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January 18, 2011

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Hantu13

Tomi,

When you say "platform," what exactly do you mean? In my understanding, IOS devices like the ipod touch, ipad and even apple tv are hugely relevant, since users of those products are part of the addressable market for potential developers.

Isn't this the point of gaining market share?

I agree with you that Apple's current strategy will make it absolutely impossible for them to be the dominant (in unit count) phone manufacturer- the price points are simply too high and the release cycle and product line up too limited- as you've articulated here before.

Nonetheless, what good will LG's position as the #4 seller of smartphones do them?

kaj

Tomi, they did however report that they are severly supply constrained, they simply couldn't build enough iPhones to meet demand.

I would say it's a huge difference if marketshare is stagnant because of less customer demand or because of supply constraints, wouldn't you agree? If the latter (as seems to be the case) then iPhone marketshare still has potential to grow as long as they can increase supplies.

Mark

@kaj

"Tomi, they did however report that they are severly supply constrained, they simply couldn't build enough iPhones to meet demand."

They had 3.75 million in inventory so I'm not buying that one. That said, iPhone share will clearly grow when the Verizon iPhone is released and will continue to make Apple pots of money.

Me? I'm bored with Apple's stuff now. It's nice but... a bit empty.

Bob Shaw

Tomi - Your analysis on trends for iPhone has been spot on. Considering that comparable smart phones to iPhone from other vendors really arrived more like in Q3 of 2010 (Nokia N8 released in Sept., 2010 and Windows Phone 7 released in Q4, 2010) this drop in iPhone market share from 18% to 15% from Q3 to Q4 is little shocking. The competition in smart phones is expected to get more intense in 2011 with new innovative products expected to be launched from Apple, RIM, Nokia, Vendors of Android based and Windows based Smart phones and also possibly Palm from HP. I am sure many more people will be actively visiting your website to get some understanding as to how things are shaping up in the smart phone as well as the general mobile phone segment in 2011.

 Tomi T Ahonen

Hi Hantu13, kaj and Mark

Hantu13 - there are many platforms that cover many devices, Android for example is used also on TV sets and tablets. I keep a very clear focus on looking at the 'mobile' as in 'mobile phone' (cellular) market. That is the biggest economic opportunity of our lifetimes and is VERY different from minor digital devices in units sold or installed base, like digital media players (like iPod Touch) or tablet PCs (like iPad). I bave been explain it at length in my books under the topic of 'Reachability' which explains why pocketable/portable devices do not compete viably with the mobile phone. Now I don't want to waste my or your time on that, you can read all of it fully in my free ebook The Insider's Guide to Mobile - which you can download on Lulu. Please read that to understand, it explains why the more expensive iPhone outsells the cheaper but identical size iPod Touch.

The iOS eco-system is relevant.. to Apple and its developers. It is NOT relevant to those who build 'mobile' services because iPod Touch's and iPads are not mobile phones. So the total market economic opportunity is trivial on them, compared to the fastest-growing Trillion dollar industry in the economic history of mankind - ie mobile. You can't do SMS or ringing tones or AR layers or Shazam music recognition etc on the iPad or Touch. That is why while yes, it is 'a platform' those devices are not part of the smartphone platform market share. It is like counting Honda motorcycle, as part of Honda's automobile market share. Yes, a motorcycle has a motor, and is a vehicle, and can even replace some uses of a car, but a motorcyle does not fit the definition of a car, and is not counted as a car.

kaj - that may be, but that is not relevant in the count. We have never made such adjustments for any other manufacturers either. We count the raw numbers here and report them.

Mark - haha, I hear you, it does start to sound boring haha.. If if was not for Steve Jobs taking sick leave, I think we might have seen far more excitement still from Apple, not I do think Apple settles far more into its 'predictable' role as a handset maker with 3%-4% market share of all phones, at the top end of the price point, a bit what SonyEricsson had just before Apple came along.

Thank you all for writing

Tomi Ahonen :-)

KDT

Two minor points, you said:

"This blog focuses on digital convergence, and the PLATFORM of the smartphone is the point here. "

If it's all about "digital convergence" and the platform, the platform is iOS -- not counting the AppleTV which is closed from third party development, Apple sold 33.38 million iOS devices last quarter. (They said that half of all iPods sold were Touches.)

But if you refuse to count the other devices as part of "the platform" since they are not "phones", how was it any more valid when you counted phones as "mp3 players" a few years ago and said that the iPod market share was a lot lower because of MP3 playing phones?

We seem to get the same chicken little, "the sky is falling" every quarter, when we all know the iPhone sales volume cycle -- Q3 is huge after a new phone is introduced. Q4 is a little bigger because of Christmas. Q1 and Q2 are lower.

Apple is playing a completely different game than the other mobile phone makers. While everyone said that in 2010, they would not be able to expand the iOS "platform" without going down market, they in fact went *up* market with the iPad.

kaj

@Hantu13, I completely agree with you there.

As a smartphone app developer I would say that all iOS devices are relevant since the same program runs on all devices. The platform is any device with a compatible OS, not a smartphone per se. So the iOS market grew with 33 million devices this quarter. That is really the only thing that matters to a typical app-developer (very few apps utilizes the phone part of a smartphone).

I can understand only dealing with smartphone marketshare for the sake of discussion and comparison, as it's done in this blog. But if we are talking platforms (as in market opportunity for developers) then all devices running that platform should be taken into account. That will be even more relevant this year as the tablet market takes of.


KDT

Tomi,

Okay, we responded at about the same time. I didn't see your post when I posted my initial comment.

I understand your point about the iPod Touch, but what happens when the line blurs even more -- i.e. devices without native voice capabilities but with cellular access? Yes I realize that the relatively few 3G capable iPads don't make a statistical difference in the overall scheme of things, but as always connected, pocketable, non-phone devices become more popular?

kevin

Tomi, Based on this blog post and your above responses, can I conclude that your definition of mobile is limited to only those mobile devices and services that utilize the "cellular network"?

Thus, you're not interested (at least in this blog) in iPod touch or PSP or DS or iPad 3G or a laptop with 3G/4G card, or in the impact these devices might have on the smartphone vendors, consumers, or developers.

 Tomi T Ahonen

Hi Bob, KDT (twice), kaj and kevin

Hi Bob - thank you, and yes, I see this year 2011 becoming even more fierce in the contest as there are still many big brands joining in the battle I just learned today that Akai the electonics brand has launched phones for India - and others are 'upping their game' ie Lenovo for example setting up a separate mobile devices division etc. I'll be here for you, am happy this blog is of value.

KDT - good point, I read both comments and obviously you already noticed that I had explained while you posted haha.. About your question - yes, we see already today, that the primary purpose of our 'mobile phone' is no longer the 'phone' ie talking ie voice calls part. The primary purpose of our phone today is SMS text messages, so we are well along the way already now, in migrating past the 'phone' need, and onto a more advanced device, which typically does do voice, but does more things that we value more. The critical parts are yes, cellular connection (always on, always connected) and pocketable. The pocketable part is McGuire's Law, and the Reachability part is my addition to McGuire's Law (which alone cannot explain why two similar pocketable devices would be treated differently) and that is the Ringing in the Pocket Test, which determines if it answers the need of Reachability. I do explain these very well in the free 350 page ebook - please go to Lulu and download it and you'll get tons of good stats and facts etc. Its called The Insider's Guide to Mobile by Tomi T Ahonen, and free with no registration needs or anything.. Its my 10th book and we made it free as a gift to my loyal readership.

kaj - fine, for a random app developer, that may be relevant. For those app developers who want to develop MOBILE apps - ie capitalizing on the biggest economic opportunity right now, then the iPad and iPod Touch are not part of that opportunity. So for example, if you do a multiplayer game with real time updates via the cellular network - that game will not work the same way with those who connect only occasionally via the WiFi network. You either create only a WiFi version (less intense, less interactive, less pervasive) or you create one that is truly mobile but does not work on WiFi-only devices.

There are plenty of websites that discuss WiFi gaming - for the PSP for example - but this site looks at the mobile industry, and expressly when I talk about the Smartphones, of course I only talk about those devices. Your point is valid, but not relevant. You are talking of a different type of device than I am, and while you may find it interesting, that market is far too trivial for me to care. Sorry.

kevin - you got it! Yes, totally. When I talk about the smartphones blood bath on this blog, or about 'mobile' as the industry and the services, apps etc, that is only those delivered on the cellular network to pocketable devices.

I also talk about digital convergence from time to time, and in those blog postings I do discuss videogaming consoles or digital TV or laptops, tablets etc. Those blogs are rare but I have another coming soon about the Digital Divide. It will be very clear in the topic of the blog what its focus is. But you are right, I will not consider a PSP or iPod Touch worthy of mention in a blog that talks about mobile phones, the mobile industry or about smartphones. PSPs and Touch's sell annually in the scale of 1% of the size of handsets.. I have enough of a headcache trying to stay atop of this industry, which is the fastest-growing giant industry ever seen in the economic history of mankind. I think we have enough to worry about this industry here haha, and you won't find any other blog or free website with more data about this industry (mobile) than my blog. There are other blogs who focus on those gadgets.

Thank you all for writing

Tomi Ahonen :-)

Rich Lazzara

I get the whole your blog your rules thing. However I have a hard time understanding how you dismiss profitability so fast and yet focus on market share/growth. So help me understand why Apple market share "NOT GROWING" matters? If market share doesnt equal profitability as you have pointed out to us, then who cares what their market share is doing? I suspect market share does matter and that's why you make a big deal about it. And in the long run profitability is all that matters.

Jonathan

One obvious thing Tomi wants to dismiss seems to be platform fragmentation. All mobile platforms are not equal from developer's point of view. Some platforms are more fragmented (hardware, stores, software APIs) than others. Also the platform market shares are not directly deductible from the sales by manufacturer.

Let's take Nokia as an example. Nokia lists all its Symbian and Maemo based devices as "smartphones". Among them there are huge differences in the devices both in hardware and software. Most of the phones do not compare well to "super smartphones" as iPhone or the high end Androids. They are just beefed up feature phones, the high end N8 is totally different to the most recent E7x. Should they be counted as being the same platform? Nope. N900 is even more different.

In addition to that Nokia is in middle of several transitions. On one hand it is transitioning to Maemo/Meego. And on another it is transitioning from old Symbian APIs to Qt. It is a mess, big mess.

Asserting that a point of Nokia's market share presents equal opportunity for a developer as a point of Apple's market share is just wrong. The same can be said about Android. See Rovio's comments about Android market in December, very interesting stuff.

cheap calls

This is really great! smartphones now are truly amazing gadgets worth to be collected. They have lots of features, and allow many applications such as VoIP. They truly are made to maximize calling experience without spending much on it. Looking forward to see and hear more benefits from different smartphones out there.

Dan

ZTE claims 90 mil phones sold for 2010, Apple is not in top 5 total mobile phone handset maker.

Bob

Jonathan,

in case you missed it, Rovio said they will continue to develop for android

Carlos


Jonathan, regarding fragmentation, is something that you have to care about. It's not a big problem, it's also in PCs and nobody says that PCs are broken because of this. Also, in the iOS, currently you have three resolutions (iPhone 3GS, iPhone4 and iPad), two performance levels (3GS against iPhone4 and iPad), different memory (3GS, iPad against iPhone 4), the OS has different capabilities depending on the device and you could also think about disk size. I'm not counting iPhone 3G (that also exists) and what will happen if the iPad2 and iPhone 5 rumors are true? Then, suddenly the fragmentation will be a great thing?

In my company, recently we have had a client that needed a LBS solution. We have developed it for him and we have deployed 600+ phones with our solution. The phones selected were Nokia and the main reason was price. I think that the people that only think in the iPhone for business opportunities are missing the point. The iPhone is important but it isn't the only player.

Mark

@Jonathan

it depends on what you're developing. Sure, an E71 will not support the same games an N8 will. It will, however, support MMS and SMS services and apps that aren't graphically demanding.

The point is that if you want true reach then you have to aim at cross platform services for maximum scalability. iOS and Android development are fine if you get the right niche but you're probably up against another twenty to thirty versions of your product, some of which may be free so unless you get very lucky you're not going to make a lot of money - for every Rovio there's a hundred other developers who made a loss in times of effort vs sales.

I think Tomi's point is that simpler apps or services have more revenue potential and I agree on this because the app revolution reminds me very much of another tech revolution back in 1999 and 2000 which ended in tears for a lot of people when they realised the economics of internet provision didn't make sense except for a few very large, very focused players with a lot of reach who were, effectively, just redefining existing markets (Amazon redefined catalogues for example).

@Rich

Sure, long term profitability is important but as long as the players in the game stay profitable to the point where they can effectively compete in the market then it's a moot point unless you're a stockholder or investor.

kaj

@Mark "They had 3.75 million in inventory so I'm not buying that one."

That is likely the minimum channel inventory they can have. They ship all around the world (most people don't live next door to Foxconn). Say that on average there is 3 weeks between an iPhone rolls off the manufacturing line and it ends up in a customers hand, and they make 178.000 phones a day (= 16.2 million in a quarter), then that amounts to 3.75 million in channel inventory. They still can have a backlog of say 5 million phones that they cannot fulfill.

Besides, they clearly stated that they had a backlog of orders they are struggling to fulfill, and to falsely claim that on a shareholders call would be a criminal offence, so I think we can safely assume it to be true.


Bob

Mark,

Android phones are moving into Nokia territory prepaid smartphones. Android is not a topend only phone like IPhone.

http://www.smartbrief.com/news/ctia/storyDetails.jsp?issueid=B5BD4F57-8301-4F6D-A928-F4F9D6646505&copyid=335A4424-41B5-41D9-92E0-61882E787ADE&brief=ctia&sb_code=rss&&campaign=rss

Phil W

@ Rich, What you mean is smartphone share doesn't matter to you. It does matter to whole load of other people though and it is important to point it out to get a balanced view of what is happening.

What I will say is good performance Apple. Hope Nokia's figures next week are good as well.

@Bob, yes Nokia knows that, it's going to be an interesting year.

Jonathan

I believe I did not, Bob. Rovio will continue to develop for android, but finds the several markets a fragmentation. They also stated the only viable gonto market strategy on Android is ad based revenue. It works for them, it is not an option for everyone.

@Carlos. After iPad 2 and iphone 5 fragmentation is still equal problem. After those iOS (not counting AppleTV) will still have two screen sizes, one set of API, a fraction of the devices, much faster software update rate, and other things that make the problem smaller.

The Retina display does not matter for a developer. An old app works on the double density display, to make it look better new set of graphics is needed. No big deal. For a full fledged iPad support a totally new UI is often needed.

iPhone also has very good baseline on which features are added once a year, not dozens of phones a year where features change randomly. There is fragmentation, but it is much more manageable. One store, and no big API and OS transitions (which RIM will need to do too) makes it less fragmented too.

@Mark

True, depends on what you are developing, but there is a big class of modern applications that are really hard to fit in a low end Symbian without making big sacrifices. To say those count equally for the common "Nokia" platform (which as of yet does not exist because of the ongoing transitions), as Tomi makes it, is not feasible.

Also, not every customer is worth the same. If you are a government you must provide service for everyone, a business can go for the market they want to (be it high end Symbian, Android, Win7 or iOS), make an outstanding product, which is hard to do when targeting every platform. If it works then expand. IOS and Android customers install and use more apps than Symbian users. IOS users are more inclined to buy apps than Android users. When talking about platform, these things really matter. It is definitely not just about how many "smartphones" Nokia sold versus Apple or Android companies.

If fragmentation really does not matter why not say JavaME is the ultimate mobile platform? It has the far biggest reach, both smart- and feature phones (not iOS obviously, but they are just a small player, who cares?). Why do we need the native apps for?

Mikko Martikainen

There are obviously different sides to what makes a mobile platform, and there is no doubt the widest possible reach one can have is with SMS. However, you can't take the installed base of SMS capable phones and count that as one addressable market. In fact, I would argue that in most cases the market you can address with SMS services is limited by country and/or carriers. Of course, this is nothing new: most markets are in fact divided by country borders, even though there has been considerable effort to open the markets. In this sense, the iOS platform, even counting only the iPhone, is not such a bad choice: you can address a market of 68-90 million active user (depending on how you count the installed base) through a single channel. I believe the addressable market for the overwhelming majority of SMS or MMS services is not bigger than that, though if you can provide me data to show otherwise, I will gladly take it. Also, I would be very interested to know what is the average ROI of SMS/MMS services, though I don't know if the data to calculate that is available anywhere.

Phil W

@Mikko, Tomi puts the active users of SMS at 3.6 Billion, so 3600 million or more than 36 times the installed base you indicated.

kevin

Rovio does not promise that their apps will work on all Android phones. As of today, it works well on some, works poorly on some, and works not at all on others.

If you're buying an Android with the intention of playing specific games, you should check the nets before you part with your money.

But if you're on Verizon in the US, and if you bought your Android phone after Thanksgiving (11/26), Verizon is offering to give you up to $200 if you want to switch to the iPhone.

Mikko Martikainen

@Phil Yeah, but I don't think there is any realistic way you could address half of that market with a service. The biggest possibilities probably lie in China and India where you actually can address a huge market with your service, but in other regions and countries? As a service/software developer, what realistic way do I have to reach those active SMS users? What is the most users I can hope to reach, and how?

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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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