Europe

Groupon in Local + Mobile EU Distribution Deal with Deutsche Telekom

This morning Groupon and Deutsche Telekom announced a "strategic partnership" that will deliver Groupon deals to Deutsche Telekom customers throughout Europe. The deal is significant for both parties. Deutsche Telekom has a presence in 10 European countries. 

According to the release: 

The partnership marks the first time Groupon will partner with a multi-national service provider to distribute its products and services across a wide international network. It is also significantly enhances Deutsche Telekom's position as a leading provider of the latest applications for its customers.

Using a wide range of marketing and sales tools, varying from promotion activities to deeply integrating Groupon services in selected fixed and mobile services, Deutsche Telekom will offer Groupon services directly to its customers. Scheduled to be available in the first half of 2012 Deutsche Telekom mobile customers will enjoy Groupon's mobile services on their devices without the need for a separate download providing easy access to the best local deals in their area.

To those who dismiss Groupon as a business without a future, this deal is a powerful reminder of the strength of the Groupon brand and its near-global footprint.

The key to success will involve two things: deal coverage and execution. How much inventory is offered and how well presented are the deals?

Groupon Now, the company's mobile offering, in the US has so far not been a success. Accordingly that experience raises questions about how this might play out in a mobile context with Deutsche Telekom's subscribers. However it will not be limited to mobile. 

By contrast UK carrier (Telefonica) O2's opt-in "O2 More" partnership with Placecast to deliver local coupons/deals has proven to be very successful. So there is a precedent that shows this could play out in a very successful way for both companies if well executed. 

2012: End of the Mayan Calendar -- and Maybe RIM Too

Next year will be decisive for the "tier two" smartphone players: RIM, Nokia and Windows Phone. Specifically, if Windows and Nokia haven't gained meaningful traction a year from now their mutual strategy will largely be deemed a failure. And RIM has become a long, slow train wreck without much turnaround potential.

During the most recent quarter the company reported that it sold many millions of handsets outside the US market: "RIM shipped approximately 14.1 million BlackBerry smartphones and approximately 150,000 BlackBerry PlayBook tablets." RIM also claims 75 million users around the world.

Blackberry phones The company slightly beat lowered analyst estimates but further lowered guidance for Q4 (a quarter when Android and iPhones are doing very well). It also said that its BlackBerry (OS) 10 smartphones won't be out until “the latter part" of next year (read early Q4). Investors promptly sold RIM, causing the stock to decline to its lowest point since 2004. 

But RIM's shares have bounced back somewhat on talk that there were several suitors circling the company: Amazon, Microsoft and/or Nokia. However Amazon publicly disavowed the rumor.

It would be problematic for Nokia to buy RIM for several reasons. While the Finnish company would gain a stronger brand in North America and carrier relationships the value of RIM's brand is rapidly declining and its other assets are of limited value to Nokia. Similarly Microsoft would inherent a troubled company and put itself in a competitive position vis-a-vis handset partners including Nokia. 

But would Microsoft be all but compelled to buy RIM if its current relationship with Nokia doesn't bear fruit?

Early reports from Europe in October suggested that the new Windows powered Lumia phones were selling quite well in the UK and Germany. However a more recent UK report argues that the Lumia 800 is not selling and represents only 0.17% of November handset sales in the UK. 

The truth is probably somewhere in the middle: sales are mixed; not as successful as Nokia and Microsoft would have hoped but better than the dire scenario presented above. Lumia phones are coming to the US early next year. However it will take a herculean effort to get consumers to turn away from Android and iPhones (though some survey evidence suggests many US consumers are open to Windows Phones). 

My prediction is that a year from now Nokia and Microsoft will have improved their respective positions somewhat but not dramatically. Nokia will be compelled to consider building a few Android handsets and Microsoft might have to look again at RIM as a way to gain market share. For its part, RIM will have to look at developing Android handsets itself (and perhaps experimenting with WebOS) to supplement BlackBerry 10. 

Regardless, the outlook for RIM is fairly bleak. In the end the company will probably have to sell itself. And at the moment the outlook for Nokia and Microsoft's Lumia phones is not terribly much brighter (at least from what we can tell at this point).

Windows Phones: Apps Gaining, Awareness Growing, Outlook Uncertain

There are three pieces of data recently out that paint a modestly upbeat, if mixed, picture for Windows Phones. Though Nokia's Lumia phones are not being released in the US until next year, awareness and potential demand for the Microsoft-powered devices in the US are rising (with Samsung and HTC models available).

According to recent survey data from The NPD Group, among those seeking to buy a smartphone within the next six months, a meaningful percentage of would-be smartphone buyers are considering a Windows Phone. Here are a few survey highlights: 

  • Android holds greater interest than other mobile OS (among 63% of respondents)
  • However 44% "of smartphone owners, and those who intend to buy one, are considering purchasing a Windows Phone 7"
  • Yet 45% of surveyed consumers are "still not aware of Windows Phone 7" 
  • Among those not interested in Windows Phones, 21% said the were "too invested" in another OS (iPhone, Android).

The availability of apps is critical to the near and long-term success of Windows Phones. To that end Distimo, which tracks app store inventories and downloads, released data showing strong growth of apps in the Windows Phone 7 Marketplace:

  • The Windows Phone 7 Marketplace is the fifth largest OS application store worldwide
  • The most popular category in the Windows Phone 7 Marketplace is Games. Other popular categories are Tools & Productivity, Entertainment and Travel & Navigation.
  • Paid applications in the Windows Phone 7 Marketplace have grown continuous [sic] with almost 1300 new paid applications every month. Free applications have increased on average by 1650 new free applications month-over-previous month.
  • The number of publishers has consistently grown since the launch of the Windows Phone 7 Marketplace with 700 new publishers per month.
  • Nearly 50% of all applications are available in the 17 countries in which the Windows Phone 7 Marketplace was originally accessible. One-third of all applications are available in all 35 countries.
Windows Phone Marketplace stats

Overall the Windows Phone Marketplace now has roughly 40,000 apps according to All About Windows Phone. While this is a fraction of what's in the iTunes app store or Android market, The Windows Marketplace is just a year old this month. Microsoft is currently running a promotion where they give new Windows Phone buyers $25 to spend on apps.

This positive momentum is tempered by a widely covered "downgrade" of the new Nokia Windows Phones. An analyst at Pacific Crest Securities cut his forecast for Nokia Windows Phone sales by 75% (from 2M to 500K). This was based on his view that Nokia Windows Phones were not sufficiently differentiated and were without "breakthrough innovation." He also believed they were not aggressively enough priced to generate significant demand. 

However Nokia has said it will use price to compete. One must also recognize that this is one person's judgment based on preliminary information. Yet if this prediction comes true and another year of Nokia-Windows phones goes buy with unimpressive sales (and Nokia's share continues to decline) it will signal a major problem (even panic time) for both Nokia and Microsoft. 

Android Dominates Q3, iPhone Top Device

According to Gartner, phones running the Android OS "sold" (read: shipped) at dramatically higher rates in Q3 than competing platforms. As the chart below reflects, Android's share of Q3 smartphone shipments more than doubled vs. last year. Nearly all others declined.

The iPhone was almost at parity with Symbian, which declined by more than 50% vs. 2010. RIM and Microsoft also declined. 

 Screen shot 2011-11-15 at 5.53.38 AM

Looking at overall mobile operating system share on a global basis, StatCounter shows Symbian still leading. Apple's iOS and Android are essentially tied about 10 points behind Symbian.  

Screen shot 2011-11-15 at 5.59.53 AM

In the US, NPD Group said that in Q3 Apple had the top-two selling smartphones: 

  1. iPhone 4
  2. iPhone 3GS (now free)
  3. HTC EVO 4G
  4. Motorola Droid 3
  5. Samsung Intensity II

Windows Phones Will Be Most Directly Competing with Android

Windows Phone (especially after the 7.5 "mango" update) has received positive reviews -- some extremely positive. I have one of the Samsung Windows Phones and have been using it periodically for several weeks and can attest to some of the accolades. The browser for example is very fast. I also like the operation of email on the handset.

Some of the various reviews assert that the Microsoft OS has "caught up" to Android and iOS. And with the release of the first Nokisoft phones, the future looks much better for Microsoft's mobile efforts (and maybe for Nokia) than it did a year ago.

However, right now at least, the best prospects for Windows Phones are feature phone users upgrading to a smartphone. These are people who generally speaking haven't been living with and become "acculturated" to an iPhone or Android device -- although the iPod Touch and iPad expose non-smartphone users to iOS.

There's almost zero chance that an iPhone user is going to switch to a Windows Phone at this point. By the same token the chance that an existing Android user will switch is low, though not as low as with the iPhone. iPhone owners display greater loyalty than Android owners. By my logic, then, Windows Phones are most likely competing for attention from those individuals considering upgrading from a feature phone to an Android handset. (Although the iPhone 4 is now $99 with a contract.)

In addition, Windows Phones are probably not competing with the top-of-the-line Android handsets (e.g., Samsung Galaxy, HTC Rezound, Moto Razr). They'll be competing more at the entry level, although Nokia's Lumia handsets are not positioned as entry level devices. To win buyers, however, they'll need to be priced as though they were entry level smartphones.

Windows Phones must generate sales to show that the platform has traction in order to make their case to developers. Without developers and a sufficient supply of desirable apps, Windows Phone will remain a second-tier OS. For higher-end users, Microsoft also needs to "answer" Siri with some compelling voice capabilities in future updates. 

There's no word on precisely when the new Nokisoft handsets will be available in North America. They'll come first to Europe and then perhaps Asia and the developing world before the US market. This makes sense because Nokia's brand is much stronger in Europe and developing markets, where the company is known for cheap devices. 

To compete in the US these Nokia handsets -- and Windows Phones in general -- must be priced at or below $150, and probably $99, with a two-year contract. That's chiefly because they don't have the apps ecosystem to compete with Android. Until they do this is a major deficiency and competitive disadvantage. That's why price is key. But Microsoft knows all this.

If I were a US-based marketing executive for Windows Phones I would secure carrier relationships that allowed pricing at $99 (with a contract). Then I would target smartphone upgraders (low-end Android buyers) and make the case that the Nokia-made devices are better.

I would also be very aggressive with developers. For example, I would pay them to port over their most popular apps to Windows, which appears to be what Microsoft is doing. And I would allow them to keep 100% of the proceeds of app sales for the first year on the platform -- maybe the first two years. 

All of this positioning advice is just based on my instincts and market observations (rather than survey data). But Microsoft and Nokia need to "get it right" or potentially miss a window of opportunity. And without some initial success and perceived momentum, both developers and carriers will be less interested going forward. 

VC's Invest $15 Million in Appcelerator Expand Global Efforts Against Platform Fragmentation

Appcelerator has secured $15 million in funding from a set of investors that is led by Mayfield Fund, TransLink Capital and Red Hat, with eBay, Sierra and Storm Ventures also participating. The proceeds a earmarked to cover global expansion for what the company already calls "the largest 3rd-party publisher in the Apple iTunes store and the Android marketplace. It claims to support a community of over 1.6 million developers who, over the years, have placed 30,000 mobile apps for more than 30 million different devices into its portfolio. The announcement contained other fascinating measures of growth at Appcelerator. For one thing, the firm has grown from 17 to over 100 employees in the space of 12 months. Some of the growth is the result of acquisitions. Aptana, with its mobile app IDE (Integrated Development Environment) was acquired in January as we reported here. On October 24, the company acquired Particle Code with expertise and a development platform focusing on HTML5 apps, especially for gaming.

Both the investments and the acquisitions aim at overcoming platform fragmentation. Far too much attention is paid to the battle between iOS and Android in a world where we all know that each brand, device type and form factor has its own specifications, extensions and design characteristics. Clearly it takes more than a village to provide the development platform and resources to enable application creators and developers to write their code once and see that it reaches the broadest audience (and monetization opportunities) possible. Appcelerator's approach to cross-platform application delivery has led to explosive growth (500% annually by its measure). Just as important, it has attracted high-visibility brands like NBC, Zipcar, ING, Merck, Medtronic, Michael’s Stores, Progressive, and GameStop to use its development and delivery mechanisms. The $15 million in additional capital will provide the wherewithal to take its act global.

Nokia Makes 'Fashion Statement' with New Phones

Probably the most notable thing about the new Nokia Windows Phones (Lumia 710, 800) is that they generally look different than the iPhone and the gazillion Android models in the market. Most of the phones are colorful and stand out accordingly. This follows in the footsteps of the mostly unreleased N9 handset.

The specs are unremarkable and the software and apps ecosystem are not different or compelling enough (at this point) to grab significant adoption or attention. But the overall package, combined with color and generally nice design of the Lumia handsets, will attract some users to these phones over the blander and more generic Android handsets. 

Nokia's new marketing campaign around these devices is "The Amazing Everyday." This is wrong. The campaign should focus on individuality, personality and customization -- how Nokia Lumia owners can stand out with their colorful handsets from a gray sea of other smartphone users. Nokia should emphasize the "sex appeal" of these devices. After all, handsets are fashion statements for many people. 

Screen shot 2011-10-26 at 9.14.05 AM

In terms of the outlook for these new phones, I would say they are very definitely not Android or iPhone "killers." They may sell relatively well in Europe and developing markets. But they're not even being released in North America until 2012. This is a strategic mistake. 

Price will be another factor in how successful they are. Nokia has fumbled on pricing in the past. If these phones show up in the US for more than $199 (subsidized) they won't sell at all. They won't sell unlocked in this market for $600 either. 

Screen shot 2011-10-26 at 9.18.03 AM

This is a good first step for Nokia and Microsoft but not one that is going to dramatically alter or transform the mobile fortunes of either company at this stage. 

Update: It appears that Nokia is doing some promotion around the idea of personalization and customization. This was part of an email I received today: 

Screen shot 2011-10-26 at 11.01.51 AM

Nokia Q3 Beats Expectations, Nokisoft Phones Debut Next Week

Nokia reported a Q3 loss of $94 million (68 million EUR) but that was better than financial analysts were anticipating. Shares jumped, accordingly, on the hope that Nokia's decline is now at an end. 

The company shipped 106 million handsets but only 17 million were smartphones. On a year over year basis, growth was off in most markets. In North America, Nokia's weakest, it shipped fewer than a million devices. However there modest growth in the Middle East and Africa and strong growth in India. 

 Screen shot 2011-10-20 at 6.58.13 AM

Nokia has bet the farm on Windows. Reportedly the first of those handsets will be revealed next week in London, on October 26. The handsets will apparently come in three colors and physically resemble the N9

Expectations are extremely high for these new smartphones, both for Nokia and Microsoft. If they're going to do well, Europe is probably the market to watch. It's unlikely that the initial Nokisoft devices will perform well in North America however. 

Android Now Number Two in Europe After Symbian

Comscore has released data this morning on smartphone usage across the "EU5," which encompasses France, Germany, Italy, Spain and the UK. Symbian-based smartphones remain the most prevalent. However they're in decline, while Android devices have now passed the iPhone to become the second most common smartphone type in these five countries. 

Comscore says there are roughly 88.4 million smartphone users in the EU5 (Spain and the UK have the greatest smartphone penetration). That compares to comScore's estimate of 81.9 million smartphone owners in the US. By contrast, Nielsen says US smartphone owners comprise 40% of the market or more than 93 million people. 

Screen shot 2011-09-13 at 5.48.23 AM

Microsoft mobile operating system handsets (including Windows Phones) are off almost 5%, which is an ominous sign for the coming Nokisoft partnership. However great hardware-software integration could give Europeans a reason to switch or upgrade from existing Symbian handsets. 

Below are lists of "mobile content" activities and penetration rates across the EU5, contrasted with the same data from the US market. With the exception of the UK market mobile app usage in Europe is considerably lower than in the US, while text messaging is lower in the US than Europe according to these data. 

Screen shot 2011-09-13 at 5.48.14 AM

Screen shot 2011-09-13 at 5.59.39 AM

What If Nokia's Windows Phone Gambit Falls Flat?

Nokia has bet the farm in Espoo, so to speak, on Windows Phones. It has seen steadily declining smartphone share in North America and outside the US over the past several quarters. Nokia's biggest markets are now the BRIC developing nations. The company is hoping to reverse the trend with a combination of Microsoft's OS and bold design. (The compelling looking N9 isn't coming to the US or Europe apparently.)

However it may be tough to reverse the slide. Yesterday comScore reported US smartphone market share numbers. Symbian, which is being phased out, continues to see share losses. Yet so does Microsoft despite its new OS, which many have praised

It's not as clear what's happening in Europe, where there are indications of greater consumer uptake of Windows Phones. But so far people aren't buying them in North America and the US in particular.

Mango, the forthcoming Windows Phone software update, offers a range of new features and improvements, though arguably not enough to dramatically advance Windows Phones vs. Android and iOS. So it's quite possible that the first "Nokisoft" phones that show up later this year in Q4 will not fly off the shelves. Pricing will be a key factor, however, and looms large in the initial sales strategy.

I'm betting that the first Nokisoft phones will see modest success -- I would be very surprised if they were a blockbuster hit out of the gate -- but it's also possible that they'll fall completely flat with consumers and disappoint expectations, which are very high. (Nokia will have to carefully manage investor and market expectations.) If they under-perform expectations you'll see investors go crazy and punish both Microsoft and Nokia, but especially Nokia.

Investors will give Nokia roughly two quarters to show traction with the new handsets. If Nokia's gambit doesn't pay off the company may go on the block. All this remains to be seen of course; but the stakes couldn't be higher. 

What Nokia probably should have done, but was probably precluded from doing by its contract with Microsoft, is to embrace both Android and Windows Phones as well as continue developing MeeGo with Intel. The company walked away from MeeGo, much to the surprise of Intel, though the N9 is the first and (apparently) only MeeGo phone. And it declined to work with Google for fear of becoming a "commodity producer" of Android devices. 

Nokia CEO Stephen Elop is of course a former Microsoft employee; some people accused him of being a "Trojan Horse" for Microsoft. But he said several times that he saw a better opportunity for differentiation by working with Microsoft. But by doing so he's limited Nokia's options and outlook if Windows Phones don't entice consumers. 

To use a US baseball metaphor: it's two outs, bottom of the 9th. Nokisoft needs to hit a double, if not a home run. 

Burned by Android 'Imitators,' Apple Being (Too) Aggressive on Tablets

Some financial analysts expect that Apple's iPad will dominate the tablet market through 2020. Competitor after competitor, including Motorola, HP, RIM and Samsung, has launched tablets only to see disappointing sales to date. So why then is Apple so aggressively pursuing legal remedies against tablet OEMs? 

Everyone reading this is aware that Apple has obtained a preliminary injunction in Germany (and throughout most of Europe) that effectively prevents the sale of the Samsung Galaxy Tab 10.1. It's also pursuing Motorola over the Xoom on the same IP/legal theories. 

I believe that Samsung essentially copied the "trade dress" or "look and feel" of the iPhone with its Galaxy smartphones and the Galaxy Tab 10.1 tablet. However I also think that Apple is going too far with its attempt to bar sales of competing devices. By extension the question arises: would any tablet device that broadly resembled the iPad be vulnerable? 

If so Apple would effectively be eliminating competition in this new computing category -- and that would be a very bad thing. I'm sure Apple sees it differently and would simply argue it's protecting its designs and IP.

What I believe is going on is the following: Apple feels that Android and its gaggle of OEMs have simply ripped off the iPhone and its app store and have reaped the benefits accordingly. As I just posted, Gartner estimated that Android devices gained a 43% share of the smartphone market globally in Q2 vs. 18% for iOS. The company feels badly burned by these "imitators" and probably vowed to not let that happen in the tablet market. 

http://static6.businessinsider.com/image/4e25f4d049e2aee37d070000/chart-of-the-day-apple-revenue-by-product-july-2011.jpg

In addition Apple's profitability and sales are much more dependent on these mobile devices than even a year ago. However the case illustrates the problems and challenges of current patent law. There's a need to protect IP owners' rights but competitors must be able to make and sell their products. What degree of product and feature similarity should be prohibited?

I certainly understand Apple's viewpoint and the rationale behind its actions. But in seeking to ban the sales of competitive tablets Apple is simply going too far.

AT&T Reports Solid Q2, Nokia Not So Much

US Carrier AT&T and OEM Nokia reported Q2 earnings this morning. AT&T, the corporation, earned quarterly revenues of $31.5 billion, which were up slightly (2.2%) over a year ago. The company reported its "best-ever second-quarter smartphone sales." Meanwhile Nokia had a worse-than-expected quarter. Overall sales were off 11% and profit declined 44%. Smartphones declined 34%.

Below is a summary of each of the company's numbers.

AT&T Wireless:

  • Total wireless subscribers up 1.1 million to 98.6 million (33K contract subs added)
  • 70% of new contract sales were smartphones; total smartphones sold: 5.6 million
  • iPhone activations: 3.6 million (24% are new to AT&T)
  • Android (RIM and Windows Phones) now 40% of smartphone total
  • 23.4% growth in data revs: up $1 billion vs a year ago
  • ARPU: $63.87 

Screen shot 2011-07-21 at 6.43.49 AM

Nokia:

Nokia saw revenues of EUR 9.3 billion, which were off 11% from a year ago. The company reported a loss of nearly EUR 500 million. Nokia sold 16.7 million smartphones vs. 25.2 million during Q2 of 2010 for a 34% decline. By contrast Apple sold 20.3 million iPhones this past quarter.

Overall sales of all mobile devices were off 20% vs last year. And all regions saw sales declines, especially Europe, North America and China. 

Screen shot 2011-07-21 at 6.56.30 AM

Screen shot 2011-07-21 at 6.56.07 AM

Nokia reiterated that a Windows Phone would be out this year but declined to be more specific. 

UK Carrier O2 Seeing Success with LBS Offers

UK carrier O2 (owned by Spain's Telefonica) is seeing great success with its opt-in SMS marketing program O2 More. The location-based service is powered by Placecast, which also supports a similar but more nascent program in the US for AT&T. (It's not clear how much promotional effort AT&T is putting behind it.)

O2 not long ago announced it had more than two million subscribers for More. Consumers sign up for the O2 program, specifiy interest categories and recieve no more than a single text per day. The program sees very low churn. 

Earlier this month the UK carrier touted the success of a More campaign for gym Fitness First:

Fitness First targeted O2 customers with location-based messages offering a free two-day pass and details of the nearest club. This resulted over 1,100 recipients signing up as new members of Fitness First on four month and 12 month contracts.

With average membership costing just under £300 per year, this uptake generated increased revenue around £400,000.

The best responding target audience was 18 to 35-year-old smart phone using single Londoners, who enjoy engaging through social media.

US carrier T-Mobile recently got into the daily deals market with the launch of an app called "more for me." But with much larger competitors -- and so many competitors -- it's unlikely that T-Mobile will see great success with the program.

However daily deals could be converted into SMS messages for broader distribution and differentiation. Indeed, the O2-Placecast model is a stronger bet than an app strategy for carrier advertising, and can reach 100% of the carrier's customers potentially.

Many marketers and companies tend to look "beyond" SMS to in-app ads and mobile Web advertising because SMS isn't sexy. (Just like text ads in search aren't sexy.) However the reach of SMS is 100% and the response rates to opt-in text messaging programs can be huge. 

For example, in early 2010 Placecast found the following in its US beta test of ShopAlerts (the same kind of program run by O2): 

  • 60% of participants found the location-triggered messages to be cool & innovative
  • 79% said it increased their likelihood to visit a store
  • 65% made a purchase as a result of a ShopAlerts message (this sometimes occurred on the same day and sometimes later)
  • 73% of participants would definitely or probably use the service in the future

Google Maps Top App in UK, Yahoo Weather Number Two

According to comScore data, commissioned by the mobile trade association GSMA, Google Maps is the top app in the UK market by almost 2:1. That's followed not by Facebook (as one might expect) but by Yahoo Weather. Facebook is number three and Google has two more apps in the top 10. 

Here's the full list, as reported in the UK's Daily Telegraph:

  1. Google Maps: 6,419,503 (users)
  2. Yahoo! Weather: 3,567,047
  3. Facebook: 3,456,442
  4. Google Mobile: 2,554,329
  5. YouTube: 2,438,348
  6. eBay: 1,195,496
  7. Sky Sports Live Football Score Centre: 1,004,085
  8. Yahoo! Stocks: 959,289
  9. WhatsApp Messenger: 798,656
  10. Sky News: 732,374

The research found, suprirsingly, that 40% of UK smartphone owners used apps in April 2011. This figure seems low to me. 

The iPhone-Android competitive breakdown was basically two-thirds iPhone, one-third Android according to the report. 

Handicapping Nokisoft's Chances

This past week has been a bad one for Nokia: the company announced earlier that it will miss Q2 sales targets and its shares hit new lows. At the "D9" conference in Southern California Nokia CEO Stephen Elop, who some have accused of being a "Trojan Horse" for Microsoft, said that the current "pain" the company is experiencing will go on for another year or so. Elop vigorously denies that he's a Trojan Horse; he also denies the companion rumor that Microsoft is ready to buy the company's hardware business. 

Nokia has almost no market presence in North America. Elop said it was roughly 30% to 40% as recently as 2004. And its position in Europe and even China is being eroded by competition in real time. Needless to say the situation for Nokia is extremely urgent, if not dire. It could go from being the market leader to a second or third place global competitor this year. 

Nokia has bet its future on Windows, which it says give it more opportunity for "long-term differentiation" vs. Android. The first Nokia-Windows Phone will be out at the earliest in Q4 of this year.  

Screen shot 2011-06-02 at 6.39.48 AMElop characterized the smartphone market now as a battle of "ecosystems" rather than handsets, and I think that's essentially correct. In that context the question is whether Microsoft and Windows Phone can develop a sufficiently large and interesting ecosystem to gain consumers' interest.

There's a kind of catch 22 problem: without consumer scale developers won't pay attention and build apps, and without apps and software consumers won't find the phones as interesting. However I also believe that the role of apps in the competitive landscape may now be somewhat overblown. Consumers need/want certain categories of apps but they certainly don't care about having access to 500K apps.

After many months of asking I just recently received a Windows Phone (as a loaner from Microsoft). So far I find it easy and pleasant to use. However I haven't used it long enough or broadly enough to come to any final conclusions. 

Some things about the OS and software are unfamiliar and require adjustment (vs. iPhone and Android). But overall the speed and general usability are good. The phone also has a polished UI design -- except for the homescreen, which I don't find compelling.

The device does lack apps; there are some but the selection is limited. And there are certain things about the user experience and software I simply don't like: 

  • As mentioned: the layout and aesthetics of the home screen (pictured, left) 
  • The degree to which the carrier and Microsoft have control over the tiles on the home screen. They can't be customized, which they should be capable of. 

Despite these complaints I would argue that Windows Phone is a credible alternative to the iPhone and Android. The Mango update also just added a ton of new features, arguably none of which are "breakthrough" and some of which are imitative of others or play catch up. But overall they improve the handset. 

In order to appreciate Windows Phone, consumers would probably need to use the device for a period of time. So far consumers don't seem to be that interested. They appear happy to continue buying iPhones and Android devices. And it's not clear exactly what Microsoft can do to stimulate more consumer demand. The company has run some entertaining commercials, which may have built modest awareness but haven't had a major impact. Pricing is another lever here but Microsoft isn't really in control of this. Rather it's the OEMs and the carriers who determine how much the handsets will cost. 

Both Gartner and IDC have predicted that Nokia will stabilize and regain market share globally when the Nokisoft phones come out later this year or next. The firms have also predicted that Windows will become the number two OS in the world after Android on the strength of Nokia's distribution. Certainly Nokia will help gain more exposure for Windows Phones and there will be more sales. How many sales is far from clear however. 

I must say in general I'm pleasantly surprised by the look and performance (thus far) of Windows Phone. I called it a "credible alternative." But is "credible alternative" going to be enough to "move the needle" and divert consumers to Windows from Android, RIM or iPhone? Probably not without more software changes from Microsoft, more apps and massive and coordinated promotion of the handsets from both Nokia and Microsoft. 

See related: Stephen Elop's Nokia Adventure 

People Don't Use Smartphones When They Eat (As Much)

Handset maker Ericsson conducts research on consumer behavior and attitudes all over the globe with thousands of consumers. Not long ago it released findings from some early 2011 research about smartphones and tablets with a specifically US audience.

There are no dramatic findings or true surprises but each piece of research contributes to a more nuanced picture of the market and consumer behavior. The data reflect self-reported usage patterns with an emphasis on time of day. Here are two of the charts that show usage of smartphones throughout the day:  

Screen shot 2011-05-16 at 12.37.49 AM

The following chart reflects the comparative "daypart" usage of the mobile Internet and GPS apps (probably maps in particular):
Screen shot 2011-05-16 at 12.37.21 AM

In terms of tablets, Ericsson found that demand was higher than for most other electronics and devices.

Screen shot 2011-05-16 at 12.33.43 AM

Finally the data show that tablet usage patterns parallel those of smartphones, rather than PCs, although tablets are "cannibalizing" PC usage to a degree. Other studies and data reflect different usage patterns for tablets, however. 

Screen shot 2011-05-16 at 12.38.30 AM

InMobi: Android Passes iPhone, Nokia Falling

Ad network InMobi released its latest Mobile Insights Report: Global Edition March 2011. Based on 31.9 billion monthly impressions generated by 220 million consumers, the latest report shows phones running the Android OS overtaking Apple's iPhone. This is consistent with most other data in the market.

The report continues to show Nokia as the global smartphone leader but, like other sources, indicates a decline in its overall share. Strikingly, InMobi says "Nokia lost -3.9 share points in just 90 days, while Samsung (+1.6 share pts), Apple (+1.9 share pts) and HTC (+2.8 share pts) gained share." 

Another striking data point: "35% of all mobile ad impressions now occur on smartphones."

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In North America, as with the Millennial data just released this morning, the Verizon iPhone has helped Apple but that has not been enought to slow Android's momentum. But for quarter, according to InMobi, Apple's growth outpaced Android's in North America. RIM also grew. 

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Globally Android, iOS and RIM grew while others declined according to the report. Below, compare the most recent IDC numbers (global estimates for year-end 2011) and those from comScore (US) representing the most recent quarter. 
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The IDC numbers for Android above are quite aggressive vs. what InMobi show. IDC's numbers are projections based on existing sales and additional assumptions about future consumer purchase behavior. ComScore's data are based on consumer surveys. 

Forecast Predicts Android to Be Dominant OS This Year

IDC has released updated numbers for its global smartphone forecast (2011- 2015). The firm expects nearly 50% growth in smartphone sales this year on a global basis:

Smartphone vendors will ship more than 450 million smartphones in 2011 compared to the 303.4 million units shipped in 2010. Moreover, the smartphone market will grow more than four times faster than the overall mobile phone market. 

During the forecast period IDC expects Apple and RIM to stay flat in terms of overall share. It expects Android to be the big winner becoming the dominant smartphone platform globally by the end of this year and continuing to grow through 2015. 

The company also expects that Windows Phones will gain share to reach 20% of the global market. That assumption is based on Nokia's embrace of Windows Mobile and it's global footprint. 

Here are the projections: 

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Almost certainly these figures will turn out to be wrong in one or more ways. However the phenomenal growth of Android cannot be disputed.

Yet Samsung and Motorola, both key Android OEMs, are scheming to diversify their lineups and lessen their dependence on the Google OS. Samsung is pushing Bada and Motorola is contemplating its own OS. This is part of an broader effort to get out of the "commodity" Android realm. Thus far however Samsung has emerged as the global leader in Android handset sales.

If Android growth reaches the anticipated levels in this chart there are huge implications for mobile advertising revenues as well. Google already dominates mobile advertising in the US market. These growth projections would all but ensure continued and even increasing dominance, not only in North America but internationally as well. 

Nokia's Is Mad As Hell and Won't Stop Suing

Nokia, which is losing share -- and mindshare -- in the smartphone market, has turned to litigation as a revenue strategy and seems hell-bent on extracting licensing revenue from Apple. Two years ago the company iinitiated mutiple legal actions against Cupertino, alleging numerous patent infringements. Starting in late 2009 and adding more actions in 2010 the Finland-based company sought to block the "import" of Apple devices by appealing to the International Trade Commission (ITC).

Nokia claims that a range of patents on touchscreens, music and camera technologies are being infringed by the iPhone and other Apple devices. Apple counter-sued Nokia on similar grounds. (Actually the mobile patent litigation is flying back and forth between multiple companies.) And the ITC on Friday ruled that Apple's products do not violate Nokia's patents. The ITC has not yet ruled on Apple's claims against Nokia.

However, if at first you don't succeed . . . and so today Nokia announced new patent-related complaints with the ITC:

Nokia has filed a further complaint with the United States International Trade Commission (ITC) alleging that Apple infringes additional Nokia patents in virtually all of its mobile phones, portable music players, tablets and computers.

The seven Nokia patents in the new complaint relate to Nokia's pioneering innovations that are now being used by Apple to create key features in its products in the areas of multi-tasking operating systems, data synchronization, positioning, call quality and the use of Bluetooth accessories.

This second ITC complaint follows the initial determination in Nokia's earlier ITC filing, announced by the ITC on Friday, March 25. Nokia does not agree with the ITC's initial determination that there was no violation of Section 337 in that complaint and is waiting to see the full details of the ruling before deciding on the next steps in that case.

In addition to the two ITC complaints, Nokia has filed cases on the same patents and others in Delaware, US and has further cases proceeding in Mannheim, Dusseldorf and the Federal Patent Court in Germany, the UK High Court in London and the District Court of the Hague in the Netherlands, some of which will come to trial in the next few months.

As the statement above indicates, Nokia has filed suits in the US and Europe against Apple. It may well be that one of the European actions succeeds in some aspect; however Apple may also succeed in its patent claims in one or more ways against Nokia.

The reciprocal actions are a by-product of failed licensing negotiations between the companies. 

Off the court, so to speak, Nokia's CEO Stephen Elop is struggling to transform the company's culture and boost productivity. Complacency and bureaucracy have been blamed for Nokia's diminishing fortunes in the smartphone market. 

Of course Nokia has bet the farm on Windows Phones, walking away from Symbian and MeeGo in favor of Redmon's software. But the first of those Nokisoft devices won't be out until 2012 according to reports. Windows Phones have seen mixed success thus far. Multiple sources indicate that the OS is not making inroads in the US market. The handsets are apparently faring better in Europe according to IDC: "The new Windows Phone 7 from Microsoft reversed its fortunes and grew 18% year-on-year and 100% sequentially [in Q4]." 

Overall there are claims that Microsoft has sold roughly 3 million Windows Phones since launch. Microsoft said in January that it sold 2 million handsets. However these numbers refer to shipments and not necessarily to consumer purchases. 

AT&T-Mobile: AT&T Buying T-Mobile's US Assets in $39B Transaction

AT&T and Deutsche Telekom AG the parent of T-Mobile just announced that AT&T (not Sprint) will buy the business of T-Mobile USA "in a cash-and-stock transaction currently valued at approximately $39 billion." Both companies boards have approved the deal; now the US must also do so. 

T-Mobile's growth has been stalled and the company has been exploring strategic options (mimicking what the company did in the UK with Orange). There was considerable speculation that Sprint and T-Mobile USA might combine or that Sprint might buy its assets directly -- to form a third equal player to compete with Verizon and AT&T. I had said under that scenario there would be a "big three" carrier configuration in the US. Now it looks pretty much like a "big two" -- if the deal is approved.

I suspect there will be a substantial review by the US FTC or Justice Department of the competitive implications of the acquisition. In my view there's a 50% chance that the deal would get blocked. If does happen AT&T becomes the largest US carrier by about 35 million people, with a total of approximately 130 million subscribers. That puts pressure on both Sprint and Verizon accordingly. 

Here are the current US carrier subscriber numbers, based on the most recent publicly released information: 

  1. AT&T: 95 million
  2. Verizon: 94 million 
  3. Sprint: 49 million
  4. T-Mobile: 34 million 

The two companies' "common network technology" (GSM) is cited in the release as one factor behind the decision. And in this technical respect AT&T is a much better fit, in the short term, for T-Mobile than Sprint (CDMA). Longer term it wouldn't matter, given the shift to 4G technologies. 

AT&T addresses the competition issue in the release very directly:

The U.S. wireless industry is one of the most fiercely competitive markets in the world and will remain so after this deal. The U.S. is one of the few countries in the world where a large majority of consumers can choose from five or more wireless providers in their local market. For example, in 18 of the top 20 U.S. local markets, there are five or more providers. Local market competition is escalating among larger carriers, low-cost carriers and several regional wireless players with nationwide service plans. This intense competition is only increasing with the build-out of new 4G networks and the emergence of new market entrants.

In contrast to these statements the market becomes much less competitive if this deal is approved. Local or regional carriers are, as a practical matter, not in a position to compete with AT&T and Verizon for most consumers. 

There will be three large carriers with any scale. And then the US market really becomes a battle between AT&T and Verizon. Sprint will probably have an increasingly difficult time competing with the other two because of their much greater scale and revenues. If the deal is allowed, however, there will (or should) be serious conditions attached. 

Carriers are trying -- so far relatively unsuccessfully -- to raise prices for consumers with tiered data plans, as voice revenues flatten and start to fall. The announced acquisition would potentially directly impact the pricing of data services in the US because it would effectively diminish choice and competition among carriers in the US market.

AT&T would be freer to raise prices, especially as we enter the 4G era and the company argues it must recoup its investments. 

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