8 December 2009
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 ‘phones vs platforms, and on the shape of product portfolios, which I will post on later this week.
1 Comment | 
Apple, Nokia | Tagged: Apple, Harrods, Nokia, retail | 
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Posted by Michael A M Davies
4 September 2009
It seems that Sony Ericsson’s adoption of the make.believe tag line has prompted at least some commentators to call again for it to release a PSP Phone:
But Sony Ericsson’s only real hope for the long-term may be a PSP-branded phone that leverages Sony’s traction in the video game space. While the market for gaming-centric phones is questionable — see Nokia’s history with the Ngage — such a device could prove popular with a young, data-hungry mobile set. And it would be a better investment than a branding facelift.
There’s clearly potential, as one of my colleagues, Brad Hagedorn noted a couple of months ago:
The potential for a PSP phone is clear when we compare the iPhone & iPod Touch’s growth with early sales of the PSP
Global growth of the iPhone, iPod Touch and PSP
Calling the iPod Touch a comparable, if less gaming centric, match to the PSP we see that their early growth is quite similar. What is interesting though, is the gap between iPod Touch and iPhone + iPod Touch sales, which represents sales of iPhones. Since the iPhone is essentially a Touch with phone capabilities, this gap is the oppotunity that Sony may be missing out by having a PSP, without having a PSP phone.
Leave a Comment » | PSP, Sony, Sony Ericsson, gaming, smartphones | Tagged: GigaOM, iPhone, make.believe, Ngage, Nokia, PSP, Sony Ericsson | Permalink
Posted by Michael A M Davies
4 September 2009
One of my pet peeves is when people who should know better mis-spell Vodafone and Vodaphone. Shortening it to Voda is OK, but makes me think of the Star Wars Jedi Knight – and then the Weird Al song. Anyway, one of the things that makes competition in high-tech so interesting and challenging is that it is often not just ‘horizontal’.
Let me illustrate this with an example from DigiTimes this morning:
MediaTek and Vodafone have jointly announced that Vodafone has selected MediaTek chipsets for two new devices. The strategic partnership with MediaTek provides Vodafone with the opportunity to offer the Vodafone 340 camera phone at a very affordable price as well as its first entry level, low-cost touch screen device for prepaid customers – the Vodafone 541, Vodafone said.
Vodafone 541
This is one of eight Vodafone branded ‘phones launched today.
‘Horizontal’ competition is two similar businesses competing with one another for market share:
- Vodafone competing with FT-Orange in the UK
- Verizon competing with AT&T in the US
‘Vertical’ competition is when businesses compete for value capture, their share of the pie, rather than for market share amongst customers. Here Vodafone is partnering with MediaTek for chipsets, but effectively competing with other mobile phone vendors, such as Nokia, for some of the value created.
Competition can in fact be ‘diagonal’ or asymmetric, when it is amongst businesses that have fundamentally different scope of activities, or business models. Think Google giving away stuff free to generate ad revenue, competing with Microsoft’s packaged applications business.
Much of the competition in the mobile and broadband sector now takes this form; watch this space for more commentary…
Leave a Comment » | AT&T, FT Orange, Google, Nokia, Verizon, Vodafone | Tagged: AT&T, DigiTimes, FT Orange, Google, MediaTek, Microsoft, Nokia, Verizon, Vodafone, Weird Al Yankovic | Permalink
Posted by Michael A M Davies
10 July 2009
There’s been a lot of criticism of both Nokia, for the seemingly slow pace at which it is adapting to the new competitive challenge posed by the iPhone and by Android, and specifically of the N97, its new flagship product.
when legacy (sorry, mature) software runs into a crappy half-assed UI, it’s a steaming pile of suck on a slab of garbage toast.
Little noticed, however, is one aspect of the user experience that works incredibly well, and may presage something really important: the widgets.
Nokia N97 Facebook home screen
For Facebook, having an active widget on the home screen changes the user experience in some ways that are incredibly important for many (younger) users.
So, as many managers at Nokia would acknowledge, it’s not there yet, but let’s play this forward a couple of years, through the N98 and N99… (OK, I’m just making these products up, but think of them as the Nokia N97 2nd Generation and Nokia N97 3rd Generation)
The Facebook widget, for example, shows the number of messages in your inbox, recent pokes, friend requests, and the last 3 status updates your friends have posted
As the next generation of users have fundamentally different behaviour on the web, and expectations of an always on, active screen, will the next but one generation Nokia N Series actually be their killer phone?
2 Comments | Nokia, UX, apps, smartphones | Tagged: Facebook, N97, Nokia, UX, widget | Permalink
Posted by Michael A M Davies
2 July 2009
Two items this morning caught my attention, both reflecting on the potential of smartphones as ‘controllers:
- NetworkWorld has a piece of commentary on why the iPhone can’t be killed
- there are now pictures available of the new controller from Sonos
Carolina Milani of Gartner manages to both get it completely right, and completely wrong in NetworkWorld. First, what she got right:
Gartner analyst Carolina Milanesi says that the iPhone’s continued success in the smartphone market has as much to do with its relationship to other Apple devices and software as it does with its own capabilities.
“From technological perspective, there are devices out there that might have higher specs than iPhone,” she says. “But there’s nothing on the market today that pulls everything together to give the superior user experience that you get with the iPhone.” (our emphasis added)
Then I believe that she gets it completely wrong when it comes to the potential appeal of smartphones as a gaming platform:
“I think a lot of gamers would rather go for a full PlayStation [Portable] than a phone-based as a video game system,” she says. “At the end of day you have enough phones that do voice and they are small enough for you to carry a second device that does only video games. I’m not sure that a video game phone would bring much to Sony, to be honest.“
Completely missing the point. If your phone is a smartphone, with a responsive and powerful user interface, and motion sensing and haptics, then it’s an insanely great gaming controller. Two games on the iPhone illustrate this incredibly well:
X-Plane exploits the graphics capability and the motion sensors as a controller. Flight Control exploits the touch screen and the peer-to-peer networking. Both of them rock, and illustrate just how good a smartphone can be as a games controller.
In fact I was thinking of a post called the ‘Flight Control’ test; for other smartphones, can you imagine playing the game on them. In particular, it’s where the Nokia N97 currently falls short (I’ll update after the update); there’s just no way that it’d work for Flight Control.
On the other hand, the growing importance of interfaces like Facebook may mean that it’s home screen is a better answer than either iPhone or WebOS.
I’m even dubious about the Pre; sometimes it just lags in its responses to touch input, and that’d cause a major (virtual) mid-air collision.
We are already seeing a lot of investment in games for smartphones, and the iPhone in particular. If games developers like id Software are in love with it, as John Carmack said in an interview with VentureBeat:
Carmack’s endorsement means Apple has one of the leading game developers in the whole industry on its side.
“I love the iPhone,” Carmack said in an interview. “It’s a real game platform, not a tiny little toy.”
It would make a lot of sense for Sony [Ericsson?] to launch a great gaming smartphone that leverages the PSP franchise, and unsurprisingly there are recent rumours to this effect again.
The Sonos news is interesting; as any of you with both an iPhone and a Sonos music system will already know, the Sonos app for the iPhone is in many ways a better controller than the dedicated controller. In response, they’re launching a new touchscreen controller:
Sonos CR200 controller
This is important, because it represents another big application area for smartphones: home control.
Apple has its great Remote application which now has gesture control, and now almost all of the major home automation companies already have apps for the iPhone: AMX and Crestron, for example.
What’s more, the value and competitive importance means that other platform players are also targeting this; even Nokia through its home control technology and There venture.
Perhaps one of the interesting ways to think about smartphones that deliver great user experience is as ‘life controllers’.
Leave a Comment » | Apple, apps, ecosystem, gaming, home control, iPhone, smart home hub, smartphones | Tagged: Apple, iPhone, Pre, WebOS, Sony Ericsson, smartphones, apps, Nokia, NetworkWorld, Sonos, Gartner, UX, PSP, Sony, Flight Control, touchscreen, motion sensor, N97, Facebook, VentureBeat, AMX, Crestron, There, home control, gaming, video | Permalink
Posted by Michael A M Davies
1 July 2009
We’ve already noted that despite the excellence of WebOS, Palm needs strong support to become a credible platform player, competing with the likes of Apple, RIM, Android, Nokia/Symbian/Ovi and even (because it might do something radical) Microsoft with WinMo.
The point is now not lost on even the analyst community (Kaufman Sets Hold Rating; Many Possible Suitors), who’ve identified several options:
“…potential suitors include Nokia, Samsung, LG, Motorola, Hewlett-Packard, Cisco, Microsoft and Dell.”
Let’s leave aside the question of why buy now, when in December Palm was trading at less than one-tenth of its current value with a market cap below $200 million, the value of Palm is in WebOS and its US presence, not the Pre, so let’s take a look:
Nokia – already bought and paid for Trolltech, and has Maemo – not likely, unless its struggles in the US make Palm worthwhile for that alone
Samsung or LG – {neutral | non-aligned | independent} device players – very hardware-focused – do they want to transform their business model become a platform player with WebOS, competing against Android and Microsoft rather than collaborating with them, or trying to co-exist?
Motorola – too many of its own issues, also already stronger in US than elsewhere
HP or Dell – clearly want to build positions in smartphones from their personal computer position, could they re-focus WebOS development in the right direction?
Microsoft – not unless or until it admits (to itself, most of all) that WinMo’s not going to get it there…
Cisco – the wildcard, perhaps as the basis for entry into smartphones as they become a key element of the the interwebs
Leave a Comment » | Microsoft, Nokia, Palm, Pre, WebOS, WinMo, ecosystem, smartphones | Tagged: Apple, Cisco, Dell, HP, LG, Motorola, Nokia, Ovi, Palm, Pre, RIM, Samsung, Symbian, WebOS, WinMo | Permalink
Posted by Michael A M Davies
29 June 2009
There’s a lot of buzz about apps for smartphones. Not all apps are created equal, however, particularly when it comes to making money from them as a developer.
And that matters to platform players (Apple, RIM, Android, Nokia/Symbian/Ovi, MSFT/WinMo and Palm/WebOS) and device vendors (Apple, RIM, Nokia, Samsung, Sony Ericsson, LG, HTC and Motorola) because apps matter to consumers, and the choices that developers make will play a big part in which platforms win.
For the core apps like mail, messaging and browsing, their importance and economics means that platform players or device vendors have to deliver a great experience, they’ll be prepared to spend $/€ millions to do so, and they’ll give them away for free. That’ll make it difficult or impossible to compete against them. The world does not need another mobile browser company.
There’s a related category where other big businesses will also seek a presence on a platform, such as the iPhone, because of the payoff to their wider online or offline business, through for example increased brand awareness or reach. Think Amazon, Barnes & Noble or BA Flights (Yes, I’m a transatlantic bibliophile).
At the other end of the scale there will be a gazillion applets or widgets. It’ll be really hard to make money from these, because customers expect them to be free, and they’re often the fruit of individual developers scratching their own (sometimes idiosyncratic or even idiotic) itch. Maybe a little advertising money, but on a small screen, even a smartphone’s high resolution version, there’s a limited window for this. Perhaps if contextual information about who and where and what can be used, the value of a click-through can be raised, if privacy concerns can be addressed effectively.
In the middle, there seem to be two possibilities:
- focused apps targeting a well-defined and stable job that people want to get done, and whose utility and usability is high enough that people will pay a few $/€ for them, but which are not so universal that they get bundled into the core and given away for free
- infotainment apps, that can be renewed and replaced, fueling our insatiable appetite for amusement, such as games
There’s some really interesting analysis by ChubbyBrain (The iPhone Inspired 2nd Economy: Over $100 Million Goes from VCs to iPhone Startups) which estimates that $100 million in venture funding has already gone to iPhone apps insurgents in the middle of the spectrum. These are business for whom the apps are the core of their business rather than a complement to it, between established businesses that can fund iPhone app development themselves, and individual developers.
The three biggest categories, both by numbers of companies, and by amount invested:
- gaming and entertainment
- information provider
- social networking
Yup, it’s all about amusing ourselves.
Interestingly, this is also why the economics of video are so different from the economics of music.
1 Comment | UX, VC, apps, ecosystem, iPhone | Tagged: Apple, apps, ChubbyBrain, developers, device vendors, ecosystem, HTC, infotainment, iPhone, LG, Microsoft, Motorola, Nokia, Ovi, Palm, platform players, RIM, Samsung, smartphones, Sony Ericsson, Symbian, VC, WebOS, WinMo | Permalink
Posted by Michael A M Davies
Michael A M Davies
Brad W Hagedorn
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Amy Bullard Davies
