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« Mobile is New Media, Lets Discuss Its Business and Media Formats (Part 1) | Main | The App Store is not the Only Solution in Mobile »

December 08, 2009

Comments

Terence Eden

Hi Tommi,

I disagree, on two counts.
1) As was mentioned at #HoTMS, American companies have two division. America and ROW (Rest Of World). America is drunk on American success - and rightly so. But they rarely see outside their borders.

2) The reason Android won't remain niche is that is a cheap and stable OS that *any* company can use. In the UK, we're seeing Android devices on pre-pay for ~£150. The iPhone is a premium product and will never allow an iPhone-lite to sell for that little. Next year, I'm sure we'll see the first sub £100 Android phones. Will they have 8MP cameras? No. Will they have 16GB of storage? No. But they'll be cheap, fast, stable, have a huge range of apps, have killer browsers, play flash and a have lot more functionality and usability than the iPhone.


T
(Disclaimer, I work for an MNO but I do not speak for them).

alex

Hi Tomi,

in my opinion, your analysis of the Apps store is flawed. If Apps store were only of interest to app developers, why would Apple have it in the first place?
I see the Apps store as a tool for Apple to attract customers and, more importantly, to keep them. Users get attached to some of their apps and will consider their availability before switching phone brands.

Inevitably other smart phone vendors are catching up in sleek UI and usability, but the volume market leaders are not even trying to catch up in software platforms.
Take Nokia as an example. They have in fact fragmented their platforms recently even further by adding S60 5.x and Maemo to S60 3.x, not even talking about continued fragmentation in the hardware (screen sizes, input methods), which make application development very hard.
So I don't see Ovi Store creating anything near the value of Apple Apps Store.
In long-term, Nokia seems on a better track, with Qt as common application UI platform across multiple operating system platforms. I expect 2010 to become interesting, when this bears first fruits. But we don't know Apple's moves in 2010.

It will be interesting to see an analysis that puts a value on the Apple Apps Store in terms of Apple's reduced customer acquisition and retention costs.


Also the Cadillac analogy is somewhat flawed.
Cadillac's market share is relatively stable, whereas iPhone's is still growing.
And installed base capable of running the same apps is growing very rapidly, compared to others who repeatedly start from zero base - how many phones can run Facebook's new app for S60 5.x ?

Point is, we don't know yet where is the ceiling for iPhone, is it 1% or 10%, or what. And we don't know how Apple might adapt their product strategy by the time the current "one-expensive-model strategy" saturates.
So not at all comparable to Cadillac, where we know that they are confined to a luxury niche.


I agree with your analysis regarding Android for 2010. Android's potential lies in the longer term.

ARJWright

Ah, nice analogy (from this USAmerican's opinion). And nearly befitting. Caddy did manage to change the luxury industry though, and that's caused the incumbants (BMW, Merc, etc.) to respond not just here, but aborad with suitablily more innovative, and better priced, models.

Android will be something to worry about in time, but the networks have to catch up the software's personality. When/if that happens, Android would be well positioned to be another Caddy (or Hyundai).

As for the west cost of the US being drunk on the iPhone; I agree. And mainly because I don't live there and it still echos here on the east coast. Too bad that mindshare and reputation matters to folks over here more than ability, else this post would not have been needed.

By the way, when are more mobile analysts going to take the chance of living off of their smartphones - where the *smart* in these mobiles can be put to a real test? Its easier to be sober when you are actually drinking and not just going along with the party music holding a glass.

Tomi T Ahonen

Hi Terence, alex and ARJ

Thank you for the comments. I will reply to each individually.

Terence - on your first point of disagreement, that American companies have two divisions, one for the US market and one for the rest of the world, I don't see that as a problem, it seems pretty smart to me, and what I'd do myself. The US market is very different from the rest of the world, and it makes sense not to try to think of the world mobile phone market as uniform. It is not. I don't see really where this is a disagreement with me, but I'll happily agree with you on this. It doesn't in any way invalidate my main argument, that the US is drunk on past iPhone achievements and its about time to sober up, and think, what can you do for me today.

Your second point, that Android won't remain a niche is a good prediction. Nobody obviously can know, and your guess is just as good as mine. What I do want to say, is that Apple did the world's most amazing new product launch, for a smartphone called the iPhone, in 2007, and then committed the whole company resources to gaining 10 million annual sales in the first full year. They even changed the company name to achieve this. I would bet quite a big amount of money and my reputation, that next year, Android will not match Apple's first year splash with the iPhone, regardless of what price point there is a given Android phone. The global market has such many factors arrayed against rapid growth - look at RIM, by far the world's best texting phone in an era when texting is found to be addictive - and simultaneously the world's best business phone - and it took them 5 years to sell their first 5 million cumulative phones. Today they sell 5 million phones every six weeks. Its the economics of the mobile phone market, which dictate, that a new player, new phone, new OS etc, cannot gain rapid market share. Can't be done.

Maybe I am wrong. Feel free to come back to this blog and lets examine in December 2010. But you might look at my various forecasts on this blog, in my six hardcover books, in my various quotes in Business Week, Wall Street Journal, Financial Times, Economist etc. my track record is pretty solid haha, but nobody knows. Its the future...

alex - You make good points, and yes, there is obviously a significant customer segment of many mililons, willing to download tens of thousands of Apple Apps Store apps to their iPhones. My point is, that in the big picture - it is TOTALLY irrelevant. Not 'marginally' relevant. TOTAL apps stores, not Apple Apps Stores, sell one fifth of one percent - of the value of mobile data, content and services this year. Any content owner or developer who has a tiny speck of intelligence, will look at that degree of mathematics, and re-calibrate. Yes, its good to develop for the iPhone because it is easy to get up and running, and if you're lucky, you might even make a little bit of money out of it. But nobody is going to earn billions on the iPhoen Apps Store, not even Apple, for years to come. But 200 Billion dollars worth of mobile data apps and services were sold last year, how much bigger is that this year. The total Apple Apps Store contribution to the mobile data global market economics, is so small, to be lost in the rounding off error. Literally. alex - one fifth of one percent? Where is the real opportunity here?

But yes, you make a very good point, that within that tiny market of 35 million users - remember the mnobile industry counts in billions, not millions - then yes, of course for Apple the loyalty factor is a good point out of apps stores. But its still tiny. Zero point seven percent of the planet's mobile phone owners have an iPhone. Who cares. Its a super premium luxury product like a Cadillac or a Rolex. yeah, cool to see on MTV cribs, watch how the rich and wealthy do, but for hte main stream market where the money is made - the mass market - that is where every consumer brand currently so hot on the iPhone, should focus on. Not the iPhone... Thats my point.

On Cadillac analogy. Yes, you make a good point, if Apple drops its price dramatically (or in other ways totally changes its marketing strategy - such as what I have been advocating on this blog for two years now, to spread their product range to more than one current phone model per year) then yes, they can break away from the Cadillac analogy. But as long as its a 600 dollar phone, it will be under 1% globally. Can't escape that.

ARJ - thanks, haha, yeah... Actually we are seeing 'awesome' smartness coming - where else, from Japan. The NTT DoCoMo mobile consierge service is really one that users say 'wow' and think their phones really are smart and read the minds of the owners.. we have some hope haha...

Thank you all for comments

Tomi Ahonen :-)

Henry Sinn

Great article. Maybe the Cadillac and leather analogy might get through to some readers. Management at Vlingo understand. [Is voice control going to be the beginning of the end of the keyboard? Implemented via mobile first?]. From their blog: "While we have attracted a significant and loyal following through BlackBerry and iPhone downloads, we also recognize that S60 and in particular Nokia represents by far the largest single path to widespread distribution.”
Others are very drunk as you say. From a small, albeit niche developer I recently stumbled upon after a request for symbian product [http://melloware.com] “While symbian is a great platform, I don't think I will port any of my apps to it. I think the iPhone and Google Android are going to dominate the marketplace. I can't go to dinner without seeing 5+ iPhones and 2+ Android phones around me. I think that trend is going to continue.”

PS Who needs an app for anything [history of personal computing] when you have a browser?

Andrew J Scott

Tomi- yes, I'm guilty of the 'drunk on iphone' comment and thanks for the citation! However, I think you're wrong about Android. Android is license free, it has multiple operators and MNO's backing it. It's reach will rapidly become very big indeed. It will overtake iPhone in 2010, it is seriously challenging incumbants; and I'd expect to see a Nokia phone running Android within 3 years (if they are still even building hardware then! ;-)

andraz

Ehm, what is a cadillac to the rest of the world? I would say majority of "the rest of the world" probably has never seen it and probably do not even know its a car brand name :). I guess very similar thing to iphone.

Tomi T Ahonen

Hi Henry and Andrew

Thank you both for stopping by. I already mentioned that you're here on Twitter so your followers can also come and join the discussion haha.. I'll reply to both individually.

Henry - first of all, a totally brilliant comment 'who needs an app for anything when you have a browser?' Loved it, and twittered it already. I'll be quoting you on it haha...

On understanding Symbian and its reach, very very valid examples, thanks. Yes, some do 'get it' and others do not. And are drunk on the hype about the iPhone (and Android). I am telling people, if they are going to launch apps, then it is yes very good to do an iPhone apps first, in most Industrialized World markets (and obviously only where Apple has a reasonable market share among smartphones like say UK or France or Australia etc). The iPhone is easiest to develop to, and you might even make some money on the app. But then, depending on where you are based, to go next to the big platform. In North America that is obviously RIM, not Android, WinMo, Palm or Symbian. RIM has over half of all smartphones in America and currently sell 3 out of 5 bestselling phones - not smartphones, all phones - in America including the topselling phone model. RIM is the giant smartphone platform in North America. And most of the rest of the world, that is Symbian, including Japan haha where its NTT DoCoMo's smartphone platform so essentially all smartphones on the network for half of the Japanese will be Symbian. But yes, with Symbian there is a lot of fragmentation, so its not 'easy' but it is far bigger.

Then as I always say, try to imagine your customer experience as a service (for example via a browser) rather than as a stand-alone app. If offered as a service, you get the option of monthly fees - a long reliable revenue stream if your service is truly useful. And obviously the other globally deployed mass market service platforms, SMS and MMS. My fave is certainly MMS...

Andrew - hey, thanks for stopping by, and good quotation haha. Obviously we see the chances of Android a bit differently, but as you are a bit biased, haha, it is certainly understandable. About that market success... Android to become 'very big indeed' and 'overtake iPhone in 2010' - I really don't think so, but it may happen. Let me give my quick thoughts why I think not.

First, six out of the big 7 are not going to support Android in smartphones. Biggest handset and smartphone maker Nokia (Symbian & Maemo) won't abandon its own operating systems. Number 2 in phones and numnber 5 in smartphones, Samsung has just announced its own OS, Bada, and while they offer token smartphones on all major OS's including Android, Samsung won't be pushing Android next year, they want to establish Bada. RIM the second biggest smartphone maker and number 6 in total handsets has its own OS.

Then we have 3rd and 4th biggest handset makers, LG and SonyEricsson, who are nowhere to be seen, in trivial market shares in smartphones. We have 3rd biggest smartphone maker and 7th biggest handset maker, Apple with its own OS. Thats six out of the seven biggest handset makers.

The only major maker to do Android 'seriously' is Motorola in what many see as a desperation move. The Moto brand is severely damaged in all markets outside of North America, and both consumers and mobile operators are wary of investing too much effort and trust in 'yet another former giant US global brand that is near bankruptcy' as many see Motorola... Plus its handsets since the Razr have been dogs.

Motorola may have a hit with its Android phones. May have. But its TOTAL phone sales are only about twice what Apple sells iPhones currently, and the Moto Android smartphones would appear at the top end of Moto's line of phones. It is unreasonable to assume it would sell more smartphones than basic phones where its current mass of revenues is.

Then it comes to HTC, the fourth biggest smartphone maker and world's approx 8th-9th-10th biggest handset maker. HTC was the launch customer for Windows Mobile and at one point said they had delivered 80% of all WinMo phones in use in the world. That HTC is switching from WinMo to Android is a big coup for Google, and a huge - possibly even deadly - strike at Microsoft. So, just with the HTC move, it is likely that Android will pass Windows Mobile and become the fourth best-selling smartphone platform, as early as 2010. Yes, this I can see. We agree on the overall trend line.

How strong is Android then? Nokia - inspite of all the silly hype - is consistently selling better market share in smartphones than it does with all phones. It is as big as number 2 and 3 combined in all phones, and Nokia smartphones are as big as number 2 and 3 combined in smartphones. Nokia has also said frequently, that it does not want to exceed 40% market share, and will focus on being profitable, rather than pursuing half of the global phone market. They just paid a billion dollars to buy out Symbian which they made open source, and aim to make their low and mid-price smartphone platform. And Nokia have established Maemo as their premium smartphone OS for top end phones. Separately consider this - in those markets where there are no handset subsidies - ie where competition is truly open - in those markets Nokia is doing its best, and Nokia has its worst markets in those countries with heavy subsidies where operators control the market, like the US and Japan. So what do we read out of this, that Nokia knows how to sell to mass markets, globally, and the only reason they don't have 45% market share today is because in some markets the operators lock Nokia out... So, don't count Nokia out of the smartphones race. If they consistently do better in market share in smartphones, than regular handsets, then Nokia is 'doing everything right' even if some analysts does not like the current model of E71 or N97... Nokia won't 'lose' much market share I'd say, they'll be pretty much guaranteed to be in 35%-40% in smartphones next year.

Then RIM. Blackerry's CEO just said a few weeks ago that they sell currently 70% of their phones to residential customers, not business/enterprise custoemrs. RIM has a 'lock' on the enterprise/business customer base, a recent survey of US businesses said that in 74% of corporations they only use one OS for smartphones and refuse to add a second platform. Blackberry has most of those and is very safe in the next replacement phones for those enterprise/business executives, will be Blackberries. But now BB is also the preferred texting phone for teenagers, from countries as far apart as Indonesia and Venezuela. Blackberry is set to grow market share, not lose it.

Apple is number 3 in smartphones. Apple has been growing steadily. And they have gradually added new countries and markets - Japan, South Korea and China all this year. They also are expanding the offering across more carriers/operators, ie the rumor is that AT&T's exclusive deal will expire next year, and in many countries like Italy, Australia, France etc the iPhone is offered on several networks. Because of this expansion in the distribution chain, even if the 2010 summer edition of iPhone 3Gx was to be somehow a 'dud' or a 'dog' the overall iPhone market share for the full year 2010 will be better than it was for the full year 2009 globally, for no other reason than that Apple is still expanding its footprint.

Thats 75% of the global smartphone market, and one won't shrink, two are guaranteed to grow. It may well be 80% by end of 2010, split among these 3. And then we have Samsung, very hungrily NOW coming to smartphones. Samsung was not very aggressive in the space before. But Samsung has very consistently outperformed all rivals in all markets it has entered, not just phones but laptop PCs, plasma screen TVs, etc. They are a very strong rival to begin with, and much more, they are launching their own OS, giving them all the reason to focus very formidable marketing resources to support Bada.

Android has HTC, that is good. Android has Moto which is pretty meaningless in smartphones. And most of the other two dozen or so brands are names most people do not recognize. They are third tier manufacturers from China, Taiwan etc, who yes, some can be big one day, but none are in the class of say RIM in total sales, not even HTC.

And we have WinMo fighting back, Palm fighting for their share, Linux Mobile also, etc. The remaining 25% to 20% of the smartphone market in 2010 will be a dogfight among 'the rest' and yes, Android seems quite strong in that field, mainly because of HTC. Seems stronger than WinMo or Palm at least...

So that is how I see it. I do agree you see it differently. Prices of the Android phones will be a factor. The mobile operator/carrier support will be a big factor. But the established big players are currently very strong and I don't see this market changing dramatically in the next year. In a few years Android can become a real rival to the iPhone, but not now, not next year.

Finally, you may want to read that blog I have at the link at the end of this article, about what is the real cause for winning/losing in market share in smartphones - the distribution channel. I think you'll find some valuable insights in that article..

Thank you both for writing

Tomi Ahonen :-)

Liz Coker

Hi Tomi -

Nice analysis. In particular, I'm glad to see you highlight the distinction between App Store apps and the much bigger market for enterprise apps and mobile services. this IS often lost on investors and marketing folks in the US.

As for why the US is still drunk on the iPhone & starting to drool over Android? Personally, I think that Apple and now Google (and the US carriers) are working their marketing magic to drive US consumers to let loose of their now, tightly held, disposable income. We are a country that has been motivated by "Keeping up with the Jones's" for two full decades. That behavior is slowly changing (out of necessity) and when an item is a nice to have, vs. a have to have item, the likelihood and cost of losing your market momentum is very high. These are American brands, so while there may not be any real new innovation, they "show" very well.

From a technical perspective, my original WM smartphone did everything the original iPhone did - a year before the iPhone came out. Apple just did a MUCH BETTER job of marketing than did HTC or AT&T. Apples' marketing was good for the entire smartphone industry - people finally paid attention. Good corporate marketing (and of course good financials) drives up stock prices. When you have no new innovation, you better look like you do if you want to see stock prices continue to climb (app store, developer programs, GPS, faster networks - that was AT&T, but Apple got the credit for a new iPhone release) . From a marketing perspective this is brilliant. I know these comments may be a bit cynical, but as is the case with many things, the perception is often more powerful than the reality. The best technology does not always win - or at least not always grab the headlines.

Richard Spence

The problem I have with this analysis is calling Symbian devices smartphones. To me they are just phones. The iphone is iconic because it has defined what a smartphone is - upgradable os, apps, app store, great browser, good development tools, accelerometer etc. Android fits this description too.

Comparing iPhones to symbian devices is like comparing a checkout Till to a PC. Sure they are both have a chip and memory and a screen etc but they are not the same thing - so a lot of the stats are not valid.

I am pretty active in the development community and I rarely if ever meet anyone developing for Symbian - really. This is nothing to do with iPhone drunkeness just that Symbian development is laughably bad and plain uneconomic the vast vast majority of developers. Without developer support, particularly small developers the platform is doomed.

If I was going to use a car analogy the iPhone is the model t-ford while Symbian is a horse and cart.

American finance solution

Good article and a nice summation of the problem. My only problem with the analysis is given that much of the population joined the chorus of deregulatory mythology, given vested interest is inclined toward perpetuation of the current system and given a lack of a popular cheerleader for your arguments, I'm not seeing much in the way of change.

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Tomi T Ahonen

Hi Liz and Richard

Thanks.

Liz - very good points and totally agree with you. Yes, its in the fizz haha, the marketing competence that is a major reason why. It doesn't stop me from feeling frustrated haha, and having to post countless comments here on this blog and on various forums, because the misguided understanding now when so many seem to think that Apple and Google invented a mobile internet for us etc..

Richard - fair enough. I agree to a certain degree. You remember I called the iPhone the dividing line, we'll count time before and after iPhone. So in terms of the 'second generation of phones' yes - but not for those reasons you list. The original iPhone did not even have an operating system for which users could install apps. There was a huge global vibrant apps industry for smartphones - mostly business apps obviously at the time - that existed prior to the iPhone. And a year after the iPhoen 2G we still didn't get to install apps to it...

So I agree with your conclusion but not the reasons to get to it haha.. The original iPhone (2G) was FAR LESS a 'proper' smartphone than a Nokia 9110 Communicator was from 1999.

Now, if you want to argue that some Symbian phones are not suitable for smartphone use, I would beg to differ. If you are wealthy enough to afford a 600 dollar iPhone then you can be picky. Most of the people on the planet cannot afford that. For many a 50 dollar basic phone is a stretch. And now Nokia has released its first sub 100 dollar 3G smartphone. Those will be used with apps and full web browsing etc just like the iPhone is. Its not as good, but to say yo ucan't count Symbian phones is pretty snobbish, its like saying anything less than a BMW is not a proper car and should not be counted.

As to developers. Obviously there is a ton of them, but mostly US based developers don't even know how to spell Symbian - for good reason, it is not significant in their home market. But what of Japan where half of the installed base of phones - not smartphones, all phones - support Symbian? The phones are not proper smartphones because they are totally locked by the carriers but the OS is Symbian (or Linux) so if you develop in Japan you develop only on Symbian or Android (until now, that suddenly last year iPhone 3GS took off, and from 2009 the Japanese would also develop for the iPhone if they want apps on only one network, the smallest of the three haha...

Thank you all for writing

Tomi Ahonen :-)

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Ah, nice analogy (from this USAmerican's opinion). And nearly befitting. Caddy did manage to change the luxury industry though, and that's caused the incumbants (BMW, Merc, etc.) to respond not just here, but aborad with suitablily more innovative, and better priced, models.

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Now the Apps Store is gaining enormous press and praise all over. First, remember, all 'normal' smartphones except the original iPhone 2G, were able to accept 3rd party applications. So this was a deficiency in the original iPhone.

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The interesting information, the tonic on a note!Ah, nice analogy (from this USAmerican's opinion). And nearly befitting. Caddy did manage to change the luxury industry though, and that's caused the incumbants (BMW, Merc, etc.) to respond not just here, but aborad with suitablily more innovative, and better priced, models. Android will be something to worry about in time, but the networks have to catch up the software's personality. When/if that happens, Android would be well positioned to be another Caddy (or Hyundai).

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Android has Moto which is pretty meaningless in smartphones. And most of the other two dozen or so brands are names most people do not recognize. They are third tier manufacturers from China, Taiwan etc, who yes, some can be big one day, but none are in the class of say RIM in total sales, not even HTC.

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you may want to read that blog I have at the link at the end of this article, about what is the real cause for winning/losing in market share in smartphones - the distribution channel. I think you'll find some valuable insights in that article..

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