Hardware

Could WebOS Become the 'New Android'?

Last Monday, when I was out on vacation, Google dropped a bomb on the mobile ecosystem: it entered into an agreement to buy Motorola Mobility for $12.5 billion. Everyone is more than familiar with the story and there's been a ton of analysis in the intervening seven days.

Here's the crux of that analysis:

  1. Google was compelled to buy MOTO because of its IP (17,000 patents) after competitors attacked Android with bigger patent portfolios 
  2. Microsoft was after MOTO as well 
  3. Google wanted more control over the final product and Apple-like hardware-software integration 

The response to all of this is yes and yes. While I don't know the actual truth of the Microsoft acquisition rumor (I believe it) all of these motivations likely played a role. Now regulators must approve the deal, which I suspect they will do.

Google said that the acquisition shouldn't change anything among its other hardware partners or the Android ecosystem generally (Samsung, HTC, LG, etc). Here's the quote from the press release:

Our vision for Android is unchanged and Google remains firmly committed to Android as an open platform and a vibrant open source community. We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices.

But it clearly does change things. Hardware OEMs will be taking a harder look at Windows now to "hedge" and "diversify." But what about WebOS? 

The other bombshell last week was HP's announcement that it's getting out of the PC business and potentially going to unload WebOS. In April last year HP (under a different CEO) bought Palm for $1.2 billion, chiefly to get WebOS. Now it may sell the software assets and it's possible to imagine several parties being interested.

It has been suggested by some that Facebook should buy WebOS. But one could imagine HTC, Samsung (even with Bada), LG and others -- including Nokia -- being interested the platform if the price were right. But what if HP were to hold onto WebOS and open-source it or license it on very friendly terms? Indeed, HP is now saying or clarifying that it will hold on to WebOS and continue to support and even license the software.  

The platform, which was early on regarded as platform most competitive with iOS, could gain new life as an alternative to Android for nervous handset OEMs. With a post-MOTO Google competing with its partners in a new, more direct way the market could well be ready for a new "open-source" Mobile platform. It's a long-shot and HP could still sell Palm/WebOS to a single buyer. If that were to happen WebOS would likely continue to languish and ultimately disappear.

However open-sourcing the platform or offering friendly, low-cost licenses to various hardware makers could give WebOS new vitality and a future. 

Millennial's 50th SMART Report Charts Growing Sophistication of Mobile Campaigns

Millennial Media is out with its monthly SMART report. Yesterday the company hosted an in-depth webinar to review the data in advance of the report's release and in honor of this being the 50th such report. Familiar data points about campaign tactics and devices were discussed. For example, in June, Android retains its platform leadership (53% of impressions), while the iPhone remains the top individual device (27% of impressions).

Here are some of the things I "tweeted" yesterday during the webinar: 

  • More than 70% of Millennial ad impressions are coming from in-app activity
  • 40% of mobile consumers' usage time spent inside the home (based on InsightExpress data)
  • Local market targeting continues to gain traction to drive consumers to brick and mortar locations
  • Feature phones are no longer in top 20 handsets on the Millennial network

But the most interesting thing about the report to me is the comparison of June 2011 findings with those in the first report more than two years ago. Here are several graphics that reflect the market's growth and evolution:

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Screen shot 2011-08-12 at 7.35.54 AM

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Screen shot 2011-08-12 at 7.33.30 AM

The broad themes reflected in the graphics above are: the rise of touchscreen smartphones (Android and the iPhone in particular) and the growing sophistication of mobile advertisers and their campaigns. I don't have the vertical categories chart among those above. However Millennial has seen explosive, quadruple-digit growth in verticals like Finance, Retail/Restaurants, Automotive, Entertainment, Travel and Pharma. 

In response to a question during the webinar about the sophistication of advertisers Millennial SVP  Mack McKelvey responded, "The vast majority of our advertisers are very savvy and challenge us all the time."

Burned by Android 'Imitators,' Apple Being (Too) Aggressive on Tablets

Some financial analysts expect that Apple's iPad will dominate the tablet market through 2020. Competitor after competitor, including Motorola, HP, RIM and Samsung, has launched tablets only to see disappointing sales to date. So why then is Apple so aggressively pursuing legal remedies against tablet OEMs? 

Everyone reading this is aware that Apple has obtained a preliminary injunction in Germany (and throughout most of Europe) that effectively prevents the sale of the Samsung Galaxy Tab 10.1. It's also pursuing Motorola over the Xoom on the same IP/legal theories. 

I believe that Samsung essentially copied the "trade dress" or "look and feel" of the iPhone with its Galaxy smartphones and the Galaxy Tab 10.1 tablet. However I also think that Apple is going too far with its attempt to bar sales of competing devices. By extension the question arises: would any tablet device that broadly resembled the iPad be vulnerable? 

If so Apple would effectively be eliminating competition in this new computing category -- and that would be a very bad thing. I'm sure Apple sees it differently and would simply argue it's protecting its designs and IP.

What I believe is going on is the following: Apple feels that Android and its gaggle of OEMs have simply ripped off the iPhone and its app store and have reaped the benefits accordingly. As I just posted, Gartner estimated that Android devices gained a 43% share of the smartphone market globally in Q2 vs. 18% for iOS. The company feels badly burned by these "imitators" and probably vowed to not let that happen in the tablet market. 

http://static6.businessinsider.com/image/4e25f4d049e2aee37d070000/chart-of-the-day-apple-revenue-by-product-july-2011.jpg

In addition Apple's profitability and sales are much more dependent on these mobile devices than even a year ago. However the case illustrates the problems and challenges of current patent law. There's a need to protect IP owners' rights but competitors must be able to make and sell their products. What degree of product and feature similarity should be prohibited?

I certainly understand Apple's viewpoint and the rationale behind its actions. But in seeking to ban the sales of competitive tablets Apple is simply going too far.

Parsing the Tablet Market Share Numbers

When I quickly looked at the Strategy Analytics tablets market share data yesterday it struck me as strange. The iPad had 61% of the market and Android 30%. The number seemed way too high for Android.

But as John Gruber points out the data are about shipments, not sales. Even though the word "shipments" is there as plain as day, I didn't focus on it. I just "bleeped" over it.

Many companies, including Samsung and Microsoft, have used shipments to argue market share; for Windows Phones in the case of Microsoft and for the original 7" Galaxy Tab in the case of Samsung. Yet shipments don't equal sales.

Here's the Strategy Analytics breakdown of "shipments market share": 

Screen shot 2011-07-22 at 1.08.21 PM

In terms of actual devices sold to consumers and in actual use, it's a very different picture. Almost without exception sales of Android tablets have so far been disappointing. The RIM Playbook has also underperformed. There are a few Windows tablets on the market but none are selling (maybe in Asia). 

In June comScore released some data that showed traffic generated by various mobile devices including tablets, for May 2011. According to the data, the iPad was responsible for "89% of tablet traffic across all markets." In the US, however, the figure was 97%.

Screen shot 2011-07-22 at 8.50.07 AM

Even though these figures don't claim to represent device market share, they're likely a more accurate reflection of devcies in the market than shipments. In my travels and interactions with people professionally I don't see any other tablets "in the wild" other than the iPad. I'm one of the few people I know that has an Android tablet. (I also have an iPad2.)

Apple has now sold approximately 34 million iPads globally. 

Finally, survey data released a few weeks ago by Bernstein Research found that consumers were far less interested in rival tablets than the iPad. 

 Screen shot 2011-06-23 at 6.01.45 AM

The "totality of the evidence" thus suggests that actual sales of Android and other non-iPad tablets collectively represent less than 15% of the market and in the US less than 10%. 

AT&T Reports Solid Q2, Nokia Not So Much

US Carrier AT&T and OEM Nokia reported Q2 earnings this morning. AT&T, the corporation, earned quarterly revenues of $31.5 billion, which were up slightly (2.2%) over a year ago. The company reported its "best-ever second-quarter smartphone sales." Meanwhile Nokia had a worse-than-expected quarter. Overall sales were off 11% and profit declined 44%. Smartphones declined 34%.

Below is a summary of each of the company's numbers.

AT&T Wireless:

  • Total wireless subscribers up 1.1 million to 98.6 million (33K contract subs added)
  • 70% of new contract sales were smartphones; total smartphones sold: 5.6 million
  • iPhone activations: 3.6 million (24% are new to AT&T)
  • Android (RIM and Windows Phones) now 40% of smartphone total
  • 23.4% growth in data revs: up $1 billion vs a year ago
  • ARPU: $63.87 

Screen shot 2011-07-21 at 6.43.49 AM

Nokia:

Nokia saw revenues of EUR 9.3 billion, which were off 11% from a year ago. The company reported a loss of nearly EUR 500 million. Nokia sold 16.7 million smartphones vs. 25.2 million during Q2 of 2010 for a 34% decline. By contrast Apple sold 20.3 million iPhones this past quarter.

Overall sales of all mobile devices were off 20% vs last year. And all regions saw sales declines, especially Europe, North America and China. 

Screen shot 2011-07-21 at 6.56.30 AM

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Nokia reiterated that a Windows Phone would be out this year but declined to be more specific. 

Likely Smartphone Buyers Prefer iPhone, RIM Takes Nosedive

A new US-centric ChangeWave consumer smartphone survey (n= 4,163) looks at mobile operating system preference and specifically iOS vs. Android. Accordingly those planning to buy a smartphone in the next 90 days expressed a preference the Apple product to Android 46% to 32%. 

The perhaps most striking finding -- and grim news for RIM -- is that only 4% of respondents say they intend to buy a new BlackBerry device.  

In terms of customer satisfaction the following graphic reflects the percentage of current smartphone owners who say they're "very satisifed" with their current handsets. Again Apple and Android lead. 

However ChangeWave noted the following about improvement for Windows Phone 7 vs. Windows Mobile:

We continue to see a big difference between the high Very Satisfied rating for Windows Phone 7 (57%) vs. the much lower rating for Windows Mobile OS (14%). Even so, the higher Windows Phone 7 rating has yet to produce a sustained momentum boost for Microsoft in term of buyer preferences.

ChangeWave also said that demand for Motorola Android devices was down (8%; down 4-pts) after the iPhone had come to Verizon:

After benefitting tremendously in the years Verizon subscribers were barred from the iPhone market, Motorola is now seeing a loss of market share at least partially attributable to the Verizon iPhone release that occurred earlier this year.

Mobile Numbers from the Google Q2 2011 Earnings Call

Below are the substantive comments made by Google CEO Larry Page and other Google executives about Android and mobile from yesterday's Q2 earnings call. I've cut out all the bloat, PR spin and puffery.

Google CEO Larry Page: 

I actually have a new metric to report in Android of 550,000 phones activated a day. And that's a huge number, even by Google standards. 

There's over 400 such devices, 39 OEMs, 231 carriers in 123 countries, and over 78 open handset alliance partners. 

[D]espite the efforts of some of our competitors, there hasn't been any slowdown in any of those things. And partners and developers are continuing to expand the Android ecosystem.  

Nikesh Arora, SVP and Chief Business Officer:

One format which was launched by Susan's team called Click-to-Call or Click-to-Share has been particularly successful. Unilever is a great use case of these formats. They integrated our AdMob product into a very large campaign of launching a new product to use the banner to drive traffic to a campaign Mobile site and achieve unprecedented results with almost 700,000 unique visitors accessing their content. 

Susan Wojcicki, SVP of Ads: 

Voice Search traffic for Mobile devices is up 6x in the past year.

There are now 135 million Android devices that have been activated in total, up from 100 million just 2 months ago. There are also now over 400 different Android devices available globally. Android market is also picking up momentum. It has over 250,000 different apps, and users have downloaded apps over 6 billion times, which is double the downloads from just a few months ago.

Mobile Display is starting to take-off too with traffic on the AdMob network up more than 3.5x in the past year. 

____

The comment by Larry Page above, "despite the efforts of some of our competitors," refers to patent attacks on Android. Right now Oracle is involved in Java-related litigation with Google over Android; and Microsoft is trying to force licensing deals on Android OEM partners.

Some financial analysts have suggested that Microsoft is getting about $5 per every Android device sold by HTC though such a licensing deal. Microsoft wants Samsung, now the largest Android OEM in the world, to pay up to $15 per Android device. There's speculation that the company is using that figure partly as leverage to get the Korean company to better commit to Windows Phones. Samsung has only tepidly embraced Windows Phones. 

While both Nokia and Microsoft await the formal release of one of their jointly produced handsets both companies continue to suffer at the hands of Android.

Nokia's share is falling like a rock and Microsoft's handsets are selling here and there but not in big numbers. Licensing revenue for mobile devices is clearly "Plan B" for the company. And while it could pay off in revenues over time that's much less desirable selling actual mobile devices.

In addition the more Android devices sell, the more Microsoft loses its grip on the overall OS market. Indeed, it's less and less "important" to have a Windows-based device in the more heterogeneous cross-platform market that exists today than it was when there were only Apple Macs and Windows-based PCs. 

Android Has 16 of Top 20 Phones on Millennial Network, Tablets Cannibalizing PC Usage

Millennial Media's Mobile Mix monthly device report is out this morning. And once again I'll excerpt what I think is interesting. First here are some of the top bullets, representing trends the company is seeing on its mobile ad network:

  • The iPhone was the top individual device (for a long time now). However Android was the "leading OS on our network for the 7th consecutive month  . . . Android also had 16 of the top 20 mobile phones."
  • iOS impressions (iPhone, iPad, iPod Touch) grew 18% vs a year ago. Android impressions grew 11%.
  • Windows Phone impressions grew 31% quarter-over-quarter; RIM impressions grew 29% quarter-over-quarter.
  • Connected devices (iPod touch, etc.) and tablets (iPad) accounted for 18% of all impressions on the network

The share of impressions being generated by smartphones is basically flat. In March 2011 smartphones were responsible for 64% of the impressions on Millennial's network. Today, in July, it's 65%. 

Screen shot 2011-07-15 at 5.34.25 AM

So-called connected devices constitute 18% of Millennial's impressions. This month Millennial has included some InsightExpress data that addresses tablets. In the chart below are behaviors that have shifted to tablets or have been impacted by the acquisition of an iPad or other tablet device:

 Screen shot 2011-07-15 at 5.34.42 AM

These numbers are lower but consistent with other data showing that tablets do cannibalize some PC usage. Below are data from a Google-AdMob survey on the same question: 

 Picture 27

Nielsen offers similar data (May 2011): 

Now back to the Millennial data. In May iOS had a 27% share of impressions but was responsible for 45% of revenue on the Millennial network. This month, iOS's share is 26% but revenues generated are 49%. Accordingly from a revenue standpoint iOS continues to "outperform" its share percentage, while Android "underperforms": 54% share, 41% of revenue generated. 

Screen shot 2011-07-15 at 5.35.01 AM

Among the top 20 handsets that Millennial sees, there are three RIM devices and the iPhone. Otherwise it's all Android. This is an amazing story.

Google CEO Larry Page said yesterday on Google's earnings call that the company was activating 550,000 devices a day. The company also disclosed that there were a total of 135 million activated Android devices in the market. There are a total of 400 Android devices in the market.

As of the end of Q2 2011 Apple had sold a total of 189 million iOS devices, including iPod Touches and iPads. 

Pew Smartphone Numbers More 'Aggressive' than Nielsen's

The Pew Internet Project came out with survey findings (n=2,277 US adults) focused on US smartphone ownership and usage. Previous Pew surveys about mobile have been flawed because they failed to distinguish between behaviors of feature phone and smartphone owners. This rectifies that problem. 

Pew found that 35% of all US adults own a smartphone. However when you limit the base to mobile phone owners, 83% of all US adults according to the survey, smartphone penetration rises to 42%, four points higher than Nielsen's 38%. Then take a look at those in the 18-44 age bracket. The number rises to an average of 50% penetration.

 

If you then look at income segmentation, the more affluent the person is the the more likely to own a smartphone. Among those making more than $100K per year smartphone penetration is at least 57%.

Pew also found that 68% of smartphone owners go online daily. Earlier this year Google found (via Ipsos) that 53% of smartphone owners are online several times a day.

Yet here's the statistic that I find most compelling: 25% of smartphone prefer their phones to their PCs as a method of Internet access. (There was no published segmentation of this figure by age or income, however.) In practical terms this is roughly 22 million people. In 2009, comScore found that 40% of iPhone/iPod Touch owners (n=7,300) said they go online more often on their mobile devices than via PC.

These data reinforce that "mobile first" should be a mantra for many advertisers and brands. 

Tablet Sales Sputter As Amazon Readies Assault on Fortress iPad

Tablets aren't taking off as fast as some analysts expected and the iPad is still the only tablet that matters. However Amazon is reportedly preparing a full-frontal assault on the iPad's market dominance. Unconfirmed reports suggest that Amazon has placed orders for up to 1.2 million Android-based tablets for sale in Q3 this year. 

Meanwhile Net Applications reported earlier this week that the iPad now represents 1% of all Internet browsing globally; 2% in the US market. The same report shows that iPad-based traffic is orders of magnitude ahead of tablet competitors, which have so far foundered. Net Applications also says the iPad delivers 25% of all mobile Internet browsing and is the third largest source of mobile Internet traffic, after the iPhone with 35.2% and Android with 31.6%.

In June the Pew Internet Project reported that "8% of adults report owning a tablet computer such as an iPad," while 12% said they owned an eReader (e.g., Nook). Between November 2010 and May 2011 eReader ownership doubled and tablets saw growth of only 3% according to the Pew survey.

Growth over time

The difference in sales is most likely due to price, given the relatively lower cost of eReaders vs. Tablets. The ad-supported Kindle is just $114, while the iPad retails for $500. But for the first time Nook has dethroned Amazon's Kindle as the best-selling eReader, according to IDC. The firm also said that tablet shipments were coming in well below its previous lofty forecasts:

For 1Q11, the seasonal trends typically found in more mature consumer electronics and computing categories had a notable impact on the burgeoning media tablet market . . . The eReader market (which IDC counts separately) experienced similar seasonality, undergoing a sequential decline in shipments to 3.3 million units as the post-holiday season proved to be challenging for that category. However, eReaders enjoyed 105% year-over-year growth . . .

Apple's iPad and the recently introduced iPad 2 continue to dominate the media tablet market, as other vendors have had a more difficult time finding market acceptance for their products. But even Apple's shipments for the quarter were well below expectations . . .

The firm pegs Android-based devices at 34% of the overall tablet market. That figure is probably way off, however, and may suggest its other numbers are wrong too. The weight of other evidence points to Android tablets being a much smaller part of the overall pie. 

For example, the chart immediately below shows Google's own data reflecting the different Android operating systems in the market and their relative shares. Android 3.0 (and 3.1), which are on the new Android tablets, represents less than 1% of all Android devices in the market. 

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The original 7" Galaxy Tab runs Android 2.2, which is the most common version of the OS and on almost 60% of all Android devices today. The 7" Galaxy Tab is also the best selling non-iPad tablet.

Apple said in May that it had sold 25 million iPads. If the iPad is 66% of the market (vs. Android's 34% per IDC) that means approximately 13 million Android tablets would have been sold globally. And the overwhelming majority of these would have to be the 7" Galaxy Tab given the chart above (and other data).

In January 2011 Samsung itself announced it had "sold" 2 million 7" Galaxy Tab devices. However these were not actual consumer sales but shipments to retailers. It's very unlikely at this point that the 7" Galaxy Tab has sold even 5 million units to consumers (as opposed to retailers). If anything sales of the 7" Samsung tablet have slowed because of a broader range of Android-based competitors. 

Beyond this comScore data argue that Android tablet devices are not a significant source of Internet traffic compared to the iPad. According to comScore, in June, the iPad represented “89 percent of tablet traffic across all markets.” In the US the figure is 97 percent. Those figures suggest that Android tablets are much closer to 10% of the market, if that. 

The "totality of evidence" thus argues that the IDC Android sales estimates are way off. In terms of the larger market, however, it's not hard for me to believe that tablet sales are down or, perhaps more accurately, not keeping pace with analysts' previously aggressive estimates. This may have less to do with the actual popularity of tablets than it has to do with analyst firms being too starry eyed about their sales projections.

We'll see what happens when Amazon, with its brand strength and marketing capabilities, introduces its iPad competitor. As I've argued before pricing with be a key driver of success or failure.

Right now Android tablet software and the overall UX remain inferior to the iPad; so until the OS catches up (which may or may not happen) and there are some Android tablet apps, which are still MIA, price will be the key success variable in Amazon's tablet effort. 

As a final note, I have previously been an advocate of the 7" tablet as a segment where Android could shine, especially given that Apple doesn't have an entry. And while it's certainly more "mobile" than 10" tablets, I'm now of the view that 7" is not sufficiently larger than a smartphone to warrant buying one.

I spent some time with the HTC Flyer recently. And while I like the device a lot -- much more than the Galaxy Tab -- most smartphone owners are probably not going to buy it. Indeed, if you're going to carry around or own two devices the second one needs to be considerably different than your smartphone. Alternatively if you could use a 7" Android tablet as a phone it might make the devices more attractive. Right now you could use Skype with a carrier data plan but that's not going to be desirable for most people.

My guess is that over time we'll see smartphone screens get somewhat larger (4.5", 5") and all tablets smaller than about 9" will go away, unless they're purchased as mobile gaming devices. 

Will LightSquared and Sprint Save Us from Usage-Based Pricing?

As I listened to the Facebook-Skype video chat announcement earlier this week -- and the discussion about how it would move into mobile -- I was struck by the fact that consumers and services are moving in the opposite direction of carriers. Consumers don't want to have to ration their data usage and publishers are increasingly delivering services (e.g., Neflix) that are bandwidth heavy and data intensive.

As you saw earlier Verizon is the latest US carrier to end "unlimited" data pricing. Following AT&T and T-Mobile's leads, the company is moving to usage-based pricing. This is often sold as a consumer benefit. But carriers see increasing data usage and want more revenue. And at a time when voice minutes are declining carriers need to gain more profit from their data networks.

As an aside the AT&T-Mobile deal is now likely to approved with conditions. This will provide better coverage and service to AT&T subscribers but result in higher prices for consumers down the line. Higher prices will also come with usage-based pricing as consumers exceed data limits. Indeed, consumers have no idea what 2GB or 5GB or 10GB all mean, as a practical matter. To that end Verizon is introducing a number of tools and apps that will help consumers monitor and manage data usage. While this will be helpful tiered-based pricing is fundamentally not what consumers want.

Among the four major US post-paid carriers Sprint alone has true unlimited plans now. This creates a rare opening and opportunity for Sprint to seize upon, especially if Sprint gets the iPhone (as suggested by many) in the fall. Many of the pre-paid carrier plans will also continue to offer unlimited data but users will only gain access to "tier two" Android handsets, many of which are getting better. Rumor also suggests a pre-paid version of the iPhone may be on the way. 

Wholesale 4G-LTE provider LightSquared may also be a kind of white knight in the battle against unfriendly carrier pricing. Sprint has done a long-term deal with LightSquared and other secondary carriers or perhaps even new MVNOs could potentially emerge, using a LightSquared network, to challenge AT&T and Verizon's control of the market. That would be welcome. 

There are real differences in the quality of the carrier networks as well as customer service differences. But at the end of the day they're commodity providers of bandwidth. What most consumers really want is a good handset selection, reasonable network coverage and, perhaps most importantly, value-pricing.

Nielsen: Smartphones Now 38%, Demand Surging

Nielsen has released data that shows smartphones now at 38% of all US mobile handsets. Further it says that among new buyers 55% of purchases are smartphones, up from 34% a year ago.

We're going to hit the 50% smartphone-handset threshold either in Q4 or Q1 next year. Below is a chart showing the breakdown of smartphones to feature phones, as well as the relative share of smartphone operating systems according to Nielsen. 

http://blog.nielsen.com/nielsenwire/wp-content/uploads/2011/06/mobile-OS-share2.png

Nielsen added that while Android leads all other smartphone platforms with a 38% share, "it is the Apple iPhone that has shown the most growth in recent months." Indeed, there have been a number of stories recently, based on financial analyst reports, that Android momentum may have "peaked." I would argue that's probably not true. But once the iPhone becomes available on T-Mobile and Sprint (probably this fall) we'll see more iPhone gains. 

Android handsets are inexpensive in some cases and in others very powerful but they continue to lack the overall polish and usability of the iPhone. I say this as a semi-loyal Android user for the past year.

The perpetual Android vs. iPhone debate is in a way beside the point. For the foreseeable future, these are the dominant OSs in the market. The real question is who will be number three?

Is There a Tablet Market or Just an iPad Market?

The tablets keep coming but none of them -- including the RIM Playbook -- have so far seemed to affect the momentum of the iPad or had much of an impact on consumers. As I've said before I now have the Samsung 10.1" tablet (courtesy of Google) and found it lacking compared to the iPad2.

I do think that some of the 7" tablets may do well. And lower-priced 10" tablets may also see some success. But there are many who would now argue that the tablet market is becoming like the MP3 player market of the last decade: all about Apple. While there were lots of MP3 players there was only one visible product and brand: the iPod. 

It's still too early to say that the tablet market is already won, but there are signs that despite the best efforts of Motorola, Samsung and RIM, the iPad remains the most desired tablet by a factor of 4X or more. Survey data released on Monday by Bernstein Research found that consumers were far less interested in rival tablets than the iPad. 

 Screen shot 2011-06-23 at 6.01.45 AM

The same survey found that the 7" tablet form factor wasn't very interesting to consumers either. I'm a bit surprised by this finding and continue to believe Android will see some success with the smaller size. By contrast the 10" tablets feel very derivative of the iPad -- although we haven't yet seen the HP TouchPad in action yet. But it too will probably be shunned by consumers.

According to comScore, the iPad currently accounts for 97% of all tablet-related web traffic in the US. That number is 89% on a global basis

As a consequence of rivals' disappointing tablet rollouts, they have scaled back sales estimates and reduced orders for parts. This includes Motorola's much hyped Xoom and the more recently released Playbook. There are at least a dozen companies bringing tablets to market now and later in the year. Most will probably fail because they seem like imitators of the iPad. (At a low enough price point, i.e., 250, clones can succeed.) 

I've argued elsewhere that the most competitive Google device vs. the iPad is probably the recently launched Chromebook (from Samsung, Acer). However Amazon, which is poised to bring out full-blown color-screen Android tablets, could prove a formidable competitor to Apple over the long term. 

According to a recent report in Taiwan-based DigiTimes:

Amazon is poised to step into tablet PCs and will launch models as soon as August-September, with targeted global sales of four million units for 2011, according to Taiwan-based component makers.

The timing of launch is to meet the peak sales period prior to Thanksgiving in the US and the year-end holidays in the US and Europe, the sources pointed out.

Amazon adopts processors developed by Texas Instruments, with Taiwan-based Wintek to supply touch panels, ILI Technology to supply LCD driver ICs and Quanta Computer responsible for assembly, the sources indicated. Monthly shipments are expected to be 700,000-800,000 units.

One can assume that Android will get better on tablets. Currently Android 3.1 offers an overall inferior user experience to the much more polished iPad software and environment. Improving software, combined with Amazon's Android appstore and the company's brand, distribution and marketing muscle could make Amazon the number two tablet player by early next year.

However success or failure will still largely depend on the quality of the device and how much it costs.

How Would Nokia Feel if Microsoft Bought RIM?

Once again RIM is a takeover (talk) target. The recent drop in the company's stock value, declining market share and newly announced layoffs have rekindled discussion among financial analysts of a potential Microsoft acquisition. The following appeared today in Bloomberg/BusinessWeek:

Research In Motion Ltd. has lost so much value that an acquirer could pay a 50 percent premium and still buy the BlackBerry maker for a lower multiple than any company in the industry.

RIM, once worth $83 billion, fell more than 80 percent from its record three years ago as Apple Inc.’s iPhone and Google Inc.’s Android platform siphoned off smartphone customers. The Waterloo, Ontario-based company, which plunged last week after saying quarterly sales may drop for the first time in nine years, closed yesterday at $25.89 a share, or 4.7 times earnings next year. That’s less than any communications-equipment provider, according to data compiled by Bloomberg.

The BlackBerry maker's market cap is currently about $14.6 billion. It's quite possible that a private equity fund could rush in and try to buy the company. But putting that aside Microsoft is always mentioned as the logical buyer (because of RIM's enterprise foothold and the hardware business). 

Yet Microsoft just spent $8 billion on Skype and more than a billion (reportedly) on its deal with Nokia. Would Microsoft turn around and now spend $15 billion or more on RIM? Beyond the cost, it would probably undermine the deal that Microsoft and Nokia have just done -- or at least trust between the companies. Suddenly Microsoft would be directly competing with Nokia, it's premier handset partner. 

I suspect Microsoft won't make a move to buy RIM in the wake of Nokia. If it were to do that Nokia might rethink "betting the farm" on Windows Phone. After all Nokia just released a pretty nice looking handset (N9) based on MeeGo. In fact the demo looks so good it makes one wonder why Nokia felt compelled to do the Microsoft deal in the first place. 

Screen shot 2011-06-21 at 12.00.33 PM

RIM's Platform Is Now Burning

Yesterday RIM reported earnings that were below expectations. (Revenue was $4.9 billion, profit was $695 million and off almost 10%.) After months of denial about RIM's outlook by management it's all out in the open: RIM is on fire and not in a good way.

It's time for the RIM version of Nokia CEO Stephen Elop's now infamous "platform is burning" memo. That immediately preceded the abandonment of Nokia's Symbian OS and the adoption of Windows Phone as the company's future.

One potential bright spot from yesterday's earnings release is that the company "sold" 500,000 Playbook tablets. However this is a fake number; it represents the number of devices distributed to retailers, not bought by consumers. In my travels -- and recently they have been extensive -- I've not seen one Playbook in actual use (though I have seen many ads).

RIM's BlackBerry brand is still relatively strong and probably stronger outside North America now. That's where the company's growth is today.

Hypothetically, with the right mix of products, RIM could stabilize and get back on track globally. But it's not clear precisely what RIM can do to regain its competitiveness. There's no easy answer here. 

If the company were to adopt Android as its platform it would become simply another Android handset OEM. And in that effort RIM would be soundly beaten by Samsung and HTC. Yet RIM's own software experience has been second-rate compared to the iPhone and Android devices (and Windows Phone). 

RIM's stock is way down this year and investors are grumbling. RIM is planning a buy back to keep the stock from sinking further. Yet Co-CEOs Jim Balsillie and Mike Lazaridis are probably on the way out, or at least one of them. The company has also announced that it will lay people off, but it needs some major rethinking and retooling of its culture and processes to become competitive once again. 

There is a diehard group of RIM loyalists out there -- and they number in the millions. However, at least in the US, they are an endangered species.

Related: Some see Verizon's hand in RIM's US decline after the company shifted its allegiance to Android. 

Survey Reveals Tablet Mania: Majority Claim to Want One

To promote the launch of the Galaxy Tab 10.1 Samsung conducted an online consumer survey (n=1,000). The results show that a majority of US adults are potentially interested in buying a tablet in the future.

The press release makes the somewhat misleading statement: “The survey revealed that 90 percent of U.S. consumers either already own a tablet or would consider buying one.” It's misleading because only a small fraction of the population owns a tablet.

Among other things, the survey examined what people do with their existing (mostly iPad) tablets: 

  • 76% read the news or books
  • 64% watch TV shows or movies
  • 61% listen to music
  • 56% update their social networking profiles
  • 53% of survey respondents would choose to use their mobile tablet to play games instead of on a PC or standalone video game console.
  • 41% video chat with loved ones

The iPad and iPad2 together constitute roughly 82% of all tablets sold in the US according to Nielsen. Apple said yesterday that it had sold 25 million iPads globally to date. I'm unable to find the breakdown of North American sales vs. international.

According to several sources tablet penetration in the US is about 4%-5%. So clearly most US adults don't have tablets and there's considerable room for growth. The Samsung survey suggests that the remaining well over 200 million US adults are interested in buying one. 

Survey responses and behavior are often distinct things. But if the pro-tablet sentiment is as widespread as suggested by the survey it will mean huge tablet sales and potentially diminished PC sales over the next couple of years accordingly. 

Apple: 200 Million iOS Devices Sold

Apple is still doing the keynote at its developer conference. Apple's Scott Forstall is on stage and the iOS 5 announcement is happening right now.

Prior to launching into discussion of iOS 5 features, Apple released some figures for devices sold to date: 200 million iOS devices (all in) sold around the world. Of that number, 25 million are iPads according to Apple. 

Very different than the comScore numbers that came out last week, here's Apple's statement about US smartphone OS market share: 

Screen shot 2011-06-06 at 10.47.09 AM

Here's the Apple press release and all the related coverage. Here's a great roundup of all the numbers presented during the keynote.

Android Continues Its Rise, RIM Its Decline

Earlier today comScore released its "mobiLens" US mobile subscriber data for April. What it shows is the decline of all smartphone platforms except for Google and Apple. RIM is now a full 10 points (according to the comScore survey data) behind Android.

What a dramatic fall for the company that less than a year ago was still the market leader by a considerable margin. Windows (despite Windows Phone) also continues to lose share. However until a Nokia-Windows phone comes out we won't clearly know the operating system's outlook. 

Screen shot 2011-06-03 at 3.30.56 PM

Below is the same data for September 2010 (9 months ago), with RIM in the lead by 13 percentage points. 

Screen shot 2011-06-03 at 3.32.15 PM

Like Nokia RIM may be forced to make some dramatic changes to appease shareholders, who will want someone to blame for the decline of the platform and the brand. The perception that RIM is in decline doesn't help the company with developers who increasingly will focus on just iOS and Android. Microsoft is trying to argue that Nokia and it represent a "third ecosystem." However that remains to be seen. 

A weak software/developer ecosystem puts the platform in question at a heavy competitive disadvantage, which is why RIM has conceptually embraced Android apps on its tablet. Independent BlackBerry apps will probably go away at some point and be entirely replaced by Android on RIM devices. 

Next week at Apple's developer conference in San Francisco we'll get some updated "real" numbers (rather than just share projections) about iPhones and iPads sold to date. 

People Don't Use Smartphones When They Eat (As Much)

Handset maker Ericsson conducts research on consumer behavior and attitudes all over the globe with thousands of consumers. Not long ago it released findings from some early 2011 research about smartphones and tablets with a specifically US audience.

There are no dramatic findings or true surprises but each piece of research contributes to a more nuanced picture of the market and consumer behavior. The data reflect self-reported usage patterns with an emphasis on time of day. Here are two of the charts that show usage of smartphones throughout the day:  

Screen shot 2011-05-16 at 12.37.49 AM

The following chart reflects the comparative "daypart" usage of the mobile Internet and GPS apps (probably maps in particular):
Screen shot 2011-05-16 at 12.37.21 AM

In terms of tablets, Ericsson found that demand was higher than for most other electronics and devices.

Screen shot 2011-05-16 at 12.33.43 AM

Finally the data show that tablet usage patterns parallel those of smartphones, rather than PCs, although tablets are "cannibalizing" PC usage to a degree. Other studies and data reflect different usage patterns for tablets, however. 

Screen shot 2011-05-16 at 12.38.30 AM

Android Tablets: 7 Inches Is Right Form Factor

In the non-iPad tablet category we now have RIM's Playbook, the forthcoming WebOS tablets, the Samsung Galaxy Tab(s) and a wide range of other Android-based tablets that are less well-known. Amazon is set to release multiple devices based on Android, according to a "stay tuned" remark made by Jeff Bezos in a Consumer Reports interview:

Asked today about the possibility of Amazon launching a multipurpose tablet device, the company's president and CEO Jeff Bezos said to “stay tuned” on the company’s plans. In an interview at Consumer Reports' offices, Bezos also signaled that any such device, should it come, is more likely to supplement than to supplant the Kindle, which he calls Amazon’s “purpose-built e-reading device.” 

While Amazon could certainly build a terrific device (or devices plural) the truth is that, among the alternative tablets out right now, none rise above the level of iPad "wannabe" or imitator -- save the 7-inch devices. And that's all about the hardware not the UX, which also falls short. That's the inescapable conclusion of my informal experiences with each of them. 

Somewhat paradoxically Google has made Honeycomb quite different than iOS. I would imagine this is partly a function of "organic" decisions about how Android should work on a tablet and partly a self-conscious effort to differentiate from iOS. But it makes using the new wave of Android tablets like learning a new language in a way; it's not very intuitive. 

Generously Google gave away the forthcoming Samsung 10.1-inch Galaxy Tab to attendees of its developer event, Google I/O, which was held in San Francisco last week. I was there and excited to receive one and try it. I've since been attempting to use it regularly during my recent travels. I also have an iPad 2 with me, which often seduces me away from the Samsung tablet. 

Screen shot 2011-04-28 at 7.45.27 AM

This isn't a review so I won't go into a lengthy discussion of features or compare the devices in detail. While the Samsung 10-inch "Tab" is quite thin and nice in many respects the overall user experience is weak compared to the iPad 2. Android tablets will become more competitive over time but currently they're not. However the 7-inch hardware makes for a differentiated form factor. (I also quite like the 5-inch Galaxy Player.)

As I've argued in the past, the smaller 7-inch devices are compelling because they're more portable than the 10-inch iPad or Android devices of comparable size. The 10.1-inch Samsung is long and wide (pictured above, right), making it perhaps good for watching wide-screen movies but otherwise "out of proportion" for viewing websites and many other uses. 

Some proof of what I'm saying comes in the form of fairly strong 7-inch Galaxy Tab sales. That device, not yet equipped with Honeycomb, offers a large-screen version of the UX found on Gingerbread Android handsets. But people are buying it because they can take it with them in a way that they cannot with the iPad. 

The iPad currently dominates the tablet market and because of its size most people use it at home: 

Screen shot 2011-05-15 at 8.55.55 PM

But the smaller form factor, with potentially more aggressive pricing, is a perfect place where Android can play and establish a "beachhead." People will consider these smaller tablets because of their portability and right now Apple has no offering to compete with them and may not for the foreseeable future. We may see a larger iPod Touch come along at some point or a smaller iPad. But that's pure speculation at the moment.

Going directly after the iPad right now with comparably sized devices is fruitless because the overall Android tablet UX, though improved, is still not strong enough.