It seems that Samsung has recognized the importance of the smartphone market – Samsung aims to treble smartphone sales in 2010 | Reuters – and now has ambitions to treble its shipments. While a target of 18 million smartphones sounds impressive, that doesn’t make it a leader:
With Nokia’s shipments comprising about 40% of the smartphone market, it’s on track to be about 220 to 250 million units, depending on how fast it grows; that implies 7-8% market share for Samsung, split across the Android and WinMo platforms.
One of the key themes we’re focused on at the moment is the multilateral asymmetric contest amongst major platform players (Apple, Google, Microsoft and Nokia in particular), device vendors (Apple, RIM, Nokia, Samsung, Sony Ericsson, LG, Motorola, HTC in particular), service providers (Google, Apple, Amazon in particular) and network operators (Verizon, Vodafone, FT Orange and so on). There’s some interesting data from Silicon Insider illustrating the size of the stakes…
The cash resources of some of the major players
While the numbers are interesting, I have to confess I hate the graphic…
It looks like an area chart, but it’s actually a line chart. Tufte’s head would explode…
And I’d love to see the analysis extended to include Nokia, RIM, Samsung and so on. And in this context, who cares about Intel, other than ARM and Qualcomm?
The Register reports the sad but unsurprising news that Nokia’s flagship store on Regent Street is going to close.
Nokia Store Regent St UK (from silicon.com)
It was actually the most recently opened store: there are others at London Heathrow and in places like Helsinki, New York, Chicago and São Paulo. You can check it (and the other stores) out online: http://www.flagship.nokia.com/
For those of you who don’t know the locale, it is directly opposite Apple’s UK flagship store.
Apple Store, Regent St UK (from the London Evening Standard)
I recently suggested to a client that they visit the two stores, for a sharp contrast in economics, illustrating what we call “asymmetric competition“:
the Nokia store sells ‘phones – lots of different models
the Apple store sells ‘phones – a couple of different models
the Apple store also sells services, such as mobileMe at ~$100 a year
the Apple store sells music and video and applications, through iTunes (as cards, in the store)
the Apple store sells computers
As a result, at the moment Apple has fundamentally different economics from Nokia. Apple makes money in a variety of related ways, from mobile devices, and from personal computers (each of which generates several times the margin of even an iPhone), and from complementary cloud services and digital media and other devices.
Perhaps unsurprisingly, this Apple Store is London’s most profitable store, generating ~£60 million a year or £2,000/sq ft, three times the sales per square foot of Harrods.
Harrods
Each iPhone drives significant additional revenue and contribution beyond the device itself; as a result, Apple’s economics are fundamentally different from Nokia’s, or indeed from any other player without the same scope of activities.
There’s a related discussion about ‘phonesvsplatforms, and on the shape of product portfolios, which I will post on later this week.
There’s a great (albeit lengthy) post on Gizmodo about Android, although the title may be a little overstated:
[Android] 2.0 is more than that: it’s proof that Android is finally going to take over the world
As a digression, it’s fascinating to see how a technological innovation can re-shape language: the former meaning of android is now relegated off the first page of search results on Google, which led me to try ‘androids‘ as an alternative:
The article from Scientific American about this date with a robot can be downloaded here; I find it intriguing partly because I began my career as a roboticist and cyberneticist.
Although it may overstate the case, because we are just in the earliest stages of a fierce contest amongst at least five credible competing app phone platforms, the post from Gizmodo does summarize well much of what provides the impetus for Android and why Android 2.0 is so important:
it’s “the first truly open and comprehensive platform for mobile devices.“
Android 2.0 means the handsets aren’t just interesting anymore; they’re truly buyable
In addition to everything else Android has going on, timing is on its side. Windows Mobile is limping along with two broken legs…
…as far as most consumers are concerned, anything Windows Mobile can do, Android can do better
The Palm Pre, polished and beautiful as it is, can’t keep up with Android’s exploding app inventory, multiplying hardware partners and rock-star ability to draw talent
Android 2.0, along with Palm’s WebOS and Apple’s iPhone OS, are the main reasons the BlackBerry OS feels so clunky and old
Let’s take a quick look at each of the other major contenders:
the iPhone is the current leader, and critically works well across not just app phones, but through iTunes across other platforms such as personal computers and TV
although RIM’s BlackBerry has been the long-time leader in the enterprise, it is not doing as well in the consumer marketplace, particularly outside North America, and its software platform (RTE, APIs and SDK) looks increasingly clunky in comparison to iPhone and Android
Nokia is investing heavily in the transition to Qt and Maemo – the big question is really can it get there fast enough
Microsoft’s most recent release of 6.5 was late and lacked usability, and despite some good things being said about it 7 is still some way off, eroding support for it
while WebOS is technically elegant, the Pre’s implementation is slow, Palm lacks distribution and was really late with its SDK – it will be extraordinarily difficult for Palm to overcome these handicaps and establish itself as a credible competitor in the face of the likes of Apple, Google, Nokia, Microsoft and RIM
Android’s a strong contender, but it’s by no means yet certain that it will rule the world. In fact, one of the real possibilities is that rather than reaching a tipping point, a few of these will co-exist over the medium- or even long-term.
David Pogue has a review today of Motorola’s Droid which includes some discussion à propos how to categorize and name devices of this type.
Motorola Droid
He promotes the noun ‘app phone‘ for them, attributing it to @mentalworkout.
[Cool app, BTW, for those who have fear of flying. I took the Virgin Atlantic flight to London earlier this week; if you're lucky enough to fly in Upper Class, it's such an extraordinarily soothing experience that you probably don't need the app.]
I really like ‘app phone‘ , and suggest that we all adopt it for this class of devices:
Nokia’s N97 and N97 Mini running the latest version of Symbian
This post re-surfaced for me, however, one of the key topics that we have found ourselves debating frequently over the last many months; what is a ’smart phone’, and what should we call it?
This is a common challenge in high-tech; how do you think about new phenomena? How do you build robust mental models? We believe that having the specialist expertise to do this, and the relevant experience of having done this, is one of the key things that differentiates Endeavour Partners.
First, what are the key criteria:
downloadable applications – in which case do BREW and Java devices qualify?
user interface, such as (responsive) touch screen or QWERTY+touch pad/trackball interface to allow easy navigation for the web and similar applications
running multiple applications – which disqualifies the iPhone?
great at browsing – typically with a full WebKit browser
third party applications have to be available, affordable and accessible
what about size – is there some constraint here, because otherwise a laptop could qualify?
And what about the additional capabilities that are now part of the competitive benchmark:
fast graphics – for video, browsing and gaming
accelerometers
GPS – for location services
WiFi
There are several specific devices or types of devices that illustrate this challenge, and the grey areas involved:
older BlackBerrys with thumbwheels but without trackballs – great at e-mail web but suck at browsing
the Nokia E71, a great (particularly when it launched) device handicapped by its click-pad for navigation (which on one occasion proved enormously frustrating as the cursor moved in clicks that circumnavigated a small target without ever being able to actually click on it, on a site that should have been designed with mobile devices in mind – Handango)
Nokia E71
many of Nokia’s myriad Symbian S60 devices that have 12-key keypads, lacking either a touch screen or a viable navigation method for browsing
and what of the forthcoming Nokia N900 – is this a smartphone, or not?
and given how unresponsive the touch screen on the N97 and N97 mini can be, and some of the usability challenges that remain with Symbian, do the N97 and N97 Mini qualify?
almost all Windows Mobile devices, that lack a touch pad, requiring a stylus or arrow keys for what is enormously painful navigation (Sony Ericsson’s Experia X1 is one of the few devices that overcomes this challenge)
On purely pragmatic grounds, and notwithstanding flame wars from some purists and Verizon’s new advertising campaign, clearly any definition that excludes the iPhone on the technically focused grounds that it does not run multiple applications at once, except for some built-in apps such as Mail and Phone, does not make much sense. Although this may be an important consideration, it clearly does not deter users, and the ease of switching amongst applications mitigates this significantly.
The related question was what to call these things? We tried the term ‘smart device‘, to emphasize the that the capabilities went way beyond making a call. Unfortunately that promotes confusion as it embraces some very devices that do not have ‘phone capability at all.
So, let’s endorse the term ‘app phone‘ for these high end devices, and use the term ’smart phone’ for the broader group of which these are a subset.
At 4G World here in Chicago, the debate is raging on about the potential value of femtocells. One audience member asked yesterday, “If I already have a 20 Mbps broadband connection and a WiFi access point, then why do I need a femtocell?” I think he was on to something, but it is interesting to go back in time a little and see how the relative business cases for WiFi and femtocells have changed as the market evolved.
This feels like a confession: Three years ago, I was a proponent of femtocells as a solution for indoor coverage, particularly when compared to WiFi UMA. Too few devices had WiFi, and it seemed unrealistic to expect many users to adopt a solution that required such a constrained selection. Different family members or different personnel within an organization may have very different device preferences or be at different points within the replacement cycle.
By contrast, femtocells allow installation of customer premise equipment where it is needed, and the problem is solved. Individual users don’t need to change their behavior, and if the costs were right, then it could be an attractive solution for many households and businesses. But the costs were too high (I priced one at $300 at the time) and commercial availability was and still is limited.
Fast-forward three years and the market has changed dramatically:
Lead by the iPhone and RIM’s Blackberry, smartphones are rapidly gaining share – in developed markets, the majority of users will have one within two device replacement cycles
Leading smartphones will nearly all be WiFi-enabled
The result is that homeowners and businesses no longer need to pay to install a femto cell, and users no longer need to be constrained to specialized, suboptimal devices. For most people, WiFi coverage already exists in their home and office, and these same people are likely to carry a WiFi-enabled smartphone now or within two upgrade cycles.
These smartphones are also responsible for driving a massive increase in data traffic and clogging up 3G networks. WiFi provides a mechanism for operators to offload 30% or more of this traffic without massive upgrades — and in advance of LTE networks coming over the next 3 years.
Device makers are scrambling to offer smartphones that match Apple’s iPhone as the key competitive benchmark (including WiFi). Mobile operators are responding to increasing smartphone usage with investments in WiFi assets and improvement of seamless switching between WiFi and wide-area cellular to offload some of the associated explosion of data traffic. The way the iPhone restricts high-bandwidth applications so they can only be used over WiFi is a good example of a first step in this direction.
Meanwhile, the level of investment in femtocells is small by comparison, involves a tough value proposition to customers, and is focused on solving a problem that is largely taking care of itself.
Have you bought and used the new Nano? I think you will quickly realize that it isn’t that easy to use.
Secondly, to say that two hands will result in a stable camera and better shot. Of course, a Cannon HD camera would result in an awesome shot.
I think comparison is Flip – which you can use with one hand. Secondly, i think the video camera on iPhone 3GS is pretty awesome. and works nicely with one hand usage.
For the avoidance of all possible doubt:
the new iPod Nano isn’t that easy to use
the right comparison is the Flip
Nevertheless, when evaluating the prospects for a new device, such as the Flip, which has not yet reached the mass market, you need to think about both the function and what else a potential customer (a) wants to do and (b) owns; you have to consider the choice in context.
As I said in my original comment, there’s only very limited scenarios under which the Flip gets bought:
Scenario 1: I want a small, easy to use, video capture device – the Flip wins (- and I don’t own a Nano and I’m not concerned about music (added))
Scenario 2: I want a small, easy to use, elegant music player – the Nano wins
Scenario 3: I want both a small, easy to use, video capture device and a small, easy to use music player – the Nano wins
Scenario 2A: I have a 5G Nano, and I want to capture video – does the usability challenge of camera placement justify the incremental expenditure on a Flip – $150 or $200? – no
Second:
if you are a casual video taker then the iPhone or new Blackberry’s do a pretty awesome job. I use the Blackberry Tour and it rocks. It is perfect for casual video. I think Flip is a step up because it creates better videos and has better sound capture.
I agree that it’s a ’step up’, but enough to justify another $150 or $200? I think not. Look, I’m a gadget freak, and even I can’t imagine running that one past my wife…
GigaOM posted this morning a suggestion that the Flip Wins For Now over the Nano:
Since I don’t own a Flip, I thought well maybe this might be a good option. I tried out the device and within a few minutes I realized that this is not for me. Why? The camera is positioned in a really awkward position which makes usage very unintuitive. I guess someone wasn’t quite thinking. Any how does it stack up against Flip? Chris and Liz did a side-by-side comparisonof the new iPod Nano with Flip SD and are underwhelmed by the new Nano
We said earlier ‘Flip the Flip‘ and we still think so. Why? Because in making this evaluation you need to consider two key things:
what’s the job that the product is being hired for, what’s its function or functions
what else does the potential customer already own
There’s only very limited scenarios under which the Flip is the best choice:
only want video capture, not music playing
do not own a 5G Nano
If a customer is evaluating a Nano against a Flip, then it’s only if the only criterion is video capture that the Flip wins. For many customers, the Nano’s music playing function will tip the balance in its favor.
And if a customer already owns a 5G Nano, then it’s going to be really hard to justify $150 or $200 to overcome the problems of poor camera placement. There’s just not enough value going to be available to sustain the Flip…
Our analysis suggests that total App Store ecosystem revenues will be between $700 million and $1 billion for 2009. This estimate breaks down as follows (** see note for more details):
2.7 billion downloads * ~15% of downloads are paid apps * $1.75-$2.50 per paid app = $700 million – $1 billion
But, as Digital Clockworks points out, in all the debate about numbers and methodology some of the most interesting and important elements of the story are being missed. First, this is a big, rapidly growing market. The key difference between our estimate and some of the lower numbers we’ve seen is that we’ve accounted for continued growth over the second half of 2009. The second half of the year will generate 50% more revenues than the first half. Also, we see this growth continuing. Over the next 12-18 months the iTunes App Store will become a multibillion dollar annual business.
More importantly, however, the iPhone and the App Store have revealed a new paradigm for how mobile users will interact with their devices and use the Internet. The App Store represents one more example of how “over the top” approaches over IP networks are beating out purpose-built, vertically-integrated network businesses.
Most of us wouldn’t dream of paying for a customized Internet experience on a tailor-made device from our broadband service provider (*** see note). But that is the way we used to buy telephone service, and it continues to be the way we do things for mobile and video services. Over time, all of these businesses will follow a similar pattern, breaking down into their component parts so that the best adapted players win in each piece of the business. The only questions are: “Who are the best adapted?” and “How long will it take?”
The App Store represents a major 'over the top' incursion in mobile data. How long will it take for 'over the top' models to eat into the mobile voice market and the video market?
__________________________________
Notes:
** Total downloads for 2009 come from Endeavour Partners’ analysis and forecast of App Store downloads, tracking Apple announcements; ratio of paid vs. free apps comes from Pinch Media but is consistent across multiple sources; average price per paid download has been reported as low as $1.67 and as high as $2.87, so we used a range
*** We actually used to buy Internet services this way as well: AOL, Prodigy, NetZero, and PeoplePC (which included a PC in the bargain!); there is a segment of users who appear to be heading back in this direction (see the success of Comcast.net or the recent push for connected netbooks with service from AT&T or Verizon)
Mobile Entertainment has spotted a fascinating development: the Apple’s App Store now apparently has a ‘top grossing’ ranking.
Why is this so important? One of the things that we think is critical is a ruthless, relentless focus on the data; what do the facts tell us? One of the most common metrics used is market share, but here’s the very first question you should ask yourself:
volume (units)?
or value (revenue)?
In mobile phones, for example, these can mean very different things: Apple has ranked as high as #3 by value (and #1 or #2 by profit), despite having only a small share by volume. Whenever you see market share data, ask yourself if it’s market share of volume, or market share of value.
In mobile applications, where many are free, it’s not enough to just know ‘Top Free’ or ‘Top Paid’, you really need to know revenues to understand the economics well.
Moreover, if rankings on this chart at least, correspond to market share of value, rather than market share of volume for paid apps, it enables developers to re-price to maximize revenues. Compare, for example, Top Paid versus Top Grossing for today; Madden NFL is #2 on Top Paid at $7.99, but #1 on Top Grossing, as AppBox Pro only costs $0.99. Moreover, TomTom at ~$100 was always going to find it hard going to make it into the Top Paid (it’s not there now, at least down to #50), is #5 amongst Top Grossing.
Top Paid
Top Grossing
This may help stall the rush to the bottom which has been the cause of so much unhappiness amongst developers.
Posted by Michael A M Davies 
Michael A M Davies
Brad W Hagedorn
Moe Kelley
Amy Bullard Davies
