IHS iSuppli released estimates for tablet market share (using shipments as the operative metric). However in the case of Apple and Amazon shipments is the same as sales to consumers.
Apple previously announced that in Q4 it had sold 15.4 million iPads and a total of 55 million to date. But we didn't know the number of Kindle Fire devices that had sold. Some analysts estimated it was between 4 and 4.5 million. Now iSuppli estimates it was 3.9 million.
With strong Kindle Fire sales in Q4, Amazon zoomed past Samsung to become the number two player in the tablet market. Overall in 2011 Samsung "shipped" more tablets; however shipments does not equal sales to end users. Below are iSuppli's global tablet estimates, showing Amazon with 6% of the market at the end of Q4.
I simply don't believe that Samsung has actually "outsold" Amazon. It may have "shipped" more devices but those devices have largely sat on retailer shelves. Furthermore, Samsung's recent announcement of the Galaxy Tab 2 (7"), with Android 4.0, may be another miscalculation. While it appears to be a nice device, a reported $400+ price tag all but guarantees it won't sell. At that price people will opt for iPads.
As I've repeatedly argued in the past no 7" tablet maker can charge more than about $250 now and expect to compete with Kindle Fire. Samsung would likely be taking a loss if it were to do so. Another way to potentially compete and still preserve margins is to get carriers to subsidize tablets. However this strategy has not worked and consumers have largely shunned carrier-subsidized tablets in favor of WiFi-powered devices. (People simply don't want to give any more money to carriers.)
One of the interesting observations that iSuppli makes is that in Q4 people may have been choosing between the iPhone 4S and iPad. In other words, more iPads would have sold if the 4S hadn't just been released. If that's correct some number of people who actually wanted to buy an iPad may have opted instead for the Kindle Fire because of price sensitivity. Indeed, the Kindle Fire is a vastly inferior device but that inferiority is masked to a degree by Amazon's content ecosystem.
In a related piece of news, Nielsen released some survey data on how parents and kids use tablets: games, education, entertainment in that order.
Once allies, now enemies, Google and Apple are finally confronting one another in court. That result has come about via this week's approval of Google's $12.5 billion acquisition of Motorola Mobility, which happened yesterday. Both the European Commission and the US Justice Department gave their OKs (with some caveats and reservations) to Google to acquire the struggling hardware maker.
Google partly bought Motorola Mobility for its patent portfolio and partly to own a hardware company that would allow it do develop a range of new products and user experiences.
Motorola, prior to the approvals, had won a couple of patent victories in Germany against Apple. Subsequently Motorola demanded just over 2% of Apple's sales in exchange for licensing several "essential" mobile patents. As a practical matter that would mean turning over billions to Motorola -- now Google (Steve Jobs is rolling in his grave). Apple rejected that demand.
Apple recently filed suit against Motorola in the US with an eye toward the German litigation:
Apple sued Motorola Mobility in a U.S. court on Friday in an attempt to stop Motorola from asserting some patent claims against Apple in Germany, according to the lawsuit.
The suit, filed in a San Diego federal court, argues that Motorola's German lawsuit against Apple breaches terms of a patent licensing agreement between Motorola and Qualcomm . . .
In the latest lawsuit, Apple says that as a Qualcomm customer, Apple is a third-party beneficiary of Motorola's agreement with Qualcomm. Under that agreement, Motorola's rights under certain patents are exhausted, Apple argues.
Samsung had been Apple's chief proxy for Android/Google but now Apple gets to slug it out with Google directly.
It's an understatement to say that the entire mobile patent litigation situation is "out of control." Perhaps the direct confrontation between Google and Apple will accelerate some sort of broader settlement so that everybody can move on.
The problem is that firms not directly making money from device sales are using IP litigation and licensing as an alternative way to generate revenue. So far this has proven quite successful for Microsoft, which makes considerable money off of Android sales even as its smartphone share continues to decline.
A flurry of hardware-growth projections have recently come out and, though I seem to repeat myself frequently on this point, their implications are quite profound. Accordingly, here are some of the numbers being pumped out . . .
Forrester projected this week that there would be 1 billion smartphones globally by 2016. The company also estimated that there will be 126 million tablets in the US by the same date. NPD said this morning that Android handsets with sub-$150 USD price tags will claim 80% of the smartphone market in Africa, India and China by 2015.
Cisco recently estimated that by 2016, "one-quarter of mobile users [on a global basis] will have more than one mobile-connected device, and 9 percent will have three or more mobile-connected devices."
Meanwhile the general PC market is likely to remain flat, especially in the consumer segment according to various estimates released in the past several months. Finally below are the Gartner 2011 mobile device and Q4 smartphone sales figures. Android's share is a little more than double that of the iPhone according to the IT consulting firm, although Apple had the top-selling smartphone in Q4. Microsoft lost share but the expectation is that it will still be one of the "big three" when the dust settles.
Though tablets are alternately classified as PCs and mobile devices by different firms, they are not traditional PCs. And given their reliance on apps and the absence of a traditional keyboard they're more like smartphones than PCs in most respects. Regardless, the proliferation of "mobile" Internet devices is accelerating. It thus won't be long (3 years) before PC Internet access is something of a sideshow or secondary tool for large numbers of people.
As mobile devices reach parity and then exceed PCs for Internet access, the cross-platform fragmentation described by Google in recent Q4 survey data (written up here) will be quite common. In other words, consumers will be using multiple devices throughout the day and week. It will be more complicated to track and market to those customers.
Source: Google-Ipsos (Q4 2011 survey data)
Most advertisers and marketers are, still tinkering in mobile, are ill-equipped to confront a future where the primary exposure to their brands and products is via smartphones or tablets and their PC websites are merely a secondary, "utilitarian" resource.
Earlier today Google released data from two related studies of US consumer shopping behavior during Q4 2011. The studies were both conducted online and fielded in January 2012. In both cases just over 600 consumers were surveyed. Both studies claim to be representative of their respective populations -- essentially e-commerce buyers who own smartphones (and tablets).
There were a great many datapoints in the material released. However, the bottom line is that consumers are now fully engaged with smartphones (and increasingly tablets) as part of their "online" shopping. Marketers and brands need to reach consumers in appropriate ways in each context -- mindful of the overall movement of users from platform to platform.
As a foundational matter, the internet was used as a shopping tool or research medium more widely than any other according to this research.
However "the internet" is not a single channel any more. Google and its research partner Ipsos found that consumers shopped and purchased via multiple device categories.
Beyond this basic insight the patterns quickly get very "non linear." The slide below reflects multiple categories of shoppers, some of whom start online and finish offline and some of whom visit the store only to purchase online or via mobile ultimately.
Google also said that 42% of respondents used more than one internet device simultaneously, while 68% started on one type of device or machine and then kept going or concluded on another (e.g., tablet-->smartphone). Interestingly, the content viewed on each category of device (PC, tablet, mobile) was basically consistent.
There were some differences in behavior, however. In this sample people used PCs much more than other devices to do price comparisons and to look for deals or coupons. And they were more likely to contact a retailer via smartphone.
Though not reflected above, video was heavily used by shoppers for product reviews/ratings, demos and to generally learn about products. But if you want to make video accessible to mobile or tablet users Flash must be avoided of course.
In addition these respondents used both apps and the mobile web to conduct research and to shop.
I could go on with more but the larger points are made already. People use PCs, smartphones and tablets to shop and buy. Brands must be prepared to interact with consumers at every point in the purchase "funnel," or perhaps more precisely: purchase continuum. That means being aware of how consumers use and interact with devices and offering device-friendly content and user experiences accordingly.
Mobile is no marginal or experimental experience for anyone any longer. Today, Forrester predicted that by 2016 there would be 1 billion smartphones on the planet. At that point the PC will be simply one of several ways that people get online.
And in the not-too-distant future hierarchy of devices and internet access methods it could well rank third out of three.
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.
For some time smartphones have been outselling PCs. And last week hardware tracking firm Canalys confirmed this was the case for the full year 2011.
The firm includes tablets -- it calls them "pads" -- in PC shipments. If it had not done so the numbers would look worse for the PC industry. Overall, there were 488 million smartphones "shipped" (a metric I think has dubious value) vs. 415 million PCs. However 63 million of those are "pads."
Deducting pads from the PC shipments, the number is reduced to 352 million for the year. What that means is that approximately 136 million more smartphones shipped than PCs. The discrepancy gets even larger (200 million) we include "pads" in a broader "mobile devices" category:
Below are the Q4 and full year 2011 smartphone shipments figures.
I'm in favor of eliminating the "shipped" metric, which is not necessarily representative of consumer purchases or devices actually in market. However the larger point here is merely to call out the growing gap between "mobile devices," broadly defined, and more traditional PCs.
Square continues to forge ahead in its remarkably successful run up to either a multi-billion dollar acquisition or IPO. Today, T-Mobile announced that Square credit card readers will be available for SMB customers in select stores in the US. It's the first wireless carrier to offer the mobile payments system to small business customers:
Today, T-Mobile USA, Inc. reiterated its commitment to small business as the first wireless carrier to offer Square credit card readers from San Francisco-based Square, Inc. in select retail stores. When T-Mobile’s fastest 4G smartphones running on America’s Largest 4G Network are combined with Square, small businesses can accept credit card payments in the U.S. nearly anywhere, anytime, with the money from transactions sent for deposit into their bank accounts the next business day. This easy-to-use solution, paired with T-Mobile’s affordable small business plans, aggregated business applications, equipment financing and trade-in services, and in-store support, allows small businesses to maximize their wireless investment and transform their business.
Square has several competitors using a similar smartphone-plug-in credit card reader for small businesses, including Intuit and the newly launched Payfirma. PayPal also targets the SMB market but doesn't offer a comparable smartphone or iPad card reader.
Meanwhile MasterCard's Ed McLaughlin may have spilled the beans on Apple's potentially impending move into payments. The next iPhone is widely expected to support NFC and an eWallet. Nokia, RIM and selected Android phones currently support NFC. Google Wallet has so far seen limited adoption because it's only available on one phone through one carrier in the US.
In an interview with Fast Company magazine McLaughlin said the following:
I don't know of a handset manufacturer that isn't in process of making sure their stuff is PayPass ready."
So that would include Apple then?
"Um, there are...like I say, [I don't know of] any handset maker out there," McLaughlin says. "Now, when we have discussions with our partners, and they ask us not to disclose them, we don't."
Apple has millions of credit card accounts on file. Every iTunes user must provide a credit card when an Apple mobile device is activated. That means effectively that in excess of 300 million people around the world have given Apple their credit card numbers, forming the basis for a payments program. Apple said on its last earnings call that there are now 315 million iOS devices in market, with 62 million sold in the last quarter alone.
Previously Retrevo found that Apple was more trusted than credit card issuers to provide a mobile payments solution.
Source: Retrevo (Q4 2011)
Other surveys have argued that 2012 will be a "breakthrough year" for mobile payments and NFC. I think 2012 will see an acceleration but not yet a consumer breakthrough.
See related: Obama and Romney Campaigns Adopt Square for Funding
US Representative Edward Markey has released a draft of the new "Mobile Device Privacy Act." The proposed legislation emerged in the wake of the Carrier IQ scandal in which data from mobile handsets were being transmitted to mobile operators without users' knowledge or consent.
The MDPA would require disclosure of any device monitoring by carriers, OEMs or app developers. It would also require the information collected to be identified and consumer consent to be obtained. According to a missive put out by Markey's office:
[The Mobile Device Privacy Act] would require companies to disclose to consumers the capability to monitor telephone usage, as well as require express consent of the consumer prior to monitoring. News broke last month that Carrier IQ software installed on millions of smart phones and mobile devices can track every keystroke of users and send the information back to the software company without user knowledge or permission.
Here are the rules, requirements and enforcement provisions contained in the act in broad strokes:
Carriers and others in the industry are likely to cry foul over "new government regulation." However, almost without exception -- Verizon claimed it never used the monitoring software -- US carriers and OEMs used Carrier IQ on their handsets without making any disclosures to consumers.
As with GPS-based tracking and monitoring the law is struggling to keep up with the pace of technology and cultural change in its wake.
This morning both AT&T and Nokia reported quarterly earnings. AT&T sold 9.4 million smartphones, including 7.6 million iPhones last quarter, but generally missed expectations and posted a loss (partly because of the blocked T-Mobile deal). The company ended the year with 103.2 million mobile subscribers in the US. Verizon earlier this week said that it had 108.7 million subscribers.
Nokia beat the market's low expectations despite announcing a $1.4 billion (€1.07 billion) loss. More importantly the company announced that it had sold more than 1 million Lumia Windows Phones during the quarter in Europe. That was consistent with analysts' projections and has boosted Nokia despite the accelerating decline of its Symbian platform.
Yet data from forecaster Kantar, discussed by Reuters yesterday, reflected that sales of Lumia handsets in all nine markets where the phones are available were "less than 2 percent." Accordingly there's a long climb up the mountain for Nokia to reclaim its former position as a market leader on the back of Microsoft's OS:
Kantar said Microsoft's Windows Phone share in all of the nine key markets it measures remained at less than 2 percent despite the high-profile launch of the Lumia range from Nokia.
Nokia's flagship Lumia 800 model failed to break into top 10 smartphones sold in Britain by the end of the fourth quarter, the researcher said.
Nokia said in November the model was off to an excellent start in Britain, and had seen the best ever first week of Nokia smartphone sales in the UK in recent history.
Microsoft and Nokia have an arrangement where licensing and royalty payments change hands. But basically Microsoft is paying Nokia billions over a period of years to use the Windows Phone OS.
Finally, in the battle over marketshare numbers, Strategy Analytics put out an attention-getting release this morning arguing, "Android Captures Record 39 Percent Share of Global Tablet Shipments in Q4 2011." This conveys the impression that Android tablets have captured substantial marketshare, which is inaccurate.
The chart below suggests that Android tablets sold 10.4 million units -- in part because Apple actually sold 15.4 million iPads.
Kindle Fire, a quasi-Android tablet (quasi because it marginalizes Google and the Android Market), sold perhaps 4 to 4.5 million units. If correct that would constitute nearly half the "shipments" in the chart above. Beyond this Nook, another low-end Android tablet, may have sold quite well in Q4 also. These are the bestselling Android tablets. All others have had negligible sales.
Previously the HP TouchPad was the bestselling non-Apple tablet because it was reduced to $99 by HP to move units.
Let's end talk of "shipments" as a market share metric. Devices "shipped" does not mean devices purchased by consumers. Nor do "shipments" stand as a proxy for purchases, although they do typically in the unique case of Apple devices.
The "shipments vs. sales gap" was most starkly revealed last year specifically in the case of Android tablets (and RIM Playbooks). Millions of units "shipped" but almost none actually "sold" to consumers. Instead they sat on shelves. Effectively then "shipments" is a discredited and invalid metric to measure market share.
Statistically valid consumer survey data would be more reliable as a measure of market penetration.
Apparently Kindle Fire didn't take much wind out of iPad's sales. Apple's holiday quarter solidly beat the most aggressive analysts' estimates. Here are the big numbers:
Across the board unit sales were higher than expected. In short a pretty remarkable quarter. US and Japan were identified as Apple's strongest iPhone markets, although the 4S just launched in China. Demand there is "off the charts."
Tim Cook characterized the iPhone 4S audience reception as "breathtaking." The iPhone 4S was the "most popular" iPhone (vs. the cheaper models) according to Apple.
Apple said that there are now 315 million iOS devices in market, with 62 million sold in the last quarter alone.
I've now had my Kindle Fire for about a month. It's the most successful Android tablet on the market (probably to the tune of about 4 million in sales) but much less of an Android tablet than others. As most people know, Amazon operates its own Appstore and users don't have access (w/o an awkward hack) to the Android Market proper.
My grade for device is "B." It's awkward as a web-browsing device. It's really awkward for email; the keyboard is sloppy and there aren't the customary Android alternatives (Swype, FlexT9, Swiftkey). It's good for reading eBooks and watching movies. In general, apps are what redeem its shortcomings as a web-browsing device.
The problem, however, is that not all Android apps are available. Surprise of surprises: Netflix, which competes with Amazon's own video service, is available. But the main New York Times app is not -- presumably because Amazon is selling subscriptions to the Times. I would expect that more Android apps will eventually become available, however.
The following chart was produced by SAI from survey data collected by RBC Capital Markets. It reflects that most people use Kindle Fire as they used the original Kindle: for reading eBooks.
Kindle Fire is an aggressive example of something that was always hypothetically always envisioned for Android: extreme customization by device makers and carriers. To that end, BusinessWeek has an article this morning about Kindle Fire and Chinese versions of Android on mobile handsets, which leave out many of the otherwise pre-installed Google apps:
Amazon.com Inc. and Chinese Internet giants Baidu Inc. and Tencent Holdings Ltd. are using Android as a building block for their devices, skipping preloaded applications such as Gmail, Google Maps and YouTube that generate ad revenue for Google, as well as its app store. Amazon’s Kindle Fire tablet, which is gaining ground on Apple Inc.’s iPad, comes with none of those apps.
The article makes the case that if more OEMs follow suit Google will lose revenue, citing a recent Cowen & Company report which estimates that Google makes roughly $7 per Android device sold. However that's not entirely true.
Most of Google's mobile ad revenue is from search -- although mobile display is growing -- and most of Google's query volume is via the browser. It's really only if there's a different "default" search engine on devices that Google will truly suffer. Accordingly, browser-based search is where Google is most vulnerable. However, third party apps that feature ads from Google/AdMob will also continue to money for the company regardless of whether Google-branded apps are on the phone.
Nonetheless, it's a provocative article and interesting to contemplate how many more hardware companies may emulate Amazon. For example, RIM or Nokia could take Android and build UIs that are very customized on top of the software. That's probably something RIM should start doing -- immediately. It would be potentially unique and provide access to the trove of apps that Android Market offers. RIM could even build its own Android appstore like Amazon. Without apps BlackBerry will fail.
Google, for its part, doesn't want to lose control of the Android ecosystem. It has responded to Kindle Fire's challenge by promising an aggressively priced, "highest quality" 7-inch tablet later this year.
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.
Retailers: if you haven't yet got a tablet app or optimized site, you're behind the curve. Earlier today the Pew Internet Project released data showing that between early December and January the population of US tablet users effectively doubled, from 10% to 19%. This is of course due to holiday gift giving.
If one were to extrapolate these figures out to the entire US population it would mean (by my quick calculation) roughly 45 million people now have tablets (distinct from eReaders). And by some measures Tablet users are more valuable than smartphone and even PC users.
According to data released last week by Adobe, based on an analysis of 16 billion visits to top retailer websites, tablet owners spent more money and were more inclined to buy than smartphone owners and PC users:
Tablet owners had slightly lower conversion rates, however, than PC users. And there is much less traffic coming from tablets vs. PCs. However there does appear to be some "cannibalization" going on.
Here are the top-level findings from Adobe's study (AOV is "average order value"):
There's plenty of other evidence that support's Adobe's finding that tablets are an important new commerce platform:
Several recent studies have shown that retailers in particular are lagging in their adoption of optimized mobile sites and apps. The Pew data and Adobe findings should be a wake up call to retailers that they have to address tablets as a distinct channel.
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.
Yesterday I discussed a Yankee Group survey (n=15,000) showing 47% of US adults now have smartphones (Android 39%, iPhone 25%). This morning Nielsen released data nearly matching that figure, reflecting 46% of mobile subscribers in the US own smartphones as of Q4. However, Nielsen says, Q4 iPhone sales have "closed the gap" somewhat with Android among recent buyers:
Among recent acquirers, meaning those who said they got a new device within the past three months, 44.5 percent of those surveyed in December said they chose an iPhone, compared to just 25.1 percent in October. Furthermore, 57 percent of new iPhone owners surveyed in December said they got an iPhone 4S.
Nielsen adds that 60% of recent handset buyers are increasingly picking up smartphones. Of concern to Microsoft, RIM and Nokia their relative shares are tiny. RIM's is less than 5% among recent buyers.
Nielsen says among recent acquirers Android still holds a lead but that the iPhone is within 2% points of a tie (chart below). This is a reversal of earlier trends wherein Android seemed to be pulling away. We'll see what the next comScore data release shows.
Overall Android still leads the iPhone 46% to 30% in the US, while RIM has 15% of the market.
PC sales are slowly eroding -- and mobile seems to blame. One could argue that the economy has taken a toll on PC sales, and that would probably be accurate. But mobile devices (smartphones, tablets) are gaining mindshare and sales at the expense of PCs.
Hardware watchers Gartner and IDC both said that Q4 PC sales fell -- somewhere around 1%. Macroeconomic conditions and component shortages are factors. But the big news is tablets and smartphones. Tablets (iPad, Kindle Fire, Nook) were among the most widely requested and given holiday gifts, to the tunes of millions in sales.
EMarketer rounded up third party data and estimates on iPad and Kindle Fire sales. Hardware tear-down firm iSuppli estimated that Amazon sold 3.9 million Kindle Fire tablets in Q4. Barclay's Capital estimated the number to be 4.5 million. The reality is probably in-between.
Meanwhile iSuppli argues that Apple "shipped" 18.6 million iPads in Q4. Shipped is a bogus metric, but with Apple products sales and shipments are closer than with other OEMs. The iSuppli estimate is probably high, but we'll find out when Apple releases its quarterly revenues on January 24.
Overall, iSuppli argues that global tablet shipments were 65 million units in 2011. Not only are tablets "sexier" but they're typically cheaper than PCs, notwithstanding price erosion in the Wintel PC market. Take a look at charts from Horace Dediu (the first one above via GigaOM), showing the decline of traditional PCs over the past couple of years.
Separately the Yankee Group conducted a US consumer survey (n=15,000), released earlier this year, which features some striking findings:
What that means as a practical matter is that only a small minority are considering another platform. While survey data shouldn't be taken as definitive, they indicate how people are thinking and, by implication, the challenge Microsoft and Nokia's joint marketing efforts face. Windows Phones are nice but struggling to grab mainstream consumer attention and interest.
In terms of tablets, Windows 8-powered tablets won't be out until later this year. Rumor has it that they could be more expensive than some Windows 8 laptops (to be determined). Windows Tablets face the same "outsider" problem that Microsoft confronts in the smartphone market. By offering laptop-tablet hybrids (like the image above), Microsoft might be able to justify a higher price and grab consumer interest.
However the totality of evidence suggests Microsoft is under intensifying pressure with Windows Phones and Windows 8. Indeed, can Windows 8 "bring sexy back" to the PC market?
Companies like Google and Apple are "market makers." They may not be first with a technology but their inclusion or the use of a particular technology can have a dramatic impact on its acceptance and adoption. Siri, as we recently argued, is one such product (along with speech on Xbox). For all its imperfections, Siri has managed to mainstream voice and speech interfaces -- at least in terms of awareness.
Siri performs at a level that has reinforced its usage and focused considerable media attention on speech. As we said in the report "Siri and the New Speech Imperative":
Voice on the Xbox and the emergence of speech as a front in the “smartphone wars” both create new momentum for voice interfaces and even a kind of “speech imperative.” At a recent search conference someone remarked, “Voice is the new touch.” In other words: a “sexy” new interface that, like touchscreens, could shape consumer expectations of how they should be able to interact with a range of devices and services going forward.
Siri's integration into the iPhone 4S has been well received by consumers and is at least partly responsible for the huge sales the iPhone 4S has reportedly enjoyed in Q4.
The New York Times today did a short roundup of companies at CES now building speech (and gesture) into consumer devices. On the heels of its indirect success with Siri (as the speech recognition front end) Nuance introduced Dragon TV at CES. Also at CES, Samsung debuted new TVs that allow voice and gesture-based control. Telematics, which offer varying degrees of voice control, are also getting a lot of attention at CES this week.
Apple TV (allegedly coming soon) is also supposed to integrate Siri. Indeed, there's a convergence of speech (and gesture) UIs with APIs and apps across an array of platforms: mobile, TV and in-car. The smartphone experience and its various metaphors are informing a host of consumer experiences beyond phones.
Benefiting from decades of research and various false starts, Siri has become the breakthrough consumer product that has raised the public's awareness of speech interfaces and their potential. But Siri isn't just about speech it's about combining Nuance's speech capabilities with natural language understanding, which is the other half of it.
We're going to see more and more devices integrate speech as a UI, with all sorts of implications for enterprises across the board.
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It seems amazing to think that just a couple of years ago Samsung didn't really have a smartphone lineup. Now the South Korean company has become the dominant maker of Android handsets globally. Chief rivals HTC and Motorola (soon to be a part of Google) have been overshadowed by the larger company.
Hurt by competition (read: Samsung) last week HTC posted its first quarterly loss in the contemporary smartphone era. Motorola also said its quarterly results would be weaker than previously estimated, negatively impacted by smartphone competition (again Samsung).
Samsung has done a ton of marketing in the US and around the world for its Galaxy line-up of smartphones. Some of that appears to be paying off. According to a December ChangeWave consumer survey (US, n=4,073) more consumers are saying they're going to buy a Samsung handset than rivals (other than the iPhone).
So if it's the iPhone vs. Android (increasingly Samsung), who will occupy the "third ecosystem" slot? Obviously it will either be RIM or Nokia-Microsoft. RIM is not yet in free-fall but nearly so. Meanwhile Microsoft has received a great deal of positive coverage in advance of the introduction of the Nokia Lumia 900. Many financial analysts are now bullish on Nokia and Microsoft's mobile prospects.
This weekend the New York Times had an extensive and favorable piece on the development of the Window Phone OS:
Windows Phone, which began appearing in devices last fall, certainly stands out visually. It has bold, on-screen typography and a mosaic of animated tiles on the home screen — a stark departure from the neat grid of icons made popular by the iPhone. While most phones force users to open stand-alone apps to get into social networks, Facebook and Twitter are wired into Windows Phone. The tiles spring to life as friends or family post fresh pictures, text messages and status updates.
The design of Windows Phones is both a strength and a weakness -- because they're different. While it's very beautiful in some "areas," parts of the Windows Phone UI are over-designed. But in general it's an impressive achievement for Microsoft.
I saw and held the Lumia 900 last week; it's a very nice phone. Yet I don't believe that it will lure people at the "high end."
Those buying the iPhone 4S or the Galaxy Nexus are unlikely to switch allegiances. Nokisoft's best shot, in my view, is to capture those upgrading from feature phones and get them used to the unfamiliar Windows Phone UI. But that initial change from the iPhone look and feel (or Android which imitates it) will be somewhat jarring for many people.
The lack of apps is also a competitive disadvantage for Windows Phones. More apps will be developed over time, especially if consumers start buying Windows Phones. Another curiosity of Windows Phones: the IE browser doesn't seem to enable sites to detect a mobile device and show their mobile version. This is good in some cases but mostly a weakness.
This year will be "make or break" for both Windows Phones and RIM, though more so for RIM. Both will battle for enterprise and consumer hearts and minds and for this third ecosystem slot. My guess is that Windows Phones (and Nokia) will probably win.
It used to be that the "free" phones being given away by the carriers were very low-end feature phones. Not anymore. Now, with a two-year contract, you can get a range of no-cost Android smartphones from AT&T, Verizon or T-Mobile.
Verizon was especially aggressive during the holidays; and this morning I counted no fewer than six pretty decent Android handsets available for free from T-Mobile with a two-year contract. These kinds of promotions have helped power Android's rise. The operating system now represents about 47% of all US smartphones according to comScore.
I don't have and haven't seen data about upgrade patterns from feature phones. But my guess would be that most smartphone upgraders are going to Android, partly because of the "free" promotions as well as the selection and ubiquity of these devices.
InsightExpress not long ago pointed out that all smartphone owners aren't the same. They can be segmented by engagement and activity level. And while I haven't seen any data on the behavioral differences between Galaxy Nexus owners (Android flagship) and those who own an LG Optimus (entry level Android handset), there likely are some.
How else does one explain the NetApplications data now making the rounds. These data, showing browser usage across millions of sites, reveal iOS with more than 3X the mobile browsing share of Android in December (iOS includes tablets here).
Given the comScore numbers above these data from NetApplications are fairly dramatic -- and curious. However, the gap isn't nearly as large in StatCounter data (global and North America below):
In North America, Apple's lead is considerably less than in the NetApplications data; and if one looks at "mobile browser" share -- the data above reflect "mobile operating system" -- Android is ahead of iOS in North America and globally. It's not clear how to explain these differences between the data sets.
Another piece of data: last month an online and mobile shopping study found that iOS devices accounted for 92% of all non-PC sales. In other words Android users aren't very active in m-commerce. In addition the study reported that "Apple mobile devices also have a larger AOV compared to other mobile platforms ($123 for Apple vs. $101 for Android in December 2011) – and far outstrip desktop orders ($87)."
Last year Nielsen posted some demographic data on iPhone and Android users and found them more similar than different. But in 2011 the recommendations site Hunch conducted a user survey (n=15K) and found some meaningful differences between Android and iPhone users. Chief among these differences were levels of education and affluence; iPhone users were generally older, more urban, better educated and had higher incomes according to the self-reported data.
Back to the comScore data above. Clearly Android is a more "mainstream" smartphone than the iPhone. Almost twice as many people own Android handsets in the US than the iPhone. However, looking at the rest of the data above, iPhone users are more engaged and active than their Android-owning counterparts on the whole.
As we move from a market still dominated by feature phones to one controlled by smartphones, by the end of this year, we'll see most people embrace Android as they upgrade. Apparently, however, this doesn't mean that they'll immediately begin displaying radically different behavior, though it does mean at least incremental changes.
Accordingly it might be fair to say that the lower-end Android handsets are becoming "the new feature phones."
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).