Next Wednesday Apple will reveal the iPad3 (and potentially a new Apple TV), with an improved display and Siri among other features. Mobile ad network InMobi released consumer survey data last week finding that 29% of respondents were intent on buying the new iPad, with half of those reporting they don't currently own a tablet. Many people (44% of those intending to buy one) also said they wouldn't consider another brand.
Whether or not these survey findings turn out to be accurate they reflect the momentum and mindshare of the Apple tablet, which has sold nearly 60 million units on a global basis. However, when the first iPad was introduced in Q1 2010 it was met with considerable skepticism and predictions of failure. It was seen as an "unnecessary" product, delivering a "watered-down" Internet experience; it was also "too expensive" and "wouldn't fit in your pocket."
A year later Dell also predicted that the iPad wouldn't succeed in the enterprise. However in Q3 2011 Apple reported that 93% of the Fortune 500 were testing or deploying the iPad. By comparison Dell recently announced that it's exiting the consumer PC business. This juxtaposition is essentially a metaphor for state the PC industry as a whole.
Increasingly, instead of buying a second computer or laptop, US (and non-US) households will choose tablets. While there's still growth in the enterprise PC market the consumer PC market is flat-to-declining. Many analysts expect Apple to sell 50-60 million iPads this year. When iPads are considered "PCs" (which they are not), Apple becomes the largest "PC" vendor surpassing HP.
Mobile display advertising outperforms PC display according to considerable research from InsightExpress and Dynamic Logic. Beyond this, ads on the iPad and other tablets further outperform conventional mobile dislay advertising. Engagement with tablets is higher than PCs and consumers have shown a willingness to buy things through tablets in far greater numbers than they have on smartphones. There's also mounting evidence that people are spending more time with mobile devices and tablets than on the PC Internet and even with TV (in some geographies), according to recent data from Flurry and InMobi.
The totality of all this data leads to the inevitable conclusion that PCs will be outnumbered by smartphones and tablets within a year or two. PCs and the PC-Internet experience will merely be one form of Internet access and not the primary way people access the Internet (except at work). We truly are in a "post-PC" era. (That was a Steve Jobs marketing slogan that is becoming factually true.) Microsoft hopes to change the trend with the introduction of Windows 8 of course. But Windows 8 will also work on tablets. Moreover its consumer success, however, is far from certain.
Publishers and advertisers that fail to recognize these trends and act on them in the near term will be at a significant disadvantage. (Flash should be abandoned right now, for example.) Indeed, publishers and advertisers should shift the bulk of their attention and development resources away from the "PC Internet" and toward smartphones and tablet-optimized sites. Mobile and tablet site design should guide PC website design (as recently happened with the redesign of Kayak.) This is especially true for certain categories such as retail and travel.
The notion that mobile is just an extension of the PC-centric Web, which still prevails in many companies, is completely misguided.
According to new data out this morning from Pew, the US mobile market has reached an important milestone: 50% smartphone owners. In fact Pew's survey data, which the polling firm says is representative of the US population, indicates 53% smartphone ownership.
By comparison, Nielsen says the number is 48% and comScore says it's 42%. Among select segments, however both Pew and Nielsen say smartphone penetration is considerably higher than 50%. According to Pew, for college graduates, 18-35 year olds and $75,000+ earners, smartphone ownership has crossed 60%. Nielsen says for some of those groups it's even higher (75%).
The graphic below is Nielsen's US smartphone ownership chart by age and income segment. For example, if those over age 55 are excluded from the sample, US smartphone penetration rises to roughly 75%. For people between the ages of 25 and 44 and making $100,000 or more per year, Nielsen says 77.5% own smartphones.
The Pew findings are qualified and explained, given potential consumer confusion over what qualifies as a smartphone:
--45% of cell owners say that their phone is a smartphone, up from 33% in May 2011
--49% of cell owners say that their phone operates on a smartphone platform common to the US market, up from 39% in May 2011
Taken together, just over half of cell owners (53%) said yes to one or both of these questions and are classified as smartphone owners.
Tracking smartphone adoption and penetration was/is really a surrogate for other things: mobile Internet access -- people with smartphones behave differently than feature phone owners -- and the mobile ad opportunity. We should now collectively shift our focus to mobile operating system share (which people are obviously tracking) and mobile Internet adoption and frequency.
We've known for several years how important and influential smartphones are in finding local business information, especially "on the go." However the latest Local Search User Study from Localeze, 15 Miles and comScore documents, among other things, the increasing role of tablets in the process of finding offline information.
Consistent with other consumer data in the market, the survey of 4,000 US adults found that the top reason for conducting a local business lookup on a mobile device/smartphone is the immediate need for information. Interestingly, the survey discovered that nearly half (49%) of smartphone and tablet owners were using apps for local business searches (e.g., Yelp, Urbanspoon, YP.com) vs browser-based search (e.g., Google).
The Local Search Study also found that while tablets were used "throughout the [local search] process," usage was concentrated in the early and middle stages (research + consideration) of the purchase process. This might be expected because of the analogy to PC usage. However comScore found that among the three groups (PC, smartphone, tablet users) tablet owners are the most engaged and active: "most tablet users conduct local business searches at least once a week . . . more frequently than PC/Laptop users and mobile phone users."
Another interesting finding: tablet owners had increased their usage of the devices over the past year. That wasn't equally true of smartphone owners. Part of the higher levels of tablet engagement can be attributed to the fact that tablets are more "immediate" than PCs but offer a larger display for "more complete information" -- as the graphic above reflects.
Consistent with this heightened engagement the study found that tablet owners were more likely to make purchases after local search activity (which in this case largely mean offline transactions) and spend more money on average.
ISIS, the as-yet-unlaunched US mobile payments inititative from T-Mobile, AT&T and Verizon has added new partners to its stable of credit card issuers and banks (BarclayCard, Capital One, and Chase), according to CNET. ISIS has been described as "Hulu for mobile payments."
I have been openly skeptical of the carriers' ability to mount a successful mobile payments intiatitive. But ISIS may turn out to be the tortise to Google Wallet's hare. The latter has been met with carrier resistence (which may be anticompetitive), security problems and limited consumer availability.
Google has been ahead of the market somewhat. But there are now also rumors that Google is internally disappointed with its Wallet initaitive and may be putting less effort into it. If so, it would be premature to "give up" on Google Wallet.
In two related mobile payents developments, PayPal (through its Zong acquisition) is launching what it calls PayPal Carrier Payment Network; and InMobi and Opera have joined for digital goods payments. The PayPal effort is designed to build on top of the Zong-carrier infrastructure (eBay acquired Zong last year) and expand carrier billing to encompass more types of transactions and larger dollar amounts:
Historically, carrier payment has been utilized primarily by online game developers and publishers to provide a fast and easy way for users to purchase goods directly in-app or in-game. While convenient for consumers, this method of payment has inherent challenges for other digital goods merchants – such as digital books, music, dating and content – to adopt as a primary payment method. Among the challenges is the cost of doing business – sometimes upwards of 40 percent – since transactions are processed through the carrier, merchants must share part of their revenue.
Similary InMobi and Opera announced that the latter will integrate InMobi's payments platform to enable virtual goods payments and purchases through Opera:
InMobi SmartPay will enable Opera users to pay seamlessly for digital goods in key markets around the globe, when they make purchases with some of the leading publishers that partner with InMobi. The two companies are committed to providing choice to consumers, mobile content developers and app developers, by building viable third-party monetization solutions in the mobile browsing and computing space.
Most US consumers have no experience with mobile payments and still need be educated about their benefits. However, large numbers of smartphone owners will eventually adopt mobile payments over time. Four tenents of success will be: simplicity, ubiquity, rewards and security.
The convenience of not having to sign credit card slips will be a welcome imrovement in the retail and restaurant worlds. The abandonment of signature requirements for transactions under $25 in many places has created demand and some experience with a simplified transaction experience. Merchants have incentives to adopt mobile payments as well for greater efficiency at the point of sale and, if don't correctly, greater security too.
Almost all of these mobile payments systems and platforms back onto a credit card. However, it's still early to pick winners and losers. As I indicate above, Google could wind up a loser and ISIS a winner -- though that's a bit counter-intuitive (given the challenges carriers face in execution generally). There are still others (e.g., Apple) that could enter the race at any point.
Today the smartphone world is essentially divided up between Apple and Google, much like Spain and Portugal divided up the known world in 15th century Europe. Right now, it's not clear whether Nokia-Microsoft will become a viable third platform. Palm's WebOS, though it has been open-sourced, is effectively dead and one could convincingly argue that Blackberry is dying as an OS.
Now Mozilla has emerged to challenge Apple but more specifically Android, with a new "truly open" mobile platform: Boot to Gecko (B2G). In many ways not unlike Google's browser-based ChromeOS for PCs, it was formally announced in Barcelona at Mobile World Congress. Deutsche Telekom and Telefonica are on board:
This week Mozilla is previewing open Web apps and Mozilla Marketplace, enabling the creation and distribution of apps powered by open Web standards like HTML5, CSS and JavasScript. We are also previewing Persona, the first identity system truly of the Web, including Browser ID. Each offering represents the latest tools available to developers and users to take control of their online lives.
Since the beginning, it has been our mission as an organization to develop and bring about a completely open and standards-based Web as a platform for innovation. Mozilla’s latest innovations are being proposed to the W3C for standardization, helping us move the needle to advance the Web and make it a more people-centric experience for all.
There are lots of questions about whether Mozilla can make this a viable platform; however the support of two global carriers lends immediate credibility to the initiative. It also shows that there's an appetite for alternatives to Android, which was itself initially embraced as an alternative to the iPhone.
Now Android is on its way to becoming the dominant smartphone platform. It was quickly embraced by carriers and handset OEMs who had no immediate response to the iPhone when it launched. Android became the de facto alternative, driving huge penetration and adoption. Now that Android is the dominant smartphone platform, demand is emerging for alternatives.
B2G is one potential alternative, especially for lower-end handsets. There are, however, many questions about whether Mozilla will be able to make B2G a viable, alternate smartphone platform. Microsoft sees Windows Phone as the true third alternative; however there's evidence of only modest Windows Phone success thus far (including the Nokia handsets).
While there's enormous momentum around iOS and Android the smartphone race is far from over and, especially at the lower end of the market, B2G could become an attractive alternative to Android.
Nielsen now says US smartphone penetration is at 48% (of mobile subscribers). This data and estimate are based on a survey of 20,000 US respondents in January. However Nielsen goes on to segment the data by age and income to find penetration figures that are well over 50%.
As one might expect smartphone penetration goes up with income. But younger users are also more likely to own smartphones than older consumers, if income is removed from the equation. In addition, recent buyers are also much more likely to have purchased smartphones than others. For example, 73% of those between ages 25 and 55, who bought a handset in the past 90 days, purchased a smartphone.
If survey respondents over age 55 are excluded, overall smartphone penetration rises to roughly 75%. And looking at those between 25 and 44 making $100,000 or more per year, Nielsen says 77.5% own smartphones.
As the figures above show smartphone penetration is much higher among key audiences and demographic segments. It's simply not true that feature phones are the majority any longer for these groups.
In this context, the delay in optimizing websites, building apps and using mobile advertising is effectively a kind of "malpractice" for many agencies and marketers.
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.