Today my thoughts in a longer blog about how I am seeing the mobile industry now in 2014. We are now shifting from the era of the 'Hunters' to the era of the 'Farmers'. The unknown big wins and prizes (and perils) have mostly been discovered and most of the big players in the industry are shifting to tried-and-true parts that work, abandoning those that don't. From hunters to farmers.
Early on in a new industry there is a need for discovery and experimentation. We had that in the mobile data industry in the past 16 years. Now we are transitioning into the steady stage when the 'Hunters' are no longer so much in need and now the existing opportunities need to be developed and systematically optimized, ie the need of the 'Farmers'. A different type of competence which then in turn pushes those who prefer the hunting to move onto better (newer) hunting grounds.. And our industry will be run increasingly by those efficiency-nazis, the accountants.. Save me more money!
In the past about year-and-half we've seen just about all major 'controversies' settled in and around mobile. Recently we saw from the Apple court documents that yes, Apple was aware of the need of larger screens (told you so) and cheaper iPhones (told you so). There were many who argued - including on this blog - that Apple didn't need big screens - and that Samsung would fail with its push into that direction - or cheaper iPhones would never come and of course Apple would not do anything as crass as colors.
We can go back all the way to Spring of 2007 (before the first iPhone was sold) when I made the first public forecast of the impact of the iPhone - not only that it would change the world of smartphones (told you so) but that it would also change the IT, media and advertising industries totally (told you so). Nobody else was making that prediction before the first iPhone launched. Today nobody doubts it. I was not a 'fan boy' of utter optimism about the early iPhone (which after all wasn't a proper smartphone in 2007) but I did say Apple would reach the target of 10 million sales. Most were either skeptical of the number thinking it would be nearer 1 million not 10. And others were total Apple fanboys who were wildly optimistic thinking sales would be far greater, 20 million or so. But I said right from the start, that 10 million was do-able by Apple in the first year - which would become a world record in new launch of a phone brand - but far more than that, I was also the only one to give the regional split of where the original iPhone as it was in 2007. would succeed and where it would not. You didn't see the international split offered by anyone at that time. And even considering other pundits who would later offer forecasts of iPhone international sales, mine was far the most accurate such analysis in 2007 (told you so).
I said initially there was no need to split the product line in 2008-2009. I was the first to call the moment when Apple's dramatic market share growth in smartphones had stalled (the market share is now in gradual decline) and then started to call for the split in the product line. While I was not perfect on my call of 'peak iPhone' - it was more a plateau for a few years before the full decline started last year, I was nonetheless the first analyst anywhere to call that end of the growth - meaning it was now time to split the product line. And yes, we know now from Apple's court documents that Apple management had arrived to the very same conclusions just about the same time (told you so).
There was earlier controversy. Back before the iPhone I was the first analyst to call the year when musicphones would outsell the iPod. I was crucified here on this blog for those 'anti Apple' comments while my clear purpose was only to highlight the need for Apple to enter the mobile phone market. We found out later from statements by Oppenheimer that yes, right about that time, Apple too had come to the conclusion that musicphones like those made by SonEricsson under the Walkman brand at the time, were about to eclipse the iPod in sales and Apple's iPhone was the musicphone response to SonyEricsson and others. Told. You. So. But yes, at the time when I explained it on this blog, man, the level of vitriol posted here in the comments of how much I hate Apple (I love Apple, I was a Macintosh trainer earlier in my career) and that I didn't understand the iPod and that iPods and musicphones were not in the same market, blah-blah-blah. Well, Oppenheimer clearly established the truth. Again Tomi was right on this blog. And you heard it nowhere else. And I was massacred in the comments on this blog for daring to suggest a mobile phone could threaten Apple's wonderful iPod portable music player. Yeah. I didn't know the business of the iPod (or iTunes)? It was the first case study in our book Communities Dominate Brands, the signature book for this blog.
So then almost always when we had iPhone related stories after 2008, when it became a proper smartphone (the first version of the iPhone in 2007 was only a featurephone) and it became possible to install apps onto the iPhone, there was the chorus on this blog that Tomi doesn't understand Apple because we can't just measure iPhone unit sales, its the ecosystem. The apps. The iPhone App Store. And look at all those downloads. Yeah. I don't undestand apps? I wrote literally the world's first book on mobile industry apps. But I also understand ecosystems my second book - m-Profits - was the world's first business book for this industry and that explained clearly that not every app idea (or service idea) was going to succeed commercially - with the location-based services the most obvious glaring example we could see already in 2002. So yeah, Tomi doesn't understand the apps and not the ecosystem. Ha ha ha.
What did I tell you. That Apple's lead in the App Store was temporary and will be eclipsed by that or those smartphone platform(s) that lead in market share. Like right now is happening, Android is taking over country by country and the projections are that either end of this year or early next year, Android will ahve more monthly downloads of apps than Apple. Told. You. So. But for years those Apple'istas have been here deriding me that I don't understand the industry. I left those comments be for a good reason, I knew over time I would be vindicated and here we are. Nobody doubts now that soon Android will have more downloads than Apple's App Store.
So if the iPhone was just a phone anyway, inspite of the Apple magic and had to conform to the industry requirements (haha, MMS? 3G? video recording? Forward-facing camera? hahaha) now the last vestige of the myth of Apple-is-different is busted as the App Store also conforms to normal economics, not some mythical iEconomics which has some magical powers to suspend economic laws. Today nobody (among serious mobile industry analysts) suggests the iPhone can grow into mass market size market share ie 20% or 30% or more. All agree the iPhone market share is shrinking and will settle into the 10% range or below in some years to come. That was what I told you ... in 2007. My view has not changed once since the iPhone came. It will be like the Mac in PCs, Apple does a premium product with premium prices with its own OS and it will have a niche market share. Yes, large niche but still a niche only. As the iPhone now in 2014 can be seen, will also become. But still two years ago we could see major analysts suggesting iPhone could grow to take mass market size globally (hahaha). Its not that I don't love Apple, I do. The most profitable position is EXACTLY where Apple is now and that is where I want it. It is not executing this strategy perfectly (yes, you read me correctly, Apple could still be even more profitable) but nobody else can assail its position currently in the handset space. But I told you. In 2007. And in my occasional Apple updates since.
The Nokia saga went rather exactly as I predicted (except fro some timing issues) and now all those contentious points are pretty well settled. The Burning Platforms memo was indeed superbly stupid, could not have been written by a (sane) CEO of Nokia. So bad that Elop was reprimanded by the Nokia Board for authoring it and Elop himself admitted to the Nokia shareholder meeting that yes his memo had damaged Nokia smartphone sales (told you so). Not just 'the memo' but the timing of the Windows partnership was dumb, in fact the whole Windows misadventure was a total fiasco - said so by nobody other than past Nokia CEO and the Chairman at the time of the decision Jorma Ollila (told you so). Bill Gates over at Microsoft when he was still Chairman called the Windows Phone project the biggest failure under Ballmer. Duh! But go read how many Microsoft trolls were here calling me an idiot and not undestanding (ecosystems, Windows, Office, enterprise, cloud...). Oh, and the nastiest Microsoft 'cruel trick on consumers' - the next version will fix it. haha. That old chestnut. We knew. I told you so on this blog, that Windows Phone 7 won't fix it. Windows Phone 7.5 won't fix it. Windows Phone 8 won't fix it... and it didn't.
I called the retail boycott against all Windows based smartphones due to the hatered of Skype by the carrier/operator community. Again, this was confirmed by Elop in testifying to the Nokia shareholder meeting - that the boycott was not just against Nokia Lumia series, it was against all smartphones that were running Windows. Not because they 'had' Skype - early Lumia did not even support Skype (and other smartphones DID) - it was the OWNERSHIP of Skype which had caused the boycott against Windows. Exactly as I explained and what Elop himself explained to Nokia shareholders. Well, we know the end. I said Nokia's handset business would be sold. And that 'at least the Lumia unit' would end up owned by Microsoft. I even said there were legitimate other candidates who would have wanted to buy Nokia (we saw that Lenovo bought the Motorola business from Google shortly after the Nokia-Microsoft deal was concluded).
I said at the time that a Linux based alternative rather than Windows would have been better and now that Elop is no longer in charge, Nokia rushed its X Series ie Android (ie Linux based) smartphones to the market alongside the Windows based Lumia. We saw that in Q1 when only a few of the announced X Series even selling and only for a couple of weeks, they grabbed 21% of Nokia branded smartphone sales, totally crushing Lumia. Duh! Any sane CEO would have done this two years ago. But yeah. Elop was obviously fired ie removed from post of CEO. And that Elop was so incompetent as CEO he would have to be fired. His tenure was even shorter than that of the failed CEO period by Olli-Pekka Kallasvuo at Nokia. (told you so, told you so, told you so...). Meanwhile the X Series was doing so well Microsoft was forced to shut it down now, before it kills what remains of Lumia. And Microsoft is too coward to give us the X Series sales numbers. Back to Elop, there were silly rumors that he might become Microsoft's next CEO. I told you that would not happen.. and it didn't.
Today more than half of all mobile phones sold are smartphones and now almost all in the industry agree that soon there will be no dumbphones manufactured anymore. I have called that date to be 2019 when all new phones sold will be smartphones. But when did you hear this as the prediction of not what might happen, but what will happen? I may have been that source, as I was arguing already in 2005 that by around year 2020 the world would see the end of featurephones being sold. I was not the first to make the prediction that all phones would be smartphones in the future, but I was definitely one of the first and as far as I can tell, I was the first to nail the rough timing (and all signs suggest that is very close to the mark). The huge controversy is now past and I was once again proven right. In an argument that raged on for almost a decade.
So I was the first to start to report on smartphones counted as computers. Now we are starting to see that also being accepted as a legitimate measure. Gartner is the first of the major analyst houses to track total IT industry computing device shipments with this definition (last year). I have been reporting it on this blog for years. And I have been giving you the market shares of the 'total' computer industry when smartphoens - and tablets - are included. Big argument back in the day five years ago. Now no argument anymore.
I called the end of the Microsoft hegemony and that Android was about to - and today has - passed Windows as the most used computing platform not just in devices sold but by now also by installed base. Those were controversial issues in the past but today they are held as 'obvious' (told you so).
We have tons more from the point that there are two types of 'internets' - the one for the legacy PC based world (6th mass media internet) and the newer, more powerful mobile internet, which can do everything the PC based internet does but can do far far more (7th mass media). It was the source of long and deep arguments for much of the past decade. Now it is no longer heresy. Google itself teaches its clients around the world that you have to 'mobile optimize'. In other words, there are two types of internets. (told you so). And obviously more of the users are on mobile than traditional PC based internet.
Along those stories, a tablet is not a 'mobile' it is only an ultraportable. Like my dear friend Gary Shwartz writes in his book Fast Shopper Slow Store - tablets immobilize people. Yes they are very VERY good replacements of laptops and in many cases can do what smartphones do - but they will not replace the smartphone. They are only ultraportable PCs and their market is a tiny slice in magnitude of what will be the global smartphone market. Duh. Told you so.
Same of the wristwatch-metaphor. Remember all that hype and excitement about the iWatch and Samsung's Galaxy Gear. We now have the first consumer survey by Endeavour Partners which says exactly the same thing. Its a fad. After half a year many who bought the expensive gadget have tossed it and tons of them now show up at eBay... (told you so).
So then Tomi's fave story 'SMS'... There was a time when many in the IT industry thought that email would crush and destroy SMS. I got into those debates early on back in my days at Nokia and early in my career. Then when it became obvious that SMS was used by people who had no access to email and the total population of SMS users was massively bigger, several times larger than email, those quieted down. But then came the IM crowd (Instant Messaging) which transformed into the OTT (Over The Top) argument now with Whatsapp, iMessage, Blackberry Messenger, Mxit etc. Skype, Facebook, Twitter all now allow alternate messaging and all are used on mobile phones. So what happened. First, the obvious truth, as I told you in 2001 - SMS is addictive. Mobile messaging is addictive. It has since been proven in university studies to be as addictive as cigarette smoking - so there is no going back, it will not end. Thank you Tomi and 'Told you so'. SMS text messaging is worth over 100 Billion dollars annually today, its user numbers are not declining, they still grew in 2013. The total SMS traffic is not declining, it still increased in 2013. The total revenues are not declining, yes SMS revenues GREW in 2013. And just the premium SMS part - voting on TV shows, delivering news, advertising, coupons, jokes, prayers, and all sorts of payments like paying for parking or at a Coca Cola vending machine - all that is premium SMS. Hos big is premium SMS? In 2013 it was worth 55 Billion dollars accordig to fresh numbers by Juniper in May 2014. How big is 55 Billion dollars? Its taking all the box office revenues of Hollywood movies, and add in Bollywood and Nollywood and in fact all movies in cinemas in all countries. Add all that cinema box office revenue together. And then add the total music industry on top of that! Yes, from Lady Gaga to Justin Bieberlake or whatever he's callled (or are they two people, I don't know) to Rolling Stones to Public Enemy to Beethoven and Bach. Total global cinema, plus total global music. And Premium SMS alone, not counting person-to-person SMS, is bigger than those two giant industries that have existed for a century. Premium SMS is 16 years old.
So yes, there is a story about OTT messaging cannibalizing SMS. It is cannibalizing the GROWTH in person-to-person SMS, but not yet causing any decline. We are near (some day at) the peak of SMS and that peak will come in three stages. The first peak will be revenues. Then the next peak will be total traffic. And the last peak will be active users. But that peak in active users turning from growth to decline won't happen for years and years to come. Are you aware how huge SMS is? SMS is used by more people than who use voice calls on mobile. Not just a Finland thing or Scandinavian thing or European thing. Even the CTIA of the USA reported already five years ago that even in the USA, more SMS are sent than voice calls. Globally, SMS had reached 6 Billion active users in 2013 said Acision. That was 84% of total mobile phone users. But voice calls are only used by about 81% of mobile phone owners.
So how's that biggest OTT messaging platform doing in 2014? We heard a few months ago that Whatsapp had reached a massive milestone, 500 million users. Yes. 500 million. Versus 6 Billion. SMS text messaging has 12 times - not 2 times - 12 times more users than the biggest OTT messaging provider Whatsapp. What about the biggest OTT of them all who does any messaging? Facebook? Facebook has 1.3 Billion active users (not all on mobile). SMS is still 5 times larger by active users! Again, I have been arguing this point year after year, book after book, conference after conference, article after article. And today there is near unanimous consensus with the last few who argue this point being laggards in the USA. Come on, if Coca Cola (I believe its an American company) teaches that your moble marketing budget should be split 70:20:10 with 70 going to mobile messaging (and they specify this is SMS and MMS, not OTT), then the 20% is to 'mobile internet' and that 10% is to 'everything else' including smartphone apps like OTT providers, but also QR codes and Augmented Reality and NFC and mobile payments etc etc etc... then you should listen.
The CTIA is an American industry lobby. Or Mondelez. Whose that? Its the new name of Kraft - yes American reader's Kraft best known for 'Macaroni and Cheeze' the world's largest food company. Kraft's ie Mondelez's mobile strategy is 'leave no phone behind' and yes, that means their mobile strategy starts with... SMS. I rest my case. When I did the keynote at the MMA Global event last year in New York City - yes, heart of the global advertising industry it was one speaker after the next who sang the song of SMS (and often added, super-SMS is called MMS for the advertising and media industries). SMS. Told you so. MMS. Told you so.
Will OTT services eventually eat this part of the mobile messsaging, probably yes. As I taught you a decade ago, as we know SMS is addictive, the only way to get those addicted users to quit using SMS is to give them more addictive messaging on mobile. Blackberry Messenger was the first proof that this would happen. The heavy youth users abandoned the majority of their SMS use as they switched to BBM using their dad's old Blackberry they got as their first smartphone.. soon all kids begged for Blackberries for Christmas. Sadly for RIM ie Blackberry the manufacturer, that BBM service works perfectly fine on the old phone, so this addicted users base did not switch to buying new Blackberry smartphones, they also wanted their cool videos and high quality cameras and large screens and bought Galaxies and iPhones, while holding the old 'Beebee' (or 'my Baby' as its often called by the youth) as their second phone just dedicated for messaging. So as BBM fizzled now we see Whatsapp attempting to take that role. Like SMS being a gateway drug and Blackberry being Cocaine, Whatsapp is now Crack Cocaine.. Yeah, really heavy usage and all heavy users have created accounts. But its still only 1 out of every 12 humans who send messages on their phones. And even those Whatsapp users will still occasionally send and receive SMS, such as voting for TV shows or receiving a coupon or offer. (I should mention RIM ie Blackberry is a reference customer of mine)
Now we have industry bodies such as the Digital Marketing Association (not 'mobile' marketing assoc) and UK Regulator Ofcom teaching businesses that there is a huge gap between what consumers want to get on SMS, and what businesses and enterprises and governments are doing. This builds on what mobile industry bodies from the MMA to Mobile Data Association to Mobile Monday etc have been teaching for years. So while OTT is growing among consumers, SMS use is still growing by leaps and bounds on the business-to-consumer area, especially in marketing and customer service uses like sending notices, alerts and now increasingly doing various security checks (sending a new password for example). (and the MMA, MDA and MoMo have used me at their various events and quoted in their publciations to help explain this to their memberships around the world).
Suddenly this issue is pretty well settled. Well, obviously we do SMS, but we are also exploring newer and more powerful options haha.. That is good. As long as we don't forget that SMS is the world's most widely used mobile data services or app, it reaches 6 Billion pockets and 84% of all mobile phone users globally are using it. The reach stops when we hit barriers of literacy, so if that consumer can't read or write, then your iPhone app is not going to reach that poor African older woman rural user anyway, who was not allowed to go to school when she was young.. She won't be using an iPhone and have a credit card to buy your app haha... But how many years did we endure the 'should we do SMS' argument? Years and years and years. I literally was the world's first expert to discuss premium SMS as a commercial product (in English) to an international audience only months after it had launched - in Finland (as it was launched by some of my friends, so I happened to watch that invention from its birth).
So where is the apps opportunity? Is it a huge business or mostly a mirage? What did I tell you? I said that apps and the mobile internet had a lot of overlap and most things could be done by both means. Some particular service concepts worked exceptionally well on one and not the other, a time-killer game like Tetris would be dumb to build as a cloud service and put unncecessary traffic onto the network. But a search engine like Google would be madness to deply as a stand-alone app (and having its total search engine link data uploaded say daily..). Games would be the main benefactor of the apps opportunity. I said so before there was an iPhone. I said it when the iPhone introduced its App Store in 2008. I say so today. And today, what do the apps economics experts say? Its mostly gaming that has most major downloads and has most usage on phones and makes most money. Games games games. Told. You. So. There is no magical 'new economics' of apps n smartphones. You have to do your mobile web version of your consumer service whether you are British Airways or McDonald's or BMW. And if you're smart, you do part of your consumer service on messaging ie SMS and MMS (like British Airways, McDonalds and BMW on award-winning mobile campaigns).
So then there was the argument about do we want ads on our phones and will advertising succeed on moible and even if it did in such weird countries as Japan or Finland, what of the rest of the world, can it succeed there too? Haha. Today we know. The world's largest media empire WPP who own such ad agencies as Ogilvy & Mather, Grey, and Young & Rubicam etc - their chairman Sir Martin Sorrell just last year explained why mobile is, and will be, the fastest growing part of the global ad industry. Why? Because according to 'SMS' ie Sir Martin Sorrell - there is a mismatch with the high amount of time spent viewing the mobile phone screen, and the little proportion of money allocated to advertising on it. That is in imbalance compared to legacy media like TV, print and the internet - where according to Sir Martin, there is 'too much' money spent compared to the amount of media time those media get from consumer eyeballs. Duh. Told you so. I chaired the world's first mobile advertising conference 13 years ago and have been reporting on this aspect of the industry ever since. Its been growing by leaps and bounds. (Ogilvy is one of my reference customers)
One of the last controversies was that about money. Will mobile kill cash. Some of you readers will remember this battle got so heated, I was cencored at the global bankers meeting in Australia a few years ago for daring to suggest that yes, mobile will kill cash. Today that is no longer controversial. While not all in the banking and money industry agree, we have global giants such as Visa and JPMorgan Chase singing the tune that mobile is the future of payments. Countries such as Sweden and Turkey are in the rush to end cash as they see the power of mobile payments. We don't have to go visit Kenya or Japan or South Korea or Estonia to see the mobile payments miracle in action. But I told you in my book in 2002 (I delivered the keynote to the world's first m-Commerce conference the year before). This matter is not yet settled, but there is growing agreement that plastic won't kill cash, e-money won't kill cash, it will be mobile that will kill cash. Even here it seems much of my work is done.
HUNTERS TO FARMERS
So we have a shift in how the industry operates. The hunters have gone into the wilderness and some have come back with amazing spoils like Uber and Angry Birds, others have died like Motorola and Nortel. We've seen epic comebacks by huge brands that left mobile but rushed back like AT&T and IBM. Others lament their departure and consider coming back like HP or joining late like Nikon and Nintendo.
Now the industry is more like farmers. Now we see the consolidation that we saw earlier in the PC industry when IBM exited and HP bought its biggest rival Compaq. In mobile handsets we see how Ericsson and Nokia have quit the handset business and Lenovo bought the Motorola business from Google to gain market share. Same pattern. Expect more of it. Same in the operator space, Zain ie former MTC is buying operators often in Africa and the MIddle East. UK has its EE what was Everything Everywhere (ex T-Mobile and Orange). The fate of US fourth carrier/operator T-Mobile has been in the hands of the regulators several times as various players have tried to buy it. Carlos Slim built his America Movil empire into Latin America mostly by buying local carriers and operators there. Expect more of these to come, similar to what we saw in the previous century in the car industry and now for example seeing in the airline industry similar to how Air France bought Dutch national carrier KLM we saw Swedish Telia buying Finnish Sonera etc. Like wrote back in 2002 we in the mobile industry can learn a lot from whats happening in the airline industry.
But the excitement and that part of thrilling fun is gone. Hunting a moose in the forest - while being in danger of being attacked by a grizzly bear, is more exciting than farming corn... We had the last big market battle in what I called the 'Bloodbath' series. (insert here rant about Elop madness). Those wars are over. Samsung won the hardware war (and is now in the same position as Nokia was in 2008-2010, where it sees shrinking profits while commanding huge marketshare lead globally and advantages of scale). Android won the OS war. The Bloodbath is done. Those who died were Palm, Ericsson, Motorola, Windows Mobile, Dell, Symbian, Nokia, Maemo, Meemo, HP, bada. Blackberry is nearly dead. HTC is on the ropes. Windows Phone failed and lives on artificial respiration until some day Nadella pulls the plug. Samsung, Apple, LG, Huawei, ZTE, Sony are winners who existed before the Bloodbath started. So too is Android, iOS and technically still Blackberry OS and Windows Phone. )
Newcomers we never heard of like Coolpad and Xiaomi have entered the smartphone hardware wars and Lenovo took a major slice after it entered. New OS players are trying to make an inroad like Firefox, Tizen and Sailfish. But they will be tiny for years to come. This Bloodbath is done. Now its time for consolidation. Will Huawei buy ZTE or vice versa. What will Lenovo buy next (Pantech?). Can Microsoft unload its Nokia unit to someone? Might the tiny Linux based OS providers join forces to die together rather than die separately (Firefox, Tizen, Sailfish). The battle now is like the end game was in the PC industry. Now you grow by acquisition. There are too many players bleeding profits so consolidation has to happen. Its free market economics haha... (oh, and among my refernce customers: HP, Intel, IBM, LG, Symbian, Ericsson, Motorola )
Thats whats happening now in mobile. The cool stuff is mostly done here. The major players will focus more and more on the bottom line, the era of the CFO is here, accountants will rule. The golden era of mobile is coming to an end. So whats next? AR the 8th Mass Medium?