many really think and believe that Apple has cut its price from 500 dollars to 200 dollars (3GS model) and 100 dollars (3G model) in the USA. Apple has done nothing of the kind. It is still a 600 dollar phone - Apple CFO Oppenheimer said so in their quarterly review analyst call last Autumn. Its totally a marketing gimmick. Apple is 'viciously' expensive, overpriced smartphone and has rivals with 'equivalent' touch screen 3 inch smartphones by rivals that cost half or less in real terms. And if you pay 600 dollars today, you do get far more in a phone than Apple offers. Still, just a lot of tech obviously do not mean the 'most desirable' phone - Apple is also a master of creating that desirability, even though their Macs and now the iPhones have always had less bells and whistles than their contemporary rivals.

Sean - yes? What was your point? I told you in the blog that global sales of basic ringing tones was a 5 billion dollar industry. The US level of ringing tone sales of 750 million dollars is well in line with that number, roughly in line with the proportion of the US total revenues of the industry as well. Did you want to agree with me or perhaps disagree with me? To me this IBIS World number is totally in line with my blog.

Thank you all for writing.

Tomi Ahonen :-)

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Romain - we do mostly agree. Yes, I'm a bit provocative in the blog and I am serious in that the hype currently around apps and app stores is totally beyond any reason. But yes, there is a place for apps, of course, and their role will grow and Apple did a good job re-inventing the apps market opportunity. But I hold my ground that current hype about apps is beyond any reason.

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    Tomi Ahonen is a bestselling author whose twelve books on mobile have already been referenced in over 100 books by his peers. Rated the most influential expert in mobile by Forbes in December 2011, Tomi speaks regularly at conferences doing about 20 public speakerships annually. With over 250 public speaking engagements, Tomi been seen by a cumulative audience of over 100,000 people on all six inhabited continents. The former Nokia executive has run a consulting practise on digital convergence, interactive media, engagement marketing, high tech and next generation mobile. Tomi is currently based out of Hong Kong but supports Fortune 500 sized companies across the globe. His reference client list includes Axiata, Bank of America, BBC, BNP Paribas, China Mobile, Emap, Ericsson, Google, Hewlett-Packard, HSBC, IBM, Intel, LG, MTS, Nokia, NTT DoCoMo, Ogilvy, Orange, RIM, Sanomamedia, Telenor, TeliaSonera, Three, Tigo, Vodafone, etc. To see his full bio and his books, visit www.tomiahonen.com Tomi Ahonen lectures at Oxford University's short courses on next generation mobile and digital convergence. Follow him on Twitter as @tomiahonen. Tomi also has a Facebook and Linked In page under his own name. He is available for consulting, speaking engagements and as expert witness, please write to tomi (at) tomiahonen (dot) com

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