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« Some Smartphone Snippets: Nokia Q4, HP is Back, Tizen Delayed Again (Updates with Nokia Lumia ASP etc) | Main | Google Sells Motorola Unit to Lenovo - I told you this would happen... »

January 27, 2014

Comments

WonTheLottery

@KPOM
Goodness, you've had to add a lot of additional criteria to what defines a tablet in order to be able to claim Apple invented it, haven't you?

Here's a picture of the SmartQ 7 from 2009: http://www.pocketables.com/2009/05/smartq-7-internet-tablet-mid-revealed.html

It's really quite slim and tablety looking but hey, it's not really a tablet because Apple hadn't invented them yet.


Then there's this video of the original LG Prada: http://www.youtube.com/watch?v=5aLOGUQouUI

Surely the upload date must be wrong... a full size capacitive touch screen, the four docked icons at the bottom... how did that happen? Apple hadn't changed the world with that design yet!

Per "wertigon" Ekström

@Foo: No, Apple isn't a niche player yet. But it's the way they are headed in the smartphone/tablet arena, same as the PC market.

Now don't get me wrong. Apple does make a healthy profit and you do not need to own the entire market - only enough to be profitable. That is a valid strategy, but, unfortunately, virtually all tech industries have heavy network effects. Why isn't the Mac at 25%, or 30% market share on Desktop PC market? Because Windows has incredible network- and lock-in effects that virtually makes everyone forced to use it, whether they want it or not. 90% of devs are using Windows, 90% of apps are Win-only.

Now imagine in a few years when Apple market share is down to 8%. Why should someone make an Apple iOS app when they can corner 92% of the market with an Android-app? Apple will sooner or later need to let go of their app store monopoly on iOS products. But that's still 5-10 years off...

Earendil Star

Astro bla bla bla... yawn!

Meanwhile, in other news, Google is selling Motorola Mobility to Lenovo...

Chinese companies are growing... also in the US...

S V E

China-based Lenovo getting into Android smartphones in a big way spells trouble for other Android mfgs (esp. Samsung). That was a very brave move for Google to take a $10B haircut. They now are a truly neutral 3rd party OS provider. I wonder how this will affect the tenaciousness with which Google will defend Android from patent royalty claims.

E.Casais

"Chinese companies are growing"

What did I write a couple of Tomi articles earlier?

quote
My contention: China is the player to observe because it will have the most impact in the medium term -- in _every_ area of the mobile space.
end quote

quote
Upcoming Chinese manufacturers will compete directly with the low to mid-range devices which are the specialty of Nokia, Motorola and Samsung.
end quote

By gobbling Motorola, Lenovo is now doing exactly what I predicted -- attacking the whole low-end to mid-range market. True, I was not at all expecting Google to get rid of Motorola so soon, and to a Chinese vendor to boot.

The next big screen iPhone, Samsung phablet or Lumia iteration are interesting, but only rehash a well-known scenario.

China is where the exciting action takes place.

Baron--9-5

Here is the Google/Android Math:

1 - Buy Patents for Protection - bid for Nortel, loses. Desperately pay $12.5B for Moto (sold video unit - $2.15B to Arris and now Mobile devices for $3B to Lenovo). Net Bill $7.35B

2 - Buy Android, nurse it for 8 years and counting - conservatively - $8.65B

So Google has invested $16B on Android.

On the plus side, Google gets to count all the profit from Ads it displayed on Android - minus all the ads it would have displayed anyway, minus all the ads that it would display but no longer does because anti-Android action (e.g. Apple Maps). Google has been making less than $1.5B/year in Mobile ad profits, which only now increased. How much of that would they also get without Android? $1B? So $500M/year net increase. So that is maybe $2.5B in increased profit - being generous.

So up to now, Google spent $16B on Android and gained maybe $2.5B. That is a NEGATIVE 84% ROI.

(P.S. assuming the Lenovo deal goes as anticipated)

So Vatar

ad SVE:

Although Google takes a haircut on the Motorola thing it is nowhere close to $10B:

Google purchased Motorola for $12.5B, but sold off the set-top division for about $2.5B. Also, Motorola had $3B cash on hand when Google bought it. And they get about $3B from Lenovo and keep most of the patents (value $1-2B???). Yes, Motorola incurred some losses during Google's tenure (about $1.5B).

So Google took a haircut of about $4B total (+/-). Does not seem like a good investment, did not look like a good investment then, but also not as bad as $10B down the drain.

I wonder if Microsoft finds a way to back out of the Nokia deal? This might bankrupt the whole Nokia if they cannot get rid of their money pit after the devastating reign of Mr. Flop.

Baron--9-5

This is a ridiculous conversation. Apple a niche player in smartphones?!!!!

Seriously?!!! The #2 vendor of smartphones in the world is a niche player? LOL

So Sony, LG, HTC, etc are what? Micro-niche players? LOL

The things we read in this forum - cracks me up.

Apple is in a unique position. A category of one. A premium vendor who is also the #2 volume leader.

Apple is the equivalent of Ferrari (premium) selling 1/2 as many cars as Toyota (#1 by volume). Unique.

And Apple has proven that there are no shortage of applications for Mac, with only 4% of the PC market. And it has proven that there will never be any shortage of iOS market given that iOS has about 25% of the smart mobile connected device market (iPhone, iPhone, iPodTouch) - six times higher iOS share than Mac OS share.

Why?

Because every developer knows that Apple consumers (buying a Mac BookAir or iPad) is 1,000 times move valuable than a user buying a cheap PC or a cheap Android.

Apple's iOS share can go from 25% to 2.5% and they still will attract developers and content providers.

Baron--9-5

@WonTheLotteryButIsStillBitter "Goodness, you've had to add a lot of additional criteria to what defines a tablet in order to be able to claim Apple invented it, haven't you?"

Why argue. Go out on the street and ask 10 random people. Who launched the first tablet. Report back the results. If the majority with an opinion say anything other than Apple, you win.

Want to bet some Bitcoins on the result?

DarwinPhish

I wonder what BMW's marketshare of wheeled vehicles is. I bet it drops evrytime a bicycle is sold.

Baron--9-5

@Per "Why isn't the Mac at 25%, or 30% market share on Desktop PC market?"

Because the Mac's ASP is 2.5x that of PCs. It is Apple's choice, to have high end memorable devices, vs cheap disposable PCs for the mass market.

One again, Apple has proven that it can maintain platform/developer health with only 5% of the market.

At 25% of the market, iOS has even less to worry.

So Vatar

@DarwinPhish:

No, you are not correct. There are roughly 3 times more bicycles sold each year than cars, and BMW has a car-market share of roughly 3%. Only looking at cars and bicycles BMW's marketshare of "wheeled cars and bicycles" is roughly 1%. Also roughly speaking more than 3 bicycles more need to be sold for each BMW for BMW to lose market share. So BMW's market share does not drop with each bicycle sold :)

This just shows that numbers can be used however you like it. I find it interesting that here on this blog years ago certain Astrosurfers wrote that Nokia losing market share from 33 to 31% is a sure sign that the company is doomed. Now it is a sure sign that the company thrives when their market share increases from 3 to 3.5%. While it is no problem for Apple to lose share from 20 to 15%. Pick your number and twist it as you like.

And no I do not think Apple is in any jeopardy. But their position was even stronger a year ago. It will be interesting to see what they will do over the next few years.

DarwinPhish

@So Vatar

You took my comment too literally and too seriously. I am trying to point out that commenting on Apple's smartphone marketshare as Tomi does is, for lack of a better word, pointless, Apple's marketshare is shrinking becuase the part of the market that Apple ignores is growing faster than the part of the market and Apple competes in. This hasn't been news in over a year. As for analysis, this ranks up there with, "less beer is drank in February than any other month".

These numbers do not show in any meaningful way Apple is worse off now than they were a year ago. Show me numbers that say the top end of the mobile phone market is shrinking or that Apple's percentage of that market is shrinking and I might think differently.

So Vatar

@Phish:
No worry, I understood what you wanted to say and in essence I agree. As an engineer I am trained to define boundaries first before I make conclusions based on metrics. Apple definitely loses market share in smartphones, a metric commonly used. As others pointed out Apple is flat when measured against the total handset market (I did not look at the numbers and do not know if this is true). The question is what is the correct metric to track Apple's success compared to its competitors. Is market share the correct one? Is profit the correct one? Is market share among teens with affluent parents in Los Gatos the right one? Or is there a set of other metrics that are relevant?

Apple's share price is one metric, and it is down more than 8% since the latest earnings call. Apple's profit is another one, and that is outrageously healthy.

I am much more interested in the following question: Is Apple's strategy to only sell high margin phones and thus not being able to sell to hundreds of millions of people in the emerging markets the right one? Would a much cheaper iPhone help them in the long run? Would a strategy work where they offer a differently branded much cheaper phone (not branded "Apple" but "Grape-Phone" or so) running iOS, thus better defending their share of installed base especially in China and India? Or does Mr. Cook execute everything perfectly just as is?

winter

@Baron95
"Comparing that with Apple losing market share while having: ..."
"It is not losing or gaining share that matters. It is the context of how/why you are losing share or gaining share."

Yes, Apple handsomely wins the battle for profits, but loses the war for the market. As has been explained ad nauseam on this blog. But I assume these were people who did not invest in Apple shares. But it seems shareholders are starting to catch up on this prospect.

This is the type of situation for which they coined the term: Pyrrhic victory
http://www.hyperhistory.com/online_n2/people_n2/ppersons2_n2/pyrrhus.html

Winter

And to beat the point home how positive network effects work, here is the result: Android might also take on the laptop and desktop markets.

Android PCs and other Windows-alternative desktops are for real
http://www.zdnet.com/android-pcs-and-other-windows-alternative-desktops-are-for-real-7000025682/

Specifically, I see home users and SMBs adopting Android PCs relatively quickly. Enterprises will move more slowly. On the other hand, XP's end of support is coming soon. Even at this late date many businesses haven't decided where they'll go. The majority will, I'm sure, go with Windows 7, but I think a substantial minority, say 10 percent, will chose in 2014 to go with Android PCs, Chromebooks, or tablets.

DarwinPhish

@So Vatar

The problem is we ended up elevating the importance of simplified market share because it is one of the few metrics that is available. But availability and quality are not the same. In fact, there are probably very good reasons why the most insightful data is not publicly available.

Apple's current strategy appears predicated on the assumption that there will continue to be strong worldwide demand for $600+ phones. While there is such demand, Apple is fine. If the market shifts and there is less demand, Apple will have to offer devices at lower price points. There are lots of data points that suggest the top end of the market is maturing/saturating, but not much yet that suggest it is shrinking. Apple is going to do everything it can to keep the $600+ market alive. This is why Apple should and likely will release phablet-like device this year because that is the one part of the high end market they do not serve.

Because of their scale, supply chain expertise, high margins and cash reserves, Apple certainly can handle price deflation and hit lower price points with competitive products. That is probably plan B. The risk right now for Apple is that all the people buying $100-$400 non-Apple smartphones are locking in to alternative ecosystems or are developing loyalty to another brands.

foo

> I wonder what BMW's marketshare of wheeled vehicles is. I bet it drops evrytime a bicycle is sold.

Many people compare Apple to BMW or even Ferrari to explain why they charge premium.

Those manufacturers bet on differentiation, so they don't have to worry about market share. In fact, being exclusive is part of the value proposition.

That said, BMWs and Ferraris are much better than the competition; but Apple is starting to loose the differentiation race.

iPhone is no longer the best smartphone, and Apple doesn't seem able to compete with Android manufacturers which innovate in a much faster pace.

That may become a problem in the near future.

Baron--9-5

Unit market share is only a main metric in mature, commodity, generic markets, where the participants all have similar pricing and profit margin.

So market share for Coke and Pepsi is a proper metric, and virtually correlates to revenues, profit, etc.

Similarly GM, Ford, Toyota.

Similarly Lee and Levis.

But you can't use market share to compare Ford and Porsche. And you can't use market share to compare Levis and Gucci Jeans.

This is so basic, I'm not sure, why we spend so much time on this on this blog.

Just look at Cars and Phones.

You have your Chinese-only, noon-google Android Phones. That is equivalent to Geely Cars. Looks good, takes you from A to B, is cheap, but performs poorly in crash test, has low reliability, poor customer service.

You have Toyota - Like Samsung - The largest, with a varied product mix, from cheap Tercel, to huge Sequoya SUVs, to luxury Lexus (Galaxy).

You have Volvo or Saab - The alternative brands - That is Microsoft Windows Phone

And you have Premium brand - Like Aston Martin - Selling the experience, not the device - That is Apple.

The only thing that is unique is that Apple while being premium is also very high volume - #2. That is the uniqueness of Apple. If Aston Martin was selling 1/2 the volume of Toyota, just like Apple is selling 1/2 the volume of Samsung, it would be about the same. Aston Martin would then be the most profitable Automaker the world has ever seen.

In addition, Apple sells it's own gasoline (iTunes, AppStore), builds its own service centers and private roads (iCloud/iMessage/FaceTime), etc.

That is unique. And unit market share of a 5B non child market is a very poor metric.

The trick for Apple as always been the same.

Keep the products premium, while still having enough volume to keep the developers supporting your platform.

That has been the same from the original Mac days to the iPhone 5S. Nothing has changed.

Apple is walking that fine line perfectly. Thus $14.50/share/quarter in profits.

Winter

@Baron95
"Just look at Cars and Phones."

There are no network effects in Porsche versus Ford. Car use has been standardized. History has taught us that there are very strong network effects in computer platforms. That holds for HW producers, developers, and users.

You unwillingness to even admit these network effects might have more to do with your financial interests than your technological insight.

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