JD Power and Associates yesterday put out its 2012 handset customer satisfaction survey findings, covering both smartphones and non-smartphones. The iPhone won the smartphone category (for the "seventh consecutive time"); LG and Sanyo were at the top of the non-smartphone handset category.
HTC was second in the smartphone category. Android market leader Samsung was third but "below industry average."
JD Power used a range of criteria to measure satisfaction, which were slightly different in each category. For smartphones the weighted criteria were: performance (35%); ease of operation (24%); features (21%); and physical design (20%).
The iPhone rankings are not a surprise. The much more interesting aspect of these survey results is the low score of Nokia. On both lists it was second from the bottom.
If this survey were conducted in Europe or developing markets Nokia might get higher marks. But the low scores in the US survey reflect the poor performance of its existing products and the weakness of its brand. That brand weakness is further diminished by the scores themselves.
It will be very challenging, even with its new Lumia Windows Phones, for Nokia to "climb out of the basement." Indeed, the existing weakness of Nokia in the US/North American market creates a "deficit" for Lumia devices as both Nokia and Microsoft seek to market them to North American consumers.
Related: iPhone Grabs Camera Market From Sony
Opera has had great success with its Opera Mini and Opera Mobile browsers. Indeed, Opera has the greatest market share of any single browser provider in mobile. But as the world migrates from feature phones and RIM devices to smartphones Opera risks being displaced by Safari, Chrome and maybe Explorer.
In a diversification move, two years ago Opera bought ad network/mediator AdMarvel (for $8 million in cash plus $15 million more in potential earn-out fees). Today the company announced that it was doubling down on mobile advertising, buying ad networks Mobile Theory and 4th Screen Advertising. AdMarvel addressed publishers while the Mobile Theory and 4th Screen acquisitions cater to advertisers and the demand side.
According to the press release:
[The two acquisitions] significantly expand its offering to advertisers and mobile publishers that engage consumers via the mobile web and applications, across all mobile platforms. Opera offers complete advertising solutions for mass-market feature phone and smartphone platforms, including iOS, Android, Blackberry, Java and Symbian.
Additionally, these acquisitions will enable Opera to better monetize the traffic that flows through Opera Mini and Opera Mobile browsers. With the world’s most popular mobile browser, Opera serves more than 160 million monthly active users that generate more than 100 billion page views, and consume more than 16 Petabytes of mobile data services a month, as of December 2011.
Mobile Theory is a leading premium mobile advertising network focused on the U.S. mobile advertising market, based in San Francisco, with offices in New York City, Chicago, Los Angeles and Seattle. 4th Screen Advertising is a leading premium mobile advertising network focused on serving the European mobile advertising markets, based in London.
Opera CEO Lars Boilesen said that AdMarvel has enabled Opera to "generate well over $200 million in revenue for our publishers globally" since the acquisition. Boilesen added that with the two new acquisitions, "Opera is uniquely positioned to deliver end-to-end mobile advertising solutions to brands, agencies, publishers and mobile operators across the globe."
It also represents a fundamental shift in Opera's center of gravity. And from an ad-network perspective it's part of a larger, long-term trend toward industry consolidation. Yet it seems that just as one mobile ad network is acquired two more spring up.
Is RIM in a "death spiral" or not? It's being widely reported today that global energy concern/evil-doer Halliburton is dropping BlackBerry in favor of the iPhone on a global basis. While this means 70,000 fewer users it's more significant symbolically: a global corp. is shunning RIM.
As recently as a year ago corporations were still a stronghold for the company, but as more companies adopt "bring your own device" policies RIM is seeing increasing losses in the enterprise.
On the other side, RIM's Developer VP Alec Saunders told a RIM-friendly developer conference in Europe that not only are BlackBerry owners using apps, but that there are 6 million daily app downloads. In his effort at "myth-busting," he added that RIM's app world sees more paid downloads than the Android Market and that developers are making more money than with Android.
Regardless, there's a growing stigma associated with BlackBerry usage -- in much the same way that an AOL email address went from being a symbol of tech savvy to tech laggard status. That stigma now exists in the US for BlackBerry users and to a much lesser degree in Europe where the brand and usage still relatively strong.
Recent IDC Q4 2011 data are not quite as grim as the StatCounter data above, but directionally consistent.
New company CEO Thorsten Heins said that not much needs to be changed strategically at RIM. He's thus declined to do what Stephen Elop did upon taking over at Nokia: assert radical action was necessary to save the company. As a consequence, unless RIM's next handset is a blockbuster, we're going to see more erosion and a continuing downward spiral.
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.
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.
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.
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.
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).
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:
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:
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.
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.
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.
In the US, NPD Group said that in Q3 Apple had the top-two selling smartphones:
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.
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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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.
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.
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.
Nokia reiterated that a Windows Phone would be out this year but declined to be more specific.
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):
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:
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.
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.
Elop 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:
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