PayPal today announced a deal with Discover Card that will potentially bring its mobile payments services to more business locations than any of its rivals, including Square. The potential reach is reportedly seven million merchants.
The new in-store payments capability should be live by Q2 of next year. Consumers will be able to pay by swiping a PayPal card, that in turn backs onto a credit card or checking account or PayPal account balance. In that instance PayPal is no different than using a conventional credit or debit card. However for some subset of merchants (but still perhaps millions) consumers will be able to enter a mobile phone number and a security PIN on the retailer POS terminal (as in the Home Depot implementation).
That mobile + PIN scenario is potentially faster and more secure than a card swipe. Today there are roughly 16 major retailers that have implemented PayPal in stores. However number is expected to grow by the end of the year in advance of the Discover rollout.
Yet PayPal/eBay will need to educate and aggressively market the service to consumers if it hopes to drive adoption. There will also need to be incentives and rewards to get consumers to try the system. Even though the mobile + PIN approach is more secure than a card swipe consumers often express security concerns about mobile payments. There's a perception they're less secure.
The deal with Discover now vaults PayPal back to a leadership position in mobile payments. However mobile payments isn't a zero-sum game. There won't be a single winner. Several major competitors can operate and succeed. Beyond PayPal and Square the question is: who will be the other winners?
See related posts:
Yesterday I posted data from Chetan Sharma (from US carriers) that reflected growing smartphone demand and waning demand for feature phones. However Gartner's latest handset sales data reflects a decline in smartphone sales from last quarter:
Worldwide sales of mobile phones to end users reached 419 million units in the second quarter of 2012, a 2.3 percent decline from the second quarter of 2011, according to Gartner, Inc. Smartphone sales accounted for 36.7 percent of total mobile phone sales and grew 42.7 percent in the second quarter of 2012.
Unlike other handset figures in the market these data represent actual handset sales vs. "shipments." Samsung is now the global market leader, followed by Nokia and then Apple. Nokia's share is now just under 20% of global handset sales. Half of Samsung's 90 million unit sales were smartphones according to Gartner.
By contrast the firm said that demand for the iPhone weakened, "as sales fell 12.6 percent from the first quarter of 2012, but grew 47.4 percent year on year." This was reflected in Apple's Q2 earnings, which missed expectations based on lower iPhone sales. The suggestion is that consumers are waiting for the next iPhone to be released.
In a related bit of data, gadget blog The Verge published results of a survey conducted by Apple at some point in the past (date unreported). The sample size was very small (n=89). The data are being exposed as part of the Apple-Samsung IP trial going on now. The survey asks why users chose an Android device over an iPhone.
Top reasons for buying an Android among those who considered an iPhone
The fact that the top reason for choosing Android is "wanted to stay with wireless service provider" indicates this survey was probably conducted before Verizon obtained the iPhone, which was in early 2011. The iPhone is now available from all major US carriers, except T-Mobile, as well as several pre-paid carriers. There's enormous pressure for Apple to deliver an exciting new piece of hardware when the next iPhone is announced in September.
Returning to the Gartner data, the firm said that Nokia is under pressure at both ends of the market. Low-cost Chinese OEMs are hurting the company's feature phone business, while its "Lumia devices continue to struggle to find a place in consumers' minds as a replacement for Android."
Mobile industry and carrier watcher Chetan Sharma has pulled together mostly carrier-published data for a mid-year update across a range of topics relevant to the wireless industry. I pulled four of his slides below; however you can see the full presentation here.
The first slide below shows increasing smartphone penetration in the US and abroad. No surprise here; this has been in the survey data for months. In Q2 smartphone sales exceeded 70% of new handset sales in the US.
Outside the US smartphone penetration isn't rising quite as fast. However it will accelerate and US smartphone growth will start to slow over the next 12 to 24 months. Feature phone sales in the US are now clearly in the minority.
The next slide shows handset market share by manufacturer, with feature phone sales representing only about 30% of total handset sales this year.
Particularly striking in the chart above are the following:
The graphic above shows the relative shares of voice and data on US carrier networks. Data, in red, now entirely eclipses voice. In 2009 the two were had nearly equal shares of traffic on carrier networks.
Finally, the following chart shows the ratio of WiFi-only tablets tablet sales with carrier network connections.
I'm drawing a few inferences but it appears the data show consumers are avoiding additional carrier fees and service plans, preferring to run tablets on WiFi networks. Notwithstanding some of the new shared data plans it appears that carriers will not derive significant new revenues from the growth of tablets.
With nearly 50 million tablets in the US market, carrier-networked devices constitute roughly 8% of the total. The lure of discounted devices in exchange for two-year contract commitments isn't succeeding in getting customers to pay additional carrier fees. Beyond basic consumer resistance to new fees, the $199 Kindle Fire, Nexus 7 and potentially forthcoming 7-inch iPad, undermine the appeal of carrier discounts.
Yesterday Starbucks and Square made a big announcement. The deal is huge for Square and will make it the payments processor for US Starbucks locations. The coffee-lifestyle company also invested $25 million in Square at a $3.25 billion valuation. Starbucks CEO Howard Schultz joined the Square board as part of the deal.
Here are the basic terms:
Why is this important and what's important about it? Clearly it's a massive win for Square, which becomes the undisputed "mobile payments" leader in the US with this deal. It brings, scale, prestige, brand recognition and revenue to Square.
However there's nothing actually new here for Starbucks from a consumer experience standpoint. Starbucks has offered mobile payments through its smartphone apps for some time. That will continue.
Square's "Pay with Square" consumer app and local business directory will also become an accepted form of payment at Starbucks. This will give a significant boost to the app, which hasn't been widely adopted.
I've described Starbucks before as "The American Idol of mobile payments." That's because it's in a nearly unique position to educate consumers and introduce them to mobile payments in a specific context, where they can experience the efficiency and convenience of paying without using cash or physically swiping their credit cards.
I've also recently written that it's this type of "point solution" experience that's going to be the driver of mobile payments rather than abstract, "horizontal" apps such as Google Wallet. Ultimately, however, Google Wallet and others may be the beneficiaries of the Starbucks-Square partnership and the "education" it brings to the market.
The high profile nature of this deal may motivate similar deals or the acceleration of mobile payments at other fast-food and "fast causal" eating establishments. I wouldn't be surprised, for example, if McDonald's initiated a mobile payments pilot of some sort in the very near future.
Just like Amazon, Facebook is building a phone. This rumor has been around perhaps for two years but Bloomberg seems to confirm it. The hardware maker is said to be the struggling HTC. Previously HTC released the ChaCha (pictured at right), with a dedicated Facebook button.
The ChaCha was a failure. Will a dedicated "Facebook phone" equally bomb? The chances are very good that it would see limited demand.
From Facebook's perspective the logic of its own device is understandable:
The problem is that iPhone and Android devices have dedicated Facebook apps. This will be sufficient for all but the most dedicated Facebook users.
The additional integrations and "cool things" that Facebook could do with its own version of Android won't be enough incentive for most people to buy the device. Younger users and first-time buyers making the switch from feature phones to smartphones might be enticed to buy such a device if the price were right.
The other major issue is privacy and data-mining. I'm making a bunch of assumptions when I say that a Facebook phone would likely collect even more data about individuals and their behavior (calls with contacts, sites visited, apps used, physical movements) than the existing mobile apps or online experience do. Thus concern that "your phone is watching/tracking you" would cause many to stay away and could even lead to regulatory investigations -- depending on how aggressive Facebook wanted to be with tracking/monitoring.
However I know that Facebook is more cautious about privacy these days and so it might be more restrained.
Although the rumors have been around for a long time, Facebook probably saw Amazon's success with Kindle and Kindle Fire and decided there was little or nothing to lose in making its own device. I just don't think many people will be very interested.
Update: On the Facebook Q2 earnings call this afternoon CEO Mark Zuckerberg said that it didn't make a lot of sense for Facebook to create its own phone. But we'll see early next year.
In the wake of yesterday's Apple earnings release -- including that it sold 17 million iPads -- Strategy Analytics has taken a crack at estimating the Q2 global tablet market. As with Gartner and IDC, Strategy Analytics' calcluations are based on "shipments," which generally do not accurately reflect consumer sales in the marketplace.
Strategy Analytics reported that a total of 24.9 million tablets were "shipped" in the second quarter. The resulting market share distribution was as follows:
Despite the fact that the Kindle Fire has sold several million units and the Samsung Galaxy Tab (7-inch) before it has enjoyed some modest success, there's no chance that 30% of the tablet-owning public are using Android tablets. In a year or so we may have a different market, espeically given the fast start for the Nexus 7, but for now it's almost all still about the iPad.
Good Technology's Q2 Data Report shows actual tablet activations in the enterprise market. (There's comparable empirical evidence on the consumer side as well.) What it reveals is that "iPads dominated tablet activations with 94.5 percent of total activations for the quarter (down from 97.3 percent in Q1 2012)." Comparatively, Android tablets accounted for 5.5% of activations, up from 2.7% in the previous quarter.
Good actually attributes Android enterprise tablet growth to the Samsung Galaxy Note, which is closer to a giant smartphone than a tablet. Regardless, we're likely to see Android start to genuinely gain tablet market share in the coming quarters -- driven by 7-inch devices if not across the board.
I was in a meeting when the Apple quarterly results came out this afternoon. As you've read, the company had revenue of $35 billion and profit of $8.8 billion. Still, this was below most analysts' expectations. Shares fell 5% in after-hours trading accordingly.
Quarterly device sales were as follows:
All the numbers came in under expectations except for the iPad; 17 million is a new quarterly record (vs 11.8 million last quarter). To date Apple has sold 83.8 million iPads on a global basis.
Sales of iPads will probably cross the 100 million threshold by the next earnings announcement. If not, then certainly by the end of the year.
CEO Tim Cook said that iPhone sales were likely depressed by talk of the forthcoming iPhone and consumers waiting for the new model.
The early success of Google's Nexus 7 tablet sales, on the heels of Kindle Fire's success in Q4 last year, establishes that the 7-inch tablet category is here to stay. Before Kindle Fire there were no successful Android tablets of any size. Kindle Fire's combination of rock-bottom pricing ($199) and Amazon content helped drive several million in unit sales. Now Google's new device is off to a blazing start.
The company just released its first TV commercial for the tablet (a very Apple-like spot).
As I previously discussed, the new Google tablet (starting at $199) is vastly superior to Kindle Fire. It now puts enormous pressure on Amazon to pull a rabbit out of the hat with its "2.0" release. Yet Amazon wants to release "five or six" new mobile devices (mostly tablets) of various sizes.
Apple is rumored to be releasing a smaller, lower cost tablet later this year. This is a defensive move for to prevent the iPad from being under-cut by lower-priced, almost-as-good products. A 7-inch iPad (or larger iPod Touch), combined with the Nexus 7, will likely dampen Amazon mobile device sales unless quality is dramatically improved.
Regardless, the rise of the 7-inch tablet category now creates additional options for consumers and additional complexity for advertisers and to some degree publishers. I suppose it's an argument for "responsive web design."
With Kindle Fire 2, Nexus 7 and the coming Apple 7-inch tablet (and the accompanying low price of these devices) we should see 7-inch tablets sell millions of units. Many people will now have smartphones, small tablets for travel and "on the go," and 10-inch tablets for home. PCs will largely be used for "work" or become secondary devices for most consumers.
Indeed, the device market is moving much faster than publishers and marketers. Publisher content and ads generally don't look particularly good on the 7-inch form factor. Tiny mobile banners are barely noticeable and landing pages look awkward filling only part of the screen. In addition, right now there are only a few apps optimized for 7-inch tablets. Smartphone apps look OK but often appear stretched or out-of-proportion.
All this will have to change -- and relatively quickly.
The PC market, where the attention of most publishers and marketers is still largely concentrated, is not going to grow. And by Q1 of 2013 there will be millions more tablets in people's hands. In fact, I believe that there will be 100 million tablets in the US market much more quickly than anyone is predicting: by the end of 2014.
With sales driven by competitive prices many of these will be 7-inchers, which don't play well with ads and content designed for smaller smartphones and which can't render apps, content or ads created for 10-inch tablets.
The rumor that Amazon was going to build a smartphone has been around for some time. However it has returned and gained new momentum of late, with the recent acquisition of 3-D mapping service UpNext. And an article last night from Bloomberg seems to confirm that Amazon will introduce a handset or handsets -- made by Foxconn, the company that makes the iPhone and iPad:
Foxconn International Holdings Ltd., the Chinese mobile- phone maker, is working with Amazon on the device, said one of the people, who asked not to be identified because the plans are private. Amazon is seeking to complement the smartphone strategy by acquiring patents that cover wireless technology and would help it defend against allegations of infringement, other people with knowledge of the matter said
Let's now assume that Amazon is making a smartphone -- a Kindle smartphone -- what is the outlook for such a device? One would assume, like Kindle Fire, that it will be built on a highly customized version of Android, with the same type of Amazon content integration as seen on the Amazon tablet.
The Kindle Fire was a sales success because of the strength of the Amazon brand and channel and the inexpensive price tag ($199). Amazon's brand won't be as much of a factor in the smartphone arena. An Amazon smartphone will have to compete on the strength of its features and on price. It's hard to imagine that Amazon will be able to compete on price because many Android phones are already very cheap or free (carrier subsidized).
Content (as in Amazon books, movies and music) also doesn't factor as significantly as a differentiator on smartphones it as potentially does on a 7-inch tablet. What matters on smartphones is the availability of apps. There's already a Kindle app for iPhone and Android; so users already have access to much of Amazon's content (though not cloud-based music or movies). And the Amazon app store is an incomplete version of Google Play (the Android market). In other words, the competitive advantages that helped drive Kindle Fire sales don't exist at all or won't exist to the same degree in a smartphone context.
The only way I could see an Amazon smartphone succeeding vs. other Android phones or the iPhone is if the phone were absolutely top-of-the-line and Amazon were practically giving it away (sub-$100). Otherwise I think we'll see a tepid response by consumers.
Beyond this, depending on what kind of finally shows up, I'm sure Amazon will be pulled into the maelstrom of mobile patent litigation.
Last week mobile ad network inMobi released tablet survey findings, drawn from 9,600 respondents in seven international markets. US responses were just under 1,000 (904). The company asserts that "tablet use has risen quickly to 29.5 million U.S. users, 11% of the total U.S. population."
By comparison, in January of this year the Pew Internet Project released survey data that showed 19% of US adults owned tablets (mostly iPads). And comScore released data showing that roughly 24% of smartphone owners also have tablets. If we extrapolate these numbers, the Pew data suggest that there are roughly 42 million tablet owners in the US (as of January 2012). The comScore data argue the number is closer to 56 million.
The inMobi number is too small, while the comScore number is probably too large. Pew is likely closer to the actual number of tablet users in the US at this point. However, by the end of the year it could be closing in on 70 million.
The inMobi survey data are from a report entitled, The Role of Connected Devices in the Consumer Sales Journey. Below are some of the top-level findings:
General consumption habits
Shopping and e-commerce
According to the survey data, "tablets have become the preferred device at home and smartphones are preferred on the go." These devices play different roles in the "purchase consideration cycle." Tablets are used in a "lean back" mode in the evenings and on weekends, almost exclusively at home.
A recent tablet-centric e-commerce report from Monetate also observed that tablets are used primarily at home, as a PC substitute, and offered the following advice:
With increases in website traffic from devices such as the iPad and Kindle Fire, e-commerce businesses must treat customers using tablets as a unique audience segment. Tablet users expect a different experience that takes advantage of their devices’ features, such as touch/swipe functionality and screen rotation.
Accordingly it's not enough to simply assume the PC site will translate onto tablets. While non-flash PC sites often render relatively well on tablets they typically fail to take full advantage of the tablet opportunity.
E-commerce optimization firm Monetate has published its latest "E-commerce Quarterly" report. The report addresses a number of issues including social commerce. For purposes of this post, I'll focus on the mobile and tablet findings.
The data in the report are drawn from "analyzing a random sample from over 100 million online shopping sessions on 100-plus major e-commerce websites." Here are some of the major findings:
Website Traffic Sources
Q1 2012 Conversion Rates by Device Category
Compare similar data from Marin Software. Directionally they're almost identical to the Monetate findings.
What both the Marin and Monetate conversion findings lack, however, is data about offline conversions. If those were tracked and factored in I suspect we'd see mobile conversion figures outstrip the PC and potentially tablets.
Monetate's focus is strictly on e-commerce conversions. But most people don't buy conventional products on their smartphone, though they may do things like banking transactions or buy apps or rent movies.
The use cases for smartphone are different than PCs and tablets, which are mostly used at home and often as a substitute for the PC. According to Monetate's report:
It seems clear that smartphone users are either doing more comparison shopping or are dissatisfied with the user experience. In fact, a recent study from comScore Inc., Shop.org, and The Partnering Group revealed that 43% of smartphone owners have used their mobile device while in a store for a shopping purpose.
Monetate also argues, despite that at-home usage of tablets, that there's a different user expectation vs. the PC experience:
With increases in website traffic from devices such as the iPad and Kindle Fire, e-commerce businesses must treat customers using tablets as a unique audience segment. Tablet users expect a different experience that takes advantage of their devices’ features, such as touch/swipe functionality and screen rotation.
This argues in favor of tablet apps as well as a tablet-optimized HTML5 site. Finally, the firm predicts that at current growth rates, "website traffic from PC users will dip below 75% in less than one year" -- meaning that smartphones and tablets will represent 25% of site traffic.
Almost nobody in the mobile handset business is making money right now except Samsung and Apple. Nokia and RIM, the former smartphone leaders, have almost seen the bottom drop out of their businesses over the past year or so. RIM hired bankers recently to consider its options. The company is almost in free fall.
Nokia had hoped that Microsoft would save it but that's not happened. The most optimistic discussions of Lumia sales indicate they're "mixed." Furthermore, existing Nokia Lumia phones won't be getting Windows Phone 8 upgrades. They'll have to settle with Windows Phone 7.8.
This fact, once made known to the general public, will essentially kill sales of current Lumia smartphones (unless carriers give them away). People will want the new and improved version of Windows Phones -- which won't be coming out until much later this year. That leaves two more quarters of weak sales for Nokia. Moreover, Nokia will be just one of several OEMs to be releasing Windows Phone 8 smartphones.
It doesn't look good.
The Sunday Times in the UK reported that RIM was contemplating either selling its handset business or seeking an outside investor such as Microsoft. Nokia also looks like a takeover target as its fortunes continue to decline. And with both of these companies struggling the likelihood that Microsoft will own at least a part of a hardware OEM grows more and more likely. Amazon is also a potential investor or acquirer mentioned in the article.
One now has to wonder whether, if Nokia had gone with Android, things would be any different at this point.
There were discussions between Google and Nokia before the latter went with Windows. According to a source I spoke with, Google was unwilling to agree to a co-mingling of Google Maps and Nokia Maps or substitution of Nokia Maps on the back end. It's unclear whether that was the dealbreaker or one of several issues that prevented a Nokia-Android deal. Microsoft did agree to use Nokia Maps and in fact Nokia does replace Bing Maps in the new Windows Phone 8 OS.
It is likely that Nokia would have sold more Lumia phones to date if they were powered by Android. That probably wouldn't have fundamentally altered the company's predicament but it would have made it marginally better. Yet HTC is building some very nice Android devices but being overwhelmed by the Samsung Android juggernaut all the same. The Taiwan-based company is struggling to remain profitable and recently abandoned the Brazilian market.
If that continues HTC could be another takeover candidate by early 2013. And if that's so it will dilute the value of Nokia and RIM as they seek "strategic options" to survive.
The long-anticipated Google (Nexus) tablet is set to debut this week at Google's developer conference, Google I/O. Gizmodo Australia has specs and apparent pictures of the device. CNET has additional information.
Gizmodo reports an 8GB model will cost $199, matching Kindle Fire, and a 16GB model will carry a $249 price tag.
Google's tablet announcement comes on the heels of the Microsoft Surface announcement last week. However Surface pricing wasn't disclosed. Rumors argue that the lower-end RT model will not come in below $599, with the higher end Pro costing at least $700.
Unless Microsoft can get the RT price down to $499, as I and others have argued, Surface is unlikely to compete with or impact the iPad very much. Rather it will likely affect competing Windows laptop sales.
The new Google Nexus tablet will probably have an immediate -- and potentially dramatic -- impact on Kindle Fire sales. The Kindle Fire is a nice upgrade from regular Kindle reading devices but a lousy tablet overall for other than accessing Amazon's content universe. The Nexus tablet is likely to be a much better device for Internet browsing with a larger app library. Android non-tablet apps will look better on a 7-inch device than they did on the 10.1-inch Android Galaxy Tab.
Those not loyal to Amazon will be inclined to choose Google's tablet over the Kindle Fire -- all things being equal. However we may see Amazon respond with a price cut, which would be very interesting since the company already looses money on every Kindle Fire sold (but makes it back on content and other sales).
No doubt you've already read a great deal about Microsoft's new hybrid tablet-PC, Surface. It's being described as Microsoft's challenge to the iPad. Some have already called it a "game-changer." But that remains to be seen. It's also probably more of a challenge to Microsoft's own hardware partners than to the iPad.
Surface is a "new family of PCs." There will be at least three versions of the computing device, sporting slightly different specs and features. The screens apparently will all be 10.6 inches. All will come with a version of Windows 8. Perhaps the most compelling feature of the device is a "smart cover" that also operates as a keyboard.
Unfortunately at yesterday's press conference, which I was not present for, the company provided no release date or pricing information. The latter is critical. However Microsoft said that Surface devices would be competitively priced. In the case of Surface for Windows 8 Pro, the company said it would be priced “on par with Ultrabook-class PCs." Right now Ultrabooks run from about $700 to $1,000.
If Microsoft hopes to compete with the iPad, the lesser Windows RT version will have to start at $499.
There are some who believe that Microsoft took the bull by the horns in creating Surface, frustrated that its partners were not building compelling hardware while the iPad increasingly stole PC sales. It may well be that this will be the "kick in the pants" that Dell, HP, Acer and the rest need to start developing sexier machines.
However it's more likely that this device -- provided it works well and delivers against its promise -- will compete with those same hardware partners. It could well capture sales that might have gone to Ultrabooks. I would also imagine that enterprises will adopt these machines, it's not as clear that consumers will. That's where price comes in.
Another factor is Windows 8 and the public response to the new OS and UI. Microsoft is no longer in the position it has enjoyed for the last 15 years: when it released an OS update people bought it (until Vista). Now Android tablets and iPads do provide a viable alternative for those not doing heavy duty Office-oriented PC content creation.
Windows 8 has so far received mixed to negative reviews. While its Windows Phone OS has been critically praised, the devices aren't selling. This is partly because the UI and OS are unfamiliar to smartphone owners who've already become accustomed to the look/operation of iOS and Android. There are also too many competing options. Android has taken Microsoft's place in the smartphone world; it has become the alternative-to-Apple software supplier.
If consumers find Windows 8 jarring they may delay buying or avoid it. That's why price is so important. Surface is a sexy little device that must be priced very aggressively to get consumer attention. Otherwise, Surface could go the way of the Zune or the even shorter-lived Kin.
We can now say that the Microsoft-Nokia partnership isn't working for either company. Nokia's woes are well documented: more job cuts, more losses, more deterioration in the core business. Lumia sales are weak on a global basis, especially in North America where Nokia was plotting its comeback. The company is in an accelerating state of decline, much like RIM now.
For Microsoft, which gave Nokia preferential treatment and established a special relationship, Nokia's fall has to be particularly disconcerting. Redmond is already providing billions to Nokia in support and marketing help. Just like the struggling economies of Europe, Nokia needs a bailout. The company is now a takeover target.
That raises the question: Will Microsoft be forced to buy Nokia, defensively? Most of the Asian handset makers have favored Android over Windows Phones. Indeed, Nokia should consider adding Android phones to its lineup -- unless precluded by its agreement with Microsoft. And that's probably the case.
Right now Nokia has about $12 billion in cash in the bank. Absent a takeover, that cash will prevent the company from disappearing any time soon. But it can't continue to operate in the current manner. Its exclusive relationship with Windows/Microsoft simply hasn't worked. Enough time has passed to make that statement.
There's almost no chance, given the current state of things, that Windows Phones will become the number two smartphone OS, as predicted by Gartner and IDC. Those forecasts were largely based on the reach and perceived brand strength of Nokia. That brand strength doesn't exist in North American and it's declining in other markets.
The chances are growing that someone will bid for Nokia. Rumors are circulating that it could be Samsung (denied by the company) or China's ZTE. However Microsoft will probably be forced to buy Nokia if it comes to that. By default the company would then be following the advice of several tech bloggers who suggested the same to compete with Apple with a more holistically integrated device.
Microsoft's Bing Maps also rely increasingly on Nokia's data and backend, another reason Microsoft may want to acquire the company. Nokia also holds valuable patents that enhance the takeover value of the Finnish company (and Android licensing value for Microsoft).
There will likely be some radical change to Nokia (sale or replacement of CEO Elop) by Q4 of this year if sales don't dramatically improve -- and they're not likely to with the iPhone 5 and Galaxy S III coming.
In January of this year the Pew Internet Project released survey data that showed 19% of US adults owning tablets (iPads). That was up from just 10% only a month before in December. Now comScore has released data showing that roughly 24% of smartphone owners also have tablets.
If we extrapolate these numbers, the Pew data suggest that there are roughly 42 million tablet owners in the US (as of January 2012). The comScore data argue the number is now 55 million. These figures seem entirely reasonable. Apple CEO Tim Cook reported 55 million iPads sold to date in February.
People use the term "tablet" but the market remains largely about the iPad. The only other two models with any traction are the Kindle Fire and the Samsung Galaxy Tab. According to Gartner Apple's share of the tablet market will be 61.4% at the end of the year. IDC says Apple had a 68% share of the global tablet market in Q1 2012.
Both of these figures are incorrect and largely based on shipment estimates. Shipments don't equal sales to consumers.
Perhaps I should say instead that people may be buying other devices but it still doesn't matter. According to ad network Chitika, based on an analysis of millions of impressions in the US, the iPad "accounted for 94.64% of all tablet based traffic." By contrast Chitika said that the nearest competitor, the Samsung Galaxy tablet, "boasts a lack luster market share of 1.22%."
Late last week ad network InMobi released its own tablet data, showing gains by the Kindle Fire and total Android tablet ad-impression share of 28%. That argues the iPad controls a 72% share of the total tablet market.
We're likely to hear an update of tablet numbers this morning from Tim Cook during the Apple WWDC keynote.
Back to the comScore tablet data: the company says that just over half of tablet owners are watching video on the device, while nearly 10% are doing so every day.
A year ago in March AdMob found, based on a survey, that 77% of tablet owners were using their PCs less. In addition 28% of respondents said that the tablet had become their "primary computer." Clearly tablet ownership does cannibalize PC usage, while smartphone ownership may complement it. Roughly 80% to 90% of tablets are used mainly at home.
Once Microsoft puts Office on the iPad it will become a true PC substitute.
Earlier today we got a refreshed device forecast from IDC. The firm believes that Android's market share will peak this year globally at 61% and decline to 52.9% by 2016. It sees Apple basically maintaining its current market share, while the company is bullish on Windows Phones.
Reiterating the notion that Windows Phones will dramatically gain share, IDC says they will surpass the iPhone by 2016 and ascend to a 19.2% market share. Here's how IDC justifies that prediction:
Windows Phone 7/Windows Mobile will gain share despite a slow start. Windows Phone 7/Windows Mobile will be aided by Nokia's strength in key emerging markets. IDC expects it to be the number 2 OS with more than 19% share in 2016, assuming Nokia's foothold in emerging markets is maintained.
Source: IDC, June 2012
The idea is that low-cost Windows Phones, made by Nokia, will do well in China, India and other developing markets. Yet so far there's really no indication that prediction will come to pass. Sales have been "mixed" at best. I have long believed that Nokia Windows Phones would enjoy modest success but not become the breakout product that both companies need.
Today ZDNet columnist Matthew Miller encouraged Microsoft to buy Nokia and pursue an Apple-like approach to the smartphone market. Indeed, Nokia as we know it today is quite unlikely to exist in 2016 let alone capture 20% of the smartphone market.
There have been rumors of a "Facebook phone" for at least two or three years. Facebook clearly needs to figure out mobile, so it's logical that Facebook would be talking again about a branded device. According to the New York Times over the weekend:
One engineer who formerly worked at Apple and worked on the iPhone said he had met with Mark Zuckerberg, Facebook’s chief executive, who then peppered him with questions about the inner workings of smartphones. It did not sound like idle intellectual curiosity, the engineer said; Mr. Zuckerberg asked about intricate details, including the types of chips used, he said. Another former Apple hardware engineer was recruited by a Facebook executive and was told about the company’s hardware explorations.
It's worth mentioning that there have already been quasi-facebook phones, from INQ and HTC (Status). The Status had the distinction of being the first phone with a "dedicated share button." By most accounts these phones are not huge successes. The Status appears to be an outright failure.
Presumably the model for any coming Facebook phone is the Kindle Fire, a highly customized version of Android. Facebook could then have an app store, develop mobile advertising, have a mobile browser and so on. The logic is clear.
The problem is that a Facebook phone is likely to fail. Most people would not want to "commit" that fully to Facebook and would likely be concerned about privacy and how their contacts and other data were being used or exploited by the software. By the same token, the availability of Facebook apps on major smartphone platforms is going to be sufficient for the overwhelming majority of people.
There will be a small slice of the population that would appreciate deep integration of Facebook into a handset (those might be younger users). But it will be a minority.
We may ultimately see a "Facebook phone" but I don't think it would be competitive with the iPhone and other Android handsets -- at least not in North America.
Yesterday AdAge reported that Amazon was in talks to buy mobile ad network Jumptap. However the report was speculative and the deal might just as easily not take place. Based in Boston, Jumptap holds 25 mobile advertising patents.
Beyond Jumptap's intrinsic appeal as leading ad network, the IP portfolio represents an added incentive to buy the company vs. one of its rivals. Yet the Jumptap overture appears to be part of a larger effort that Amazon is making to evaluate multiple ad networks for acquisition:
Amazon has kicked the tires on a few mobile-ad companies, including mobile-ad network Jumptap, according to two people familiar with the talks. Amazon and Jumptap declined to comment.
Amazon has also hired a former Microsoft executive (Jamie Wells) to build a mobile ad sales team, according to the AdAge article.
Jumptap began life as a mobile search company intended to provide white-label services to carriers and others that wanted to compete with Google. However the company was forced to "pivot" a few years later as that business proved limited at best. It has since found much more success as a display ad network.
In the recent ad network comparison we did for the report Finding the “L” Spot: The Importance of Localization to Mobile Ad Performance, I was surprised to see that Jumptap had much greater reach (in the three test cities) than the other networks, including Millennial and AdMob.
Even if it's not Jumptap, it's quite likely that Amazon will acquire an ad network, given its burgeoning mobile business -- though Kindle Fire sales have slowed dramatically.
I have also speculated that Facebook is another one that is likely to acquire a mobile ad network. However if the company does wind up buying Opera it would get the benefit of Opera's earlier acquisition of "ad mediator" AdMarvel.
In January I predicted that Amazon would buy a mobile ad network. Jumptap was one of the potential companies.
Here's a selection of our previous coverage of Jumptap:
Millennial Media puts out regular data about activity on its large ad network. However that data typically lacks historical context. It's a snapshot or a moment in time. It's more interesting to examine movement and trends over time.
This morning the Q1 Mobile Mix report came out. I've gone back to the equivalent report a year ago to compare metrics. In one instance the current report does compare smartphone and tablet penetration vs. a year ago. The most striking thing is that feature phone share on Millennial's network has declined from 23% to 7% since last year. By Q3 or Q4 it's likely to be below 5%.
In terms of operating system share, iOS and Windows have gained share relative to their positions a year ago. Apple's operating system is bolstered by the iPad. In Q1 2011 the top two tablets were the iPad and the Samsung Galaxy Tab. In Q1 2012 the top three tablets are the iPad, Galaxy Tab and Kindle Fire. Unfortunately, however, the report doesn't indicate volume of impressions by tablet.
Top app categories haven't changed that much in a year. Weather has fallen somewhat and Travel has appeared in the top 10.
Finally (though it may be hard to read) the list of Millennial's top 20 devices is pretty similar to last year. The iPhone is the top device and the rest are mostly Android devices. However, very surprisingly, several more RIM devices appear in the 2012 list vs. the one from last year. Given the continued delcine in RIM's sales there's no clear explanation for why RIM has gained positions.
Despite growing to 3% of Millennial's network overall impression share, no Windows Phones appear on the 2012 list.