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How's Our Four-Year-Old Mobile Forecast Doing?

Several years ago Dan Miller and I built a mobile advertising forecast that factored in display, search and pay per call. We haven't updated it in part because we've been extremely busy but also because the market is so dynamic. Beyond this there are scores of mobile ad forecasts out there, so it just seemed like adding more noise to the cocophany.

Here's what we projected in 2008:

There's a new mobile ad-revenue forecast out today from eMarketer, which upwardly revises to $2.6 billion (2012) the company's previous forecast. It's very close to our number above. EMarketer's number is somewhat larger -- but not by much. 

While the eMarketer forecast isn't an "average" of third party data, it reviews and takes into account the other data in the market:

Generally speaking, most forecasts are either too conservative ("contrarian") or overly "optimistic," often in an effort to grab attention and coverage for the firms generating them. 

If (or when) we re-do our mobile ad forecast above -- since this year is( the final year of the projection -- our methodology will likely change somewhat, because the market has changed so much in the past four years. Frankly, I'm surprised and pleased that our forecast has so closely tracked the actual growth of mobile ad revenues. 

Nokia Sells a Million Windows Phones, AT&T's 7.6 Million iPhones and Fake Android Tablet Numbers

This morning both AT&T and Nokia reported quarterly earnings. AT&T sold 9.4 million smartphones, including 7.6 million iPhones last quarter, but generally missed expectations and posted a loss (partly because of the blocked T-Mobile deal). The company ended the year with 103.2 million mobile subscribers in the US. Verizon earlier this week said that it had 108.7 million subscribers.

Nokia beat the market's low expectations despite announcing a $1.4 billion (€1.07 billion) loss. More importantly the company announced that it had sold more than 1 million Lumia Windows Phones during the quarter in Europe. That was consistent with analysts' projections and has boosted Nokia despite the accelerating decline of its Symbian platform.

Yet data from forecaster Kantar, discussed by Reuters yesterday, reflected that sales of Lumia handsets in all nine markets where the phones are available were "less than 2 percent." Accordingly there's a long climb up the mountain for Nokia to reclaim its former position as a market leader on the back of Microsoft's OS:

Kantar said Microsoft's Windows Phone share in all of the nine key markets it measures remained at less than 2 percent despite the high-profile launch of the Lumia range from Nokia.

Nokia's flagship Lumia 800 model failed to break into top 10 smartphones sold in Britain by the end of the fourth quarter, the researcher said.

Nokia said in November the model was off to an excellent start in Britain, and had seen the best ever first week of Nokia smartphone sales in the UK in recent history.

Microsoft and Nokia have an arrangement where licensing and royalty payments change hands. But basically Microsoft is paying Nokia billions over a period of years to use the Windows Phone OS.

Finally, in the battle over marketshare numbers, Strategy Analytics put out an attention-getting release this morning arguing, "Android Captures Record 39 Percent Share of Global Tablet Shipments in Q4 2011." This conveys the impression that Android tablets have captured substantial marketshare, which is inaccurate. 

The chart below suggests that Android tablets sold 10.4 million units -- in part because Apple actually sold 15.4 million iPads.  

Kindle Fire, a quasi-Android tablet (quasi because it marginalizes Google and the Android Market), sold perhaps 4 to 4.5 million units. If correct that would constitute nearly half the "shipments" in the chart above. Beyond this Nook, another low-end Android tablet, may have sold quite well in Q4 also. These are the bestselling Android tablets. All others have had negligible sales.

Previously the HP TouchPad was the bestselling non-Apple tablet because it was reduced to $99 by HP to move units. 

Let's end talk of "shipments" as a market share metric. Devices "shipped" does not mean devices purchased by consumers. Nor do "shipments" stand as a proxy for purchases, although they do typically in the unique case of Apple devices.

The "shipments vs. sales gap" was most starkly revealed last year specifically in the case of Android tablets (and RIM Playbooks). Millions of units "shipped" but almost none actually "sold" to consumers. Instead they sat on shelves. Effectively then "shipments" is a discredited and invalid metric to measure market share. 

Statistically valid consumer survey data would be more reliable as a measure of market penetration.

Apple's Really Really Big Quarter (by the Numbers)

Apparently Kindle Fire didn't take much wind out of iPad's sales. Apple's holiday quarter solidly beat the most aggressive analysts' estimates. Here are the big numbers:

• Revenue: $46.3 billion (cash on hand is now $97 billion) -- kaching!
• Mac sales: 5.2 million
• iPhones: 37 million (vs. about 30 million expected) -- 2X YoY
• iPads: 15.4 million (well over a million more than expected) 
• iPods:  15.4 million (iPod Touch was more than 50% of sales)
• Apple retail stores: $6.1 billion (22K visitors per store per week)
• Gross margin: 44.7%
• Quarterly profit: $13.06 billion (yowza!)

Across the board unit sales were higher than expected. In short a pretty remarkable quarter. US and Japan were identified as Apple's strongest iPhone markets, although the 4S just launched in China. Demand there is "off the charts." 

Tim Cook characterized the iPhone 4S audience reception as "breathtaking." The iPhone 4S was the "most popular" iPhone (vs. the cheaper models) according to Apple.

Apple said that there are now 315 million iOS devices in market, with 62 million sold in the last quarter alone. 

Kindle Fire: A Template That Will Burn Google?

I've now had my Kindle Fire for about a month. It's the most successful Android tablet on the market (probably to the tune of about 4 million in sales) but much less of an Android tablet than others. As most people know, Amazon operates its own Appstore and users don't have access (w/o an awkward hack) to the Android Market proper.

My grade for device is "B." It's awkward as a web-browsing device. It's really awkward for email; the keyboard is sloppy and there aren't the customary Android alternatives (Swype, FlexT9, Swiftkey). It's good for reading eBooks and watching movies. In general, apps are what redeem its shortcomings as a web-browsing device.

The problem, however, is that not all Android apps are available. Surprise of surprises: Netflix, which competes with Amazon's own video service, is available. But the main New York Times app is not -- presumably because Amazon is selling subscriptions to the Times. I would expect that more Android apps will eventually become available, however.

The following chart was produced by SAI from survey data collected by RBC Capital Markets. It reflects that most people use Kindle Fire as they used the original Kindle: for reading eBooks. 

Kindle Fire is an aggressive example of something that was always hypothetically always envisioned for Android: extreme customization by device makers and carriers. To that end, BusinessWeek has an article this morning about Kindle Fire and Chinese versions of Android on mobile handsets, which leave out many of the otherwise pre-installed Google apps:

Amazon.com Inc. and Chinese Internet giants Baidu Inc. and Tencent Holdings Ltd. are using Android as a building block for their devices, skipping preloaded applications such as Gmail, Google Maps and YouTube that generate ad revenue for Google, as well as its app store. Amazon’s Kindle Fire tablet, which is gaining ground on Apple Inc.’s iPad, comes with none of those apps.

The article makes the case that if more OEMs follow suit Google will lose revenue, citing a recent Cowen & Company report which estimates that Google makes roughly $7 per Android device sold. However that's not entirely true.

Most of Google's mobile ad revenue is from search -- although mobile display is growing -- and most of Google's query volume is via the browser. It's really only if there's a different "default" search engine on devices that Google will truly suffer. Accordingly, browser-based search is where Google is most vulnerable. However, third party apps that feature ads from Google/AdMob will also continue to money for the company regardless of whether Google-branded apps are on the phone.

Nonetheless, it's a provocative article and interesting to contemplate how many more hardware companies may emulate Amazon. For example, RIM or Nokia could take Android and build UIs that are very customized on top of the software. That's probably something RIM should start doing -- immediately. It would be potentially unique and provide access to the trove of apps that Android Market offers. RIM could even build its own Android appstore like Amazon. Without apps BlackBerry will fail. 

Google, for its part, doesn't want to lose control of the Android ecosystem. It has responded to Kindle Fire's challenge by promising an aggressively priced, "highest quality" 7-inch tablet later this year.

Of Devices and Men: Apple Earnings, Nokisoft Sales & RIM's Complacency

Apple reports quarterly earnings today after the US market's close. Speculation about device sales and revenues is feverish. I'm less interested in whether Apple beats expectations than I am in getting a concrete sense of how many iPhones and iPads are in the market. Since earnings are a cat and mouse game in which the financial analysts try to predict sales and revenues and the company tries to surprise it's hard to say what will happen. 

Revenues are expected to exceed $40 billion; consensus estimates are about $39 billion. Roughly 30 million iPhones have been sold according to the various estimates. One question mark is iPads. Were sales hurt by the cheaper Kindle Fire? The expectation is somewhere between 13 and 14+ million were sold last quarter. We'll know later today.

Meanwhile over in Windows Phone-land, early sales estimates for the Nokia Lumia line in Europe appear to be promising, with analysts estimating that the company sold more than 1 million phones since launch. Bloomberg averaged the numbers and determined the consensus is that 1.3 million units "shipped": 

The Lumia handsets, which went on sale in Europe in November, probably sold 1.3 million units globally to operators and retailers by the end of last year, according to the average estimate of 22 analysts compiled by Bloomberg. The projections range from 800,000 to 2 million and only one analyst predicted sales of fewer than 1 million handsets. 

Separately, another source shows that Nokia handsets already dominate Windows Phones that have actually been sold to consumers (vs. shipped). According to data compiled by WMPowerUser, Nokia-made Windows Phones now constitute nearly 50% of the active market. 

Finally, as I had predicted early this month, RIM's co-CEOs were ousted or sacrificed to appease investors, who have punished the stock over the past year because of the company's performance and perceived complacency in the face of rapidly declining share. Remarkably, RIM's new CEO Thorsten Heins, a company insider, said that no new strategy is required to right the ship:

Mr. Heins has worked at RIM since 2007, most recently as the senior of two chief operating officers. On a conference call Monday, he immediately emphasized that he will mostly follow the path set by his predecessors, co-Chairmen and co-Chief Executives Jim Balsillie and Mike Lazaridis.

He told analysts not to expect "seismic changes" and ruled out splitting up the company. Mr. Heins (pronounced like Heinz ketchup) said he was focused on getting out the company's newest line of phones, to be run off its latest operating system, BlackBerry 10.

RIM and Nokia may turn out to be case studies with opposite outcomes. Nokia, having taken radical action, may turn around and regain momentum (though it's not clear yet). RIM, if Heins merely stays on course, may crash and burn.

RIM's OS and devices aren't competitive with the iPhone and Android at this point. It can no longer rely on the enterprise market and its product line is confused. Developers are also not writing for RIM. It thus needs to embrace the Android ecosystem in one form or another -- probably sooner rather than later.

Indeed, the company doesn't have that much longer to take some dramatic action. But by picking a loyal and apparently complacent insider in Heins RIM may have all but precluded that from happening.

Tablet Ownership Doubles, Now Critical Channel for Retailers

Retailers: if you haven't yet got a tablet app or optimized site, you're behind the curve. Earlier today the Pew Internet Project released data showing that between early December and January the population of US tablet users effectively doubled, from 10% to 19%. This is of course due to holiday gift giving.

If one were to extrapolate these figures out to the entire US population it would mean (by my quick calculation) roughly 45 million people now have tablets (distinct from eReaders). And by some measures Tablet users are more valuable than smartphone and even PC users. 

According to data released last week by Adobe, based on an analysis of 16 billion visits to top retailer websites, tablet owners spent more money and were more inclined to buy than smartphone owners and PC users:

• Tablet Visitors spent over 50% more per purchase and were nearly three times more likely to purchase than Smartphone Visitors
• Tablet Visitors spent over 20% more per purchase and were nearly as likely to make a purchase as Traditional Visitors

Tablet owners had slightly lower conversion rates, however, than PC users. And there is much less traffic coming from tablets vs. PCs. However there does appear to be some "cannibalization" going on.

Here are the top-level findings from Adobe's study (AOV is "average order value"):

There's plenty of other evidence that support's Adobe's finding that tablets are an important new commerce platform: 

• Call It 'T-Commerce': Almost 50% of iPad Users Have Made Purchases in Past Month
• It's a Four-Screen World Baby

Several recent studies have shown that retailers in particular are lagging in their adoption of optimized mobile sites and apps. The Pew data and Adobe findings should be a wake up call to retailers that they have to address tablets as a distinct channel. 

Windows Phone's Polarizing Predictions: Either Beats iOS or Total Failure

Yesterday when Microsoft released quarterly earnings the company said nothing specific about Windows Phone sales. It touted its relationship with Nokia but didn't disclose any figures or evidence suggesting "momentum." Nonetheless three hardware analyst firms, Gartner, IDC and most recently iSuppli predict that by 2015 Windows Phones will have greater share than iOS.

Here are the iSuppli handset sales projections (RIM is presumably among the "others"):

According to the firm most of Windows Phone sales will be driven by Nokia:

Although Nokia is not the only seller of Windows Phone smartphones, the company is expected to dominate the market, accounting for 50 percent of all Microsoft OS-based handsets sold in 2012, IHS iSuppli predicts. The company's share then is set to rise to 62 percent in 2013. Nokia's portion of the market will begin to decline in 2014, as other companies increase their sales of Windows Phone products.

The cyan Nokia 900 was one of the big hits, at least aesthetically, of the recent CES in Las Vegas. It's a solid phone and one that Gartner et al anticipate will mark the return of Nokia to North America. Indeed, these Windows Phone beats iOS forecasts are largely based on the strength of Nokia's global footprint.  

Despite the near consensus that Nokisoft will power a comeback for the two companies there are skeptics. At the other extreme take Om Malik's thoughtful piece likening Nokia to Kodak, which just declared bankruptcy: 

Sure, Nokia has a brand, global presence and a sizable marketshare. So did Kodak. It took 132 years, the last 15 of those spent in constant belt tightening, for the photo film company to sink. Having missed the big wave, Nokia doesn’t have the luxury of time.

Malik anticipates near total failure for the Nokisoft effort. And there are others who agree. My view resides in the middle. I said in my "mobile predictions for 2012" that Windows Phones will see modest but not huge success in North America, greater success in Europe/Asia. 

I don't think that Windows Phones will take the market by storm in North America. I believe the two companies will have less than 10% market share here. With lower-cost models in developing countries they will see more success as well as in Europe, where Nokia's brand is much stronger.

However, predicting what will happen in even three years in the mobile market is next-to-impossible given the pace of change. Yet I remain quite skeptical of the Gartner et al "automatic" assumptions of Nokisoft's win over iOS -- largely on the basis of Nokia's historical performance. 

Nielsen: Smartphones Now 46%, iPhone "Closing the Gap"

Yesterday I discussed a Yankee Group survey (n=15,000) showing 47% of US adults now have smartphones (Android 39%, iPhone 25%). This morning Nielsen released data nearly matching that figure, reflecting 46% of mobile subscribers in the US own smartphones as of Q4. However, Nielsen says, Q4 iPhone sales have "closed the gap" somewhat with Android among recent buyers: 

Among recent acquirers, meaning those who said they got a new device within the past three months, 44.5 percent of those surveyed in December said they chose an iPhone, compared to just 25.1 percent in October. Furthermore, 57 percent of new iPhone owners surveyed in December said they got an iPhone 4S.

Nielsen adds that 60% of recent handset buyers are increasingly picking up smartphones. Of concern to Microsoft, RIM and Nokia their relative shares are tiny. RIM's is less than 5% among recent buyers. 

Nielsen says among recent acquirers Android still holds a lead but that the iPhone is within 2% points of a tie (chart below). This is a reversal of earlier trends wherein Android seemed to be pulling away. We'll see what the next comScore data release shows. 

Overall Android still leads the iPhone 46% to 30% in the US, while RIM has 15% of the market.