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« The Microsoft Handset Opportunity with Nokia - the Full Analysis of Potential (its not looking good) | Main | Some Amazingly Big Milestones.. I truly love my life »

May 12, 2014

Comments

E.Casais

"The remaining 2.6 Billion accounts are second or third accounts for the same user"

Any idea how many of those accounts are actually for wireless modems (data cards or USB keys), or actually used in industrial applications?

baron99

You can always tell the Microsoft shills and their patrtners. They play nice at times ...but isn't it revealing how they always look for, and find, ways to diminish Android/Google/Opensource using whatever non-sense arguments they can dream up. At times, I feel sad for them...NOT! But, they must be so thoroughly frustrated that they are getting their butts kicked. ...for years!!! It can all be summed up with "NO ONE WANTS A WINDOWS PHONE" :-)

BaseLee

@Leebase

If you start thinking and stop being apple cheerleader, you will notice Tomi writes that apple figure INCLUDE THE APP STORE REVENUE, but in Samsung, Google took the app store revenue.

Capice?

Tomi T Ahonen

Hi all

A few quick responses from Doha airport lounge as I await my flight to Lagos Nigeria for the next conference this week

E.Casais - I do report that data point in the Almanac. For 2014 its 380M total data subscriptions ie 9% of all subscriptions are non-human/non-phone cellular connections either M2M or used in laptops, netbooks and tablets. It is 6% of unique users.

LeeBase - that stat too - enterprise/business users is regularly in the Almanac. About 3% of total subscriptions are with enterprise/corporate customers but its about 10% in the Industrialized World. (and there is a whole chapter on Apps economics)

And to you second comment - please note I did not discuss 'profit' as the measure for the largest 'mobile-only' corporations. I did exactly like Fortune and other global measures of the biggest companies, by revenues. We know Apple makes (currently) the biggest profits of this industry - indeed of any industry - but that is, as you know, beyond the scope of this blog. Don't bring that topic into this discussion.

Keep the discussion going

Tomi Ahonen :-)


Henry Sinn

Tomi,

More like this please..

...and some marketing / innovation / advertising trends (like you used to do a few years back)

Henry Sinn

MMS has to be on the way out....

It costs WAY more than SMS and there are may problems with recipients actually receiving..

Why would anyone send and MMS when you can send an SMS with a link - that immediately opens the door to a transaction (assuming the link takes one to a mobile-friendly site - responsive or m.)

RottenApple

@Leebase:

How about admitting that you do not understand the market? If premium is all that counts for you I don't think your opinion needs to count. As in other markets, premium should be a small niche. The smartphone market isn't there yet, and that's why Apple seems so powerful. But don't exepect things to remain the same forever.


Your recent posts also have clearly shown that you have absolutely no clue what constitutes a 'normal' smartphone user.
It seems, 'normal' is for you someone who likes to waste their money on pointless nonsense.

But it has clearly been shown that this isn't the case. I had a discussion about this with my boss just this morning.

I was told that

- approx. 2% of smartphone users actually buy apps
- of these 2% the vast majority will spend some money the first few days, and maybe occasionally for 2 or 3 weeks. Once the novelty wears off they stop.
- the tiny rest - maybe 1% of those 2%, that's the heavy spenders. These are also mostly early adopters.

To summarize, most people use a smartphone precisely what it's meant for: a mobile phone with internet access and a photo, video and music player. And that's where they stop.

That is even true for Apple, but since the heavy spenders are mostly early adopters, Apple got a lot more of them - and that's the ONLY reason why Apple is selling so much more apps - not the made up nonsense that the low end market 'doesn't use their smartphone as a smartphone.'


We'll see how this pans out. It's clear from the numbers that most smartphone users are not heavily invested into any kind of 'ecosystem'. They are not vendor-locked-in. Right now there is very little motivation to switch away from Apple, especially in the US with its price-fixed market but this can change very quickly.

It's quite obvious that the other manufacturers will see the gravitation to cheaper hardware first - because you can downgrade without too much change all at once - but I'm quite certain that this will affect the entire market eventually.

This also explains why Apple seems to grow in premium market share. Those who want Apple have no decent cheaper option. If they want to get something cheaper they have to quit Apple but since they also quit the premium segment they won't show up with the direct competition.

A modern mid range smartphone has more than enough computing power to satisfy the need of >95% of all users so the incentive to buy premium will grow smaller steadily. But if the market goes down with its price as a whole, Apple won't be able to survive with its premium-only pricing. They will have to lower their profit margins eventually.

Oh, and nobody is talking about 'failing' business here. But you seem to persistently ignore the bigger picture of current developments and focus on Apple's numbers in a nice protected fruity bubble where nothing else matters.

E.Casais

"It's a separate market and should be judged and counted as the separate market it is."

Nope, and again nope. The argument by RottenApple stands, and is one commonly used in market analysis. If products can be fairly seamlessly substituted for one another, are sold via the same channels, have the same functionality and the same conditions of utilization, then together they constitute a single market. Since one can move down or up with Android, WP, or BB, then this means that smartphones are just one big market. Actually, this is acknowledged by Leebase who talks about "premium segment" -- not premium market.

And yes, when people realize that they finally do not really need a Range Rover, a Tissot, or a Galaxy Note S5, and that a Logan, a Swatch or a Galaxy Ace is enough for them, this represents a problem for all those upscale manufacturers (but an opportunity for downscale vendors). Conversely, when people can move up, this represents an opportunity for upscale vendors (and an issue for downscale ones). Same as it always was in every market.

There is obviously disagreement about how much Apple might be affected by this (my opinion: not in the short-to medium term, but probably in the medium to long-term), but iPhones are just one, admittedly major, participant in the mobile phone market. Trying to delimit an upper-end-expensive-smartphone-that-is-really-used-intensively-as-a-smartphone-and-not-as-a-feature-phone market is meaningless -- this is merely a (lucrative) segment of a larger market.

"Just as smartphones were never treated simply as "mobile phones" before, but as a separate market."

Never? When smartphones were Communicators, BB, or HTC WM they were included in mobile phones stats as such -- RIM was indeed compared to Nokia or HTC as such. These was a single market for phones -- some were smart, some features, some basic. It has actually not changed that much in this respect.

E.Casais

"they are not in the same market for analyzing how one car maker is doing vs another."

They are. Totally. Hint: Ferrari is just a subsidiary of Fiat.

Once again, you are mixing up market and segment. Luxury, premium, mid-range, budget -- these are not different markets, but different segments of the same market. Most manufacturers in most markets have a product range that addresses different segments, often under different brands. The success of manufacturers can be analyzed with respect to their (un)successful forays in different segments. There is fluidity between segments (obvious when economic conditions change dramatically).

Apple has maintained itself in the premium segment of the PC market, the mobile phone market and the tablet market. This is how the analysis must proceed. It is not so that Apple is selling trucks while the others are selling cars -- these are not sold via the same channels, are not used under the same conditions, cannot be seamlessly substituted for each other, i.e. they are truly different markets in the same way that PC and mobile phones are different markets. The iPhone is a phone -- it's even in its name.

"Developers don't support the platform with the most users....but the platform where the most money is made."

You are assuming that (a) most apps are developed by pure play independent software vendors (b) they are developed for profit.

This may well not be the case. Banks, transport companies, or administrations develop plenty of apps -- and their target is the mass market. Corporations develop plenty of apps for internal use -- and their target is whatever platform satisfies their requirements. Sales of such apps are in most cases irrelevant. What counts is how many people they can reach, i.e. the market share of the target platform...

In that perspective, iPhones are always safe as long as their market share is 10% or more. It is only when a market share dips below 5% that it becomes a niche -- and then mass market, free apps developers will start wondering whether it is worthwhile developing for iPhones. Once people do not find their favorite free local e-banking or train schedule or e-townhall app, then the bleeding away from the insular iOS premium segment may begin.

"Keep saying the amusing paradoxes like"

I have never uttered anything about peak iPhone, Apple failing, profitability being irrelevant, or any of those statements you attribute to me.

I have stated that differentiating between smartphones and other phones did not make sense (and now everybody is saying that many smartphones are not smartphones because they are used as dumbphones).

I have stated that market share is essential because of network effects, but that Apple is firmly ensconced at the top of the range and that the bloody battle will be for the mid-range (and now everybody is arguing that the 300$£€ smartphones coming from China or Motorola look increasingly enough compared to the 700$£€ Xperia/iPhone/Galaxy).

I have stated that the big change to look for is Chinese manufacturers and associated services going out of China, and that the big battlefield will be in developing countries of Asia, Africa and America (and now you cannot save yourself from all those reviews of Meizu, Xiaomi and Lenovo devices, and everybody is pondering the strategy of Nokia-Microsoft in emerging countries with Lumia 520 and Nokia X*).

I have always stated that Apple will remain safe and hugely profitable till the medium-term, and that the point where it may start to decline (but not collapse) is when its employees move to the new fancy headquarters.

Alles klar?

RottenApple

@Leebase:

All your polemics can't hide that you try to twist the argument to favor your interpretation.

It's one market. I'd even go so far to include feature phones in the same market. People who buy a feature phone do so because they do not need smartphone features (or at least they think they don't.)

Also, don't even think that the sales made through the app stores are the majority of profits generated through smartphones. They are a tiny niche, reaching an even tinier group of users. If you are into making apps to generate a profit by selling them your point may have some merit.

But it's completely and utterly irrelevant for someone who provides a service that can be accessed through the internet, be it via a web interface or an dedicated app. These providers have absolutely no interest in how much money Apple makes, their only interest in iPhone users is whether the investment to support their platform is bringing back enough revenue through their service.

For these businesses the average cost conscious Android user - who would never show up on your radar - might be as interesting, or even more interesting, depending on the service being offered.

But whenever you (or Baron95) show up, this is completely ignored, all that matters to you two are the immediate profits generated directly in the smartphone 'ecosystem'. So yes, it DOES matter that Apple's market share is falling, not to those who try to make their profits by selling apps, of course, but by the economy in general.

Tomi T Ahonen

This is apparently becoming an 'eternity argument' on this blog, that apparently almost every thread eventually ends up on 'is the iPhone part of overall smartphone market or is it a niche'... guys.. you're not going to convince each other. You make valid points from you own POV. You also clearly see what the other side is saying. Could we not do this every time?

Apple is a niche player, luxury segment of smartphone market and increasingly the handset market will now measure total handsets not just smartphones which extends the market measurement DOWN in price not up. That makes Apple even more niche. Ie its 15% of smartphones but only 8% of all phones... Definitely premium niche but do we really have to do the 'ferrari vs fiat' argument again and again. Sorry LeeBase - Ferrari and Porsche and Aston Martin DO GET COUNTED in the global car market for market share which includes ultracheap cars like Tata and Smart etc

Tomi :-)

Tomi T Ahonen

PS - LeeBase )and Baron95) you WON.. Apple is most profitable and most valuable company on planet.. (but we don't do profits on this blog, as I don't want the wall street babble here)..

Tomi :-)

E.Casais

@Tomi

Perhaps you should have a "sticky" post like they exist in most bulletin boards where the basics of what is discussed or not is laid out (no stock prices, no Fitch/Moodys/S&P ratings, etc), and the "eternity" questions are preemptively answered to thwart new threads devoted to them?

Siasa

@RA

Apple's market share is declining, but it shouldn't matter since the unit sales are still going strong and Apple has good revenues. Decreasing market share didn't matter for Nokia in 2010. Why should it matter now for Apple?

Your claim about only 2% smartphone users downloading apps sounds strange.

http://www.theappys.ie/blog-news/98-of-iphone-users-download-apps/

If that was true, one iOS user downloading apps should be spending 200 dollars on apps every month. Clearly this is not the case. Apple had one billion dollars of app revenues in December 2013 only. If the installed base was 500 million and only 2% of the people were downloading apps that would make only 5 million users and those 5 million would be spending on average that 200 dollars every monthly.

Siasa

What we are actually missing is the current status and the trend of future app sales. We know that iOS is currently (probably) the biggest platform what it comes to app revenues. However we don't know how the market is split between the two platforms, Android and iOS.

What we also don't know is the speed of the trend changing the current status. Without that knowledge it may take anything from a week to two decades for Android to catch up iOS app revenues.

I have found some good estimates, but even at the best those are just estimates and tell little about the trend.

Why is this important to this topic? Because almost 9% of Apple's revenues in 2013 came from apps and that was included on the numbers.

Tomi T Ahonen

Siasa

Good question. This blog is the biggest free site of stats on the mobile industry overall, which is worth 1.5T USD ie 5x bigger than the internet economy for example. I focus on where the big money is, and apps is trivial in size (today). So I talk about where the real big money and opportunities are. If smartphone apps some day become a major content type for mobile, I will devote a lot of time and text to it. I know many are curious about it but seriously, apps are 3% of the 'mobile data' opportunity globally. SMS is nearly half. So you understand I HAVE to talk about SMS but really don't much care about apps. Apps are only viable currently for gaming and even there it is a horribly bad business prospect where typically one in 100 finds success (normal 'hits' businesses like pop music, books, movies etc have 10x better chance ie about 1 in 10 is a success). I know the tech press especially from USA obsesses about apps but again, I focus on where the reality exists not the hype...

that being said, I have done some apps analysis and the Almanac has some and I will at some point do a review of app store economics and app developer (despair) economics on this blog... Don't expect that in the next few weeks though, haha...

Tomi Ahonen :-)

Siasa

Since only Apple was making revenues of 10 billion in 2013 getting over 100% growth over the previous year, isn't that big money? Google must have been making tons also.

http://www.apple.com/pr/library/2014/01/07App-Store-Sales-Top-10-Billion-in-2013.html?sr=hotnews.rss

Google must also be making huge amounts of money with the apps and the growth must be really fast also on Android.

Apps are also a major reason for people buying smartphones. Just like camera and screen size are. Those have been covered in the past. Apps are also enabling companies to do business on mobile. Banks and video rental services use apps and those numbers can't be seen on app revenues while they are used with apps.

Even while Nokia in Q1 2014 was only a shadow of what it used to be, it still gives us a good way to compare the size of the business. Apple's app store had more revenues in 3 months than Nokia had for the entire D&S in Q1. I can only imagine how big it will be for Google in a year or two.

WonTheLottery

@LeeBase
"Instead it is more meaningful to group by how the phones are used.
..//..
The low end smartphones are bought by people who bought the cheapest phones before and they will be used like the feature phones they used to have."

Where's your evidence for that? You've just made the assumption it will be the Notes and Galaxys that will be responsible for downloading most Android apps but where's your proof? I very much doubt it's true, the overwhelming majority of downloads from all app stores are for games which suggests the devices doing the downloads are not being used as smart devices at all, they are being used as games consoles/media players.

Personally I'd imagine most play store downloads will actually be kids who are more likely to have low/mid range Android phones not a Note or a Galaxy S*.

If we're going to create market segmentation based on our own imagined usage of devices it's going to be a rather fruitless discussion.

RottenApple

Actually, I do think that heavy gamers are willing to spend a bit more for their hardware. But ultimately those will be the ONLY ones willing to spend money for processing power.

Just as with PCs everybody else doesn't need it.
But again: Heavy spender does not equal affluent customer.

We are getting an extremely skewed picture here: The metrics Leebase uses heavily emphasize a very small group of users. But this group is not necessarily the one with the most money. These are gamers. Gamers always have and always will spend a disproportionate amount of money on their hobby, be it on PCs, game consoles or smartphones. They prefer to get 'the best of the best' when it comes to gaming hardware. But they often don't spend money on anything else.

The so-called affluent people, with good income and a qualified job normally do not play games, though, they may spend some money on apps, but compared to the gamers this is still a lot less. They are interested in other things - and with the current information we can't even tell how much of these prefer Apple over Android.

But by conveniently lumping these two together as the 'typical Apple user' we of course get a nice and rosy picture of the entire Apple 'ecosystem' - full of users who heavily invest in apps and also spend a lot of money elsewhere in the ecosystem, too.
The only problem with it, it's a mirage, nothing more. This customer does not exist, except maybe as a very small subgroup of the other two. These are two distinct groups of customers, in fact - and need to be analyzed separately.

Siasa

There may be less people who are willing to spend on apps but in total the revenues Apple is currently generating with the App Store are quite impressive. 10 billion dollars in the last year is lots of money.

The good question is if Apple will be able to maintain the growth they had in the past. Last year it was over 100% compared to year before. This year Apple should be making at least 20 billion in app revenues if they keep on growing at a comparable rate. Is that possible?

What it comes to the games, it's not something Apple should be embarrassed of. Games are quite popular today and most people seem to be playing some games. Even the dumphones have some pre-installed games. If there are reasonable amount of money to be made with mobile games, there is no reason not to pursue that market. Obviously it was 10 billion market for Apple last year.

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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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