Communities Dominate Brands

Understanding OTT - Why Carriers dislike BBM, hate iMessage and fear Skype (updated)

I was just speaking in the Netherlands doing a keynote at the Mobile Convention. As I was in town, the news broke that the local incumbent fixed and mobile operator, KPN, was laying off 5,000 employees in an austerity measure, and simultaneously, Carlos Slim's America Movil was making an offer to buy about a quarter of the company. KPN has significant telecoms presence in several European countries like Germany and Belgium. America Movil is the giant telecoms giant out of Mexico, and Carlos Slim is obviously the richest man on the planet. Why would this be relevant to OTT, Over The Top business? Because KPN was the first major telecoms operator to report a significant decline in its core SMS text messaging business, that drives more than half of the profits for most European mobile operators. KPN made that announcement a year ago. Since then they have had disappointing market news quarterly, and their share price had fallen so much, that clearly Carlos Slim felt they were a good value in terms of a step into the European telecoms market.

GET DOWN WITH OTT

With that, rather clumsy intro, lets look at OTT. What am I talking about. I'm talking about BBM, Blackberry Messenger. I'm talking about iMessage and Facetime on the iPhone. I'm talking Google Talk, MXit, Whatsapp. And of course I'm talking about Skype. Over The Top providers will offer bypass services, typically for the most profitable parts of the telecoms business, via apps loaded to smartphones. If you want to save money from your SMS messaging costs and you have a Blackberry, then use BBM. If you have an iPhone, then its the iMessage. In those cases, your friends will also need to have the same service that exists only on that same platform. Or if you have friends with different smartphones, you can install Whatsapp, and send and receive mobile messages free, shared with any friends who also have Whatsapp. 

Skype we all know, we can do free phone calls via the internet, in addition to the messages, and we can also do videocalls over the internet. All free.

Consumers love OTT services, obviously. And businesses like those savings too. But the telecoms operators hate them. And then the hatered comes in flavors, depending on who it is and what they do.

OPERATOR ECONOMICS 101

So lets look at the very basics of telecoms operator business. In 2011 the mobile industry earned 1.3 Trillion dollars. Most of that was not the costs of our handsets or other 'hardware' such as the telecoms networking infrastructure. Most of the business - 77% of it actually - was on the services side. Most of that 1.0 Trillion dollar service revenue pie, went to the telecoms operators. And of their income, 65% came from voice calls, and 19% came from messaging. So out of the total mobile telecoms revenue pie, 84% came from voice and messaging. That a large share for essentially just two services.

But more important than revenues is profits. Roughly speaking 50% of global mobile operator profits came from voice calls, and 45% came from mobile messaging. So voice and messaging generted 84% of revenues, and 95% of profits for the mobile industry's biggest players. Now you see? These are truly the 'cash cows' that keep the industry alive. A dramatic threat to either one of these two services would be a catastrophic menace to the very survival of the mobile operator involved. If anything were to actually jeopardize both voice and revenues - that would be the existential threat to the very industry.

UPDATE - May 12 - AT&T CEO Randall Stephenson was interviewed at NY Times. He says he stays awake at night because of OTT services like iMessage. (So I'm not just making this stuff up, it really is an existential threat here we are discussing. OTT services are the biggest headache for mobile operators/carriers worldwide)

Now the rapid rise of iMessage or Whatsapp takes a brand new meaning. It is nice for us consumers to make calls on Skype but the revenue and profit drain is enormous. Lets now look a bit at recent stats reported about the OTT business.

WAY, WAY OVER THE TOP

The UK is a highly competitive telecoms market with many similar-sized real network operators, and also many viable and sizeable virtual operators (MVNOs) and a market where voice call tariffs and SMS messaging tariffs tend to be among the lowest in Europe. The bundles to get big buckets of free voice minutes or messages are plentyful on all networks. Roughly speaking half of the market is with prepaid customers and half postpaid accounts. There are both subsidised handsets and unsubsidised handsets. There is no dominant domestic player and unsually for most markets, the past national monopoly service, British Telecom, sold its mobile asset, so there is no dominant major legacy player with both a fixed and mobile network to run. The UK has been near the lead in most of the major technical and user-adoption issues for mobile, an early indicator market for Europe and considered one of the more advanced mobile markets also globally. The UK is a very good test case for many mobile matters. A test laboratory, if you will.

We just heard from a survey by MyVoucherCodes of the UK's OTT market. 81% of British mobile phone users have installed an app for at least one OTT service. Four in ten UK mobile phone owners with an OTT service, have also shifted away messaging traffic from traditional SMS, either partially or completely. That means 33% of the total mobile phone user base in Britain.

One third of British mobile phone owners has not only installed an OTT app, and uses it, but likes it so much, they have already shifted part or all of their messaging traffic away from SMS. That is massive. Remember, 19% of mobile operator revenues and 45% of profits globally come from SMS. And in Britain already today, a third of the user base is shifting or has shifted away from this vital piece of the mobile operator business, sapping revenues and profits.

The even more damaging part of this evolution is, that the shift is most rapid and most complete, with the heaviest users. The youth. The heavily travelling. The expat foreigners. Those who used to generate a disproportionately large volume of the total messaging traffic (and revenues, and profits).

How big is the damage overall globally? Ovum measured for 2011 globally and found OTT cannibalization of lost revenues to mobile operators out of text messaging at 14 Billion dollars. When the remaining real SMS market was worth 126 Billion dollars, the theoretical revenue pie would have been 140 Billion. And messaging OTT provider have thus cannibalized about 10% of the total global revenues of SMS text messaging. How rapidly did this threat emerge and materialize? I count the start of mass-market OTT service in mobile from the year 2005, when Blackberry Messenger started to be adopted in many markets by the youth. So in the next 6 years the cannibalization of SMS revenues and profits has gone from zero to 10%. And if we project a standard S-curve to this number and the past 6 year growth pattern, we get the cannibalization level at about 20% by the end of this year 2012.

BAD BADDER BADDEST

Yes, I know thats bad English. I just like the Badness of it all. This is a blog, I can be a bit more casual with the language, get over it. But yes, lets look at a few of the OTT providers. The UK survey by MyVoucherCodes revealed that the biggest OTT provider in Britain is iMessage which is used by half of all who use OTT services. Blackberry Messenger came in second, used by four out of every ten people. Whatsapp had 37% and Skype 33% of UK messaging users who use OTT services. Kik was ranked 5th at over a quarter of all OTT users.

UPDATE May 11 - I have just spotted US stats to help further understand the market

A day after this blog went up, I found a US survey by Acision, which says that of US messaging oriented OTT services installed specifically on smarpthones (remembering that OTT apps also often are available on mid-range featurephones) Acision measured the US adoption rates among smatphone users as follows: Facebook 37%, Skype 17%, Twitter 17%, iMessage 11%, BBM 10% and Whatsapp 5%. And similar to the UK finding, most who use SMS have not stopped doing so even with OTT services. In the USA, even among smarpthone users, 91% send SMS regularly and 45% of smartphone-owning SMS users, (and many in this group even while having access to OTT provider solutions) say they would be lost without SMS. I should point out, that the survey was commissioned by a mobile messaging provider (Acision) but the survey size was significant at 1,000 US mobile phone owners. There is tons more data and findings about US messaging users both SMS and OTT in the survey, which was reported at Mobile Enterprise 

BIG REGIONAL DIFFERENCES

The OTT market is still quite fragmented and there are many regional or local players. The domestic market use of OS brand-specific OTT providers, iMessage and BBM specifically, depends very strongly on domestic penetration rates of that platform (iPhone, Blackberry) in that country (and specifically among consumer users when we consider Blackberries). iMessage is big in France but nearly invisible in India. BBM is nowhere in China but huge in Venezuela. And so forth.

So if we want to consider the level of fear and loathing from the side of operators/carriers, then there are roughly four levels of threat.

First there are the small players and regional players. These are certainly a threat, and in some markets - take MXit in South Africa for example, they can be a huge disruptive player. But globally, a carrier group would rate them still as the least dangerous threat.

Secondly come the OS specific platforms, specifically currently Blackberry Messenger and iMessage. Blackberry has some 75 Million users worldwide, so it is less of a threat than iMessage, which reaches about 150 million users of iOS devices, not just iPhones but also iPads and iPod Touch devices.

Third are the global cross-platform messaging companies, specifically currently Whatsapp. While the user number is still less than BBM or iMessage, Whatsapp has the threat to be on all smartphone platforms breaking past the barrier of one OS family. The global installed base of smartphones is over 900 million today (plus you can double that easily, if you add Java/Brew capable 'featurephones'). But still, Whatsapp has a long way to go to approach anything near that large a number of active users.

Fourth, and on the top with Over The Top, is one and only one: Skype. Skype has over 900 million users today, so just by virtue of being the biggest, it is the biggest threat. But where most OTT providers are single-service plays (mostly on messaging), Skype is a triple threat, doing voice calls, messaging and videocalls.

 

METCALFE'S LAW

 

And now we gotta come do some math. Don't worry this is not going to hurt. But telecoms operator staff tend to be engineers and they love their math. And they all know Metcalfe's Law. Metcalfe's Law is a law about communication networks. The law says that the utilty of any network increases in the square of the increase in its users. When you double the network use number, you increase the network utility to all users, not by double, but by quadruple (2 times 2, or in math terms, '2 squared' or 2 to the power of 2). So if your network user number grows by 3, the utility to all users grows by 3 x 3 = 9. This now gets interesting.

According to pure user numbers, iMessage is roughly twice (when measured by number of current iOS device owners, not necessarily active iMessage users) as big as BBM. But according to Metcalfe's Law, iMessage is four times as dangerous to carriers simply as a network to transmit messages.

What about Skype? It is 6 times bigger than iMessage (ie 36 times more dangerous) and it is 12 times bigger than BBM (ie 144 times more dangerous).

You notice how this gets frightening really fast. If carriers/operators 'disliked' BBM and tried to stiffle its growth, they honestly fear iMessage and are doing all they can to prevent its growth. How then would they react to Skype? Pure terror might be an appropriate term for their spontaneous unprompted reaction, I would say. 

And hey, that is Skype today, before Microsoft gets into bed with them. Now Microsoft is promising to integrate Skype into all their platforms, starting with Windows 8. Soon it will be on Xbox360 and on Windows Phone etc. Take you 900 million current active users, and add in 1 Billion Windows desktops. Yes, there is bound to be significant overlap, but even if we say the resulting Skype plus Microsoft juggernaut comes out at 1.5 Billion, that is 10 times bigger than iMessage - yes, not 36 times more threatening as Skype is today, but yes, 100 times more a threat when powered by Microsoft.

Thats just messaging. Messaging which delivers 19% of operator revenues and 45% of operator profits. Skype also kills voice calls where 65% of revenues and 50% of profits are today. And finally, Skype also destroys the future, because it cannibalizes consumer videocalls, something operators/carriers wanted to be a future revenue and profit stream in the 3G and LTE networks, using smartphones with the second, forward-facing cameras.

For whatever dislike, mistrust, fear and hatered any mobile operators have for BBM or Whatsapp or iMessage, that is simply exponentially more towards Skype. And I have not even started about the role of international calls and international call roaming to the profits of the mobile operators. Skype is like a guided missile, aiming for any place where a mobile operator has its best profitability.

THE EMPIRE STRIKES BACK

So how is the carrier community reacting. Any operator can react to low cost or cheap or free voice or messaging provider, by the obvious marketing tool - cutting its own prices. The operators tend to not lower their main public price for the voice minute or SMS text message, for example, but rather they use other methods by which they can focus the damage, for any price cut means directly a cut in profits too. So they give big (or ever bigger) bundles of free calls and messages at some price plan or point.

Then the operators try to set up something similar. For Skype VOIP calls and various Skype clones like Vonage, the operators have already been deploying VOIP based discount call services, such as those used for international calls. Typically you would need to dial some special prefixes on that operator's network, to access those cheaper VOIP technology based international calls. And on the messaging side, some operators have been starting to roll out clones of OTT messaging services like Whatsapp. In the USA, T-Mobile launched Bobsled, while in Spain, Telefonica has launched Tu Me.

And of course the operators also try to limit, cripple, shut down or charge extra for uses of those services, just like TeliaSonera in Sweden is now doing for Skype. Their (new) contract terms say their unlimited data plan explicitly excludes access to Skype and if Skype is used, those data charges will be above the standard all-you-can-eat package.

LEAST THREATENING OPTION

Now we are approaching the point where operators are making those hard choices. The actual decisions depend very much on what is in their home market, what kind of smartphone platfroms are popular etc. But consider for example BBM and iMessage. Clearly both are undesirable for the operator. But consumers want smartphones. Which one to support in marketing terms (from in-store promotions to handset subsidies)? So first, iPhone is already bigger by reach than Blackberry. But when you add the global iOS family of product to the iPhone side, and the few sold Blackberry tablets to the BBM side, you get a very lopsided picture, the reach of iMessage is far bigger. Then lets add data loads. A Blackberry often has a smaller screen, it is less optimal for web surfing, they are very well suited for messaging which has a trivilal data load footprint compared to modern web content like YouTube videos. Then compare to iPhones. They have excellent data consumption elements, a large screen, great intuitive browser and typical Apple goodies. And for messaging, an iPhone with its touch screen is never gonna beat a Blackberry QWERTY keyboard. Remember the UK stats, for most users who have installed OTT messaging services, they don't quit using SMS. So having a good messaging phone will increase the traditional messaging traffic versus a bad messaging phone. 

So an iPhone causes heavy data loads and is not causing increased messaging to the same degree as a Blackberry. Meanwhile a Blackberry has on average less web traffic but has far higher uses of messaging, both on BBM and on SMS. Then add the data compression which on the Blackberry solution is far better than any other smartphone. Finally add BBM and other Blackberry data plans, with most Blackberries, there is a revenue opportunity for the operator already built-in on BBM, which Apple of course does not give to the operator. On all these things, while yes, operators hate BBM too, the overall Blackberry package is far far less harmful for the operator total business, than an equivalent iPhone.

The same goes for Whatsapp, and yes, for Skype. Whatever option is out there, Skype is literally the most dangerous, the most harmful and most threatening. That is why carriers hate Skype above all others. That is why when Microsoft bought Skype, they were faced with an instant, global sales boycott of all Windows Mobile and Windows Phone smartphones - even as these did not come with Skype pre-installed. The carriers know that VOIP and OTT messaging are inevitable. But Skype is not inevitable. They will fight Skype till the last minute and message and videocall. And mark my words, the operators win in this game. We've seen this movie before. Nokia tried to bypass carrier services and make revenues for itself with something called N-Gage. The carriers said no you don't. Nokia's market share had a severe drop globally from 40% of all mobile phones to 24% and Nokia went back to the operators, apologized, and immediately ended the N-Gage app store with its side-loaded games and operator-bypassing software sales. Why could Apple then do it successfully? Its the Blackberry vs iPhone problem of today. When Apple launched the iPhone App Store in 2008, they were tiny in smartphones, only 10% of all smartphones and 2% of all phones sold. They were not a threat (then, they are now). Unfortunately it seems that Nokia's Stephen Elop has managed to fire or scare away all the senior management talent who knew the N-Gage story, as Elop clearly has not learned this lesson. As Churchill said, those who fail to learn from history are doomed to repeat it.

And if you think the carriers don't have this kind of clout anymore, ask Apple last year. Apple thought the iPhone loyalty and fan support is strong enough, that Apple could deploy a virtual SIM card to the 2011 new version of the iPhone (what later became the iPhone 4S). The carriers said no. Apple lost four months of sales, had to rush a redesign of the iPhone 4S with a real SIM slot and the carriers won. They won against Apple. Who wins against Apple?

And if you are a Microsoft fanboy, what of Microsoft then? The carriers promised to launch the Kin youth phones, Microsoft's first phones ever (two years ago). Then they didn't like Microsoft's arrogant bullying tactics, and after they took the marketing launch campaigns, and the phones hit the stores, they stopped supporting them. Microsoft pulled the Kin phone from the market - in six weeks. The shortest life of any phone ever created. Yes, the carriers have this power. They used it against Nokia when it was biggest in handsets, they used it against Apple when it was biggest in smartphones, and they have used it against Microsoft specifically, even before Microsoft angered them totally, with the purchase of Skype. Now the matters keep getting worse for Microsoft (and Nokia Lumia) as we just learned yesterday, that Nokia CEO had been telling the Nokia shareholders how dramatic world domination plans the Axis of Evil (Skype + Microsoft + Nokia) now have. But read that blog to hear the Nokia story, this blog is not about Nokia, this is about OTT platforms and why carriers dislike BBM, hate iMessage and fear Skype.

For those readers who might want to know more explicitly about the danger Skype poses to mobile operators, I wrote a blog about that last year. This is far more detailed and specific, and obviously only about Skype. Read: Why Do Carriers Hate Skype: Let Me Count The Ways.

OUR PREFERENCE IS NOT THE ISSUE

Please note, I am here to explain how carrier business works. Obviously for us, normal people, consumers, the OTT services are excellent and help drive innovation and lower costs. Those are all good things. I am not in any way suggesting OTT is not coming or will not take over for messages and calls. I do want my readers to understand why there is such a big difference among the OTT providers, and why the carriers are so nervous about this matter. As I mentioned, MY PROJECTION says 20% of all messaging revenues is going through OTT within a year, doubling from what it is today. I am not in any way suggesting we try to go back to a previous decade haha.. I am not saying what we want. I am saying what the operators/carriers think, and they decide which handsets are in the stores and which are sold to their customers. Thus the carriers control this situation. And if Microsoft were, for example, to put a premium price Skype on Windows 8, where the calls are not free, then nobody would use that, they'd go to free alternatives, obviously. So the purpose of this blog was to answer the question from many on this blog and on Twitter, who asked me to explain this part of the telecoms economy and competitive landscape. I am not here to defend carriers or suggest OTT should or even could be eliminated. What I AM saying, is that the carriers have power to pick one over another, and in that contest, Skype is already doomed.. 

WHO IS THIS GUY?

Oh, and those who ponder who is this silly Ahonen with his weird views? I'm the most published author in the mobile industry with 12 books out already and explicitly, I wrote the industry's first business book, how to make money with mobile (M-Profits a multiple bestseller, translated etc). In that book I discussed this opportunity and threat - literally 10 years ago - so I didn't discover the OTT issue with iMessage last year or BBM a few years ago, haha. Before I worked at Nokia, I was employed at Elisa Corporation (Finnish carrier/operator) in the 1990s. and as the head of our international products I oversaw our trial of an early VOIP service in 1997. I've been personally actively involved in the BUSINESS of this opportunity for 15 years, literally, and written 'the book' about the mobile carrier/operator business. If you think Tomi is a weirdo, think again: I am referenced in over 120 published books already, by my peers. If you think my thoughts here are weird, the real experts of this industry - the ones who write the books - they trust me. You might consider re-reading this blog with that in mind.. And I'll be here in the comments to chat with you too. Just remember my rules of comments on this blog - don't be rude to my readers, stick to this topic of this blog article (you must illustrate in your comment that you read the full article else I remove your comment as a waste of the time of my readers) and don't use profanity. I also remove spam and some obvious troll comments but you don't have to agree with me, I keep very hostile comments here on this blog critical of me and calling me mad etc. Thats all fine, I will be here ten years later after another 10 books and those comments will be very petty by then haha..

Video of my Keynote in New Zealand on Future of Telecoms

This is a video of me in Auckland New Zealand two weeks ago, where I delivered the keynote to the Telecomnz confernce called Tel.Con. 




The presentation looks at how will money be made in the future of telecoms. I discuss such critical topics to telecoms as 'Peak SMS' how long can text messaging revenues and profits sustain mobile, smartphone migration rate, how long will it take and can all phones become smarthpones, and my latest view to the Grand Convergence we will see this decade. I talk about the astonishing developments in mobile money, the 9 Unique Abilities of Mobile, and what happens when money and advertising merge - ie Advocurrency. The presentation runs 50 minutes and the video is very well produced. Oh, and even if you don't want to see the full video, check out the video at about 47:30 what happened on stage haha, this is a memorable event for me for that reason (was first time for me haha)

The Virtual Tupac via 2D/3D holographic projection, the dead rapper returns

This is so amazing. While this is the quarterly reporting season and thus there are many stories here on the Communities Dominate blog about smartphones, there is life in the world beyond smartphones too. And this is a truly amazing story. Plus its about a rapper and me being one of the world's oldest white dude European fans of rap music haha - of course I have to celebrate the return of Tupac.

Tupac Shakur was a chart-topping rapper who was killed very early in his career. There are some recordings of his performances and some music videos etc. But now, a company called AV Concepts has worked with the record label and helped create a virtual avatar version of Tupac. So this is not using his films and videos to create something out of past recordings like they did for example with Michael Jackson's death. No, this is an actual human-sized and very realistic robotic avatar, created with programming not just to look like Tupac but to move like him with his mannerisms etc, and of course to sound like him. And that virtual Tupac just made his stage debut in California with Dr Dre and Snoop Doggy Dog.

Now, this is not a real holograph like say the Princess Leia character in Star Wars. This is using a magician's stage trick with a projection on a glass pane, but to the audience he looks perfectly real and the two other rappers were able to choreograph their moves and rhymes to work with Virtual Tupac. It is the modern digital virtual electronic version of a animatronic puppet like you might see in Disneyland but this is far more realistic, and it being only software, they can easily make this new Virtual Tupac to change his dance moves, sing different lyrics, say hello to the audience etc. It is VERY cool technology. Take a look at the AV Concepts site for a video. And here is MTV news covering the story. 

Largest Mobile Social Networks Today by Size of User Base

Facebook has just bought Instagram for a cool 1 Billion dollars. Congratulations to both. But the news seems to be suggesting Instagram is the biggest mobile social network. It is far from that. It may be the biggest social network purely for mobile - in the USA - but that is hardly the biggest in the world. I became curious to find a convenient list of the biggest social networks on mobile, thinking surely such a list exists somewhere - this being the hottest focal point and future direction of the hottest industry right now. I was surprised such a list doesn't exist (or at least I was unable to find one easily). I think a good page should be set up at Wikipedia but while we await that, lets collect my best understanding of the biggest social networks as measured by their mobile users. This includes both 'pure' mobile social networks and the most recent counts of the largest online social networks by their mobile user base. No surprise who shows up on top, either..

LARGEST SOCIAL NETWORKS ON MOBILE, END OF 2011

Social Network (Owner) . . Users . . . Home Base

Facebook mobile . . . . . . . 425 M . . . USA
Mobile QQ (Tencent)  . . . . 200 M . . . China
Sina (Weibo) . . . . . . . . . . 150 M . . . China
RenRen  . . . . . . . . . . . . . . 61 M . . . China
iMessenger (Apple)  . . . . . . 58 M . . . USA
Mig33 . . . . . . . . . . . . . . . . 55 M . . . Singapore
Twitter mobile . . . . . . . . . . 55 M . . . USA
Blackberry Messenger . . . . 50 M . . . Canada
Mxit . . . . . . . . . . . . . . . . . 50 M . . . South Africa
Nimbuzz . . . . . . . . . . . . . . 50 M . . . Netherlands
Skype Mobile (Microsoft) . . 40 M . . . USA
Gree . . . . . . . . . . . . . . . . . 35 M . . . Japan
Instagram . . . . . . . . . . . . . 30 M . . . USA
Mobile Cyworld (SK)  . . . . . 25 M . . . South Korea
Mobage Town (DeNA)  . . . . 25 M . . . Japan
Mocospace . . . . . . . . . . . . 22 M . . . USA
Whatsapp . . . . . . . . . . . . . 20 M . . . USA
FourSquare . . . . . . . . . . . . 15 M . . . USA
Mixi . . . . . . . . . . . . . . . . .  15 M . . . Japan
MyGamma (Buzz City)  . . . .  5 M . . . Singapore
Flirtomatic  . . . . . . . . . . . . .  4 M . . . UK
Itsmy  . . . . . . . . . . . . . . . . . 3 M . . . Germany
Funbook (XL)  . . . . . . . . . . .  2 M . . . Indonesia
Frenclub . . . . . . . . . . . . . . .  1 M . . . Malaysia

Source: TomiAhonen Consulting Estimates April 2012
The above information may be freely shared

Please note, that this is a preliminary and incomplete listing. Secondly, before you complain that Facebook has over 800 million users etc, remember, I am counting the MOBILE users.

Thirdly, I would welcome any and all corrections and revisions, especially any mobile social networking services that are missing from the above listing. There are many national and regional social networks that are almost impossible for me to discover and find, especially when their native language is other than English.. So please accept the above list as 'preliminary and incomplete' as of 10 April, I hope to be able to add a lot more to it, as I post this blog and also request assistance from my Twitter followers and the Forum Oxford community.

A few special mentions. I could not find any official number for Skype Mobile users. I did find Android and iOS Skype app download numbers. From the iOS number I arbitrarily assigned Apple's iPhone percentage ie 58% as in the strict definition of 'mobile' the iPod Touch is a portable/pocketable device, not a 'mobile' device, and the iPad is an ultraportable PC but not a 'mobile' device, only true cellular permanently connected pocketable devices (ie those that 'ring in the pocket') fit the definition of a mobile device. Hence I only count iPhones not iPads or iPod Touch's and used that iPhone percentage of all iOS devices. And I assumed that of all Skype apps ever downloaded, still 90% are in use on smartphones (total wild guess, I have no better data). Same with the iMessenger number as 58% from total Apple official iMessenger users, except obviously am counting 100% of the iPhone iMessenger users being active as its a relatively new service vs Skype thats been around much longer.

But yes, as a service to all who are intersted in social networking, or mobile, or mobile social networking haha, please accept the above as a listing of the biggest social networks today, by the count of their mobile phone based users.

And one shameless plug, as it is directly relevant to this blog posting. For those who want to read more about the fastest-growing part of the digital space, where the biggest money is being made right now, you may want to read the first book that focused only on the mobile side of social networking, Tomi Ahonen Pearls Vol 2: Mobile Social Networking. The ebook runs 173 pages and costs only 9.99 Euros. Take a look at the book description here, the only place where the ebook is sold: Tomi Ahonen Pearls Vol 2: Mobile Social Networking.

So the Digital Jamboree starts: Q1 Results from RIM are horrid - Blackberry in tailspin

So we start the Smartphone Bloodbath Year 3: Digital Jamboree. And first up, Q1 results from RIM the maker of the Blackberry. At last Quarter it seemed like Blackberry had gotten its mojo back, growing 33% from the previous quarter (slightly faster than the industry even) and looked like its market share had stabilized at 9%, down from its peak of 21% back in Q3 of 2009. It has been a steady decline since. By Q1 of 2010 Blackberry had 18% of the global market. A year later at Q1 of 2011 it was down to 14% and now we have the latest numbers. For the calendar Q1 quarter of 2012 RIM sold 11.1 million smartphones, and that is about 7% market share. 

First a quick note to the smartphone stats wonks, I am modelling a 3% rise in smartphone shipments for Q1 fuelled by the Chinese New Year sales, so I am projecting 160 million total units shipped. We will not know the actual number as per usual, until each of the big 4 handset industry analyst houses has reported (Gartner, IDC, Canalys and Strategy Analytics) whose numbers are expected around first week of April.

BLACKBERRY OVER THE CLIFF

Secondly, obviously, Blackberry's temporary stabilization turns out to have been an illusion. The sales of Blackberriesfor Christmas was maybe some corporate/enterprise customers using some end-of-year budgets to replenish handsets, and in some markets parents buying Blackberries for their kids as Christmas presents. But since then, the BB sales have fallen off a cliff. In fact, if you liked my hypothesis of The Cliff Theory of how handset makers die, now Blackberry's one year performance fits dangerously the pattern identified in The Cliff. Their market share dropped by half in a 12 month period. While my theory has so far only looked at annual sales numbers, not quarterly sales numbers, this is nonetheless a very dangerous sign for RIM.

The other part my theory of The Cliff suggests, is that in the desperate moves a handset maker tries to recover, it will inevitably go from making profits to making losses. That has just now happened also at RIM, they reported their first quarterly loss in Q1 of 2012. This is VERY bad news and promises VERY bad coming months. The company is in a tailspin.

Consider. Just one year ago, for the full year 2010, RIM was the world's second largest smarpthone manufacturer by units shipped. RIM sold 48 million Blackberries vs third place Apple with 47.5 million iPhones. RIM had grown 39% in size from the year before and was very profitable. Last year 2011 that growth stalled to only 9%, and RIM fell from 2nd biggest smartphone maker to fourth, with 11% market share. Now compared Q1 of 2012 to Q1 of 2011, RIM's actual shipment number is down ! Blackberry global shipments are down 23% in one year while the industry itself grew 63% in the same period.

And obviously, the true danger-sign that all bets are now off at RIM, is when a profit-generating smartphone maker turns into a loss-maker. This is arguably the beginning of the end. If 'The Cliff' theory holds, RIM will fall to 3.5% size over the next 12 months (or worse) and will be gone from the market as an independent smartphone maker within 2 years. Could be much faster, as we heard already from the new management at RIM that they are seeking partners (and trying to sell the company, or parts of the company, or get an investor or partner).

IS RECOVERY STRATEGY THE RIGHT ONE

RIM's new management promises to return to its roots more. The early news stories that Blackberry is abandoning the consumer market proved to be misreported, but the company is trying to reorient to focus more on the enterprise/corporate segment (while not abandoning the consumer market). And they continue with their tablets. This is all bad news. Blackberry owned the enterprise/corporate market in North America but that market has been eroded as enterprise/corporate customers are increasingly willing to allow employees to use their own phones - very often iPhones in the USA but increasingly also Android devices. In the rest of the world, Blackberry was not strong in the enterprise sector. The worse news is, that there is a steady trickle of major enterprise/corporate/government clients who are switching completely away from Blackberry and (usually) to the iPhone. RIM will find it increasingly hard to even stabilize the market in the enterprise/corporate sector in those countries where it is relatively strong and find it hard to crack new markets in this sector.

Meanwhile the enterprise/corporate sector, especially in the Industrialized World, is already nearly fully saturated in smartphones. There is almost no growth in this sector. Yes, RIM can find replacement sales here, but even if every existing Blackberry is replaced 1 to 1 by another Blackberry, it would mean Blackberry's global market share would erode from the current 7% to about 4%-5% within a year (assuming the rest of Blackberry sales would not fall). No matter how you spin it, if the primary focus of RIM will be the enterprise/corporate sector this year, it means Blackberry's market share will continue to fall dramatically, and that means very very bad news every quarter.

The growth in smartphones is with the consumer market; and even that is becoming saturated over the next few years in the Industrialized World. Here in some of the most advanced Asia-Pacific countries like Singapore, Australia, Hong Kong, UAE etc - the proportion of smartphones out of all new mobile phones sold is well past 80%. In Western Europe it is past 70% and in the USA it is well past 60%. So the growth potential of consumer smartphones is not strong anymore in the Industrialized World nations, where today more than half of all phones in use already are smartphones. The growth opportunity is mostly in the Emerging World markets where about half of all smartphones will be sold this year. Out of all active mobile phone accounts, 80% are in the Emerging World countries and only one in five is in 'the West' ie the Industrialized World countries. And for the Emerging World, we need lower-cost smartphones near the 100 dollar price (without subsidy included). The average Blackberry device costs over 300 dollars and is priced far too high to be a mass market proposition in most of the Emerging World markets.

Blackberry did have strong success in many surprising Emerging World markets from Indonesia to Nigeria to Venezuela but RIM seems not to have been able to fully capitalize on that and to spread into the rest of the world. There are many countries where the Blackberry is not strongly welcome by the carriers/operators (like China) or where the local regulators are concerned about the level of 'too much' security on the Blackberry service (like several countries in the Middle East). These all have hurt Blackberry's chances. And of course there is the added pain of having launched the tablet which does not support Blackberry's other business well and has been an enormous drain on RIM's profitability while selling in modest numbers only, compared to the market dominant iPad.

I explained in my Blackberry analysis last year, that RIM also suffers a problem related to the youth market segment. The youth do love their Blackberries ('feeding the BeeBee' as they say in Britain when they send BBM messages) but the addiction is more to the BBM messenger service than the device. Any old Blackberry can be used to send BBM instant messages, so once a teenager has any old Blackberry device, that is enough. Then as the Blackberry typically is not the most advanced phone by screen or camera or web browser or app store selection etc, the youth will happily replace their 'other' phone with something new, but keep the old Blackberry. That is why Blackberry has a far slower replacement cycle than the smartphone industry overall. This further means less handsets sold - compared to the industry average - per year than the rivals. It means a loss in market share when measuring new handsets sold. More bad news to come in the coming months.

In short, this is the worst quarterly results from RIM and while it was up and down several times last two years in the results, this is now both a giant drop in market share, and the first time RIM goes from generating profits to generating a loss. I think we've seen another giant fall off a Cliff. And how astonishing, RIM was the world's second largest smartphone maker just over a year ago. How fast they can fall in this volatile industry. Keep tuned for more in Smartphone Bloodbath Year 3: Digital Jamboree.

Previewing Year 2012 in Smartphone Bloodbath - Year 3 is the Digital Jamboree

I started to monitor the 'Bloodbath' in smartphones in year 2010, when it seemed like this space was really heating up. I had given many blog updates about mobile phones before, but from January of 2010, I've done deep analysis every quarter of the smartphone market and given my commentary on the various players and their strategic moves. (Long blog warning, this article runs about 10,000 words and very deep detailed numbers and facts)

MOST CONTESTED GLOBAL INDUSTRY

In 2010 I counted that among the Global Fortune 500 largest corporations on the planet, four years before, in 2006, only 6 brands were manufacturers of smartphones. By the start of year 2010 it had ballooned to more than 20. That was not just massive growth in the competition of smartphones in a very short time, but of any globally contested industry, it was the most competition we have ever seen among Fortune 500 sized companies. There have never been 20 car manufacturers or airplane makers or home electronics brands in the Global Fortune 500. Banks and oil companies are industries with more than 20 competitors, but they are not competing globally. Citibank and HSBC do offer banking services globally, but most of the banks listed in the Fortune 500 do not have offices in most countries. Same is true of petroleum. BP and Exxon do have gasoline service stations worldwide but many local giants like Pemex and Petronas do not. In smartphones, once Apple jumped in, the iPhone is sold in just about every country. The smartphone industry had become the hottest and most fiercely contested industry on the planet. And with massive rewards if you did it right - Apple is now the world's most valuable company by market capitalization, and most of its revenues and profits do not come from the Macintosh PC business or its iPod and iTunes music unit. More than half of Apple's revenues and profits come from - yes - its smartphone unit. Apple calls itself a mobile company.

I applied my business consulting training and analysis to the heated market in 2010, and suggested that the competition would become so intense, that some of the big brands would falter and exit the smartphones battles. Not everyone could make money in it. And so I called year 2010 the 'Year of the Bloodbath'. How right I ended up being. Former smartphone giant Palm died that year. Microsoft's highly anticipated Kin family of youth phones appeared onto the market, and in six weeks was killed off. Two big-name Smartphone industry CEOs were fired as their companies stumbled, Nokia and LG. Google's first attempt at a smartphone, the Nexus One, while highly regarded in the press, was not warmly welcomed by the carriers and Google soon pulled it from the market, but did return with later versions of the Nexus series.

After the carnage of the Year of the Bloodbath, I looked into 2011 and decided the carnage was not over, and called last year 'Year 2, Electric Boogaloo' of the smartphones Bloodbath. I felt there were too many rivals and many of the startegies were idiotic (almost all rivals attempting to copy-cat the iPhone). We saw the end of Motorola and HP. We saw the exit of Ericsson, a former giant mobile phone maker and early smartphone pioneer - finally throw in the towel after a ten-year partnership with Sony. Arguably this departure releases Sony to do what Sony does best. Time will tell.

That would qualify for a truly Bloodbath'ish year in smartphones, but we have not even mentioned Nokia. Nokia's new CEO Stephen Elop decided to take the growing smartphone sales of Nokia (which after he took over, also produced increasing profits) and demolish those. He took the growing sales of the world's most sold smartphone operating system, Symbian, with half a dozen partner manufacturers (mostly out of Japan)  and the bestselling smartphone OS on five of the six inhabited continents, and by a massive margin, the world's most used smartphone OS by installed base - and announce its end and the termination of its migration path to MeeGo. Elop committed to 150 million more Symbian based smartphones (he has since reneged on that promise saying now that Nokia cannot deliver that amount). Never in the history of any 'platforms' based industry, has a market leader quit while it was ahead. Microsoft didn't abandon Windows when ahead. Sony didn't abandon PlayStation while ahead. The VHS alliance didn't abandon the VHS video recording standard when it was ahead of Sony's Betamax. The Blueray DVD platform didn't abandon its market when it was ahead. But Nokia took the Symbian platform - while it was towering over its rivals - and abandoned it last year. And Nokia decided to announce its replacement platform, MeeGo as stillborn. As we know, Nokia annouced it will migrate to Windows Phone.

Last year thus saw the announced deaths of two major platforms - Symbian what had led the industry from its beginning. And MeeGo the Nokia and Intel partnership that was to have replaced Symbian (which had several handset makers and PC makers already committed to it). We saw a couple of netbooks released on MeeGo by the tech partners including Fujitsu, and two smartphones by Nokia, the N9 which was sold, and the N950 which was only produced in tiny quantities for demonstrator purposes.

And the carnage still wasn't over. As HP had bought Palm, it had acquired WebOS and had initially intended to use WebOS as its platform across various portable technologies. HP's revised Palm and the WebOS platform were also killed last year.

But it wasn't all contraction in the industry. Many smaller or 'dumbphone' oriented phone makers were entering the smartphone space from the low-cost side, such as African Mi-Fone and India's Micromax. On the platform side, Intel replaced outgoing Nokia with Samsung to announce Tizen in 2011 as a smartphone OS we should see devices released this year. Some local/regional players like South Korea's Pantech, and Japan's Panasonic and Sharp, announced intentions to spread internationally and have showed early smartphones on that path.

YEAR 2012 IN SCALE

So lets look first, at the overall size and scale of this Smartphone Bloodbath Year 3: Digital Jamboree. What do we see? First lets talk scale. Last year the smartphone industry grew in units sold from 298 million units sold, to 486 million units sold. That was a growth rate of 63%. Understand how massive this number is. The growth rate, I mean. This industry which already sells more devices than the TV industry or the DVD players or videogaming consoles or digital cameras, still grew 68% in just one year. If you grow 68% in a decade, that is a nicely growing global industry. Smartphones grew 68% in one year!

And yes, last year for the first time, more smartphones were sold than all types of personal computers (Desktops, laptops, netbooks, and tablet PCs like the iPad) combined. And of the migration from dumbphones to smartphones, last year 30% of all new phones sold were smartphones (that was up to 33% by Q4 of 2011).

What kind of numbers will we reach this year? I am modeling (again, conservatively at the start of the year, this may be and likely will be revised during the year) that the overall growth rate will slow down. The growth rate was 73% in 2010, and 63% in 2011. I am thus pegging my first target saying smartphone growth this year will be 53% and we'll reach 745 million smartphones sold this year. That would be roughly 43% of all mobile phone handsets sold this year. (please note, last year I upgraded my forecast several times in the year, it is likely I will do so for this number too)

Now. How enormous is 745 million? Its twice the number of new TV sets sold globally. All those nice flat screen TVs we see in the home electronics stores. Its more than 5 times bigger than the total number of stand-alone digital cameras and camcorders sold worldwide. It is about twice the number of all portable computers (laptops, netbooks, tablet PCs). This year we will pass 1 Billion smartphones in use, and sometimes next year, there will be more smartphones in use than any type of personal computers in the world.

Where will be the bulk of smartphone sales? While we all will no doubt admire the next iPhone out likely in June of this year, the big growth in smartphones is not at the top, where we have the Blackberry Bolds and HTC Titans and Samsung Galaxies and Sony Xperias. The big growth is at the bottom of the pyramid. Deloitte estimated that this year we will see 300 million new smartphones sold with a cost of 100 dollars or less (unsubsidised price - remember the unsubsidised price of the iPhone 4S is 660 dollars, not the 179 dollars you might see at a store, when you are forced to take a 2 year contract). Who sells 100 dollar smartphones? That market is heavily contested by mass market volume produces especially from China like Huawei, ZTE, Lenovo and G'Five. Samsung is contesting that market with its bada-powered smartphones. Google is rushing to make the Android OS competitive in the low cost space. Nokia's Windows Phone smartphones are not suited for this space, and Nokia is discontinuing the Symbian OS which worked well with low-specification phones. As Nokia's new Asha series of 'featurephones' are not true smartphones, Nokia may find its Asha soon uncompetitive against these low-cost smartphone rivals. But what is certain, is that the top end iPhones, Blackberries and premium smartphones like Samsung Galaxies are not able to contest this low end of the market. And that is where 40% of the market exists this year.

DIVERSIFICATION

I had said that the harmonization of the smartphone market at the time of hypergrowth was a bad sign, where everybody tried to do their iPhone-clones. Now in 2011 we saw more diversification and even more signs of that in early 2012. Nokia's 808 PureView is perhaps the best example of this now, as a phone that is definitely not 'slick' and 'slim' but does offer that glorious 41 megapixel camera and all its camera-oriented goodies. But look at other smartphones, from large screen phones (HTC Titan, Nokia Lumia 900, Samsung Galaxy Note) to the smartphones with pico-projectors (Samsung Galaxy Beam and others) to smartphones with 3G glassless displays (from LG and others) to phones optimized for videogaming (Sony Xperia Play, and likely soon a 'true' Playstation Portable smartphone). And we've of course had the QWERTY oriented Blackberries and their countless clones.

This is good for the industry. This is an unprecedented opportunity for diversification and giving consumers what they need. Not everyone wants the slimmest phone with a minimalist specification set, like the iPhone. I have been saying that Apple leaves money on the table, if they just released a QWERTY slider version, they would increase iPhone sales by at least 30% maybe 50% and they could price the QWERTY variant above the price of the regular iPhone and make a ton more of profits. But of course Apple doesn't listen to anyone haha..

But that is the overall big picture of the industry. Now lets look at the major brands and what to expect for 2012, Year 3: Digital Jamboree. Oh, why call it Digital Jamboree? I think this is now starting the first year of consolidation and deeper partnering. Many of the weak rivals are out of the game (Palm, Motorola, HP, Ericsson) and some platforms have been culled (or their end announced) in the past few years (Windows Mobile, Palm/WebOS, Symbian, MeeGo, LiMo, Maemo, Moblin). We saw major pairings of major players last year: Google buying Motorola, Nokia joining Microsoft, Samsung and Intel partnering. Now we have a period we will see more of that dance and likely we see the camps solidifying, not unlike the big Boy Scout Jamborees we see every four years (I was a Boy Scout way back when in my youth, and attended the World Jamboree in Norway in 1975). So lets look at the brands in order of their size, starting first with handset manufacturers:

APPLE

Apple took the crown last year as the world biggest smartphone maker. Just a year before, Apple had been half the size of Nokia the massive market leader. Now by Q4 Nokia's smartphone unit had fallen to almost half the size of Apple's iPhone by unit sales. Apple sold 24% of all smartphones worldwide in the Christmas quarter, and 19% for the full year. The iPhone 4S was delayed but continued Apple's incredible streak of hit smartphones where each year its new model outsold the previous model by a large margin. Can that continue? I think this year 2012 definitely yes. The iPhone 4S was in reality only a modest upgrade compared to the iPhone 4, and many analysts expected more tech brilliance out of the 4S. I said on this blog that the iPhone 4S was a last-minute redesign and thus somewhat a compromise due to Apple's over-reach with its intention to do the iPhone without a SIM card. We now see Apple in a battle with other handsets wanting to go from the microSIM to a nanoSIM. But apart from the SIM card, the iPhone 4 line is starting to fall behind on the screen size battle. The original iPhone 2G and even 3G were globally screen size leaders, with 3.5 inches, where most contemporary smartphones had 2.5 inch screens and the biggest rivals were at 3 inches in 2007 (excepting for some superpremium phones like the Nokia E90 Communicator with its 4 inch screen). Today we have many smartphones well past the 4 inch screen size, and the top dog is the Samsung Galaxy Note at 5.0 inches in screen size. Compared to the iPhone 4S, the Note screen is about twice as big, a massive competitive advantage when held at arm's length.

If Apple releases a new bigger screen iPhone, I expect it to be called the iPhone 5 (rather than iPhone 4GS or something like that). And a 3.5 inch screen on a flagship phone is now being obsolescent in 2012. Many other tech specs are hoped for or expected by fans, from WiMax '4G' to NFC to of course a higher spec camera.

No matter what Apple does, the next iPhone will be cool and desirable and people will once again wait in line to be the first to get it. Some things to look for with Apple. Is the next iPhone released in June or September. The sooner the better for Apple's world domination plans. And will there be a split in the product line. I have been advocating on this blog that Apple needs to introduce a low-cost 'entry level' model, what I call the iPhone Nano. I have said that releasing the Nano variant (and splitting the product line) would increase Apple's total unit sales by at least 50% and if done intelligently, a Nano variant would not eat into existing iPhone customer sales, but would open massive markets in the lower-cost countries where most phones are not subsidised and a 660 dollar price tag puts the iPhone 4S as much beyond the reach of the common consumer as a Rolls Royce or a corporate jet or a luxury yacht. But even in those markets, the newly affluent middle class could afford a 300 dollar (unsubsidised) Nano iPhone.

The other sign to look for is a tech called TD-SCDMA. That is the exclusive 3G standard for China Mobile. If Apple starts testing a TD-SCDMA variant of the iPhone, the only client would be China Mobile (alone as big as all US carriers, AT&T, Sprint, Verizon, etc - added together - and that number still doubled). Currently China Mobile has millions of iPhone users while the iPhones do not operate on China Mobile's 3G network. If Apple did release a TD-SCDMA version, this would signal a huge jump in iPhone sales in China. Obviously Apple would not bother to do that, if they cannot get a contract with China Mobile to carry the iPhone.

SAMSUNG

 

The world's second largest mobile phone handset maker, Samsung, became last year the second largest smartphone maker too, for the first time ever. For one quarter (Q3) they were briefly the world's largest smartphone maker but for the full year, Apple took the crown. But as Samsung is growing far faster than Apple - Apple almost doubled but Samsung grew more than 3x last year - and as Samsung offers a far wider portfolio of smartphones from the top of the line (Galaxy Beam, Galaxy Note) to the ultra-low-cost basic smartphones running on bada, Samsung is certain to pass Apple for the global crown this year. I think Quarter-by-Quarter we may see a see-saw effect with these two brands battling for the quarterly lead, but for the year, Sammy is pretty set to become the top dog. And for the full year, they are likely to reach their decade-long ambition - to pass Nokia as the world's largest handset maker too. That might not happen for the full year sales, but is very likely to happen in Quarterly handset sales around Q4 or even Q3.

If I was to predict a direction, I think Samsung felt stung by Nokia's 808 PureView taking the crown for the Phone of the Event at the world's biggest mobile industry event, the Mobile World Congress in Barcelona a few weeks ago. Samsung has been an early pioneer in cameraphones and has done many high resolution cameras in the past. We might see Sammy do a top-line cameraphone but obviously running Android, and branded Galaxy. As Nokia seems reluctant to sell the 808 PureView everywhere (bizarrely, for example refusing to sell it in the USA, where Nokia wants a come-back and where the 808 PureView has been warmly received in the tech press) - as Samsung is the bestselling dumbphone of the USA, and the bestselling Android powered smartphone of that market, Samsung could just steal some of Nokia's thunder with this option. It would not be the first time Samsung took what Nokia madly threw away - witness stepping in for Nokia after MeeGo with Intel to develop Tizen.

NOKIA

 

For Nokia this is the year of proof for the Microsoft partnership, the Windows Phone OS and Nokia's Lumia line. I have reported that the early prodcuts in the Lumia line are surprisingly flawed and the next updates seem to be more bad news. I also reported that the Lumia sales are now encountering so many returns that the retail sales channel is revolting and refusing to sell Lumia even when asked for by name. But Nokia's new CEO Stephen Elop, the ex Microsoft guy, forges on and pushes Lumia into every channel he can. We hear that in the USA the Nokia-Microsoft partnership paid AT&T 25 million dollars so that AT&T would allow its own staff to use Lumia phones as company phones (but would need to hand in their iPhones or whatever Android/Blackberry phones they currently use, not an easy switch as the Lumia 900 is quite deficient in many ways). Same with China, Nokia and Microsoft seem to have been willing to invest heavily in breaking into the China market.

I am wary of the Lumia push, as the phone series itself is so deficient, and not suited for (non-American) consumers and markets. But we will see. I calculated that early evidence from UK statistics suggests that when Nokia tries to migrate from Symbian to Lumia, they cannot achieve 1 to 1 replacement, but bleed about 30% of their customer base in the transition. Maybe with better models later this year, Nokia can do better. But the early signs for Lumia are not strong, and as long as Nokia's CEO refuses to sell the N9 and N950 on MeeGo globally (the N9 is sold only in tiny or inconsequential remote markets; and its sister product, the N950 is not sold anywhere) there is no relief to the smartphones unit. Expect Nokia not only to bleed market share, but to see actual unit declines in smartphones this Spring. It may reverse if Nokia bring better Lumia devices to the market (or reverse its idiotic decisions on the MeeGo devices, N9, N950 and others in the pipeline).


Nokia is still producing new Symbian phones - witness the superphone 808 PureView which will end this year 2012 as the undisputed top dog cameraphone on the planet. Bear in mind, the camera feature is more important to buyers than the operating system or the apps. Why Nokia is not capitalizing on its global leadership in cameras with the Lumia series is beyond me (but it is greatly due to the crippled nature of Windows Phone and how unsuited it is for premium camera operations on a phone. Nokia itself has said that the Windows Phone environment cannot support the porting of the 808 PureView technology until 2013 at the earliest. Says something about the 'burning platforms' Symbian OS and how 'obsolete' it actually was not).

Nokia's low-cost smartphone strategy cannot be built with Windows Phone, even the lowest cost Lumia 610 will have an unsubsidised price of about 250 dollars. So Nokia will be abandoning much of the 300 million sub-100 dollar market to the rivals who are able to produce low-cost smartphones at Samsung, ZTE, Huawei etc and the ultra-low cost local rivals like Micromax and Spice in India, Mi-Fone in Africa, G'Five in China etc. Nokia was supposed to fight for this segment with the Symbian line until its low-cost Linux based Meltemi is finished. The madness of course is that as MeeGo was Linux based, and compatible with Nokia's Qt developer tools (as is Meltemi, Symbian, Maemo, and Nokia's featurephones OS, S40; plus Qt also is compatible with Android and Blackberry), the only OS that Nokia supports that is not compatible with Qt is.. Windows Phone! So the past of Nokia is Qt compatible, and the future of Nokia is Qt compatible, but Nokia's 'main' smartphone platform for 2012 is not Qt compatible. Something is wrong with this picture. But yes, we await Meltemi to launch its first low-cost smartphones. That might happen still this year. Elop has been good at pushing far more aggressive delivery times at Nokia.

So how Nokia in Year 3, Digital Jamboree? I think Nokia will certainly bleed market share and depending on how hard Elop pushes away from Symbian and MeeGo based smartphones to Lumia series, Nokia may see actual unit sales declines even, continuing this year. Nokia started the year 2011 with a 29% market share on January 1 with only Symbian based smartphones. It ended the year on December 31, after 2 Lumia handsets and one MeeGo handset had launched, and still with dozens of Symbian devices, with 12% market share. As I have written, this is a world record in destruction of a market-leading brand in a one-year perdiod, in any industry ever. For 2012 I think its pretty clear we see Nokia plunging into single-digit market share territory. A good year would have Nokia ending the year with 8% in Q4, a bad year would see Nokia with Lumia, and what maybe remains of Symbian and MeeGo devices, as low as 6% market share. 10% is to my mind impossible, considering the bad replacement ratio we now see with Lumia not replacing Symbian even 1 on 1, far less gaining market share in that transition.

 

If Elop is fired and/or the Microsoft strategy is abandoned, and/or MeeGo wildely promoted with both N9 and N950 and/or Symbian 'reinstated' via the 808 PureView and also low-cost Symbian sub-100 dollar smartphones - any of these could resurrect Nokia to profits and a return to growth. I have said to not be surprised, if Elop is packaged with the Lumia division and sold to Microsoft, where Nokia and Microsoft might part ways this year. If you look at past Microsoft partnerships, most of them have had their falling-out periods, often very quickly after the truth of Microsoft's intentions has become clear to the 'victim' in the partnership (I am thinking of say Sendo, LG, Motorola etc)

RIM

Blackberry was seemingly in deep trouble early last year, as it tried to push the tablet PC and simultaneously cut its staff especially in marketing and sales. That has however stabilized and by Q4 RIM was back to growing again. For the full year RIM only grew 9% but in Q4 the Blackberry maker grew 33%. The good news at RIM is the return to growth. The bad news is that RIM is almost immune from being able to grow at the rate of the industry. The reason is that RIM was 'too successful' in the two biggest early-adopter market segments for smartphones - business/enterprise users, and the youth segment. They are now pretty well saturated for smartphones and the main business for RIM is to try to replace those handsets (and neither of them will replace their Blackberries at the global average replacement cycle). So Blackberry now is seeing 'anemic' growth when compared to rivals like Apple and Samsung.

The problem is worse with the iconic Blackberry form factor. The inbuilt full QWERTY keypad is a key to the addictiveness of the Blackberry form factor to all who do heavy messaging from emails to SMS to Blackberry messenger to Facebook to Twitter to other instant messengers like Whatsapp. Five years ago when the iPhone emerged, a Blackberry Bold style handset with its 2.5 inch screen was a reasonable substitute to the 'huge' iPhone display, where the buyer would need to weigh now big a screen they wanted, and whether they wanted a tactile 'real' keyboard or only a touch-screen keyboard. But today if you place the same Blackberry Bold style flagship phone from RIM against the Samsung Galaxy Note with its gargantuan 5 inch screen, the Blackberry screen looks like a postage stamp and today this form factor is on its way out among smartphones. It is replaced in smartphones by touch-screen slider-QWERTY hybrids, which address both the needs of a large screen and touch screen, as well as the full QWERTY - and as the keyboard is a slider, it fits length-wise, not width-wise, so the keys are much larger and easier to type on than the squeezed QWERTY on the Blackberry. On the low-cost end, Blackberries are challenged by far cheaper featurephones with similar QWERTY keyboards on Blackberry clones that in some markets are called 'Chinaberries' coming from the hundreds of low-cost handset manufacturers situated here in the Shenzhen region just outside of Hong Kong in China.

RIM will be in the news a lot for 'disappointing' numbers quarter in and quarter out. It will come out with its new operating system version which may help things, but this industry is not about handset design as much as it is about handset sales. The sales and marketing of Blackberry has suffered time and again with carrier concerns about Blackberry messenger eating into SMS text messaging revenues especially among heavy users. And in some markets (China, Japan, Korea) the Blackberry brand is not a significant player. The news that Blackberry will be supported by the Qt developer tools by Nokia had the potential to boost Blackberry and even possibly bring a long-term merging path for these two giant makers, but now that Nokia is not pushing the Qt environment (being incompatible with Windows Phone), that has turned into a mirage also for RIM.

HTC

 

HTC was once the bestselling Windows Mobile smartphone maker - it was the launch customer for WinMo and stayed as its bestselling phone brand until 2010. HTC was also once the bestselling Android provider until replaced by Samsung in 2011. Today HTC seems a bit adrift. It seemed to have found a new direction with the Titan series and especially the early specs on the Titan 2, which raised the stakes in the megapixel races with its 16 mp camera, but that lead was short-lived, with now Nokia's 808 PureView breaking through the stratosphere in megapixels jumping to 41 mp. And the Titan 2 has failed in side-by-side comparisons of the camera against slightly lesser megapixel count sensors like the Nokia N8 with its 12 mp camera, due to other factors like sensor size, the quality of the optics etc. I should note that for mobile handset buyers, still today, latest data from 2011 said that twice as many consumers used their camera feature on their phone, than downloaded apps on their phones - these numbers are consistent globally including in the USA - and thus, if a major handset maker has a great camera, it can address a far larger audience than a maker who has the best app store. So the HTC move seemed very smart. Maybe it was an early attempt and HTC will do better with the Titan 3 or whatever comes next. But HTC was strongly growing in 2010, it stumbled somewhat in 2011. It did grow for the full year faster than the industry - 81% but by Q4 HTC saw a severe decline in sales of 28%. The near term future for HTC is uncertain, can it recover or is there something systematically wrong with the company. 2012 will tell.

That was the big 5 smartphone makers who together control 70% of the world's smartphone market and where each had a market share in 2011 of between 19% (Apple) and 9% (HTC). The rest of the rivals are not really contenders, they are the pretenders, the largest of which had only about 5% market share sizes (Sony and LG) and down from there. But lets take a few to consider of the pretenders class

SONY

Sony is finally rid of the Ericsson part of the partnership. This is no doubt good in some ways and bad in others. What Sony did get, over the past ten years, is the best possible good will and reputation that Ericsson had managed to build on its side of the telecoms brand, in particular any synergies from Ericsson the world's largest telecoms networking infrastructure provider. Sony had given some of its consumer electronics brands to the SonyEricsson partnership to exploit - Walkman for musicphones and Cybershot for cameraphones but a big source of pain had been that the Playstation brand, Sony's strongest brand of the 2000s decade had not been given to the handset partnership. The nearest thing was the SonyEricsson Xperia Play but that was not a pure Playstation compatible device. It was a crippled little sister to the Playstation Portable. Now that Ericsson is gone, expect Sony to give its smartphones a big push, including using the Playstation brand. Also don't forget Sony is a huge player in the content side of digital media from movies to music. Meanwhile Sony has a vast array of consumer electronics where it can leverage the Sony synergies, starting with TVs that are becoming more intelligent and connected and internet-enabled.

Sony is firmly in the Android camp but does some lip-service also in the Microsoft family. It used to support Windows Mobile and has some commitments to launch Windows Phone smartphones but those are likely to be very few and far inbetween, just enough to prevent Microsoft from starting to sue Sony in the courts (like Microsoft already did to Motorola after it quit the Microsoft family for good). Sony has stated that this year 2012 it will finish its migration from dumbphones to smartphones, becoming the first of the legacy dumbphone makers to complete that transition. I should also point out, that the past SonyEricsson has suffered from generating a loss several times in the past quarters, perhaps with Sony's leadership now and clear focus, it can return to healthy profits and become a viable strong contender in the industry once again. I would say Sony is the strongest of the pretenders if it gets its act together, that could climb into the contenders class in a year or two.

LG

LG was the world's third largest handset maker at the start of last year but suffered throughout the year and downgraded its targets and goals. LG was hoping to ride a similar Android-powered rise as its cross-town rival Samsung, but LG has been a pale shadow of what Sammy has been able to do in mobile. Earlier, if you remember, LG bet big on a Microsoft-powered 'strategic partnership' about three years ago which went totally sour. After the Microsoft-powered smartphone dud turned profit-making LG handsets unit into loss-making, LG abandoned that path and shifted to primarily providing Android smartphones (with a smattering of other platforms supported) and climbed to borderline profitability after two years of hard struggle, and abandoning large swaths of its market share globally (yet another warning to Nokia, some have said that as the Microsoft Lumia adventure goes nowhere fast, Nokia's future is increasingly destined to join Android but now as a wounded giant rather than the proud leader it would have been a year ago).

LG was trying to use the 3D glassless displays and 3D stereoscopic cameras as its gimmick to differentiate and capture success. That has not panned out at least so far. We need to give LG another year to play with this strategy, as the 3D television technology is still in the early adopter level globally. LG might be poised to capture a good strong trend, or it may be that on phones 3D will never amount to much. A time of anxious analysis at LG this year.

HUAWEI

 

The largest of the new Chinese handset makers in the smartphones space. Huawei's cross-town rival ZTE is bigger in dumbphones, Huawei is bigger in smartphones. Both companies seem to copy-cat everything the rival does, so they provide just about any mobile telecoms tech from networking infrastructure to 3G data dongles and modems. Huawei is growing strongly especially in the low-cost smartphone segment on basic Android powered handsets and aims for the Emerging World markets like India, Africa, Indonesia and obviously its home market of China. Huawei is pretty certain to capture a nice slice of the 300 million size sub 100 dollar low price end of the smartphone market this year and here is where we will see Huawei mostly competing.

GOOGLE-MOTOROLA

So Google bought Motorola last year. Will Google hold onto Moto this year, time will tell. I felt that Google's main aim with the Moto purchase was to secure a strong patent portfolio to defend itself in the increasingly hostile patents wars. The family of Android vendors was not pleased that Google now became a handset manufacturer itself, especially Samsung has been clearly signalling its diminishing love of the Android environment, both pushing its own bada and in 2011 announcing it will replace Nokia with the Intel developments in smartphone OS that became now known as Tizen. I think Google itself will minimize the smartphone emphasis of Motorola, focusing strongly on returning the Motorola loss-making handset unit into profit-making, finishing the transition from dumbphones to smartphones, and being happy with a smaller market share but healthy unit. And Google might spin off the handsets side of Motorola in a year or two, after it is healthy, 100% smartphones and profitable. Google could also push the emphasis of the tablets side of the Motorola unit, so as to not compete very directly against most Android smartphone makers.

Don't expect Motorola to grow in a meaningful way this year, but rather, to stabilize and become profitable. I think Google will continue with its strategy of producing Nexus smartphones that are built by the Android makers, so that is another way that Google can try to keep its partners happy. But the brand that seven years ago sold more than one out of every 5 mobile phone handsets in the world - powered by the hugely popular Razr, is now gone and last year Motorola was a total bit-player of smartphones, with a market share of under 4% and falling. It was down to 3% by Q4.

MINNOWS

Then we have the truly little fish, whose market share is 2% or less in smartphones. I will only discuss this briefly as a group. This includes former big smartphone brands like Panasonic, Sharp, Fujitsu and Kyocera; includes big dumbphone makers who also make some smartphones like ZTE, Mi-Fone, Micromax; includes PC makers like Lenovo, Acer and Dell; and the obscure other maker like Pantech the 3rd mobile phone handset maker of South Korea (behind far better known Samsung and LG), or such smaller brands as INQ of the Hutchison group better known in mobile telecoms for the 3G brand Three in many European and Asian markets. Someone from this group can climb into the contenders during the year. Others may find it too expensive to fight for this market and quit. I would place more promise on the small makers who focus on the Emerging World markets than those who focus on the more affluent markets but you never know. Being the 3rd or 4th bestselling phone brand of a significant market alone is good enough to keep you in business, so you don't need to be a global hit to be able to survive and plot your cunning plans for world domination.

OPERATING SYSTEMS

 

So then the battle for the operating systems in the Smartphone Bloodbath, Year 3 Digital Jamboree. What do we see here? Over the last two or three years have set in motion the end of several of the big platforms and now we see more clarity of where the end-game is going to be fought. It will be a race with six major rivals or groupings. Lets look at them by size

 

ANDROID

Android has reached the point where it is selling roughly half of all new smartphones worldwide. The rocket-ship like rise in its market share growth has slowed and now is only growing by smaller gains per quarter, as is likely when you approach the half-point of any industry with several rivals. Google has on paper a phenomenal army of its Android supporters - of the ten biggest smartphone makers, seven produce Android smartphones today and each of the last 3 in the Top 10 are supporting a different OS, meaning Android is now the giant big bad wolf, that faces three little pigs to face off against, so to speak. But that is the optimist's view. The glass-is-half-empty view says that Android's strongest partner, Samsung, is not fully committed and could easily move half of its total smartphone production to its other platforms in just one year; and several other Android rivals have stated a willingness to support other platforms including HTC to Windows Phone and Huawei to the now-deceased MeeGo (and thus could go to Tizen). Android is not built on a solid foundation, but it was built very fast. Google is now adding many supporting elements, not the least of which is the various initiatives around Google Money.

Android's big growth obstacle in 2012 is that the rest of the field is mostly weeded out, the weaklings are gone and who remain tend to be stronger players with long-term interests. If we say Apple will do about 20% of the market in 2012, and say Blackberry does 10%, and the Nokia-Microsoft mess of Symbian, Windows Phone, Windows Mobile and MeeGo - to have a combined about 10% this year, then we have blocked out 40% and if Android walks into 2012 with 50%, there is maybe 10% to fight for. And biggest in that ring is Samsung with bada/Tizen which took 2% last year - its first full year and twice what Microsoft's Windows Phone did in the same period, also its first full year, but Windows Phone had HTC, Samsung, Nokia and others selling its phones. bada did it alone with Samsung.

So the upside potential for Android is somewhere under 60% for 2012 and it could end that we see the ceiling at 50% if Samsung shifts strongly away from Android. The big Nokia give-away from Symbian has already happened so there is not much to take from there and the Palm give-away has already finished and the Windows Mobile market give-away has about 1% left to go. I think we are seeing this year a settling of the 'natural' state of Android into the 50% to 60% range where it is likely to be relatively stable for some years go come.

iOS

The second bestselling smartphone OS last year was Apple's iOS. Remember, I am only counting smartphones, so if you want the full iOS ecosystem, it is bigger when we add iPads and iPod Touch devices. But I only count smartphones for this market, as smartphone sales are drastically bigger than tablet PCs or media players etc. And the other platforms like Android have tablets too. I will analyze the full ecosystem battle later in this blog

 

Apple's iPhone has shown a stunning ability to reach past supposed ceilings of where its price would be a limit. Last year selling 93 million iPhones, Apple took 19% of the smartphone market but when we count all mobile phone handsets (1.6 Billion sold last year) that was only 6% of the global handset market, and that percentage is well in line with the historical market share of what the Macintosh PC has been doing over its 28 year history. Apple is an aspirational luxury brand, make no mistake about it. While in the premium phone 'smartphone' category Apple can near one in five smartphones sold, in all mobile phones, where the iPhone costs more than 10 times the average price of a mobile phone handset worldwide - it is simply too expensive. I have said for several years, that the iPhone cannot grow its market share in meaningful ways anymore. I have been proven wrong, but I say it again. If Apple only release one new superphone priced iPhone this year, they have a natural limit of what they can do with such an expensive device. If they grow, it will be in very slight increments, a percent or two. Far more likely - remember the Deloitte projection of four out of ten smartphones sold this year will cost under 100 dollars (unsubsidised price) - the 660 dollar iPhone (unsubsidised price) will hit a market share ceiling due to being overpriced. As to an ecosystem, for developers of say smartphone apps and games, the iPhone installed base reaches one in six smartphones used worldwide. In installed base it is now third behind Symbian and Android, having overtaken the Blackberry installed base.

SYMBIAN

 

Nokia's Symbian started the year as the world's bestselling smartphone OS and had half a dozen significant smartphone manufacturers as its partners like Fujitsu, Sharp, Panasonic etc. After Stephen Elop created his communication disaster with the Elop Effect, Symbian sales crashed. Today it is the third bestselling smartphone OS and at Q4 of 2011 managed only 11% market share. It should be noted, that even 11 months after the infamous 'Burning Platforms' memo and more than a year of Windows Phone sales, Symbian alone on Nokia still outsold all Windows Phone smartphones made by HTC, Samsung, LG and yes, Nokia itself - by what? By 10 to 1. So don't think Symbian is going to go down quietly. Just looking at the spectacular 808 PureView and its monster camera technology, Symbian shows abilities that Windows Phone won't be able to replicate for at least another year. But yes, Elop did announce the death of Symbian and we see it now going.

This is very likely the swan song year for Symbian, we will probably see the very last Symbian based smartphone launched this year and then it will be over. Nokia never reached the 150 million more Symbian devices as promised by Elop. And this year we should see a strong ramp-down of the Symbian devices, with the intention of a 1 to 1 replacement by Nokia's Lumia line of Windows Phone based smartphones. Like I wrote in the above, the early evidence suggests that won't happen. But in any case, we should see Symbian's current 11% market share dwindling down to about 2% or so by the Christmas quarter, when no new Symbian models are released and only older Symbian models are still being moved off the shelves, at severe discounts. It is sad, as still today, by installed base Symbian is the world's most used smartphone and even in Q4, was the bestselling smartphone OS on each of the three most populous, of the six inhabited continents. I feel like Symbian is being killed while it still had a lot to give, come on, just look at the 808 PureView for example or other recent Nokia flagships like the E7.

The only difference to this scenario is if Elop is fired and/or the Windows Phone 'only' strategy is abandoned. I have said long before Elop came to town that Symbian is not viable for the future of Nokia, it has to go, but that as Nokia migrates away from Symbian, Symbian is still very well suited to low cost smartphones, those under 100 dollar devices with low specs. Windows Phone is not viable in that segment (at least not yet). So if Nokia had a clear change of leadership and/or smartphone strategy, the Symbian OS might live on at the lower end (and arguably its partner OS, MeeGo at the high end).

BLACKBERRY

 

The Blackberry OS was the fourth bestselling smartphone OS last year and its market share is gradually eroding while the smartphone sales are modestly growing. As Blackberry is not licenced to other manufacturers and RIM itself has had horribly bad luck in trying to expand the platform to other devices (epic failure with its tablet PCs), the Blackberry OS is the weakest of the ones with big footprints. For the installed base, the Blackberry smartphone does still reach over 100 million devices potentially, but many of those are enterprise/business smartphones which have limits and restrictions how they can be used, so this potential is severely limited in reality, as a far smaller addressable market on the consumer side of Blackberry at perhaps half that number.

That was the big bad wolf and the three little pigs, Android, vs iPhone, Symbian and Blackberry. Then what else is in the forest? Some ants. Lets start with the biggest, the killer ant:

 

bada

Samsung's bada is the fifth biggest smartphone OS by new sales and this year will become the fifth biggest by installed base, passing the size of the dwindling installed base of outgoing Windows Mobile. bada devices captured a 2% market share in Q4 of last year and have grown steadily and outsold for example the Windows Phone OS across all its makers by more than 2 to 1, even after Nokia jumped into the Windows Phone market. bada is so far only a Samsung-supported OS, but it is said to be developed into the Tizen path, which has other handset makers also committed to it. We should see the first Tizen smartphones launched by Samsung during 2012 and we should learn more about the converging development paths of these two operating systems then. In any way, when Microsoft talks about 'Windows Phone is the Third Ecosystem' please note that it is not even the 5th ecosystem by any measures, bada is. Microsoft's operating systems come in at 6th and 7th today.

WINDOWS PHONE

Microsoft's Windows Phone is a year and a half old now, and after its launch quarter when it splashed onto the scene with Microsoft handing out millions of free devices, and the OS briefly held a 2% market share at launch, it fell ever since. By Q3 of 2011 the Windows Phone market share was nearing one half of one percent (yes, 0.5%) and only when Nokia's Lumia smartphones were launched with Nokia's biggest marketing push ever, did the Windows Phone sales recover, barely, to 1% market share in Q4 of 2011. Note that when you look at various industry analyst reports, they report now a 'Microsoft' market share in smartphones, which adds both Windows Phone and the incompatible older Windows Mobile OS. I do not fall for that trickery, the operating systems are incompatibile and should be counted separately. But Microsoft doesn't like that, as it highlights how badly Windows Phone is failing in the market.

And before we look at this year's potential, let me make one more point. Samsung, HTC, LG and others have been providing Microsoft based smartphones for years. They should know how to do it well. Samsung and LG are the bestselling dumbphone brands in the USA, Microsoft's best market, so they should be able to really do well in the US market with Microsoft powered smartphones. Both are doing well in smartphones in the USA, using Android. And HTC is one of the USA's bestselling smartphone brands, again on both Android and the various Microsoft platforms. If you want a 'dream team' of handset makers to support your Windows Phone platform in Microsoft's strongest market, the USA, then the group of Samsung, LG and HTC is it (not Nokia, which has failed in the US market recently). How was this trio doing in the USA? Saw failing Windows Phone sales all year. How did they do worldwide? Without counting Nokia Lumia smartphones, Windows Phone smartphones saw falling smartphone unit in four consecutive quarters! This while the industry grew 63% last year! Please do not delude yourself into thinking that the Windows Phone 'ecosystem' with Samsung, HTC and LG joining Nokia is strong. The Windows Phone OS would have died last year, were it not for the last minute savior seen in Nokia. And in its first quarter of sales, the poorly performing Lumia series for Nokia became the bestselling Windows Phone brand in the world. Nokia did not need Microsoft to survive; it was the other way: Microsoft desperately needed Nokia to survive.

So what of this year? Yes. First, its pretty clear, come what may, Windows Phone will see growth. Not just unit growth, but market share gains. Its not much to shout about if you start from under 1% but at least its something. I said earlier that the shift was supposed to be about 1 to 1 as Nokia ramps down Symbian and replaces it with Lumia. If so, Nokia could have shifted about 12% market share at the start of the year, 90% Symbian and 10% Windows Phone to about the same market share but opposite proportion by Q4, ie 90% Windows Phone and 10% remaining Symbian (I am obviously not including MeeGo in this simplified model). Now we know from the facts, that this will not happen. Nokia will still bleed sales as it tries to force undesirable Lumia smartphones to its loyal customers.  Lets say that by Q4 the total combined market is half, so 6% and 5% of that is Windows Phone and 1% is remaining Symbian. If so, Windows Phone on Nokia brand could get something like 4% of the global smartphone market this year - about 30 million smartphone handsets - and if we add another 2% by the other handset makers - which would still be more than doubling their current sales - and say Windows Phone has a total 2012 annual market share across all Windows Phone family smartphone manufacturers of 6%, that is about 45 million devices for the year. Pretty pathetic actually. But that is the kind of levels we should aim for for Windows Phone (remember, for Nokia there will be more smartphone sales from the ramping down of Symbian and what few millions of N9 and other MeeGo devices are perhaps sold as well).

MEEGO

For the full year MeeGo did not even register in the one percent range, but MeeGo only launched in the last quarter of 2011 with only one handset model actually sold, the N9 (even as its sister model, the N950 with QWERTY slider was also manufactured by Nokia in small numbers). Nokia refused to give the exact count of MeeGo powered N9 sales but in every country it did launch, it had very warm reviews, some actually calling it better than the iPhone! We calculated from Nokia's Q4 results that after we remove the Symbian sales and the Windows Phone sales, MeeGo sold about 1.75 million units worldwide in the few countries it launched in Q4. In the same period, the two Lumia smartphones sold at lower prices in more affluent countries that were Nokia's strongest markets - and flopped, selling only 600,000 units. So one MeeGo device, the N9, outsold both Lumia smartphones by 3 to 1, even as Nokia's CEO refuses to give the N9 and MeeGo any marketing support. This is a still-born OS that is likely to die quietly in 2012. The sad truth is, that if Nokia bothered to launch the N9 in those markets where the Lumia is now failing, and only sold at the same level - so Nokia would do about 3.5 million N9 unit sales in total - as its a very high priced smartphone, made in Nokia's own factories to Nokia standard components (the Lumia is not made in Nokia factories and does not use Nokia standard componets) and while the Lumia incurs a royalty payment to Microsoft, MeeGo based smartphones incur no royalty payments - Nokia would generate so much profit just from N9 sales globally, that Nokia corporation would return to profitability. But Elop feels his ego is more important than the profits of his company. So like I said, I expect MeeGo to be killed and buried this year. What a rotten end to a true winner that actually beat Microsoft when launched on the identical Nokia smartphone brand and on touch screen phones of near identical appearance. Also what a powerful last vindication of the MeeGo development team.

(Please note, Nokia seems to have 2 new MeeGo devices under development as reported on 28 March at the Netbook News site. This gives considerable lease-of-life to MeeGo and if these devices come to the market during 2012, would be strong boost for Nokia. Also, this news to me even more strongly underlines the necessity for Nokia now to market the N9 and N950 globally in every market, while they are hot and desirable, since Nokia is clearly continuing also with MeeGo. Why on earth, when a CEO has a hit product on his hands, he would refuse to sell it, especially if this product could turn the loss-making smartphone unit into profit-generating once again)

WINDOWS MOBILE

 

Microsoft's Windows Mobile still refuses to die. It is used in some business/enterprise markets, sold in very small numbers by Samsung, HTC and others, in numbers of far less than 1 million in total last year. Microsoft is now terminating the app store for WinMo etc, but stubbnornly this thorn in Microsoft's side continues to sell in small numbers.

TIZEN

 

And then we have the Intel-Samsung partnershp with Tizen. While most of Tizen's steps have happened below the radar, there is vast potential for this OS to become the real 'third ecosystem.' Consider who are on the Tizen Board: Samsung and Intel, obviously, but also Japanese smartphone makers Panasonic, NEC and Casio. And then there is that 'tiny' player Huawei from China. Yes, that Huawei which has already passed LG and Motorola in smartphone sales per quarter, and is now chasing Sony and HTC. This is not an idle partnership. But wait, then there are the carriers! What? Yes, NTT DoCoMo, Orange, Telefonica and Vodafone are also on the Tizen Board. Just how big is that? These four carrier/operator groups control one sixth of the global mobile market from the telecoms subscriber side, and with 960 million subscribers, are a massive force in the industry. They include 3 of the 6 biggest operator/carrier groups globally. If they end up saying they will specify Tizen as their preferred OS - like NTT DoCoMo had done with Symbian in the past - its a near guarantee of Tizen commercial success. Understand, these four together are more than nine times as big as AT&T of the USA for example.

The keys are when do we see first handsets, will there be serious commitment from the other handset makers, not just Samsung, and how will Sammy itself migrate and grow the bada evolution to Tizen. But this may well end up being the masterstroke by Samsung, snatching MeeGo/Intel partnership from Nokia and turning it into the legitimate 3rd ecosystem while Windows Phone lingers in 6th or 7th place..

ECOSYSTEMS

I will also add a few thoughts about the broad picture when we add other devices, not just smartphones, and the other significant elements of an ecosystem. We go again in size, from the biggest

 

WINDOWS 7 / WINDOWS 8 - 300 million new sales, 1.1 Billion installed base

 

If we look at the big picture ecosystem, currently the biggest is Windows, from the PC side. They sell something like 250 million PCs, and when we add the Windows Mobile and Windows Phone smartphones, we can add a couple of million to that, but they get lost in the rounding-off error. Windows/Microsoft has an installed base on PCs roughly in the 1 Billion range globally. To that you can also add Xbox 360 which sells in the couple of dozens of millions per year, and has something like 75 million perhaps in the installed base (I am not bothering now to research that number, its for big picture scale only, that it is smaller than PC number but bigger than smartphone number for Microsoft). The developers like the Windows world (to a degree) and Windows 8 seems sure to be another global near-monopoly on the PC side. There should be lots of tablets coming also in the Win 8 stage. Note, that this ecosystem is severely skewed to the PC (and Xbox) side, its smartphone side is trivial and is likely to get lost in the shuffle. Microsoft's ecosystem is the most tightly controlled and least open. Microsoft is also most greedy in various licenses and most prone to sue anyone they feel doesn't play exactly by their rules. No wonder Microsoft is called the Evil Empire and for example its ten-year legacy in mobile is littered with ruined partnerships and lawsuits.

QT - (450 or) 800 million new sales, (1.0 or) 1.4 Billion installed base

Qt could already be the biggest ecosystem, it will be that shortly. I am simply not up to date on the development and support of Qt, as I am no longer a programmer and really can't care about that level of the technical detail. The point is, that as the Qt developer tools enviroment is being developed and evolved, it either supports today, or will support soon, most of Nokia's devices, from current smartphones on Symbian, MeeGo, Maemo, to Nokia featurephones on S40, to future low-cost smartphone on Meltemi. Qt does not support Windows Phone. Qt can also be used to develop apps for Android and Blackberry and soon even more (mostly Linux based) smartphone operating systems. Qt compatible sales just on the Nokia brand run about 450 million devices per year, and if we add in Android and Blackberry, that unit sales jumps to about 800 million new devices sold per year !!! The current installed base just on Nokia brand on Qt runs about 1 billion devices and runs well past 1.4 Billion when we add Android and Blackberry to the total. The Qt environment (as the tool is finalized) will be clearly the biggest ecosystem on the basis of installed base, and in new sales, it totally dwarfs the only other big rival, Microsoft's Windows. This is very legitimately the 'first ecosystem' not only in smartphones but in all digital technology platforms. And thats before we see any tablets on any of the supported platforms haha..

Note that the Nokia ecosystem obviously includes the now unbranded Ovi store (ie Nokia store) which is the bestselling app store on five of the six inhabited continents and supports 130 languages and has carrier billing (the most powerful revenue-generating method of paying for mobile apps, so that you don't need a credit card) in over 50 countries. Nokia has traditionally been the most open ecosystem not just using open source principles but also very broadly inviting real competitors as co-developers, from the broad original Symbian partnership to what was the MeeGo partnership with half a dozen handset manufacturers (several of whom have since shifted to Tizen)

iOS - 250 million new sales, 350 million installed base

The Apple iOS ecosystem includes primarily the three iOS platforms, iPhone, iPad and the iPod Touch. But we can consider the Apple community to also include the Macintosh part of the Apple world, so we get to total annual sales in the rough scale of about 250 million (and this year that may grow massively to say 400 million) and an installed base of 350 million which will probably double this year. Apple is expanding into more areas like TV and it also has the iPod/iTunes business in the digital world to add to this arsenal. Apple's control of its ecosystem is legendary or infamous depending on your viewpoint but clearly the iOS ecosystem is very much at the end of 'closed', not open.

ANDROID - 250 million new sales, 275 million installed base

 

The Android ecosystem is very new but growing very strongly. Most of it is centered on smartphones but increasingly there are tablets and other devices too. By current sales, Android smartphones account for just about half of all smartphones sold, so as the migration continues of the handset industry from dumbphones to smartphones, Android is very well poised to capitalize. Android is quite open but not the most open of the open systems. As I've written, if Samsung decides to migrate its Galaxy series away from Android, being the bestselling Android manufacturer currently, that would be a big blow to the Android family but not a fatal one. Google has enormous online assets it can use such as search, Gmail, advertising, mapping etc.

BLACKBERRY - 60 million new sales, 120 million installed base

The smallest of the big ecosystems worth considering here is Blackberry, which does sell about 60 million smartphones and tablets, and has about a 120 million installed base. Blackberry is limited to RIM and is struggling to grow even within its market and suffering as it tries to push tablets. Blackberry's strongest asset from the services side is Blackberry Messenger (BBM).

So that is how I see the Smartphone Bloodbath Year 3, Digital Jamboree. What do you think? How will this market evolve this year? Is it yet another year of deaths, or perhaps a year we see more partnering and collaboration and mergers.

Please allow me one plug - For those who feel they cannot have enough facts and numbers about the handset industry, I wrote a statistical handbook about the handset industry in 2010. The ebook is called the TomiAhonen Phone Book 2010 and runs 171 pages and has 98 charts and tables including just about anything you could ask for, including sales numbers, installed bases, market shares, features, form factors, etc. The ebook costs only 9.99 Euros so if you need the numbers, that is the place to go. And now a special offer - I will be doing the totally updated edition for release in the summer of 2012. If you buy the 2010 edition between now and when the 2012 edition is released, I will give you both for the price of one. So if you order the TomiAhonen Phone Book 2010 now, you will get the 2010 edition now, and for no extra cost, the 2012 edition this summer when it is released. Is that a good value? To see more, please see the TomiAhonen Phone book 2010. 

 

All Roads Lead to Mobile - World Cyber Games to go Mobile-Only

Its 30 years from the first home videogaming console this year. Happy birthday Odyssey (later bought by Philips/Magnavox). We had one of those consoles, I believe it was the first Odyssey in Finland (it was on the US TV NTSC standard obviously, so even after the adapter to our TV set, we only got the black-and-white version visible on our TV screen, haha, but it being essentially ten variations of 'Pong' - that was not much of a loss. And yeah, this was the game where you had to place a translucent plastic sheet on the TV screen, to know which game you were playing. A few years later, we got the more advanced Philips/Magnavox Odyssey 200, which was on the European PAL standard and plugged directly to our TV set.. Our household was very popular for all the cool gadgets we always had haha)

So, fast forward 30 years, and we're now in 2012. I just saw Patryk Zabicki ie @p47 on Twitter forward a breaking story about the world championships in videogaming. Didn't you know they exist? Sure, the world champs tend to come from South Korea where there are tons of professional videogamers and several TV stations broadcast videogaming action 24 hours a day. I wrote about that all in my 2007 book Digital Korea with Jim O'Reilly, in the gaming chapter.

So yes, the world championships in videogaming are called the World Cyber Games (WCG). And today the Cadred website reports that after 12 years, the World Cyber Games this year will for the first time abandon the other platforms, in particular the PC based gaming, and will only feature championship gaming and thus championships in mobile games. Why? Because traditional game makers are all shifting to mobile. Why is that? We know, haha, because as I say about the 7th Mass Medium: "Mobile is the magical money-making machine" of course. Yes, the CEO of the WCG, Brad Lee explains in his letter to members that game makers are all increasingly making most of their money from mobile. Hence the current plan (not yet finalized) for the WCG is to make this year's event a mobile gaming only event where all prizes will be for games on mobile. Cool!

The CEO Insane - How To Rescue Nokia (story updated)

I know I know, nobody is going to listen to me anyway. But Nokia's Shareholder Meeting is coming up, and some have been asking me how would I fix Nokia today. I wrote a long detailed blog last year telling what was broken and how to fix Nokia overall, not just the smartphones part. Its sad to see it took Elop a year to get around to trying some of the ideas that I insisted Nokia needed to do back then (he is now, for example the 808 PureView is exactly what I suggested). So I will try to keep this short and to the point and focus only now on the catastrophic situation with Nokia's smartphones unit and the Lumia line. And am trying to inject some humor into this rant. Lets see how the sane CEO would behave when faced with, lets say, a hypothetical situation...

( UPDATES TO THIS STORY on 28 March, 11 April & 12 April, see end of story )

LUMIA LAUNCH FAILURE

 

Your company launches a new platform called Windows Phone, on a new brand of smartphones called Lumia. This is sold in parallel with two other smartphone OS platforms you also support currently, Symbian and MeeGo. The new Lumia phones are introduced in a dozen leading countries in Europe and Asia. Now five months later, you discover that the first Lumia phones are not competitive in the market on their specifications and designs. They receive mediocre support in the press. They receive alarmingly often published opinions suggesting customers are better off buying smartphones by rival manufacturers or ones using your other platforms. Smartphones have traditionally been a key to the profits of the company but currently your smartphone unit is generating a loss.

The sane CEO moves strongly to embrace the hot smartphones on the two other platforms, in particular the highly rated N9 using MeeGo and 808 PureView using Symbian and takes every opportunity to be seen with these desirable phones, and to try to convince all in the media that if you don't like the first Lumia, don't worry, take these alternatives from Nokia instead. The sane CEO would fight Android and the iPhone (and Blackberry) with MeeGo and Symbian, if Lumia is not working (now). Smartphones on the two platforms would be broadly promoted in all major markets including launching the N9 to all Lumia launch countries and the 808 PureView especially in the USA. This could be done while working to improve the next Lumia smartphones to remove the obstacles to their market success.

The insane CEO refuses to be seen anywhere near an N9 or 808 PureView and only insists on talking about the undesirable Lumia. The insane CEO would refuse to even sell the N9 in the European and Asian Lumia markets and refuse to sell the 808 PureView in the USA.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

N9 KILLER SUPERPHONE ON MEEGO

 

Your N9 running MeeGo has received glowing reviews in all markets where it has been released. It alone outsold both Lumia smartphones by a ratio of 3 to 1 in Q4, the first quarter when both were sold, even as Lumia smartphones were cheaper; the N9 was sold in less affluent countries, and the Lumia were sold in Nokia's best markets. The comparison reviews consistently rate the N9 a far better smartphone. It is rated consistently a better value even while being more expensive than the Lumia, in consumer reviews from Australia to South Africa to your company's native Finland. Whereas Lumia phones are manufactured at Compal factories in Taiwan, your own Nokia factories are idling and the N9 could be manufactured at far lower costs in your own factories - the most efficient handset factories on the planet. Whereas the Lumia phones use components not usually used by Nokia, the N9 uses standard Nokia components so the manufacturing of the N9 gain from bulk discounts in its components. Whereas the Microsoft Windows Phone OS causes a royalty payment per handset that Nokia has to pay to Microsoft, the MeeGo OS on the N9 is (co-)owned by Nokia and no royalty payment is needed. The profitability of selling the N9 is far higher than the Lumia, even before marketing expenses are considered. Meanwhile because the N9 is a true flagship phone and significantly more expensive, it would not even threaten to cannibalize Lumia customers. But because of the outwardly similar appearance, the N9 could actually help sell the Lumia. The current attraction of the N9 is so intense, the biggest European handset market, Germany, had the extraordinary review by Germany's biggest newsweekly magazine, Der Stern, suggesting to its readers, they should drive to another country - like Switzerland or Austria - to purchase an N9 because it is truly that good, but inexplicably, the N9 is currently not sold in Germany (rather than to buy an Nokia Lumia which is sold in Germany).

The sane CEO immediately orders mass production of the N9 and releases it to every country and makes massive promotions in Germany, personally appearing in Der Stern inteviews holding the N9. Judging by the Q4 numbers of the few relatively poor and often small countries where the N9 was sold, if it was offered globally, Nokia would sell at least 4 or 5 million N9 units per quarter. This single action alone would return Nokia's loss-making smartphone unit to profitability.

 

The insane CEO steadfastly refuses to sell the N9 in most of Nokia's best markets, and puts his own ego ahead of the profitability of Nokia.

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

RETAIL CHANNEL REFUSES TO SELL LUMIA

 

You have already admitted in public that many retailers in many countries do not support the Lumia fully. You have mentioned the retailers in the UK as particularly problematic. Now comes news from Nokia's home market where Nokia traditionally had over 80% market share - even higher in smartphones - that the Finnish handset retailers are refusing to sell Lumia. This is the nail in the coffin, really. When your own dogs bite. When sales people in Finland refuse to show Lumia phones when asked for by name! Even as Nokia has massive marketing support and huge in-store displays. Similarly a separate survey by Talouselama of European handset retail stats, says Lumia sales are collapsing.

The sane CEO takes the two other platforms, Symbian and MeeGo, and rapidly pushes several highly regarded phones on those platforms, in particular the N9, the 808 Pureview and the N950 - and rushes those handsets to the retail channel. The sane CEO warmly embraces the Symbian and MeeGo based smartphones and issues a public statement about Nokia's acknowledgement that Lumia needs more work, to restore the retail channel's trust in Nokia. If he feels so inclined, the sane CEO may end the Lumia series or consider relaunching it with new handsets next year. In any case the sane CEO points out the strong synergy Nokia's Symbian has with MeeGo and Nokia's featurephones running S40, to Nokia's developer community, through Nokia's Qt developer tools and Nokia's Ovi store.

 

The insane CEO refuses to sell the hot new phones on the MeeGo and Symbian platforms, and keeps pushing more and more undesired Lumia handsets to the market. 

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

N950 KILLER SUPERPHONE ALSO ON MEEGO

 

Your company designed and started production of a second MeeGo based super-smartphone, the N950, as the sister phone for the highly loved N9, last year. This is the QWERTY-slider version, well suited for high text messaging users, Twitter and Facebook users, email and business users, similarly to how Blackberry, Nokia E-Series and Communicator smartphones are used. The N950 uses the highly praised MeeGo OS and is built in Nokia factories, running on Nokia components and could be priced above that of the N9 to be very profitable for Nokia. As none of the four first Lumia smartphone have a QWERTY keyboard, nor does the N9, nor does the 808 PureView, the N950 is the topmost and only modern QWERTY flagship smartphone for Nokia, since the E7 from more than a year ago - a smartphone that in many markets is still the bestselling Nokia smartphone today. The N950 would be in rare status, where for example Apple still refuses to sell a QWERTY version, so only the N950 would be isolated from iPhone rivalry for the approximately 30% of consumers who prefer QWERTY keyboards on their smartphones. The N950 is comprehensively loved by all who have used the device as an exceptionally solid premium smartphone from Nokia. And as there is no comparable QWERTY device on Lumia series, the sale of the N950 now would in no way 'hurt' Lumia sales. There is no downside to launching the N950 everywhere, only a huge, profitable upside.

 

The sane CEO rushes to launch the N950 to every market now, to capitalize on the good will of the N9 and MeeGo. The launch of the N950 to Nokia's major markets alone would be enough to turn Nokia's loss-making smartphone unit into profit-making.

 

The insane CEO takes the N950 that its factories already manufacture in trickle levels, and refuses to sell the N950 in any country, only handing out a few of the N950 smartphones to some developers.

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

CONSUMERS REJECT LUMIA

 

Your Windows Phone vision as communicated a year ago was to replace Nokia's Symbian based smartphones on a 1 to 1 basis, with Windows Phone. This assumed Microsoft could deliver a competitive and desirable OS out of Windows Phone version 7.5 and that Nokia's first Lumia smartphones would be well received. Now evidence comes from the early markets that even when supported by the biggest marketing campaign ever seen in mobile history, by the largest handset maker in the world; and then further augmented by a massive support campaign by Microsoft - including giving free Xbox 360 videogaming consoles to customers who buy Lumia 800 smartphones - the customer are not willing to take Lumia smarthpones. The crushing statistics from Britain report that Nokia is now losing a third of its last, most loyal, remaining customers, when pushing the transition from Symbian to Lumia. And British press, such as the Guardian, actually recommend consumers to return their Lumia smartphones. The second hand market and auction sites like Ebay are overflowing with Lumias being discarded.

The sane CEO acknowledges the first attempt at Lumia has failed in the best Nokia markets and reacts rapidly to offer strong substitutes to those markets - in particular the Nokia N9 which has consistently in all side-by-side reviews outperformed the best Lumia 800, and also rush other top Nokia smartphones such as the 808 PureView and N950. The sane CEO would be seen broadly embracing these smartphones and issuing clear statements that Nokia is not abandoning the Symbian and MeeGo platforms - while showcasing how advanced these platforms are.

 

The insane CEO refuses to sell Nokia's best phones but pushes ever worse and ever less desirable, and ever cheaper Lumia clones to these markets where the first Lumias have already failed.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

TABLET FOLLY

 

Apple is making a ton of profits out of the iPad. The tech press love stories of tablets. The reality is, that if you are a PC maker like Apple, Samsung or Lenovo, a tablet can be a great strategic move. There is a lot of synergy between the PC/laptop business and tablet business, from shared components to the same distribution channel to synergies in marketing, pricing, and branding. If you are a handset maker like Motorola or RIM, to try to compete in the tablet space is lunacy. There are few shared compoents, the distribution channel is totally different, the marketing is different, the pricing is totally different and so is the branding. Apple and Samsung have been very profitable doing tablets. RIM and Motorola found massive losses out of their forays into tablets.

 

The sane CEO would never contemplate any tablet project as long as Nokia corporation was producing massive losses. The sane CEO would concentrate on Nokia's core business in handsets, and put the biggest effort in restoring the profitability of the smartphone unit. With smartphones even against Apple, Nokia would have many natural strengths from its long history in mobile phones, such as the fantastic camera on the 808 PureView or the swipe touch technology on the N9, to the QWERTY on the N950 etc, to a home-field advantage of still today the biggest installed base of both smartphones globally, and dumbphones who will soon migrate to smartphones.

 

The insane CEO would squander scarce resources on a futile tablet project, resources desperately needed to fix the leaking ship of the smartphones unit. With tablets against Apple, Nokia would bring no assets and no competitive advantages while facing Apple at its home turf and massive market share domination in both tablets themselves, and compared to Nokia, Apple's considerable installed base of Macintos PCs and laptops.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation. But Microsoft would ever so dearly love to see someone make tablets for Windows, and Microsoft couldn't care less if that manufacturer made any profit out of it, nor indeed whether it lived or died. Microsoft just wants a tablet to face off against Apple. But I'm not saying Elop is in Microsoft's pocket)

CHINA

 

The world's largest mobile telecoms market is China. The world's largest mobile phone handset market is China. The world's largest smartphone market is China. The world's largest carrier/operator is China Mobile, alone bigger than all US carriers combined - and twice that number still. Yes, take all US carriers, AT&T, Verizon, Sprint etc, add them together, and then double that number, and its still not as big as China Mobile the carrier is alone. Your Nokia brand is China's biggest handset brand and most desirable handset brand. Your Nokia smartphones have been the bestselling smartphones of China and the Nokia Ovi store is China's biggest app store and the Symbian OS has by a huge margin China's biggest smartphone installed base. Nokia had achieved the exceptional partnership arrangement with China Mobile, that they were a co-developer of the MeeGo OS. Windows Phone has not yet even been introduced a single smartphone model in China by any handset brand, not even HTC or Samsung, while the Nokia N9 has been selling there since Q4 of last year.

 

The sane CEO issues public reassurances to China Mobile that Nokia will remain with MeeGo and use it as one of Nokia's platforms and to support China Mobile, and to help China Mobile's initiative and software partners to expand the Chinese-language services even beyond MeeGo to other Qt compatible platforms including Nokia's Symbian, S40 and Maemo, and also Android and Blackberry. The sane CEO will immediately commit to producing TD-SCDMA 3G versions of all MeeGo capable handsets today - the N9, the N950 and the older N900. TD-SCDMA is a China-specific 3G standard that for example Apple does not support with the iPhone. Nokia has traditionally provided Symbian based smartphones on TD-SCDMA. Before those Chinese variants are finalized, the sane CEO would rush the N950 to the Chinese market now to capitalize on China Mobile's interests in MeeGo.

I am sorry, I really have to stop here for a moment. Do you realize what this means? Nokia had in its pocket, the monopolistic exclusive rights to 12% of the planet's mobile phone total market! All it needed, was for Elop to go, hat in hand, to China Mobile and promise there will be glorious MeeGo and Symbian smartphones, running Ovi in Chinese, on that TD-SCDMA 3G standard which Nokia already supports fully, and China Mobile would forever block the iPhone and Blackberry and Android and Samsung and HTC and all others from its networks. This is as near to a monopoly as you can hope for. This was the greatest coup in mobile. This was a license to print money. Canalys reported that Nokia's smartphone market share was 77% in China in 2010 - and it was even higher on China Mobile's network obviously. This was Nokia's cherry on the top, just before Stephen Elop's suicidal Elop Effect. And with Nokia's massive factories in China, they could churn out those millions of smartphones at great profit. Any sane CEO sees, this is the most imporant customer relationship that has ever existed in the mobile industry, and you do not screw with it. The sane CEO will turn heaven and earth, to get China Mobile smiling and happy back, to a MeeGo and Symbian based partnership with Nokia. Ok, lets return to my rant...

The insane CEO spits in the eye of China Mobile's commitment to MeeGo, and forces China Mobile to contemplate Windows Phone based, clearly undesirable and globally market-failing Lumia smartphones instead, especially where MeeGo is fully compatible with the Nokia Ovi store and the Qt developer tools, while Windows Phone is not. Where the Ovi store has tons of Chinese apps and Windows Phone obviously has nothing to offer. And the Chinese market has very little utility and compatibility with Microsoft platforms where PC penetration is low, Zune is not popular and Xbox 360 is actually legally forbidden in the market.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

 

SUPERPHONES

 

Nokia's global brand, price premium and overall appeal has been driven over the years by genuine iconic superphones from the 9000 Communicator to the N93 to the E90 Communicator to the N95 to the N900 to the N8 to the E7 to the 808 PureView. Nokia's flagship phones are expected to showcase technology nobody else has, much like the automotive world looks at the Mercedes S-Class for the ultimate cutting edge tech that will come to normal cars only years later.

The Symbian OS is fully capable of delivering superphones (as is MeeGo for the most part) but Windows Phone is not. Windows Phone is severely crippled when contemplating superphones. Nokia has just admitted, that for example just the camera technology of the 808 PureView, which yes, runs Symbian happily today, won't be able to be put onto Windows Phone based Lumia phones until in 2013 at the earliest. Standard Nokia superphone features like NFC and multiple displays and TV out and HDDI output and enhanced Dolby sound and Augmented Reality etc are simply not supported on Windows Phone. There is no ability to use the Lumia as a WiFi hotspot. Some of the first Lumias have even more problems like not offering forward facing cameras so you can't do videocalls. Not to mention more mundane features we expect like folders and the ability to edit a text message and to display the clock in idle mode and genuine multitasking etc.

A sane CEO will observe from what Microsoft has now delivered on its promised Windows Phone to Nokia's Lumia, and conclude, Windows Phone is not ready for prime time, and certainly not suited for top end premium phones, superphones that can compete head on with the iPhone 4S and Samsung Galaxy Beam etc. The sane CEO will start to issue clear statements that of course Nokia will continue with MeeGo into the future as its OS for the top line superphones - because MeeGo was designed from the ground to be an OS for superphones - and that also Symbian will live on, as it is actually quite well suited as well for many top phone uses from cameraphones to business-oriented QWERTY phones.

 

The insane CEO abandons the top of the market that Nokia used to rule, to the iPhone and Samsung Galaxy, and only competes in the middle of the smartphone market where every rival is competing and prices are squeezed and profit margins are thin. The insane CEO would continue to suggest that there is no future for Symbian nor for MeeGo.

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

 

ECOSYSTEMS

Yes, the consensus is - and has been for quite a while - that the big race in smartphones is for the ecosystem. The key to the ecosystem is whose OS has the biggest installed base, not the number of apps on an app store for example or some billion-level download number. Your memo told the world what are the main elements of a mobile phone ecosystem as you wrote that after counting the hardware and software, an ecosystem will also include: "developers, applications, ecommerce, advertising, search, social applications, location-based services, unified communications and many other things."

Nokia has recruited the world's largest army of developers to its ecosystem (over 400,000 copies of Nokia's developer kits have been issued, this totally dwarfs all other smartphone developer communities). By the app store, Nokia's Ovi was ranked second best by number of downloads when you took over and is still third best, far ahead of for example Windows Phone. In ecommerce Nokia not only had the world's most widely used mobile content store in Ovi - the bestselling content store in every language except English, Japanese and Korean - ie covering 93% of the planet's population. And Nokia had a huge lead in its mobile money solution, Nokia Money, ahead of rivals like Google. Nokia's in-house mobile advertising agency was one of the first, and one of the world's biggest. And so forth and so forth.

The sane CEO believes what he wrote, that the future is won on the ecosystems and he would safeguard Nokia's ecosystem lead and build upon it. Like how mobile money is a key to customer loyalty and Nokia handset branding in Emerging World countries.

The insane CEO would spit on Nokia developers by announcing that the promised migration path from Symbian via Qt to MeeGo is ended. The insane CEO would sell Nokia's advertising unit and simply discontinue Nokia's mobile money project when it had already won 12% of the mobile money market share in India, the world's second largest mobile telecoms market. The insane CEO would open the door for a rival company's ads to be shown on Nokia screens without Nokia control to potentially threaten Nokia's brand loyalty.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation. I cannot but be bewildered, what in the world could possess Mr Ecosystem Elop to actually destroy Nokia ecosystem components? I mean, about the only conceivable reason would be if Elop somehow wanted to help Microsoft's ecosystem defeat Nokia's ecosystem? No, that cannot be, Elop is a Nokia CEO)

 

AFRICA

 

The largest part of your current customer base and new phone sales are in the 'Emerging World' markets, in particular Africa, India, the Middle East, Indonesia, Brazil, Russia, etc. You talk of the 'next billion' users there. Windows Phone is utterly unsuited for this market. Microsoft itself says Windows Phone OS is not currently suited for low-cost smartphones. Nokia itself said last year that Windows Phone was not suited for the Emerging World markets. Windows Phone is the most closed and restricted environment which in Emerging World markets is far more damaging, where due to problems with cellular coverage, electrical supply, poverty, illiteracy etc - the need to be able to transfer files via Bluetooth, and with microSD cards and using interactive USSD etc is vital. PC penetration is minimal, Microsoft's PC Windows markets share even among PC owners is low and most of Microsoft's platforms are not used such as Zune and Xbox. The ability to use cloud-based file sharing and storage is both prohibitively expensive and incredibly unreliable in these markets.

Nokia's Symbian is perfectly suited for this market, as Symbian is fully functional with modest specification handsets and is fully open in various connectivity from Bluetooth to NFC to microSD to TV-out to HDMI etc. Nokia's Ovi Store is the run-away dominant market leader in this market. Symbian today can power smartphones that cost less than 100 dollars (unsubsidised price). Windows Phone lowest price Lumia costs 250 dollars (unsubsidised price). In the Emerging World markets this price differential is decisive. Morgan Stanley Deloitte told us that 300 million smartphones at a price of under 100 dollars (unsubsidised) will be sold this year. Nokia cannot compete there with Lumia, only with Symbian.

 

The sane CEO continues to expand Symbian to lower cost smartphones in rough parallel as Samsung and Android, and uses Nokia's scale as a competitive advantage to capture the Emerging World markets to Nokia's Symbian based ecosystem, including Ovi Store and Qt.

 

The insane CEO tries to push 'lower cost' Lumia handsets like the Lumia 610 - which still costs 250 US dollars (unsubsidised price) and issues statements that Nokia is accelerating the end of Symbian while Lumia is not ready to take over this low end and Nokia has no alternative.

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

CLOUD COMPUTING

 

The emerging view is that the future of the whole internet, telecoms and computing industry is headed to the clouds. Nokia believed in cloud computing and mentioned Elop's background in Microsoft's Cloud Computing project as a desirable skill when Elop was hired. One would think he would understand and value the leadership position that Nokia had gained in Cloud based solutions.

 

The sane CEO would fully support and expand and capitalize on Nokia's leadership in cloud based solutions.

The insane CEO shuts down Nokia's Ovi Share and Ovi Contacts and forces Nokia users to migrate to cloud-based solutions run by rivals.. like Microsoft's Skyshare, Windows Live and Outlook. 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation. The conspiracy theorist might suggest that Mr Cloud Computing would deliberately sabotage Nokia's cloud solutions just so Microsoft would have less competition. You might think that; I could not possibly suggest such a thing.)

808 PUREVIEW

 

Your stunning 808 PureView cameraphone with gobsmackingly awesome camera technology won the phone of the show award at the world's biggest mobile telecoms trade show in Barcelona last month, ahead of stiff competition such as Samsung's Galaxy Beam with its tantalizing built-in pico projector. The 808 PureView runs on Symbian, an OS you have previously suggested was obsolete and equivalent to a burning platform. Yet on this magnificent superphone, Symbian does tricks Windows Phone cannot even hope to do this year, from normal Symbian abilities such as true multitasking to abilities more relevant to the camera excellence such as HDMI output. The 808 PureView is receiving the best early reviews of any Symbian based phone ever, even in usually hostile US tech press. The 808 PureView starts shipping in weeks, for example to the UK market.

 

The sane CEO celebrates the excellence of the PureView, rides the hot press, is seen everywhere with that phone, and uses it to celebrate the competitive advantages of Symbian, its open system, its Qt developer tools, Nokia's Ovi store etc and of course, the sane CEO launches the 808 PureView to the US market immediately.

 

The insane CEO refuses to be seen near the 808 PureView and even facing strong US media love of the astonishing cameraphone, refuses to launch it in the USA

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation. This could not have possibly anything to do with the embarrassing fact, that even after Elop's Burning Platforms memo, the 'failing' Symbian continued to outsell Microsoft's Windows Phone - in Microsoft's home market of the USA last spring. No, there can't be any such grudge between Redmond and Espoo, could there? And besides, the CEO of Nokia would look after Nokia's best interest, right, not Microsofts in any case)

 

LOYAL CUSTOMERS

 

The Lumia smartphones are now obviously a dud. They were not designed by Nokia's A-Team out of Finland, in fact the Lumia designers come from California, from what at best could be called the junior squad, the farm team, the total novices. And now we have seen the evidence is overwhelming. They messed it up rather comprehensively for Nokia's new line of smartphones. The Lumia is just barely suitable to make a good impression in the store, but by the time you bring it home, it will disappoint you day in and day out. Not unlike the complaints about Detroit cars of the past, made to look good in the showroom but a disaster to live with over time (I trust this has long since been fixed with the new Detroit). But its a common accusation of US designs, focusing on the shallow first impression rather than the durable value.

So lets look at Nokia's loyal user base. They have used Nokia branded phones for years, many for over a decade. They have always expected certain levels of utility and convenience and logic and rational behavior on their Nokia phones, whether smartphones or featurephones. How is Lumia today? The user may be impressed in the store. But takes the Lumia home, and tries to move old pictures from the old phone to this new phone or vice versa. There is Bluetooth yes on the Lumia but it won't do file transfer. What of the microSD slot? There isn't one. Shot some video in the camera? Try sending it via MMS? Yes, the Lumia will do MMS and let you send pictures, but not videos. What of messaging? Nokia practically invented mobile messaging (Matti Makkonen, my mentor at Nokia, actually did invent SMS, but he did it at his previous employer, Telecom Finland ie Sonera). So many users, especially the youth and business users, heavily into messaging will tend to favor Nokia phones. Try to draft an SMS text message and save it? You can't. Lumia won't let you save message drafts! What of the FM transmitter you have had for years with Nokia phones so you can connect to your car without cables. There isn't one. What of the TV out you want to show friends your pictures or videos that you shot on the Lumia? Nokia has supported TV out for six year already. The Lumia doesn't do that either. The alarm clock won't wake up on the phone like it used to on all previous Nokia's - a really nasty problem to discover the first time. And so forth.

 

The sane CEO looks at these serious usability problems, which are all traced to the deficiencies of the Windows Phone OS and the design of the Lumia. The sane CEO decides this Lumia series is now more of a threat to Nokia's reputation - and long term damage to Nokia loyalty - than a way to succeed in the market and will at least limit its production and market launches. The sane CEO will explore less mature markets where the Lumia might succeed even with these deficiencies, like the USA, where far less advanced phones and often phones with crippled features are commonplace. The sane CEO will either end the development of Lumia phones or suspend their marketing in Nokia's main markets like Western Europe and advanced Asia-Pacific, until newer, better Lumia devices of far more modern design can be brought to the market.

 

The insane CEO pushes even more, even cheaper, even worse Lumia devices to the market to ruin what is left of Nokia's loyal customer base.

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

 

CUTE

 

Your company has built an application developer tools environment, called Qt. Qt is effectively an ecosystem. Developers can make apps via Qt that work on Nokia's Symbian, Maemo and MeeGo smartphones, today. These have an combined installed base of 300 million smartphones currently in use worldwide. That is the biggest installed base of any smartphone platform. Qt is far more powerful than that. Qt will enable development of apps to Nokia's proprietary 'featurephone' OS, called S40. That means that just on Nokia platforms, Qt reaches a potential of 1 Billion with a B-Billion pockets. Yes. On Nokia's own platforms, Qt is four times as big as Android, five times as big as all iOS devices ever shipped including iPhones, iPod Touch's and iPads, ten times bigger than the Blackberry ecosystem - and 100 times bigger than the Windows Phone 'third ecosystem'.

Qt is a true key for Nokia's global dominance. And I haven't even gotten to the good part yet. Qt also allows development to Android and Blackberry smartphones. Qt is tested to be faster by a whole order of magnitude in development time and development cost. It is by far the best way to develop apps to smartphones. Qt is also compatible (or will be) with other less common platforms such as Limo, bada and Tizen. Of all smartphones in use today, using Qt you have the ability to reach .. 83% !!!!!

 

And wait. Nokia's new upcoming low-cost smartphone OS, Meltemi - is also of course, compatible with Qt. The total potential reach of Qt is not just bigger than any other smartphone ecosystem - Qt potential reach today is bigger than the total installed base of Microsoft Windows based personal computers and all Windows family smartphones, combined. This is a juggernaut. And the only OS that Nokia currently supports, that is not compatible with Qt is.. Windows Phone. That Windows Phone which is not viable for 90% of Nokia's current market. (Not viable for the high end smartphones, not viable for low-cost smartphones, and utterly incompatible with the featurephone market segment). So Nokia will have to, into the foreseeable future, support systems other than Windows Phone - that are compatible with Qt. You get the picture?

The sane CEO will cherish this enormous power and  celebrate Qt at every stage he opens his mouth, repeating the amazing stats about Qt, and fully funds its rapid development so all the platforms will be soon also in production (Qt is not yet finished). The sane CEO will always favor any Nokia solution which is compatible with Nokia's Qt ecosystem, the legitimate 'first ecosystem' of the planet, and always try to avoid mentioning any rivals that threaten Qt.

 

Only a certifyiably lunatic CEO would waste incredibly valuable and rare media time and attention, by promoting a rival to Qt - the Windows Phone 'third ecosystem' - a product of a competitor company that is unsuited for 90% of Nokia's future. That is not just moronic and mad, it is a direct violation of his fiduciary duty to Nokia's best interests and an obvious conflict of interest. Whether Nokia buys and pays for Windows Phone OS or not, and whether Elop himself thinks Windows Phone might or might not succeed - it is Microsoft's duty to promote that OS, and as long as Nokia produces a rival ecosystem - Qt in this case - it is madness for the CEO to invest his valuable media exposure to promote a competitor to Nokia's ecosystem. He must be fired for this blatant breach of his fiduciary duty. The Nokia shareholders should demand a million dollars for every time he uttered the term 'third ecosystem' in front of a TV camera!

(But I'm sure it wasn't done on purpose, I mean, he'd be a criminal if he promoted Microsoft's interest ahead of Nokia's best interest, and still collected a Nokia paycheck.)

 

TO BURN OR NOT TO BURN

 

I think we see the picture. Now, I will end with a little comparison, to burn, or not to burn. Consider these facts.

 

In Q4 of 2010, just over one year ago, the first full quarter that Stephen Elop was in charge of Nokia, this is how Nokia performed under his watch: Nokia's smartphone unit - the unit of Nokia's handset future - grew unit sales by 7% from just the quarter before. Yes. You read it right. Nokia was not 'declining' smartphone sales when Elop took over. Nokia in his first quarter in charge, grew unit sales by 7%. Was that at the cost of price cuts? No! Nokia average prices of smartphones grew by 14% ! (When does that happen in economic theory, that you increase your price massively, and yet grow sales strongly?) Nokia's smartphone unit revenues grew by 22% from just 3 months earlier! And profits? Check this out. Nokia's smartphone unit profits jumped a Nokia-record of 65% from the quarter before!

Nokia smartphone sales were literally twice as large by unit sales than its nearest rival, Apple's iPhone. (Imagine how much Coca Cola or Toyota or Boeing would love to be twice as big as its nearest rival). Nokia's Symbian was the world's bestselling smartphone OS. Nokia's market share in Q4 of 2010 was 29% of all smartphones sold globally. Nokia's Ovi store was the world's second bestselling app store by downloads. Nokia's smartphone migration rate was 25%, ahead of the world migration rate to smartphones.

Nokia's Symbian OS had as its carrier partner NTT DoCoMo of Japan, the most advanced, most inventive and most innovative company of this whole industry, which not just launched this industry, it has literally invented about half of the total industry's inventions. This carrier was committed to using Nokia's Symbian in its radically futuristic phones for years to come. Nokia also had for the MeeGo OS as its carrier partner China Mobile, the world's biggest mobile operator/carrier. Thus Nokia had exclusive preferred access and market to both the most advanced mobile country and the biggest mobile country, where both NTT DoCoMo and China Mobile had explicitly said they do not want the iPhone! But They wanted Nokia's platforms!

Nokia's credit rating was an A. Nokia's brand was ranked the 8th most valuable brand on the planet by Interbrand. Nokia's shareholders so much loved Elop's first five months in charge, by early February, Nokia's share price had climbed 11% since he took over. That was Q4 of 2010.

 

Now lets move just 12 months ahead in time, the latest quarter for which we have Nokia data. Now in Q4 of 2011, this is how Nokia performed: Nokia's smartphone unit sales have collapsed 31% from where they were a year ago (while the industry grew 71%). Nokia average sales price has fallen by 10% - but this is by an accounting gimmick, where Elop assigns a Microsoft marketing support payment of 250 million dollars to the price. The real price (what consumers are willing to pay for Nokia branded smartphones) has actually fallen by 16%. Nokia's smartphone unit revenues have fallen by 38%. Instead of reporting a profit of 510 million Euros (663 million US dollars), Nokia's smartphone unit now generates a loss of 190 million Euros (247 million US dollars) per quarter. So Nokia has destroyed 757 million Euros (910 million US dollars, nearly a Billion dollars) of profits per quarter.  

Nokia smartphone unit sales now are half the size of the new market leader in smartphones, Apple's iPhone. Yes, Nokia went from being twice as big, to half the size of Apple in just 12 months! Nokia's market share has collapsed to 12%. Nokia's Symbian has fallen to third bestselling smartphone OS. Nokia's Ovi store has fallen to third bestselling app store by downloads. Nokia's smartphone migration rate is now 16%, severely behind the world migration rate to smartphones.

Since Nokia selected Windows Phone, NTT DoCoMo has abandoned Symbian and today runs Android as its primary operating system. Since Nokia selected Windows Phone, China Mobile has become miffed too and today strongly supports Android (and its Chinese variants). Nokia has abandoned exceptional and unique competitive advantages that had blocked Nokia's most dangerous rival.

Nokia's credit rating was downgraded three separate times and is near junk. Nokia's brand fell out of the top 10 for the first time since rankings were published. Nokia's shareholders so much hated Elop's next twelve months in charge, since its February peak, Nokia's share price had crashed 60%. This is Q4 of 2011.

 

The sane CEO would look at the situation one year ago, conclude Nokia was doing reasonably well, was healthy, profitable - and growing strongly in every single metric imaginable. That is where a sane CEO would say Nokia's platforms are "not on fire". And the sane CEO would say looking at today's situation, that if ever, today Nokia's platforms "are on fire".

 

The insane CEO looked at the situation a year ago when everything was growing including profits, Nokia smartphone sales and Nokia share prices, and issued a Nokia-wide memo claiming bizarrely that Nokia's platforms were on fire. And truly the Roadrunner cartoon Wiley Coyote moment, using Acme rockets, running over the cliff and then looking down into the canyon and starting to fall.. the insane CEO would look at the world today, and say he feels the platforms are no longer on fire (and that he need not fear Samsung as a rival, he can sleep soundly today).

 

(The criminal CEO would act in the best interests of Microsoft but obviously I am not suggesting that is Elop's motivation)

THE SANE BOARD

 

The sane Nokia Board looks at its recently hired CEO, Stephen Elop, objectively and observes that since he took over, he did not focus on his primary task, to fix Nokia's execution. He issued damaging memos and statements that destroyed Nokia's market share, retail support, and trust by consumers and developers alike. He has continued to consistently act against Nokia's best interest and refuses to make obvious right choices such as releasing the two MeeGo handsets globally, yet continues to pursue wild goose chases like tablets. The board would use metrics such as plunging strongly profit-generating smartphones unit to losses, the crashing share price and the disasterous credit ratings and falling brand value. The sane Board would calculate the long-term damage of the wanton destruction of Nokia's previously mightly market share and observe that this year Nokia's market share is headed to single digits. The sane Board would evaluate the long term damage from destroyed partnerships with the leading companies of the industry, the devastation of the ecosystem and the abandonment of all sensible paths to a future from cloud computing to mobile money. The sane board concludes that no matter how clever Elop sounds like in his interviews, the con-artist is an utter fake and a madman who will destroy Nokia with his delusions. The sane Board fires Elop now.

 

The insane Board looks at the evidence of Lumia failing by every metric, and lets the delusional psycopath go on to ruin Nokia, to sell all its assets from patents to programing skills to the advertising unit to the Vertu unit while the Nokia share price continues to fall.

 

The criminal Board colludes with Elop or is criminally negligent in ignoring his blatant disregard of the CEO's fiduciary duty and conflict of interest. A criminal Board would face stock market regulator investigations on both sides of the Atlantic. Individual members of a criminal Board would face lawsuits and massive fines and be barred from any Board work in the future. But I am not suggesting the Board is criminal.

THE WAY OUT

The sane Chairman of the Board looks at all of this, understands the CEO has lost all trust and respect and sees the demoralized company on the brink of ruin. He takes the CEO aside, says, this won't work, and tells Elop to go back to Ballmer with an idea. Next the sane CEO manages a divestiture of only the Lumia unit, sell it yes, to Microsoft, and make them take Elop with them. Throw in a 3 year license to use the Nokia brand in the North American market with the Lumia but not for other markets. Pay back the several hundred million dollars so far that Microsoft has paid Nokia. Get rid of all of it. The split is relatively painless, as most of the hardware is from Compal of Taiwan with non-standard Nokia components, so few factories, designers, employees are involved. The Windows Phone software is obviously also mostly Microsoft so again, few Nokia staff would be involved.

The insane Chairman of the Board watches as the proud Nokia ship slowly sinks as the clown CEO, no, thats not fair to clowns. As the Microsoft Muppet CEO blasts ever more holes to the sinking ship, below the waterline and just boosts the speed by which Nokia sinks. And the proud legacy of the Chairman, thought by most in his home country as its greatest industrialist and even in European circles held in highest esteem, rapidly sinks along with it.

NOKIA CAN BE SAVED

Nokia can be saved. I am not saying Microsoft Windows Phones have to be discontinued (while it would be the best move right now, in my estimation). I am saying the magical MeeGo devices, N9 and N950 have to be sold globally now, now when they are hot, and can command a good price, and bring Nokia back to profits. The CEO has to commit to MeeGo also into the future and restore the damaged relations with China Mobile. Symbian is best suited for Africa and Emerging World markets until Meltemi is available. Qt is Nokia's smartphone strategy and the only OS that is incompatbile with Qt is Windows Phone. Lumia has been tried, it is failing now. Nokia had a superior ecosystem a year ago, now Elop is destroying it piece by piece. He has to be stopped while there is anything left. For Nokia to survive as an independent company, it must take drastic actions now. The first step is strong embracing of MeeGo and the N9 and N950, globally in every market from the UK to the USA. And Elop is utterly incompetent, he has to be fired!


UPDATE 28 March, 2012 - Nokia finally takes partial step in right direction! Nokia reported at Netbook News quoting info from Mary McDowell and Nokia's 'Next Billion Group' - that Nokia is now developing not one but two lower-cost MeeGo devices, (hooray! Finally! Some sanity at Nokia HQ! We celebrate!) aiming for the Emerging World markets. Note this completely reverses the idiotic statements CEO Stephen Elop said less than a year ago about MeeGo. Good move Nokia, more of this. Except why is CEO Elop not running at the front of this story? Why is he refusing to be seen near any MeeGo story about Nokia! And now, EVEN MORE WITH THIS DRAMATIC NEWS DEVELOPMENT, if there are new MeeGo devices coming - and there is unprecedented press support of the N9, why not release the N9 and N950 on MeeGo now, sold in every market now, to help support the interest in, and future sales of those upcoming newer and cheaper MeeGo devices.

 

UPDATE APRIL 11

For anyone still reading this blog, Nokia just issued its profit warning today and I have commented on it and crunched some numbers. In 2011 Stephen Elop set the world record for biggest destruction of a Fortune 500 sized company any one year. Now in Q1 of 2012, he went even better, producing the worst quarter results ever seen anywhere. Read my view of the Nokia Profit Warning and why things are even worse.

UPDATE APRIL 12

I have written a 'proper' and not very 'Elop sucks' type of posting, honestly, accurately, precisely, comphrenesively, with facts and stats, about what is not wrong, and what is wrong, and what must be done, if Nokia is to be saved. If you want to read it, it is here The Hearbreaking Fact is that Nokia Can Be Saved and within one Quarter at that. 

The State of the Union blog for Mobile Industry - all the stats and facts for 2012

The big statistics and numbers blog! Its that time of year, the start of a new year, and we have to update and memorize new numbers. For me this annual blog is a kind of honor, a bit like the US president who gives his 'State of the Union' speech to Congress. (The state of our industry is strong!) And the blog article will get very wide coverage throughout the year as the definitive collection of the big numbers in one place. 

So lets do a bit of the headline stuff. Two years ago we learned that the richest person on the planet was no longer from the PC industry, Mr Bill Gates of Microsoft in the USA, but that title had been taken over by Mr Carlos Slim, the mobile telecoms tycoon from Mexico whose America Movil network stretches across 240 million people and most of Latin America. Cool. This industry produced the richest person on the planet.

Three years ago I reported that mobile had passed the Trillion dollar level in annual revenues and in so doing, had become in fact the fastest new industry to reach that lofty level - television and radio never became that big, the PC industry and the internet even combined, are not that big today. Print media - all books, magazines and newspapers printed annually - never reached that level. Mobile is not just one of a handful Trillion-dollar size giant global industries like the automobile business or food or construction or banking or military spending; but mobile has set the record for the fastest growth from zero to one Trillion dollars in annual revenues. We have literally witnessed the setting of a world record in growth of any industry. Even as the world went through two economic downturns in the past ten years, mobile grew strongly through both of them.

Then last year we had Apple fighting for the lead for the most valuable corporation by market capitalization (which it has since seized and is now increasing that lead). But few remember that less than two decades ago, Apple was on the brink of bankruptcy. They brought back Steve Jobs to rescue the company, and he steered Apple to the mobile future. So much so, that the company whose official name was Apple Computer, and had launched highly successful new series of Macintosh PCs and the iPod music player and iTunes store - changed its name to only 'Apple' when Jobs announced the iPhone. Since then Apple has called itself a 'mobile' company. Today the iPhone delivers more than half of Apple's revenues and most of Apple's profits. Like I say in my seminars and workshops - Mobile is the Magical Money-Making Machine. This is very literally and factually the strongest industry on the planet, with the most robust growth, the strongest profits and thus it is the best place to be for any company or person to build a success.

But its no longer just the PC industry which is excited about mobile. Look at statements from various industry giants outside of technology. Visa said in 2011 that the future of payments is mobile. And they were not talking about contactless payment plastic cards. They were talking about mobile phones. Google's Chairman Eric Schmidt wrote on Harvard Business Review last year, that mobile money is one of Google's top priorities. What? The internet giant known for advertising intends to take on Citibank and American Express and Paypal? In mobile? Yes. Google has been mad about mobile for seven years now, and their internal mantra is 'Mobile First' - meaning that for any Google initiative today, they will deploy the mobile variant first. This from the company that set the record for fastest growth from zero to entering the Fortune 500. And they say the future of the internet and advertising (and money) is.. mobile.

Facebook and Twitter say the future of social networking is mobile. BBC says the future of broadcast is mobile. Tesco's the big UK retailer feels mobile is vital for the future of retail. Gaming is rushing to mobile (Angry Birds, anyone?) and music is already on mobile. Even print media are rushing to embrace mobile from MMS based highlight clips to Augmented Reality enhancements to print editions.

Its not just business. Government is increasingly turning to mobile. Politics is embracing mobile. Healthcare is providing assistance via mobile. Education is using mobile to help in learning. This is by far the most dynamic and most exciting industry to be in. And with that, lets start to dig into the numbers today. All data in this blog is current as of December 31, 2011 and yes, you may freely quote all the data on this blog (please list the source as TomiAhonen Almanac 2012).

5.9 BILLION SUBSCRIBERS

 

When I left Nokia ten years ago to start my own consultancy, the global mobile phone subscriber count was at 700 million - there were more fixed landline accounts (1 Billion) globally than mobile accounts. The leading countries like Finland, Hong Kong, Austria, Italy and Israel had passed 80% mobile phone penetration rate per capita, and one country, Taiwan was past 90%. Yes it was an exciting time, but even the mobile industry itself did not foresee this incredible growth. The industry expected the world to have 2 Billion mobile phone subscriptions by the end of the decade - a huge growth of tripling in size in one decade. The reality was quite different. By the end of 2010 we had 5.2 Billion mobile phone subscriptions on the planet (prepaid and post-paid, combined). All sensible analysts predicted that the growth rate would slow and nobody expected half of Africa to be connected. How wrong we all were.

Today more than 77 countries have passed 100% mobile phone penetrations per capita including the mobile laggard country, USA which finally reached that level last year. Meanwhile the leading countries continue to push past 150% and past 175% and even yes, past 200% mobile phone penetration rate - as the UAE did becoming the first country with literally two mobile phone accounts for every living person of any age.

 

The planet has a population of 7 Billion people alive. And now there are 5.9 Billion active mobile phone subscriptions. That is a global penetration rate of 84.3%. To put it another way, if we allocated all mobile phones to every living person by age, starting with the over 100 year olds, and then proceeded down every person alive getting one mobile phone subscription, today the ages we would cover comes down to everybody older than the age of .. eight! Yes, if the 5.9 Billion mobile phone subscriptions were distributed evenly, every single person on the planet age 9 or older, would have one.

Makes you think? In one decade this industry grew more than 8 fold. This mobile industry has sustained a compound annual growth rate of 24% year-on-year for a whole decade! (when measured in its paying customers, obviously, the revenue growth is not quite that dramatic while also good). Even the past year, we grew new customers from 5.2 Billion to 5.9 Billion, adding 700 million new customers in the past year. The whole mobile industry had only 700 million customers a decade ago! The growth rate of adding 700 million new customers to 5.2 Billion is still an enormous 13.5% in just one year.

Compared to the landline cousin, ten years ago fixed landline was the big brother of telecoms, at 50% bigger. Today, if a telephone rings anywhere on the planet the odds are 5 to 1, that the phone ringing is a mobile phone. Yes, the picture is so lopsided, that for 5.9 Billion mobile accounts, there are only 1.1 Billion fixed landline telephones worldwide.

When will we reach 100% per capita mobile phone accounts. Some have started to push early numbers now for 2012. I saw a Cisco projection claiming we'll hit that milestone this year. I think that is premature, but definitely by Spring of 2013, the world will pass that incredible milestone, that when measured per-capita, there will literally be more mobile phone subscriptions than people alive on the planet. I do not think we will see that number this year, but we will definitely see it by Spring of 2013.

4 BILLION UNIQUE USERS, 4.8 BILLION HANDSETS IN USE TODAY

A mobile phone subscription is not a unique user. Some still are astounded by the stats, but yes, increasingly we, perfectly normal people, are walking around with two mobile phones in our pockets. And in many markets the competitive situation is such, that consumers switch between carriers/mobile operators by swapping the SIM card, so you might have two or three or four mobile phone accounts and use one phone. Several manufacturers have introduced Dual SIM phones (mobile phone handsets with slots for two separate SIM cards, allowing the user to switch between two networks without swapping out the cards). The first Triple SIM phones have already appeared.

Just to be clear. Why two phones? Imagine having a phone from work - a Blackberry. But your employer has tight controls on what you can and cannot do on that phone. So you get yourself an iPhone as your private phone. You are now part of the population with two mobile phones (and two mobile phone accounts). If you have a data dongle for your laptop or netbook or iPad - that would be a third cellular mobile account..

I was the first telecoms expert to expose the bizarre concept of multiple phone ownership (because it happened first in Finland and it was first observed by my team when I was employed by the Finnish telecoms operator/carrier group Elisa/Radiolinja/Helsinki Telephone at the time in the late 1990s) and have been reporting on the phenomena ever since. So my consultancy has also provided the most accurate counts of how many of the planet's total mobile users are 'unique' users and how many of those accounts are second and third accounts. This is the far more relevant number to consider on a planetary migration to digital connectedness. How many 'unique' users are there on mobile, after we remove the second phones and the multiple subscriptions.

Its an easy number to memorize for this year - 4 Billion. That is the unique mobile phone user number. That is 57% of the total population of the planet, which very literally - not by statistical gimmicks - very literally do have an active mobile phone subscription (prepaid or post-paid) and at least one mobile phone handset that they use.

And you might ask what of the total number of mobile phone handsets in use. That number will be more than the unique users (some have 2 phones) and it will be less than the 5.9 Billion total subscriber number (because some only have SIM cards on rival networks sharing one phone on them). My consultancy now reports the 2011 number for total active mobile phone handsets in use and with a live paid subscription to be 4.8 Billion. Wow. 4.8 Billion pocketable digital communication devices that are in use on Planet Earth every day. Wow. That is huge.

MOBILE SUBSCRIBERS AND HANDSETS IN USE
Total mobile subscriptions (incl multiples) . . . 5.9 B
Total mobile handsets in use . . . . . . . . . . . . 4.8 B
Total unique mobile phone owners  . . . . . . . . 4.0 B

Source TomiAhonen Almanac 2012

This data may be freely quoted

How big is 4.8 Billion? There are 970 million cars registered and in use worldwide. There are 1.1 Billion landline phones. There are 1.3 Billion personal computers of any kind including desktops, laptops, netbooks and tablet PCs like the Apple iPad - all combined. There are 2.2 Billion internet users (including office use, home use, shared use at internet cafes and schools etc, and mobile internet users). There are 1.8 Billion television sets and 4 Billion radios in use globally. But 4.8 Billion actual mobile phone handsets in use! Wow, that is an enormous number. Or let me put it this way. If you take all television sets in use in the world, and add all personal computers of any kind including laptops and tablets, and add fixed landlines - their combined total - 4.2 Billion is still less than the 4.8 Billion mobile phone handsets currently in our pockets globally. Massive! Obviously much more on mobile subscribers, also regionally, and by age, and across the Digital Divide in the TomiAhonen Almanac 2012.

THE AVERAGE USER?

So with 4 Billion unique users and 5.9 Billion total mobile subscriptions, clearly there are 1.9 Billion 'second or third' (or fourth etc) accounts. How many of us therefore actually have more than one account? The number is now 1.5 Billion people or 37.5% of the total number of unique users, actually walk around with two SIM cards or more in their pocket. 400 million of those have three or more active mobile subscriptions (mostly pre-paid accounts).

And yes, 3.2 Billion people on the planet who have a mobile phone account, are satisfied (or can only afford) with one handset, but 800 million people already walk around with two phones in their pockets (some ultra-geeks like me have 3 phones, haha, but that number is too small to register in the big picture). So yes, one in five of us, literally 20% of anyone who has a mobile phone, walks around with two connected phones in his or her pockets (and/or purse in the case of the ladies..)

Its no longer 'weird' to have two phones. One fifth of all who have a mobile phone today, actually use two phones daily. Not just two accounts, two actual phones. This is a remarkably different reality from the one imagined by industry thought-leaders a decade ago, when they were planning mobile phone handsets for the future. The mantra was the perfect device, that would do 'everything' but now if we have two devices, we will of course optimize. One is great for texting - has a great QWERTY keyboard like a Blackberry, while the other is great for surfing, has a big touch screen like the iPhone. Or if we love our cameras, we have one camera-optimized phone in one of our pockets like the Nokia N8 or the HTC  Titan 2, etc.

SMARTPHONES

And what of the normal user? How many of those mobile phone handsets are smartphones then? Not that many actually. Globally the installed base is still 81% non-smartphones, what I call 'dumbphones'. Some are very advanced 'featurephones' that have cameras, big color screens, full internet browsers, and often improved input methods from QWERTY keyboards to touch-screens. These would typically cost in the 50 to 100 US dollar ranges without any handset subsidy ie no contract. Still others are of the ultra-cheap type that do only voice, SMS and have perhaps some rudimentary functions and facilities - a flashlight/torch, an FM radio and a clock. These can cost under 25 US dollars without subsidy. Many of the phones in use are older, often second hand, so there is a large pool of hundreds of millions of older Nokia models still in circulation especially in the less-affluent countries in the Emerging World. Also our younger kids often get hand-me-down phones which may be a two-year old Samsung or SonyEricsson or indeed an iPhone 3GS.

So 19% of the installed base of handsets globally are smartphones. That is an increasing ratio, last year it was 17%. The new sales of mobile phone handsets this year passed 1.6 Billion units, and 30% of them - 486 million - were smartphones. By the fourth Quarter, ie Christmas sales - a third of all mobile phones sold were smartphones. So we are well on the way on that transition which is now unstoppable, that eventually all handsets in the world will be what we now define as 'smartphones' (but the actual form factors and specifications will of course evolve).

Most who read this blog will have an interest in the Industrialized World, and with us in the most affluent parts of the planet, the migration to smartphones is well along already. In Europe the installed base of smartphones corresponds to a 41% penetration of smartphones per capita. In many individual countries like the UK, Netherlands, Switzerland and Finland, the tipping point has been passed where there is a smartphone now for half the population (bear in mind, with these 'per capita' calculations, we still have the dual phone phenomenon - so in reality some wealthy employed white-collar workers will often have two smartphones). North America passed the point last year where there is a smartphone for one third of the total population per-capita. In advanced countries of Asia-Pacific like here in Hong Kong or Australia and Singapore etc, the penetration rate of smartphones per capita is almost half, at 48%.

This tracks perfectly the sales patterns too. Last year the US market reached the point where half of new phone sales were smartphones. Europe was there a year earlier and advanced countries of Asia-Pacific were reaching the half-point of new handset sales by 2009.

But others of my readers are interested in the Emerging World (or the full global view). So lets not forget that. I can report that in the Middle East the smartphone penetration level per-capita is past one third, at 37%, slightly ahead of North America. Some of the leading countries like Qatar, UAE and Israel are well ahead of the mainstream Europeans and the Asia-Pacific region. Latin America has passed the point of a smartphone for one out of five people, the per-capita penetration rate is 22%. In the less-affluent countries of Asia, which includes most of the big population countries like China, India, Indonesia etc, the smartphone penetration rate is 12% per capita. And in Africa its still in the early days, with smartphone penetration rate of 3% per capita.

How many smartphones will be sold this year? I am projecting about 750 million, which would be about 44% of all new phones sold. The migration is continuing and the global smartphone installed base will pass the 1 billion level by the second quarter of 2012. We will end the year with something between 1.1 Billion and 1.2 Billion smartphones in use worldwide, which starts to approach the installed base of all personal computers of any kind including desktops, laptops, netbooks and tablet PCs like the iPad.

While everyone obsesses about the iPhone and Android (and Windows haha) the global installed base of smartphones by operating system is still dominated by Symbian. Not for long, because of Nokia's suicidally stupid move to end Symbian last year, while it towered over all rivals - and was growing new sales strongly - but yes, even now, more than one year after the infamous Burning Platforms memo that destroyed Symbian's (and Nokia's) future, this is the picture of the installed base:

Installed Base of Smartphones by Operating System 2011
1 - Nokia Symbian . . . . . 33%
2 - Google Android . . . . . 31%
3 - Apple iPhone  . . . . . . 16%
4 - RIM Blackberry . . . . . 12%
5 - Samsung bada  . . . . . . 3%
6 - MS Windows Mobile . . 2%
7 - MS Windows Phone  . . 1%
Others . . . . . . . . . . . . . . . 3%
TOTAL IN USE . . . . . . 910 Million

 

Source TomiAhonen Almanac 2012
This data may be freely quoted

 

If you want to see the actual market shares of new sales for the various smartphone handset maker brands and the operating systems for full-year 2011 or the latest quarterly sales numbers, please see this, my comprehensive blog article about smartphone market shares. And if you are interested in national smartphone penetration rates, I have that too. The top 3 for most smartphones per capita are Singapore, Hong Kong and Sweden. The chart for 42 country penetration rates in 2011 is here. Much more data about smartphones including regional data, market shares, handset features, age distribution etc in TomiAhonen Almanac 2012.

 

Last year 2011 was the first time that more smartphones were sold than all types of personal computers added together including desktops, laptops, netbooks and tablet PCs like the iPad. I have also been calculating the global 'computer manufacturer' market shares annually, when smartphone shipments are included in the overall numbers. The chart for last year for the biggest PC makers with smartphones included is here. And for those who need all the nitty-gritty about mobile phone handsets, feature sets, market shares, regional penetration rates, and market sizes for the major countries, the obvious total data source is the Tomi Ahonen Phone Book 2010.

 

WHAT DO WE DO ON MOBILE?

So what do we do on our mobile phones? The obvious answer used to be 'we make voice calls' and some smartphone users might say 'download apps' or perhaps that we 'surf on the web'. That is all fine and good, but the truth of the matter is that last year marked a major milestone in the 'mobile' industry, where the primary use of the mobile handset is no longer voice calls - and no, its not apps nor is it web surfing either. The primary use worldwide - and the one with most users today - is SMS text messaging. Yes, last year, only 18 years after SMS text messaging was first offered as a commercial service for consumers, our favorite messaging method has passed voice calls in total users. SMS text messaging is used by 85% of mobile phone users - 5.0 Billion people - vs voice calls that are only used by 83% of mobile phone users (4.9 Billion people). Apps and mobile web come far lower on our list of preferences. And its good to see that even the USA is finally embracing SMS wholeheartedly. Pew reported in 2011 that the active user level of SMS text messaging had reached 88% of US cellphone owners. That compares to 90% in Pakistan, 91% in Brazil, 91% in China, 96% in Indonesia. Most of Europe has passed the 90% user level years ago for SMS text messaging.

So its time to end calling it a mobile 'phone' (or cellular 'phone') - because voice calls are no longer the most used service on our mobile handset devices. I am trying to learn to call the device just a 'mobile'. But lets talk about SMS text messaging a bit. First how big is 5.0 billion? Compared to total email users - SMS is three times bigger. Compared to all landline telephones? SMS is 4 times bigger. Compared to facebook? Over 5 times bigger. Active users? SMS text messaging grew users last year from 4.2 billion to 5.0 billion ie 16% growth in total paying users. In just one year! The traffic in SMS text messages grew even more - by 18% and while the carriers/operators kept giving huge bundles of 'free' SMS messages in various pricing packages, the revenues of SMS globally? Still grew 5% last year reaching 126 Billion dollars worldwide! The SMS industry earns a fresh new million dollars every four minutes of every day, day and night, 7 days a week, 52 weeks a year. SMS alone is bigger than Hollywood movies and the global music industry and videogaming - all added together. Or to put it another way, SMS text messaging alone is bigger than the revenues of the global radio broadcast industry. Not bad for an 18 year old haha.

DON'T FORGET MMS

And then we have the other monster mobile messaging success, MMS picture messaging. The versatile MMS is exceptionally well suited for various media and advertising uses, but also has a growing user base in consumers who send pictures. The usage of MMS has now passed 43% of the total mobile subscriber base and at 2.5 Billion active users, MMS now has more users than the total of people who access the internet by any method (at work, at home, at shared computers at libraries, schools and internet cafes; and via mobile internet). MMS became the second most used data service on the planet last year. And what a service. MMS user base grew by 21%, and MMS revenues grew by 15% reaching 39 Billion dollars last year! Much of the premium revenues are generated by various media and advertising uses as media brands learn that MMS answers most media issues with SMS - MMS allows longer texts than 160 characters of SMS; and MMS allows adding sounds, pictures and video clips. MMS is also an increasingly popular transport vehicle for coupons, offers, tickets, boarding passes, receipts etc

WHAT OF MOBILE DATA?

You may have heard some say that soon there will be more users of the internet on moble phones than on the PC. Those 'experts' are severely misguided. We passed that milestone two years ago as reported widely from IBM to Nokia. Now we have the latest count of browser based service use on mobile handsets for 2011. Today the number of mobile internet users (including WAP) is 30% of all mobile subscribers - and thus 1.8 Billion total people worldwide - browse internet content on their mobile devices at least part of the time (in the Industrialized World most of us will also have access to a traditional PC). Still out of all 2.2 Billion internet users worldwide today, less than 400 million use a PC exclusively. Over 1 Billion use both a mobile device and a PC to access the internet - and in 2011, 800 million use a mobile handset exclusively as the internet access device. In six of the world's ten largest internet user countries the mobile use is bigger than traditional PC based use (China, Japan, UK, India, Russia and South Korea).

And what of news? An astonishing milestone also has now passed. The global user base of news and alert services on mobile is 1.9 Billion. Why is that a relevant number? Yes, its four times more than the total circulation of all daily newspapers worldwide - so even accounting for three readers per newspaper, mobile news still now has more (paying) users than total readership (paid and free-loading) of all newspapers printed. But that is not the astonishing number. Now mobile news has passed the total number of television sets in use globally! No wonder the Associated Press Managing Editors declared in September of 2011, that mobile was the future of news.

How about advertising then? Sure. That too is exploding globally. JP Morgan told us a year ago that the total value of all mobile advertisingin 2010 globally was 11.5 Billion dollars. I now have the update to that number, for 2011 that was 14.4 Billion dollars (including advertising on various new ad platforms such as the branded smartphone apps etc). How many people receive ads on their phones? 3.4 Billion people worldwide, or 58% of all mobile phone owners. Most of that is now banner advertising, with SMS text messaging based ads second, MMS third and the rest such as search, location-based ads, adver-gaming, branded smartphone apps, etc making up the rest. For those in the marketing and advertising (and perhaps media) industries who would like to understand mobile advertising more, please see Tomi Ahonen Pearls Vol 1: Mobile Advertising.

WHAT DO WE DO ON OUR PHONES?

Here is an abbreviated chart is exceprted from the brand new TomiAhonen Almanac 2012 of the types of activities we do on our mobile phones today, as a percentage of all mobile phone subscribers:

PERCENT WHO USE MOBILE SERVICE/FUNCTION

 

SMS text messaging  . . . . . 85% . . . 5.0 B
Voice calls  . . . . . . . . . . . . 83% . . . 4.9 B
Camera . . . . . . . . . . . . . . . 71% . . . 4.2 B
Received Advertising  . . . . . 58% . . . 3.4 B
MMS picture messaging  . . 43% . . . 2.5 B
News and alerts . . . . . . . . 32% . . . 1.9 B
Browsing (incl WAP) . . . . . 30% . . . 1.8 B
Premium SMS (incl voting) . 28% . . . 1.7 B
Download apps (incl Java)  . 18% . . . 1.1 B

Source: TomiAhonen Almanac 2012
This data may be freely quoted

Note for example the active user base of cameraphone based digital cameras at 4.2 Billion (or 71% of all mobile phone users). It is four times more than the installed base of all non-phone based cameras on the planet, including digital and film based stand-alone cameras and videocameras, combined. Much more such user info in the new TomiAhonen Almanac 2012 if you need more data.

The mobile has become indispensible for us. Its more than a communication device, it now has our clock and alarm, it has our calendar and reminders. We use the camera not just to take 'traditional pictures' but also as a memory tool taking pictures of what we should remember to buy at the store and where we parked the car. We store vital information at the phone book and we store valued SMS text messages with information such as addresses and parts numbers etc, to the romantic message that so touched us that we want to keep it forever. Nokia reported a year ago that the average person looks as a phone 150 times per day. For every waking hour, that means you and I look at our phone once every 6.5 minutes. Those heavily addicted teenagers do it even more - although they are so proficient at their phones, they often don't need to look at the phone to send their messages.

SO WHERE IS THE MONEY?

Ever since my second book (M-Profits the first business book for the mobile industry) my obsession with this industry has of course always been the money. Where are the revenues, how are the profits generated. And even while many still are hyping the smartphone apps space, that is not where the money is. The mobile industry is a juggernaut. The mobile industry is the youngest Trillion-dollar sized giant industry on the planet, and reached that level only three years ago. Last year the world economy grew between 3% and 4% in size. In the same period, the mobile industry grew revenues by 10%. The mobile industry is now worth 1.3 Trillion dollars (1,300 Billion dollars).

Most of those revenues are earned by the carriers/operators whose total revenues last year passed 1.02 Trillion dollars. 651 Billion of that was in voice call revenues and 186 Billion was in various mobile messaging service revenues. 179 Billion dollars was in premium data services. Beyond the operator/carrier revenues, there was also equipment sales consisting of handsets, networks and various accessories.

MOBILE INDUSTRY REVENUES 2011

Operator Revenues  . . . 1,016 B
 - Voice Revenues  . . . .   651 B
 - Messaging Revenues .  186 B
 - - SMS revenue  . . . . .  126 B
 - - MMS revenue . . . . .     39 B
 - VAS Data Revenue . .   179 B
Handset Sales  . . . . . .   185 B
Other hardware sales  . .    95 B
TOTAL INDUSTRY  . . . 1,300 B

Source: TomiAhonen Almanac 2012
This data may be freely quoted

So yes, the very first mobile telecoms service as we know it, on a cellular network service, was launched commercially (in Japan, by NTT) in 1979. It took this industry only 29 years to breach the 1 Trillion dollar level. So we have been witness to the establishment of a world record in the fastest growth of any new industry. No wonder the world's richest person is now Carlos Slim of America Movil and high tech companies from Apple to Google say their future is in mobile.

And what are the companies that lead this industry? I also provide the listing of the biggest global corporations - when their non-mobile business is removed. So after we remove the Macintosh PCs from Apple and remove the plasma-screen TVs from Samsung and remove the fixed landline business from Vodafone, who are the biggest companies on their 'pure mobile' business. The latest top 10 list of the biggest companies purely on their mobile revenues looks like this:

BIGGEST COMPANIES WHEN ONLY COUNTING THEIR MOBILE BUSINESS
1. China Mobile, China, operator . . . . . . . $ 77 B
2. Verizon Wireless, USA, operator  . . . . $ 72 B
3. Vodafone Mobile, UK, operator . . . . . . $ 66 B
4. AT&T Wireless, USA, operator . . . . . . $ 58 B
5. Telefonica Movil, Spain, operator . . . . . $ 55 B
6. T-Mobile, Germany, operator . . . . . . . . $ 49 B
7. Orange Mobile, France, operator . . . . . $ 48 B
8. Nokia Mobile, Finland, handsets . . . . . $ 45 B
9. Apple iPhone, USA, smartphones . . . . $ 42 B
10. Samsung Mobile, S Korea, handsets . $40 B

Source: TomiAhonen Almanac 2012
This data may be freely quoted

That is the Top 10. I published the Top 25 on this blog earlier if you want to see that, and to find out more about my quirky names for some of those imaginary companies, and how they would rank in the Fortune 500 etc.

ABOUT THOSE APPS

I have been monitoring the despair of the app developers in attempting to monetize the smartphone app space. Apple is about to celebrate its 25 Billionth iPhone app download but before you cheer that big milestone, bear in mind, Apple has only paid out a total of 4 Billion dollars so far. So Apple, the most successful app store, in its four years of existence, has only generated 5.7 Billion dollars of total revenues cumulatively (of which Apple kindly keeps 30%). Those 25 Billion downloaded apps have shared 4 Billion dollars of developer revenues in total or about 20 cents per downloaded app. Its not a way to get rich, if the median app gets under 1,000 downloads (meaning, half of all apps out there get even less than that). Obviously most apps on the App Store are free apps, so yes, the numbers are somewhat better for the paid apps, but this is no goldmine. I have been cautioning audiences globally to beware of the app store opportunity, it is a treacherous one, and its not anywhere near the easiest way to make money in mobile. And while we are on those numbers, the total smartphone app revenues in 2011 were now 12 billion yes, but those were not all 'app store' type of consumer apps.

Like in years past, the majority of the smartphone app revenues were still generated by enterprise/business apps, such as those for the Blackberry enterprise users, sold often with licenses counted in the thousands or more. Consumer apps associated with 'app stores' only were worth 5 Billion dollars last year, 2011, and enterprise apps were worth 7 Billion dollars, giving us the grand total of 12 Billion dollars last year for all types of smartphone apps. 12 Billion may seem big perhaps. But before you get excited about that number - all apps revenues formed only 4% of the total mobile data revenues opportunity last year. Yes, you are far better off going where the big opportunities lie such as in gaming, news, social networking, music, television related services (like TV voting) etc. That is why Coca Cola has a rule of 70:20:10 about their mobile strategy - they put 70% of their mobile dollars to SMS and MMS mobile messaging; they invest only 20% to the mobile internet; and only 10% in mobile apps. Or the simple way to say it, is like US food giant Kraft, whose mobile strategy is 'no mobile left behind.' They too start with SMS and MMS, then do mobile web (and WAP) and only after no mobile has been left behind, do they bother with the apps side of smartphones. Similar thinking is with Finnair the airline that invented the mobile check-in and a similar mobile philosophy is for example used by the German railway system.

Incidentially where is the strongest growth in profits and revenues, if not in apps? Its in mobile social networking (think Facebook and Farmville but on mobile). And conveniently, if you so desire, I have a book for you on that, with 50 case studies of excellence in user-generated content, citizen journalism, virtual worlds, dating, flirting, picture sharing, multiplayer gaming, social networking etc. The ebook is called called Tomi Ahonen Pearls Vol 2: Mobile Social Networking.

WHO IS THE LEADER? JAPAN OF COURSE

 

This is a difficult complex industry - far more complex than rocket science actually - and very difficult to fully comprehend. But the industry was launched in Japan, and for most of the commercially viable innovations of this young industry, Japan and Finland have taken turns in the leadership, with South Korea, Sweden and Norway often also playing major parts. But recently some innovation has come from the USA, especially relating to those smartphone apps (even though, some of the most successful - like Angry Birds by Rovio comes from Finland - or the most futuristic and innovative - like Layar the Augmented Reality Browser comes from the Netherlands). So it becomes difficult to know where to go to see the future in mobile. Where is the leadership? I have done the math for you. I use a formula which combines the four most used measures of mobile industry leadership (mobile subscription penetration rate, the generation(s) of the networks in use, the adoption of mobile data services, and the level of how advanced the handset installed base is, ie smartphone penetration rate). The world's leading mobile country once again was Japan for 2011, here is the Top 10 list as I calculated it:

1 - Japan
2 - South Korea
3 - Singapore
4 - Italy
5 - Finland
6 (tie) - Sweden
6 (tie) - Taiwan
8 - Austria
9 - Hong Kong
10 - Australia

Source: TomiAhonen Almanac 2012
This data may be freely quoted

If you were looking for the USA, it didn't make the top 10 but is ranked 17th (up from 19th in 2010). You can see the Top 20 list here, and the Top 30 list with far more information is of course in the TomiAhonen Almanac 2012.

IT ONLY GETS BETTER

But its not ending there. The world's largest lock-maker, Assa-Abloy is deploying locks for hotels and homes that can be operated by mobile phone. Google, Nokia, Vodafone and many more mobile giants are in a race to deploy mobile money solutions around NFC Near Field Communciations, a new technology coming to our phones - 19% of Japanese already make such payments.. daily. You may have heard of the border-crossing incident on the US-Canadian border where a stranded visitor had lost his passport, but had a scan of it on his iPad and was allowed to pass over the border. I have been saying for some time now, that in the future our passports will be on our phones. But today, I advise all friends and collagues to make scans of our passports and driver's licenses and save them on our phones, just in case you are in a similar situation. While such a scanned image is not necessarily legally valid, it is far better than nothing - and if you have a good cameraphone (5 megapixel or better) all you need is good sunlight, take a picture of your passport and driver's licence and save them onto your phone(s).

Meanwhile the innovation in mobile is relentless. Turkey became the second country after Spain, to accept SMS based signatures as legally binding in contracts last year. Estonia became the second country after Norway to accept SMS based tax returns! And after Sweden launched it, there is now a race for which country is the first to stop the manufacturing of coins and banknotes altogether - replaced by mobile money. Kenya has passed the point where 30% of its GDP is now going through mobile phone money accounts. The 'usual suspects' are in the race of course including Finland, Norway and Estonia; including Japan and South Korea; including the Philippines and South Africa; as well as some less obvious countries like the Netherlands and Somaliland. But the first country to give a target date for when they expect to eliminate cash is Turkey - and they said in November of 2011, that their target year is 2025. That is only 13 years from now!

If we go back 13 years to 1998, that was the year of the movie Titanic and when Bill Clinton had his Monica Lewinski scandal. Google was launched that year. Tony Blair was Britain's Prime Minister. And now only a similar amount of time into the future, we may see the first country to end the manufacturing of cash (and this being a race, it may actually happen a little bit earlier in some other ambitious country). Wow. After several thousand years, we will be the generation to see the end of cash as a monetary instrument, in our lifetimes. Killed by mobile. And yes, if you needed to read a quick book about mobile money and payments, check out my Pearls Vol 3: Mobile Money.

My dear friend and fellow mobile statistician and forecaster, the author Chetan Sharma says the world will change more in the next 10 years, than it has in the previous 100 years. The driving force in that change is mobile, as mobile is a robust, economically sound industry, not clinging desperately to some advertising-based revenues alone. This is the best economic opportunity of our lifetimes. And not just in strict monetery terms, obviously also if your passion is in education, please substitute 'learning' for profits; or if you are in m-health, consider healthcare benefits rather than revenues. And so forth. But this is the richest and most rewarding opportunity and the epicenter of creativity. No wonder Google's Chairman Eric Scmidt says 'Put your best people on mobile'.

UPDATE 29 FEB - I have announced the release of the TomiAhonen Almanac 2012. With that publication I added some exclusive data from the Almanac with four charts (out of 96) published in total and some other excerpted sample data from the Almanac. You may find the data useful especially if you are interested in the mobile internet, gaming, music, handset installed base, or the 'Digital Divide'. See more here TomiAhonen Almanac 2012 Released.

WHERE NEXT?

This article is using data from the brand new edition of my annual statistical volume for this industry, published in ebook format, called the TomiAhonen Almanac 2012. You may freely quote any of the data in this article, please mention the TomiAhonen Almanac 2012 as your source. And if you are interested, the Almanac has over 90 tables and charts, is a 184 page ebook. conveniently formated for the small screens of smartphones so you can carry all the stats in your pocket with you and only costs 9.99 Euros for immediate download. Please see more including sample pages at this link TomiAhonen Almanac 2012.

If you need more information about the handset side of the industry, my Tomi Ahonen PhoneBook 2010 is still very current with all the data about cameraphone resolutions, screen sizes, smartphone operating system market shares etc. Similarly formated and priced 9.99 Euros, also at over 90 tables and charts in an 180 page ebook, the sister volume to the Almanac, focusing only on the handsets side of our industry is the Tomi Ahonen PhoneBook 2010.

Gutenberg is a moblogger, Martin Luther is coding and the Medici are using MPesa

In No Straight Lines there is an entire chapter devoted to all things mobile. It is called Gutenberg is a moblogger: economic, organisational and societal transformation through mobile communications.

It maybe that a certain Mr Ahonen - has much of this covered on the CDB blog.

I explore mobile from the perspective of what it can do at an organisational and at a societal level.

From the Achuar tribe in the Amazon rainforest using mobile and GPS enable digital technologies to challenge the Peruvian government and the mining companies trying to exploit their habitat and way of life to children using iPhones at school for learning in new exploratory ways - I make the point that mobile plays an important role in the evolution of every aspect of our society.

So NSL looks at education from Africa and India to the western world, it looks at how bricks and mortor organisations can become platforms and become part of a global economy, we look at how people living on $2 a day could be doubling their daily income by working on their mobile phones – we look at the politcal consequences of rapidly shared knowledge and information, we look at data and the impact on how commerce per se will evolve enabled by mobile. And we celebrate organisations like Ushahidi that are showing us the way in how innovation really works. In Japan we look at ground breaking business models that are already nearly 10 years old and we wonder why the fashion industry is not fully up to speed, nor indeed the media industries either.

Why? Because they fail to see what is right in front of them - they are stuck in an ambiguous world.

I also argue that if organisations are not able to really design with mobile they could be missing a significant opportunity and this is NOT about apps.

It just might get you or your clients thinking differently about the future potential of our mobile society

No Straight Lines on Amazon UK. Amazon US.

 

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