Hardware

iPhone Price Drop Potentially Significant for Holdouts

Our mantra is that cost is an under-appreciated driver or barrier when it comes to mobile behavior; cost is the single biggest inhibitor of mobile data plans and Internet adoption. That's what our surveys and those of third parties have consistently demonstrated.

Another set of US-based findings from a different NPD study (n=1,500) on the potential impact of the iPhone 3G price cut ($99) shows that it overcomes a key objection to buying one. Yet cost of data plans and consumers not wanting to change carriers remain meaningful barriers to wider adoption of the device:

  • When it comes to the primary reasons consumers do not want to purchase an iPhone, “high price” was the second-leading reason (42 percent) after “lack of interest” (55 percent).
  • Data plan pricing and exclusivity remain key obstacles for iPhone adoption. When it comes to their reasons for not purchasing an iPhone, 18 percent of consumers who have not purchased an iPhone cited the expense of the data plan, while 21 percent said they didn’t want to switch carriers.

Recall that Piper Jaffray found the potential pool of those willing to move to AT&T to get the phone is dropping:

  • Among the 256 customers surveyed, 28% were switching carriers to AT&T, down from 38% last year and 52% in 2007.

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Related: Here are two more iPhone related pieces of data . . .

According to Boingo Wireless data, the iPhone (89.2%) and iPod Touch (4.7%) represent 94% of all smartphone usage on its network. Overall the iPhone apparently constitutes 25% of the overall usage of Boingo's mostly airport WiFi network. 

Crowd Science has found much higher rates of iPhone loyalty and satisfaction than for competing handsets:

  • 40% of Blackberry and other smartphone users would switch to Apple's iPhone, as their next smartphone purchase.
  • Only 14% of non-Blackberry smartphone users would switch to a Blackberry for their next purchase. Meanwhile, a vast majority of iPhone users (82%) are loyal to the iPhone brand.
  • Compared with Blackberry users, iPhone users report a significantly higher overall satisfaction level with their phone. In particular, iPhone users are more satisfied than other smartphone users with their phones' screen size, navigation, availability of add-ons, and video playback.

NPD: Many Consumers Not Happy with Netbooks

A survey of 600 US netbook owners by NPD in April and May found very mixed reactions and satisfaction levels. According to the survey:

  • "58% of consumers who bought a netbook instead of a notebook said they were very satisfied with their purchase, compared to 70% of consumers who planned on buying a netbook from the start."
  • Among those 18-24, "65% said they bought their netbooks expecting better performance, and only 27% said their netbooks performed better than expected." 
  • The chief feature of netbooks, mobility, is apparently not being used by most people who buy them. NPD found that 60% of netbook owners never took the devices from the house.  

People are primarily responding to the lower pricing of netbooks, it would appear, rather than their portability. The now widespread presence of netbooks places the entire PC OEM industry in something of a difficult spot. If these findings are representative of the larger population, sales may slow -- netbooks have been a bright spot in PC hardware sales -- but consumers won't want to "go back" to paying considerably more for conventional laptops.

It appears to be a matter however of setting the right expectations of consumers, who largely seem to be believe they're getting full notebook memory and functionality in simply a smaller (and cheaper) package.

In our recent consumer survey, we asked people in the abstract if they would rather have a smartphone or netbook if the costs were equal:

“If the costs were the same, would you rather have a smartphone or a netbook as your mobile Internet device?”

 Netbooks

LMS/Opus (question n=352; survey n=611)

Motorola "Social Networking" Android Phones Coming to Verizon, T-Mobile; Sprint Offers Own

According to the WSJ we'll see two new Motorola Android devices from T-Mobile and Verizon this year. Both will have slide-out keyboards. Beyond the keyboards they'll attempt to differentiate with social networking software pre-loaded. According to the WSJ:

The software, built on Android, will emphasize "social communications" services, a person familiar with the device said. The phone will have a range of built-in social-networking software from popular providers such as Facebook and Twitter, the person added.

What that means precisely remains to be seen. How will it be different than apps for example? T-Mobile is about to release the myTouch 3G with a Samsung Android phone ("Bigfoot") to follow. So T-Mobile by the end of the year should have three Android devices -- if these Motorola phones reach the market. 

The WSJ piece also argues: "The biggest advances in smart-phone development in recent years have come not in hardware but in software that makes phones simpler to use." But once we have "18 Android devices" in the market, all with software and user experiences that are nearly identical, it will likely fall back to pricing and/or hardware to be the differentiators. 

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Related: Sprint releases two "social networking" phones -- Samsung Exclaim ($79.99) and HTC Snap ($149). The company is also making a bigger effort to market and do CRM through social media, including Twitter

These two phones have tiles or other pre-installed social networking software on the handsets. The combination of this sort of positioning and lower price points could make such phones popular with those looking to save money vs. more expensive and higher-end phones (such as BlackBerry or the Pre). 

The iPhone 3Gs' Weekend 'Box Office'

So how did the new iPhone do over the weekend? According to this report (based on Piper Jaffray estimates), it sold 750K units. For context, the iPhone 3G apparently sold 1 million units during its first weekend. Here are some other estimates and figures from Piper Jaffray's in-store survey:

  • Among the 256 customers surveyed, 28% were switching carriers to AT&T, down from 38% last year and 52% in 2007.
  • 56% were upgrading from an old iPhone, up from 38% last year.
  • Among customers buying their first iPhone, 12% were switching from a Research in Motion BlackBerry, up from 6% last year.

This is a solid performance. But the smaller number of people switching to AT&T to get access to the phone may mean:

  • Other competitive phones are holding people back
  • The would-be switchers are diminishing out there, which points to Apple's need to get the device to other carriers in the US to continue growth

In a related bit of news, the iPhone 3.0 software upgrade appears to have broken Google's voice search's elegant hold to your ear capability:

We're aware that the current version of Google Mobile App does not fully support Apple OS 3.0. It is still functional, but some users may experience difficulties using voice search when lifting the phone to their ear (like you reported) or have blank rows appear in their search history. If you want to conduct a voice search, just tap the microphone icon instead of lifting the phone to your ear.

Apparently they're working on the fix.

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Update: Apple put out a press release that says it sold more than 1 million 3Gs iPhones:

Apple today announced that it has sold over one million iPhone 3GS models through Sunday, June 21, the third day after its launch. In addition, six million customers have downloaded the new iPhone 3.0 software in the first five days since its release. 

RIM Holding Own in Handset Sales, Subscriptions

Yesterday RIM reported Q1 results. Here's the thrust of the news:

Revenue for the first quarter of fiscal 2010 was $3.42 billion, comparable with $3.46 billion in the previous quarter and up 53% from $2.24 billion in the same quarter of last year. The revenue breakdown for the quarter was approximately 81% for devices, 13% for service, 2% for software and 4% for other revenue. During the quarter, RIM shipped approximately 7.8 million devices.

Approximately 3.8 million net new BlackBerry® subscriber accounts were added in the quarter. At the end of the quarter, the total BlackBerry subscriber account base was approximately 28.5 million.

Almost 8 million BlackBerry devices and 3.8 million new subscribers. RIM remains firmly at the top of the US smartphone heap, its position well established in the enterprise as it tries to broaden its appeal to consumers with new models. One of the advantages that RIM has -- beyond its installed base -- is the corporate subsidy that many of its users get. It's like the Wall Street Journal to the iPhone's NY Times. 

Notwithstanding the fact that the new iPhone is already proving to be a hit, although we'll have to wait for the "box office" numbers on Sunday, RIM is not going to be displaced by the iPhone. The question now for RIM is whether it can continue to broaden its appeal to consumers (partly by improving its mobile Internet experience) and whether the Pre or Windows Mobile phones can make inroads against the BlackBerry in the enterprise market.

In three years' time I wonder what the market will look like. Will we still have five viable smartphone platforms? Will Symbian be totally absent in the US market? Will the market share order be the same? Will Android have broken out in the consumer market given the anticipated flood of new devices? 

Regardless, smartphones will occupy a larger chunk of the handset market in three years -- perhaps 20% to 25%. And with smartphones come bigger dataplans and more Internet engagement

Senate Call for FTC Look at AT&T-iPhone Deal Unlike to Go Anywhere

Four US Senators, led by John Kerry, called on the FTC to investigate whether exclusive deals such as the iPhone-AT&T deal were harming competition and stifling consumer choice in the wireless market. From Senator Kerry's letter:

We ask that you examine this issue carefully and act expeditiously should you find that exclusivity agreements unfairly restrict consumer choice or adversely impact competition in the commercial wireless marketplace. We ask that you consider the following factors in making this determination . . .

Whether exclusivity agreements are manipulating the competitive marketplace between commercial wireless carriers. Specifically, whether the ability for a dominant carrier to reach an exclusive agreement with a handset manufacturer is inhibiting the ability of smaller, more regional carriers to compete . . .

The not-so-subtext here is the AT&T-iPhone relationship, but maybe also the Verizon-Storm and Sprint-Pre deals as well. One wonders whether some of the involved Senators want the iPhone and are not on AT&T.

Do these deals restrict consumer choice? -- absolutely. Do they harm competition? That's not as clear.

We have a very competitive handset and operator market in the US. But what you'd likely get if you had all handsets available to all consumers, as you do in many EU countries, is a race to the bottom in terms of cost/price. Some consumers would stay or go to the "best network," but most consumers would simply go with the cheapest plans.

The carriers know this and increasingly recognize that, as the smartphone segment grows, they're on the cusp of "dumb-pipe" status. Opening up the market further would accelerate this development, notwithstanding the promises of app stores, etc. Exclusive handset deals are one of the few things that differentiate them. 

Telecoms are powerful enough to prevent any further opening up of the market. So don't expect any concrete action on Senator Kerry's letter. Or if there is an investigation, the conclusion will likely be that investment would be harmed and thus consumers . . . Plus ça change. 

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Update: Incoming FCC Chair (approved yesterday) Julius Genachowski made a statement today in which he said he would "act accordingly to promote competition and consumer choice." We'll see . . .

Palm Pre Playing Mostly to Sprint Subscribers

This should come as no surprise, but reportedly the Pre is not luring new subscribers to Sprint. According to Bloomberg on Wednesday:

A survey of retail sites showed that most buyers of the Pre are already Sprint subscribers, helping the carrier retain customers, Chicago-based Jennifer Fritzsche said in a report today. Palm began selling the Pre exclusively through Sprint in the U.S. on June 6.

The research suggests the Pre isn’t drawing customers away from larger rivals AT&T Inc. and Verizon Wireless, Fritzsche said. Sprint has lost more than 4 million contract customers in the past year as those carriers introduced more feature-heavy, Web-equipped phones, like the iPhone and the BlackBerry Storm.

As we previously speculated:

The Pre has prevented me, a Sprint subscriber, from defecting to AT&T to get the iPhone but it's unlikely to lure people from AT&T in anything like the numbers that the iPhone has driven for AT&T.

When the Pre comes to Verizon in 2010 -- if the iPhone hasn't by then -- it should see strong sales. So while the Pre will probably stop some of the subscriber bleeding for Sprint, it's not going to turn in big new subscriber gains. Discounting is proving to be a much more successful strategy for the carrier (i.e., Boost's $50 plan). 

I argued before that Microsoft should take a hard look at buying Palm and largely replace Windows Mobile with Palm's WebOS. It could maintain both of course. It's unlikely that Redmond will make a bid for Palm given that that would amount to an admission WinMo is in big trouble. There's also the hope that 7 remedies some of the complaints about the the OS. 

As I've argued before however, Apple and Android are on the consumer left, BlackBerry is on the enterprise right with the Pre somewhere in-between. Notwithstanding LG and HTC's commitment to WinMo, enterprises can opt for BlackBerry and consumers will be inclined to choose other handsets, but for aggressive discounting. 

As for Sprint, it will be time to take a hard look and further dataplan and voice discounting if it hope to reverse direction and start growing its main business. Let the price war begin anew!

Android 'G2' to Be Called 'myTouch 3G'

The forthcoming T-Mobile Android G2/Ion/Magic will be apparently be formally called "myTouch 3G" according to the Wall Street Journal. It will go on sale at some point in the next couple of months and be the first of an anticipated deluge of Android-based devices to hit the US market.

The forthcoming myTouch 3G has no physical keyboard unlike the new Samsung Bigfoot (Android), which will also be sold by T-Mobile in the US at some point this summer.  

Google itself stole some of T-Mobile's thunder around the G2 by giving it away to hundreds of people at its recent developer conference. As a consequence there have been a number of reviews of the device on popular tech blogs and news sites. I have one and like it very much but find the overall experience to not match the iPhone's, although there are some features that are more desirable. 

These many soon-to-arrive Android devices will be appealing to consumers who want an "Internet phone" but who don't want to switch to AT&T to get the iPhone. Android isn't yet in a position to compete with Windows Mobile or BlackBerry for enterprise customers. But Windows Mobile phone consumer sales may be most vulnerable as more Android phones roll out.

Finally, as many more Android device hit the market and extend the reach of Android Market, its appeal to developers will grow accordingly. Apple is clearly (in my mind) making a mistake by staying with AT&T and may find itself with the "cadillac" device but with a de facto cap on its market share because of its carrier exclusivity. 

Study: 40% of iPhone Users Online via Mobile More Than PC

AdMob and comScore just put out results of a study (n=7,300 US mobile users over 13) that contains a lot of interesting demographic and behavioral data about the similarities and differences between iPod Touch and iPhone users. However, by far the most important finding of the study -- consistent with what we've been arguing around here -- is that 40% of those users are going online more often on those mobile devices than through a PC (see graphic below). 

While this is self-reported data, it points toward a near-term future when growing numbers people use their smartphones as primary and their PCs as secondary ways to access the Internet. (See also, here and here for more confirmation of this.) This phenomenon is already true in many developing nations, where mobile phones are outstripping PCs for Internet access -- and where search volumes on mobile devices are approaching or exceeding the PC accordingly.

That single 40% data point alone is the answer to the "why" question of mobile marketing -- not the "4 billion phones vs. 1 billion PCs" statement that one often hears in the first couple slides of a presentation. Another striking finding: "5 in 10 consumers on both iPhone and iPod touch devices use the mobile Web more frequently than they read printed newspapers." Indeed, we just posted "Smartphones are the new print."

Below are slides showing the percentage of iPhone/iPod Touch users who use mobile more than the identified medium:

 Mobile more than . . .

One could argue that the smartphone is the everything media device: a newspaper, magazine, TV, radio, PC rolled into one. But wait, there's more . . .

And now for the demographic information (verbatim from the release):

  • iPhone users are generally older. 69 percent of iPod touch users are between 13-24 years of age, while this same age segment represents just 26 percent of iPhone users. 31 percent of iPhone users are 35-49 years old, while only 12 percent of iPod touch users fall in this age segment.
  • In total, 74 percent of iPhone users are over the age of 25, compared to 31 percent of iPod touch users.
  • More than 70 percent of users on both the iPhone and iPod touch are male.
  • In line with the older demographic composition of iPhone users, they also have higher incomes. 78 percent of iPhone users have an annual household income of at least $25,000, compared to only 66 percent of iPod touch users.
  • iPhone users are more likely to have children than iPod touch users, most likely due to the age difference in the two groups. 46 percent of iPhone users have children, compared to only 28 percent of iPod touch users.
  • In the next six months, iPhone users plan to purchase clothing (57 percent), entertainment (47 percent), and travel (45 percent), while iPod touch users plan to purchase clothing (61 percent), entertainment (53 percent), and cell phones (36 percent).
Age breakdown

Is the Pre for Consumers or Business Users?

Boosters and critics of the new Palm Pre want to compare it to the iPhone, which makes sense. But is it more appropriate to compare it to BlackBerry devices? Palm's original Treo traction was among business users, many of whom subsequently adopted BlackBerry.

Forbes discusses the business outlook for the new Palm device (which I'm going to get this weekend or die in the attempt):

Traditional "Palm shops" or companies that have long worked with Palm will have a built-in interest in the Pre, says Alves. That could include corporations that support Palm's Treo line, but want to upgrade to a newer Palm phone. Not all of these companies are likely to migrate, however, as the Pre is a radically different device running on a brand-new operating system, webOS.

WebOS could be its own selling point, says Alves. Some corporations may be intrigued by the operating system's new ideas, he contends. Palm created webOS to toggle between several open applications and streamline multiple calendars and e-mail accounts--features that should appeal to professionals as well as other users.

Of course the distinction between business users and consumers is blurred on its way out, as BlackBerry has broadened its appeal to consumers and the iPhone continues to add features that appeal to business users' IT departments (e.g., exchange support, encryption). The Pre also will have "crossover appeal" in both categories. 

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Related: According to a report in AllThingsD, a JP Morgan Chase analysis estimates that Palm has so far shipped 100K Pre units. 

Nielsen: iPhone Users Older, Richer than General Mobile Demo

The conventional belief about mobile phone and Internet users is that they're younger. Perhaps true as a broad generalization, it's not true for BlackBerry and the iPhone where data plans are costly and/or the devices come through the company or are used for work. Older demographics abound.

Indeed at our Internet2Go event earlier this year, the Yahoo!-Cramer-Krasselt keynote discussed how Porsche was able to reach more difficult-to-reach business types (prospects) through mobile, BlackBerry especially.

Picture 14

 Here's how the campaign performed online and in mobile (better across all metrics):

Porsche Campaign
Source: Cramer-Krasselt

Nielsen does some demographic and behavioral analysis of iPhone users in the US and finds: 

  • 40% have household incomes of $100K or more – twice the ratio among all subscribers (19%)
  • 98% of iPhone users use the data features of their phone
  • 88% use the [mobile] Internet (making them 4x as likely as the typical subscriber)
  • 75% download apps (5x as likely as the typical subscriber)
  • 72% used location based services (7x as likely as the typical subscriber)

Furthermore, 53% of the iPhone user base in the US is older than 35:

 Nielsen iPhone age segmentation

BlackBerry is going to show very similar demographics in terms of age and income distribution. 

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Related: Forrester has similar (but somewhat contradictory) data about iPhone users:

Forrester iPhone

Is the Smartphone Landscape That Confusing?

The media survive on drama. Accordingly they are playing up competition in the smartphone market: Pre vs. iPhone vs. Android vs. RIM (with little mention of Windows Mobile or Symbian lately). For example, Fortune's Jon Fortt writes:

[T]he [smartphone]landscape has changed dramatically. Suddenly Palm appears to have a potential hit with its new Pre, and Google is showing off slimmer second-generation (G2) Android phones. (I've used both the Pre and the G2, and they're pretty darn nice.) All of this new competition is good for consumers, but probably not for Apple's profit margins.

Also the NY Times writes

But smartphone shopping has suddenly grown more complicated. BlackBerry’s new app store, App World, is good, and growing. Virgin Mobile and Boost recently debuted smartphones good enough to serve budget-minded technophiles. And Palm’s new Pre is very nearly the iPhone’s equal . . .

For people in the market for a high-end phone and willing to bear the payments, the market really isn't that complicated. It's true that Apple now has rivals that offer devices better than they once were -- and perhaps "good enough" for those who want to remain with Verizon or Sprint. However, the Pre, the G2 and BlackBerry at this point don't rival the iPhone's total user experience. They don't.

The "I want a keyboard" objection that one hears, favoring the Pre or the G1, is based generally on perception and not experience. (The BlackBerry is almost in a category by itself on that front.) As I've said in the past I had that bias until I got used to the virtual keyboard on the iPod Touch. Now I wouldn't return to a physical keyboard and find it awkward. Indeed, while it may facilitate texting, the prospect of using the keyboard to enter search queries or URLs on the Pre is very awkward (as was flipping the phone into landscape mode for the G1 before the cupcake update).

Very heavy text messenging users and those who have become habituated to BlackBerrys through their jobs will probably still prefer a physical keyboard, but that's not the bulk of users out there. The G2/Ion, HTC's successor to the G1, eliminates the physical keyboard entirely. I have one and have been using it daily. It's a very nice phone but it's still no iPhone. For example the virtual keyboard on the iPhone beats the HTC virtual keyboard on a number of fronts. 

A valid objection to the iPhone (beyond price and AT&T-related objections) is the fact that more than one app still can't run at one time. You can't listen to Pandora while answering email, for example. We could also critically discuss battery life (now improved) or the poor quality of the iPhone's phone. And one could go down the list of phones comparing them feature by feature. Each one has its selling points but none holistically matches the iPhone user experience. I don't have an iPhone and I won't switch to AT&T, the weak link in the overall iPhone experience. But I've been using the iPod Touch for well over a year as well as other devices side by side.  

While the competition is getting better -- good news for users who don't want to move to AT&T -- the marketplace still isn't that competitive or confusing, despite what the press may be reporting. 

Consumers Interested in Lower Cost Service Plans

We've got two contradictory but seemingly parallel trends going on in the US mobile market: consumers upgrading from feature phones to smartphones (an related data plans) and users looking for cheaper plans and options. For discussion of the first trend, see: The Mainstreaming of Smartphones.

On the other side of the spectrum we've had a price war going on in the pre-paid segment that has yet to break through to post paid (I'm keeping my fingers crossed). Boost, Virgin Mobile and MetroPCS have been trying to match each other with aggressive pricing on all-you-can-eat voice and data plans. Most aggressive among them is Boost's "all-in" plan for $50 per month. That plan has been terrifically successful for parent Sprint

The PR and advertising around these plans, together with "organic" interest because of the recession is driving online research and search behavior. Research firm comScore just put out some interesting data showing consumer visits and search behavior around these pre-paid carriers and their plans are way up: 

 Picture 2

Also interesting is the fact that more, older consumers are looking at these pre-paid options as a way to save money (probably vs. current carrier plans):

Picture 3

Reportedly, "organic" clicks to carrier sites are way up, while paid search clicks (ads) are down. To me that indicates that consumers have heard about deals (via other media or WOM) and are seeking them out directly via search engines. 

The Mainstreaming of Smartphones

Everyone who reads this blog or pays attention to trends in the mobile market knows that smartphone users -- iPhone users in particular -- are much more engaged with the mobile Internet than conventional mobile phone users. Replacement cycles are also getting shorter, causing more people to turn in their "feature phones" for these higher end devices.

While price (handsets, data plans) is often the main driver of these buying decisions (witness the $99 iPhone), culture has a powerful if less tangible influence on consumers. The NY Times covers the latter aspect of the phenomenon:

For a growing swath of the population, the social expectation is that one is nearly always connected and reachable almost instantly via e-mail. The smartphone, analysts say, is the instrument of that connectedness — and thus worth the cost, both as a communications tool and as a status symbol . . .

Smartphone ownership hovers around 13%-14% of the US mobile handset market. Recently, we asked consumers who didn't currently own smartphones whether they intended to upgrade in the near future:

Smartphone purchase intent Opus

n=603, April, 2009

Our guess is that we'll hit 25% smartphone penetration in the next several years. That still leaves lots of less smart phones where SMS assumes a much greater share of the activity. 

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Related: The Yankee Group projects that 41% of US consumers will upgrade to a smartphone as their next mobile device. The firm also claims that by 2013 smartphones will represent 38% of the market. 

I think this latter number is aggressive, but if pricing (handsets, plans) is right it could be approached. I would say it's probably closer to 30% of all handsets (up from 14% this year) on the aggressive end. 

I don't know what time frame is being used regarding the 41% number above (next handset purchase). But if you look at the LMS/Opus chart above, you see that 41% are planning on buying smartphones -- in agreement with the Yankee figure -- with only 20% saying it will happen in the next year.

Sprint: Pre Breaks (Our) Sales Records

According to a post on CNET, quoting Tim Donahue, vice president of business marketing for Sprint, the company said the the Pre had broken sales records over the weekend:

"We experienced our best one day of sales and single weekend sales for any phone we've launched in our history," he said. "We sold out of the device over the weekend in most of our store locations. And it happened at a much faster rate than we had planned on."

I had made an online appointment at a relatively large and busy local Sprint store early Saturday (for Monday, first one available) to try and get the phone. I indicated that I wanted a "handset upgrade" and that I was interested in buying the Pre. There was no email indicating whether or not (in fact) I would find the phone at my store. 

When I called yesterday before my scheduled appointment I asked: "I want to buy the Pre, do you have any in stock?" The torpid sales rep on the other end said, "no." Period. He didn't say "I'm sorry we don't have any but we'll put you on a list." Nor did he offer to contact me when some come in or direct me to a store that might still have one. 

By playing "hide the ball" with Pre supplies Sprint got to claim a sell-out but sold fewer Pre phones than it might have otherwise. Furthermore, Sprint is blowing it by not making it easy for me -- a loyal Sprint customer for years with two unlimited plans ($200+ per month) -- to find one of these phones. They should have made them available to loyal customers to buy online in advance or buy online and pick up in local stores. That would have satisfied customers like me and added incremental sales.

But I guess nobody thought of that.  

Market Confusion: Palm vs. Apple

Wall Street woke up Monday morning to stories and reports of a generally successful Palm Pre launch over the weekend. Then at around 1pm Eastern a Steve Jobs-less Apple took the stage and demo'd a range of new and pretty well-received upgrades: iPhone (3Gs), a $99 version, improved battery life and a range of new features and capabilities, including MMS and video. Some of these were predicted, some were not. Voice control turns out to be more extensive and elegant (from afar) than imagined. And video is a sexy and much in demand feature. 

Here's how the two companies' stocks performed today:

APPLE VS. PALM What this indicates to me is that the market is a bit confused regarding how to interpret the news: will the Pre impact iPhone sales? Will the iPhone upgrades blunt Pre demand?

I will still be pursuing a Pre (despite my unsuccessful effort so far). But I believe that Palm and Sprint made a big mistake by not making more available during their weekend window. Now the media coverage will largely shift to the new iPhone until the device ships in two weeks. 

The range of apps and apps-related features demo'd by Apple today made the Pre look limited and lacking by comparison. However the iPhone did not come through with the ability to run multiple apps at once. That's either a philosophical position or a battery life issue -- or both.

While there will be a bunch of side-by-side iPhone 3Gs vs. Pre comparisons, the next big media opportunity the Pre will get (unless there's a big marketing campaign) will be when it launches on Verizon next year. 

Mobile Apps and the Future of Handheld Computing

Mobile apps pre-date the iPhone but the iPhone made the market. Now there are a growing number of startups that are focused on building mobile apps -- and not the PC Internet. The just-launched Pre is apps poor right now, although (among others) a couple of high profile mobile companies have launched apps for the Pre: Zumobi and uLocate (Where)

What's starting to become clear is that mobile apps are a critical success factor for any platform that wants to remain competitive over time. According to a new study from a firm called GravityTank (reported in the NY Times), mobile users are heavily engaged with mobile apps:

  • Respondents have downloaded an average of 23.6 applications to their phone and use an average of 6.8 apps every day.
  • Nearly half (48 percent) of phone owners report shopping for apps more than once a week. About the same number (49 percent) report using apps on their phone for more than 30 minutes a day.
  • 32 percent said they used portable gaming devices less because of their app-enabled phones. Other technologies and media also suffered; 31 percent said they read newspapers less; 28 percent use GPS devices less; 28 percent use their MP3 players less; and 24 percent are watching less television. 

But there's also the PinchMedia data that show rapid abandonment of apps by users after a short usage period.

Android has plenty of apps but I would argue it's a platform focused on mobile Internet browsing. Apps are largely perceived by Google as an interim step. Vic Gundrota, Vice President of Engineering at Google, made the point at the recent Google developer conference that publishers wouldn't want to build apps for multiple platforms and so would focus their efforts on the (mobile) Internet more broadly. That's a simplification of his comment but it reflects that Google is betting on the mobilization of the Internet longer term. However it does have a display ad product for apps as well. 

I think what we're seeing is the emergence of a kind of hierarchy in mobile usage: favorite apps trump the browser, bookmarks on the browser trump search as a navigational tool. All this is subject to change and evolution but that's what I observe in my own behavior and in the behavior of others. 

Whether apps developers take to the Pre will impact its long term success. Right now, as mentioned, there are reportedly few apps available (and limited developer interest) but if sales continue to grow (especially after the Verizon launch of the Pre next year) apps developers will probably port their apps over to the new WebOS platform. 

If there are truly five mobile apps platforms that remain standing after a couple of years -- iPhone, RIM, WinMo, Symbian and WebOS -- then there will be more demand for products such as those offered by Rhomobile, which enables enterprises to build "native apps" for each of the major smartphone platforms through a "write once, publish everywhere" software framework.  

Palm Pre Launch a Stage-Managed Success, Apple Announcements Shortly

Sprint's forced Pre shortages seem to have paid dividends. Various financial analysts estimate the device sold around 100K (or so) units across the US over the weekend and sold out in most places. According to the NY Times:

Jennifer Walsh Keifer, a Sprint spokeswoman, said late Saturday that Sprint had sold out of Pre phones at a number of locations around the country and that the company was doing its best to restock stores.

This is all bogus because Sprint wanted to create shortages to make a sellout more likely. The company accordingly wanted to create the strong perception of demand to avoid negative coverage today had it not sold out. As a Sprint customer I received at least five emails on Saturday from Palm and Sprint alerting me to the fact that the Pre went on sale. But there was no specific information about where I could buy the phone. I want the Pre but I resent the manipulation of supplies for PR/marketing purposes. 

However the Pre's moment in the sun may be over as media outlets eagerly await new iPhone related announcements this morning at the Apple WWDC in San Francisco. I won't reproduce all the rumors here, there are many. If you're interested, there are a range of places online to see live blogging of the Phil Schiller keynote, including on the NY Times site

There are two proclaimed advantages that the Pre has over the iPhone in its current state: a physical keyboard and the ability to run multiple apps at the same time. The first one is actually not an advantage. It's a perceived advantage. 

I was initially very critical of the iPhone's on-screen-only keyboard until I got my iPod Touch and gained experience using it. Now I wouldn't want a physical keyboard. The Android G1 was also touted as better in some respects because of the fact of a physical keyboard. Interestingly, the forthcoming G2/ION has only a virtual keyboard. The Pre has no virtual keyboard. And although I don't have one in my hands yet, I can imagine the awkwardness of inputing queries on the Pre. 

The "cupcake" update for Android added a virtual keyboard to the G1 to rectify similar awkwardness on that device. 

The Apple keynote begins at 10 a.m. Pacific/1 Eastern. If Apple's 3.0 software update doesn't allow multiple apps to run simulatenously (don't recall if it does) then the Pre (and Android) will still have bragging rights. But I suspect there will be enough new stuff to reduce the Pre to another wannabe. 

Pre Embraced by Google, 'Dissed' by Apps Developers?

While there are lists circulating that show which Best Buy retail stores will carry the Palm Pre, the Best Buy website shows that it's not yet available and will carry an $800+ price tag without a two-year contract with Sprint. That will effectively kill all non-Sprint related buys. Meanwhile the Google Mobile Blog reflects that Google will have a very prominent place on the Pre:

Palm Pre phone's webOS works great with Google Search, Google Maps, and YouTube, which are built into the device. You can also easily sync your Gmail, Google Calendar, and Google Contacts to Palm Pre.

We're big fans of Palm Pre phone's universal search feature. Just start typing a query from the home screen (no need to launch the browser). If your query doesn’t match any contact info or the name of an application on your phone, you’ll be prompted to search either the web with Google, local places on Google Maps, articles on Wikipedia, or Twitter.

But the Pre apps store apparently is quite limited right now in its offerings. This was a point of negative criticism among otherwise generally positive reviews from several device pundits over the past couple of days. Sprint and Palm are apparently not concerned believing that now that they have built it the developers will come. (If it sells the developers will probably come.) Yet there's still reason to question that assumption. Recall Skyhook's developer survey:

56% of all developers surveyed will port their app to other platforms. Developers are most interested in Android. 58% of non-Android developers plan to port to that platform, while 40% of non-iPhone developers plan to port an app to that platform. 26% will port to RIM, and 20% will port to Windows Mobile.

Developers are least interested in Palm and Symbian, with only 8% and 9% of developers planning to port their applications to those platforms, respectively.

And CNET offers more anecdotal evidence of the same attitude: 

"My sense is that this will lead to Apple increasing their lead in the market even more," said Bart Decrem, CEO of Tapulous, a small developer that creates applications exclusively for the iPhone. "It will be a tremendous challenge for Apple's competitors that are trying to build their own application stores to get traction with developers, because we're in no rush to work on other platforms."

Pre at Best Buy

Without a healthy selection of apps the Pre probably cannot be competitive with the iPhone long term.

The Pre Gets a 'B+'

If we had to assign a letter grade to the early reviews of the Pre, it would be a strong "B" or "B+". The early Boy Genius review, the David Pogue (NYT) review and now the Walt Mossberg (WSJ) review published today all offer good and bad. Mossberg and Pogue are mostly positive, saying the Pre is a "credible challenger" to the iPhone and and "elegant contender." In fact, Mossberg blesses the device as the "best competitor" to the iPhone that he's seen so far.

The Palm app store is a weak link that Mossberg focuses on especially as a deficiency vs. the iPhone. But the Pre is unique among iPhone challengers in that it has the same "multitouch" on screen experience, which could violate Apple's IP/patent (but that's a decision for others). 

Much is made by keyboard lovers of the Pre's physical QWERTY keyboard. However, what's interesting is that the same was said of the G1 and now the HTC G2/Ion/Magic, which is an advance but still no iPhone, has eliminated the physical keyboard. I too was a virtual keyboard detractor until I lived with the iPhone Touch for awhile. Now I wouldn't go back to a phone with a physical one. 

But wait, I will be going back . . .  I'm going to try and get a Pre as a Sprint customer. Indeed, the Pre has keep me from jumping ship to AT&T for the iPhone. I hope that Sprint's strategy to create fake scarcity (to build buzz and demand) doesn't prevent me from getting my hands on one in the next couple weeks. My loyalty to Sprint is thin. 

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USAToday's Ed Baig offers another positive review of the Pre.