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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

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Tomi T Ahonen

Siasa

I hear you. Honestly. 10 Billion is massive. Except NOT IN THE MOBILE INDUSTRY. 10 Billion would be massive for the tiny gaming industry or the miniscule internet industry or the modest PC business. But moblie is already one of the 10 largest industries of the planet and BY FAR the fastest-growing. 10 Billion is TOO SMALL FOR ME TO CARE. Look at PREMIUM SMS. Not all SMS. Just the premium SMS part (voting for TV, advertising, coupons, news, jokes etc). Premium SMS according to stats by Juniper out now in May 2014 were worth... 55 BILLION dollars. Even that is only 11% of the mobile data industry! You really are mistaken if you think apps are a significant slice of this industry. It is not, and the only fools who peddle that tired story are West Coast 'analysts' who are mesmerized by Apple PR.

Coca Cola, the largest advertiser on the planet has this guide to all who do mobile marketing. Their guideline is 70:20:10. Put 70% of your mobile budget to messaging (SMS and MMS). Put 20% of your budget to mobile internet. And the remaining 10% is for experimental projects which includes EVERYTHING else, not just apps but QR codes and Augmented Reality and mobile money and whatnot. And yes that total apps budget would then cover ALL app platforms. This is Coca Cola when they did the other keynote to the MMA - Mobile Marketing Association in New York City the heart of the global advertising industry (and I did the other keynote). Apps is a side-show to the huge profitable and massively growing mobile industry. I hear you that you feel its important. I hear you that you've read in many places how 'big' it is. But 10 Billion is peanuts to this industry which measures 1.5 TRILLION dollars ie 1,500 Billion dollars.

Tomi Ahonen :-)

Siasa

10 Billion is just Apple's share of the app industry. It would be hard to imagine that Apple would be alone generating over half of the revenues made from apps. This makes it reasonable to assume that the entire app industry must be worth at least 20 Billion. It's said that Google Play is smaller than App Store, but Google Play is not the only alternate store in the world. The rest of the app stores are also generating revenue and together they most certainly must be bigger than Apple. Apple was simply a good example of a single company because we know how much revenues they have. It's nothing else.

I'm also not saying that apps are as big as the SMS but only that it's approaching half of the value of the SMS business and it's growing. If apps had a growth of over 100% last year and if that growth continues, in 2015 it will be as big business as the SMS is. That's the if. It's also possible that if there is no growth, that will never happen.

It's simply worth looking at where the growth is. Let that be SMS, Augmented Reality or even apps. Today 10 Billion from apps is peanuts when compared to the entire mobile industry, but that's not the question. The question is if apps can continue to get 100% growth and if they can, who will be generating the revenues?

It's not about how it's today but how it will be in 2015 or 2016. Is it possible that the app sales for all the platforms will exceed the revenues SMS has?

E.Casais

@Leebase

Nobody denies the ubiquity or impact of apps in the mobile world.

However, if one is to analyze the economic importance of (free and non-free) apps, including their indirect or induced effects, then the right point of comparison is the WWW. Because this is exactly how people reserve seats, shop online, order tickets, plan trips, find good places to eat or look at maps on the PC (and also tablets and smartphones).

The Web was (and still is) as disruptive as apps, and in the same way. On the other hand, just like apps, the _paid_ Web is relatively minor, compared to the PC, ISP service, networking gear, and associated software (firewall, antivirus, etc) industries. Just ask whomever tries to monetize a WWW presence directly -- such as newspapers. Few players are successful at it, like Netflix or ...online games.

In short: as business _enablers_, apps are huge (just like Web sites); as _pure_ business, apps are not that big (just like Web sites), and how big pure apps business ever will be is a controversial issue.

Tomi has shown how relevant such technologies as SMS and Web/WAP were, for instance, in marketing and sales. It would be interesting if he could give a few experience reports on apps in the same context, and compare their relevance.

WonTheLottery

@Leebase
All the things you've listed are prime candidates for HTML5 - no apps and no locked-down 'ecosystem' required.

Research just conducted by ICM on 13 large UK retailers that had both native apps and mobile websites found the following:

65% of Boots customers use its mobile website, only 8% use their app.
62% of Next customers use its mobile website, only 11% use their app.
and so it goes on...
The only exception was eBay which had a ratio of 35/52.

Isn't it possible the reason more iPhone users than Android users buy from Amazon via an app is because Android users find using the browser perfectly acceptable? IMO having to install a special bit of software just to buy from one retailer is a pitiful scenario.

Winter

@Leebase
Did you notice you were shifting to a different "market" yet again?

There are apps that sell, and that is a small market. There are apps that sell other services and stuff, that is a huge market. The former is part of the mobile phone market. The latter is part of online commerce.

Mobile phones are communication devices. The value of the communication is not part of that market. The smartphone ecosystems are completely irrelevant to Amazon, Expedia, or whatever online travel agency dispenses apps. They only care about whether they can reach their customers.

This is not different from radio sets. The broadcasters could not care less about what radio set you use. They only care whether you can listen to them.

On the other hand, the users do care about their phones. And it is the users that determine which phones succeed. The rest of the industry will simply follow the customer.

RottenApple

@Leebase:

1. 'Apps are downloaded more than music.'

Think about it. You may come to a simple realization:
a) The only way to install an app is to download it.
b) There are several different ways go get a song onto a phone, of which buying a download is only one.
c) Free apps are - well - free. There's a good chance that many of them get downloaded, started once, user realizes it's crap - delete.

So there's both some inflation in app downloads and some loss in music due to other means to get the music (like ripping it from one's own or a friend's CD.)
I do buy downloaded music. But I rarely do that on the phone directly. I do most of my purchases from my home PC because it's far more convenient as I listen as much to music at home as on my phone and I'm not limited by poor player software this way. I also buy quite a bit of CDs. So nearly all of my music purchases bypass the mobile metering. It's still my main use of my smartphone.


I have to agree with the rest, of course. That's what I have been saying all along. Most revenue generated through apps will never go through the app store.

I have to admit, though, that the way things develop is not right. An app for this, an app for that, yet another app for yet another service, and so on, and so on. This app overload is not healthy development and at some point I fully expect this to revert to standard web services, once the feature set matures and becomes better. It's far, far cheaper to design a well working mobile website once than to hire programmers to create apps for currently 3 different platforms, having to deal with requirements of 3 different app stores (or even more of you do not want to limit yourself to Google Play for Android) and provide constant maintenance to the apps. And for most services the website will be good enough.

@Siasa:

"It's not about how it's today but how it will be in 2015 or 2016. Is it possible that the app sales for all the platforms will exceed the revenues SMS has? "

SMS are old news, dull and boring. Revenue is already falling. They are getting cannibalized by other messaging services and I think the only way they can survive is making sending SMSs free. Of course that'd mean their revenue will tank, unless you resort to accounting tricks and distribute the monthly contract fee across the different services it covers.

Nobody I know who owns a smartphone still uses SMS, the only holdouts are the few who own feature phones and have no other option. SMSs biggest advantage today is that it not only reaches smartphones but also feature phones. But once that's gone, all bets are off.

So yes, I fully expect app revenue to bypass SMS rather sooner than later.

Siasa

@RA

Apps solve one fundamental problem the web pages have. They can work when the user is offline. This is quite convenient for lots of productivity apps and of course for games. When you are on a flight, it's extremely convenient that the apps work even when you are out of coverage. Doing this isn't possible with the current web pages and browsers the mobile phones are shipped with.

Spotify is one example of apps people like to use even in offline mode. While the free version requires you to have a connection, that's not the case with the paid one. How could you do that with a web page? Or the games if you have a huge games library to choose from and no internet connectivity?

Clearly we don't even know the size of the mobile app market. You say that most of the revenues don't go through app stores. I don't really buy that since it would make the app market worth at least 40-60 Billion dollars and that's 2013.

E.Casais

@Siasa

"Apps [...] can work when the user is offline."

If, and only if, they have been designed to that effect. Many apps actually depend on a permanent connection -- because they are constantly synching, updating, polling, or transmitting personal information to some server (of Google, Apple, Microsoft, Facebook, etc).

Conversely, web pages solve fundamental problems that apps have: for instance, linking. One can share URL of web pages seamlessly -- this is not possible with apps. For instance, searching. One can search Web pages, not apps.

Apps and Web pages have both advantages and shortcomings. There is no silver bullet.

WonTheLottery

@Siasa
"Apps solve one fundamental problem the web pages have. They can work when the user is offline ..//.. Doing this isn't possible with the current web pages and browsers the mobile phones are shipped with."

It is entirely possible to use mobile web sites offline so long as you use a quality browser that supports web app manifest (e.g. Firefox). A manifest file named manifest.webapp must be linked to from index.html and it tells the browser what files should be cached in order for the web app to function offline.

Furthermore (as long as you're using a quality browser) a web app can also use IndexedDB to store and retrieve assets, such as video or audio files, from a local object store, so being offline is not a problem.

Siasa

@EC

That's what I was saying. You can't replace all web pages with apps and you can't replace all apps with web pages.

@WTL

I don't think it works that way. If the web page is closed by the OS or the cache is cleared, it's not really working like that. Besides, how is the used supposed to store tens or even hundreds of games on a browser of an Android or iOS device? With the stock browser most people are using anyway. The idea was to have them ready for offline use and not have the page open in the browser anyway.

WonTheLottery

@Siasa
"I don't think it works that way. If the web page is closed by the OS or the cache is cleared, it's not really working like that."

https://developer.mozilla.org/en-US/Apps/Build/Offline

RottenApple

@Leebase:

The reason apps currently have the upper hand is not that apps are inherently better but that the web still hasn't caught up with usability issues. HTML5 is still being hailed as the solution to all problems but it was really just the first step.

But I'm quite confident that this will get sorted out. It has to, the economy cannot afford to do all the work twice or even three times while at the same time being at the mercy of the app stores.

Of course for some services a dedicated app will always be better, eBay for example. It can just do a lot more than a mostly passive website that cannot run in the background while the browser is closed. But these are exceptions. For normal online shopping I really see no use in apps, they only complicate matters. But well, maybe they even find a solution for that.

Not that this only concerns apps as a gateway to a service. There will always be apps that have no place in a web brower - like games or a music player. But long term I don't expect these web portal replacement apps to survive. They are costly baggage that most of its suppliers would gladly abandon if it could be solved in a more generic fashion.

WonTheLottery

@Leebase
"They [apps] are also relegating the web to legacy status...but that's a battle for another day."

Now that's funny! :-)

You might want to reflect on the reason Google are working on Chrome OS, Samsung on Tizen, Mozilla on Firefox OS and LG on WebOS.

RottenApple

@Leebase:

As usual, you seem to think that events from the past will go on on the same trajectory.
However - and it's a big however - this is a situation the economy can't tolerate. It has to change at one point because it's a costly misdevelopment.

So since there's a need to solve it - trust me - a solution will be found eventually.
So far the solution isn't there yet - HTML5 wasn't it, that's why the situation hasn't changed yet.

WonTheLottery

@RottenApple
"So far the solution isn't there yet - HTML5 wasn't it"

That's a premature enunciation ;-)

JavaScript keeps getting faster and smartphones are getting rather powerful, even at the budget end of the market. We are only just reaching the point of viability for HTML5 on mobiles.

Have you tried the new ZTE Open C running Firefox OS 1.3? It's genuinely a nice budget device. Every previous Firefox OS device had been a compromise too far but now they actually have a device that's considerably better than many budget Androids.

Now let's wait and see what Samsung's soon to be released Tizen devices are like.

Siasa

@WTL

Does it work like that on the stock browsers? I was talking about the stock browsers. It could be implemented to work like that the the manufacturers decided to do that but it really should work that way both on iOS and Android.

I'll quote myself.

"Doing this isn't possible with the current web pages and browsers the mobile phones are shipped with."

Notice how I mentioned the current we pages and the browsers (the current browsers) the mobile phones (currently) are shipped with.

In future it may be different but just now this can't be done with web pages. Not with current web pages and not with current browsers. When they evolve it's different but not currently.

Tis also contributes to the question if apps can continue with the 100% growth rate.

WonTheLottery

@Siasa
"I'll quote myself.

"Doing this isn't possible with the current web pages and browsers the mobile phones are shipped with."

Notice how I mentioned the current we pages and the browsers (the current browsers) the mobile phones (currently) are shipped with."

Google are collaborating with Mozilla in defining the standards for open web apps, if Chrome doesn't support them now (and maybe it does, I don't know) it soon will. Much greater HTML5 integration is also being rumoured for Android 4.5.

@Leebase
"Mark Zuckerberg announced that "betting completely on HTML5 is one of the, if not the biggest strategic mistake we've made"."

Then Sencha made an HTML5 Facebook app that was superior to Facebook's native app, thus exposing the reality - the problem was not HTML5 it was the incompetence of Facebook's developers. I can point you to a bounty of really crappy native apps, does that prove native is not up to the job?

"Android native apps would be the loser. And you know that native apps will continue to be better even if HTML apps improve to "good enough"."

What is a native app on Android? Is it a Java app or a C++ app?

Furthermore I don't know native apps 'will continue to be better', compiled apps can cause hard crashes, memory leaks, buffer overruns, etc... Research has shown iOS apps are twice as likely to crash as Android apps. Why do you think that is? Also, see my point about Sencha and Facebook above.

E.Casais

"Research has shown iOS apps are twice as likely to crash as Android apps."

Any reference about a serious technical investigation of this?

Siasa

@WTL

As I mentioned before, I was talking about the current situation where web apps can't work offline as well as the native apps. Not with the current browsers the phones are shipped with and not both on iOS and Android.

It may be and will be completely different in the future. However I was talking about how it's now. This is part of the question if the apps business will continue to grow with 100% rate or not.

For example, implementing paid Spotify with the offline capabilities for both Android and iOS wouldn't be possible with the same level of integration and offline capabilities as it's with the native apps. In the future maybe but I'm talking what's possible now and why we now have native apps.

RottenApple

@E.Casais:

"Research has shown iOS apps are twice as likely to crash as Android apps."

"Any reference about a serious technical investigation of this? "


I don't think it needs much of a technical investigation, it's simly the dangers of native code. No matter what platform you target, some memory corruption issues are much harder to find in native code. On Android with Java you get an exception during development, on iOS you need to be lucky because it has no managed platform that could take care of such checks.
None of which means that native code is bad, of course, but it makes it a lot harder to spot certain types of errors.

@Leebase:

"What happens then? That won't change the reality of the economics that keep the iOS platform at the top of the heap. What you'd see is that the "two must support" platforms would change to HTML-6 and iOS. Android native apps would be the loser. And you know that native apps will continue to be better even if HTML apps improve to "good enough". So now Google cedes the best user experience to the iPhone/iPad."

Ouch! You again operate from a set of bogus assumptions. Let's see:

- HTML6 or whatever it's called needs to be as good as native toolchains to create content, otherwise it will fall as flat on its face as HTML5 did.
- And if Apple decides not to support an open standard, now that'd be very bad news for Apple users, such decisions could cripple them. Imagine countries where Apple does NOT hold 40% market share. Would it make economic sense to support it then, too, if they go out of their way to stand apart? And if adoption of HTML6 progresses pressure will mount. This is something Apple may be able to delay for a short period of time, but not block. If it becomes common knowledge that Apple phones are ill suited to browse the modern internet, Apple will be dead. Apple cannot sell a phone that can't do what all the competition can.

This is not like Flash which always was and always will be a curse of the internet.

It's really astounding how you constantly manage to draw the wrong conclusions from some statements!

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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 Helsinki 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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