Mobile Platforms

Outlook for Amazon Smartphone Murky

The rumor that Amazon was going to build a smartphone has been around for some time. However it has returned and gained new momentum of late, with the recent acquisition of 3-D mapping service UpNext. And an article last night from Bloomberg seems to confirm that Amazon will introduce a handset or handsets -- made by Foxconn, the company that makes the iPhone and iPad:

Foxconn International Holdings Ltd., the Chinese mobile- phone maker, is working with Amazon on the device, said one of the people, who asked not to be identified because the plans are private. Amazon is seeking to complement the smartphone strategy by acquiring patents that cover wireless technology and would help it defend against allegations of infringement, other people with knowledge of the matter said

Let's now assume that Amazon is making a smartphone -- a Kindle smartphone -- what is the outlook for such a device? One would assume, like Kindle Fire, that it will be built on a highly customized version of Android, with the same type of Amazon content integration as seen on the Amazon tablet. 

The Kindle Fire was a sales success because of the strength of the Amazon brand and channel and the inexpensive price tag ($199). Amazon's brand won't be as much of a factor in the smartphone arena. An Amazon smartphone will have to compete on the strength of its features and on price. It's hard to imagine that Amazon will be able to compete on price because many Android phones are already very cheap or free (carrier subsidized).

Content (as in Amazon books, movies and music) also doesn't factor as significantly as a differentiator on smartphones it as potentially does on a 7-inch tablet. What matters on smartphones is the availability of apps. There's already a Kindle app for iPhone and Android; so users already have access to much of Amazon's content (though not cloud-based music or movies). And the Amazon app store is an incomplete version of Google Play (the Android market). In other words, the competitive advantages that helped drive Kindle Fire sales don't exist at all or won't exist to the same degree in a smartphone context. 

The only way I could see an Amazon smartphone succeeding vs. other Android phones or the iPhone is if the phone were absolutely top-of-the-line and Amazon were practically giving it away (sub-$100). Otherwise I think we'll see a tepid response by consumers.

Beyond this, depending on what kind of finally shows up, I'm sure Amazon will be pulled into the maelstrom of mobile patent litigation. 

Marketers Confused about Mobile, but Increasingly Building Sites and Apps

Despite all the promises of digital marketing, data and analytics most marketers remain confused about how to manage the increasing complexity of digital channels, devices and tactics -- let along integrate them coherently. In particular, two recent surveys from email marketing services provider StrongMail and IBM show that marketers and CMOs conceptually embrace mobile marketing but are generally stumped by tactics.

The IBM survey was conducted in 2012 and had a sample size of roughly 350 "marketing practitioners." The StrongMail survey was conducted in Q1 and had 802 respondents, described as "business leaders." Just under half (46%) of the StrongMail respondents technically qualify as small businesses, with fewer than 100 employees. The IBM survey was more representative of enterprises and had respondents from multiple countries.

Among StrongMail survey respondents, only 55% had an existing mobile presence or were engaged in any form of mobile marketing. And 57% said they'd been doing it for only a year or less. Although 43% of those without a mobile presence or strategy planned to implement one within the next year. 

What did they plan to do? In roughly equal numbers the StrongMail respondents planned to build mobile sites (30%) and mobile apps (26%), followed by SMS/MMS marketing (15%). Impressively, 70% of StrongMail survey respondents planned to increase their mobile budgets in the next 12 months. But there's a difference between "talk" and action. 

For those still not doing anything, the top three answers to the question "Why aren't you leveraging mobile marketing?" were the following:

  • We see value in mobile but haven't yet determined the right strategy: 37%
  • Lack of resources/staff: 22%
  • Lack of funding/budget: 12%

Confusion over strategy and tactics similarly plagues the marketers at the larger organizations surveyed by IBM. In answer to the question, "Which three of the following market factors will be the biggest challenge for your organization over the next 3 to 5 years?" they responded that the proliferation of channels and devices was the biggest challenge: 

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Like the marketers in the StrongMail survey, the emphasis in the IBM survey was on mobile sites and apps. In response to the question, "Which of the following mobile marketing tactics is your company using or planning to use?" they said: 

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In this case, however, mobile email, SMS and local ad targeting were also being (at least conceptually) embraced. In the StrongMail survey the top current marketing methods reported were the following:

  • Mobile websites: 70%
  • Mobile apps: 55%
  • QR codes: 49%
  • SMS/MMS: 40% 

Interestingly only 13% of the mostly small business respondents in the StrongMail survey said they were using "location-based mobile marketing." And among those not currently doing any mobile marketing, only 3% indicated they were planning to implement it. 

By contrast the larger companies represented in the IBM survey were more interested and bullish about location. This is almost the opposite of what you might expect. SMBs could be expected to be more interested in location-based mobile marketing while one would anticipate that enterprises would be more skeptical. But the opposite appears to be true, drawing inferences from the data in these two surveys. 

Monetate: Non-PC Devices to Grab 25% of Traffic in Less than a Year

E-commerce optimization firm Monetate has published its latest "E-commerce Quarterly" report. The report addresses a number of issues including social commerce. For purposes of this post, I'll focus on the mobile and tablet findings.

The data in the report are drawn from "analyzing a random sample from over 100 million online shopping sessions on 100-plus major e-commerce websites." Here are some of the major findings: 

  • 88% of website visits now come from PCs, down from 92.1% in the prior quarter.
  • Tablet traffic increased 348% in one year, while visits from smartphones increased 117% during the same time period.
  • More than 6% of all website visits now come from tablet users; 95% of this traffic is from iPads.

Website Traffic Sources

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Q1 2012 Conversion Rates by Device Category

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Compare similar data from Marin Software. Directionally they're almost identical to the Monetate findings.

http://searchengineland.com/figz/wp-content/seloads/2012/03/Screen-shot-2012-03-26-at-5.10.22-AM-600x238.png

What both the Marin and Monetate conversion findings lack, however, is data about offline conversions. If those were tracked and factored in I suspect we'd see mobile conversion figures outstrip the PC and potentially tablets.

Monetate's focus is strictly on e-commerce conversions. But most people don't buy conventional products on their smartphone, though they may do things like banking transactions or buy apps or rent movies. 

The use cases for smartphone are different than PCs and tablets, which are mostly used at home and often as a substitute for the PC. According to Monetate's report:

It seems clear that smartphone users are either doing more comparison shopping or are dissatisfied with the user experience. In fact, a recent study from comScore Inc., Shop.org, and The Partnering Group revealed that 43% of smartphone owners have used their mobile device while in a store for a shopping purpose.

Monetate also argues, despite that at-home usage of tablets, that there's a different user expectation vs. the PC experience:

With increases in website traffic from devices such as the iPad and Kindle Fire, e-commerce businesses must treat customers using tablets as a unique audience segment. Tablet users expect a different experience that takes advantage of their devices’ features, such as touch/swipe functionality and screen rotation.

This argues in favor of tablet apps as well as a tablet-optimized HTML5 site. Finally, the firm predicts that at current growth rates, "website traffic from PC users will dip below 75% in less than one year" -- meaning that smartphones and tablets will represent 25% of site traffic. 

RIM, Nokia Contemplate Futures Amid Dramatic Market Changes

Almost nobody in the mobile handset business is making money right now except Samsung and Apple. Nokia and RIM, the former smartphone leaders, have almost seen the bottom drop out of their businesses over the past year or so. RIM hired bankers recently to consider its options. The company is almost in free fall.

Nokia had hoped that Microsoft would save it but that's not happened. The most optimistic discussions of Lumia sales indicate they're "mixed." Furthermore, existing Nokia Lumia phones won't be getting Windows Phone 8 upgrades. They'll have to settle with Windows Phone 7.8.

This fact, once made known to the general public, will essentially kill sales of current Lumia smartphones (unless carriers give them away). People will want the new and improved version of Windows Phones -- which won't be coming out until much later this year. That leaves two more quarters of weak sales for Nokia. Moreover, Nokia will be just one of several OEMs to be releasing Windows Phone 8 smartphones. 

It doesn't look good. 

The Sunday Times in the UK reported that RIM was contemplating either selling its handset business or seeking an outside investor such as Microsoft. Nokia also looks like a takeover target as its fortunes continue to decline. And with both of these companies struggling the likelihood that Microsoft will own at least a part of a hardware OEM grows more and more likely. Amazon is also a potential investor or acquirer mentioned in the article. 

One now has to wonder whether, if Nokia had gone with Android, things would be any different at this point.

There were discussions between Google and Nokia before the latter went with Windows. According to a source I spoke with, Google was unwilling to agree to a co-mingling of Google Maps and Nokia Maps or substitution of Nokia Maps on the back end. It's unclear whether that was the dealbreaker or one of several issues that prevented a Nokia-Android deal. Microsoft did agree to use Nokia Maps and in fact Nokia does replace Bing Maps in the new Windows Phone 8 OS.

It is likely that Nokia would have sold more Lumia phones to date if they were powered by Android. That probably wouldn't have fundamentally altered the company's predicament but it would have made it marginally better. Yet HTC is building some very nice Android devices but being overwhelmed by the Samsung Android juggernaut all the same. The Taiwan-based company is struggling to remain profitable and recently abandoned the Brazilian market. 

If that continues HTC could be another takeover candidate by early 2013. And if that's so it will dilute the value of Nokia and RIM as they seek "strategic options" to survive. 

Google to Announce $199 7-inch Tablet This Week

The long-anticipated Google (Nexus) tablet is set to debut this week at Google's developer conference, Google I/O. Gizmodo Australia has specs and apparent pictures of the device. CNET has additional information.

Gizmodo reports an 8GB model will cost $199, matching Kindle Fire, and a 16GB model will carry a $249 price tag.

Google's tablet announcement comes on the heels of the Microsoft Surface announcement last week. However Surface pricing wasn't disclosed. Rumors argue that the lower-end RT model will not come in below $599, with the higher end Pro costing at least $700.

Unless Microsoft can get the RT price down to $499, as I and others have argued, Surface is unlikely to compete with or impact the iPad very much. Rather it will likely affect competing Windows laptop sales. 

The new Google Nexus tablet will probably have an immediate -- and potentially dramatic -- impact on Kindle Fire sales. The Kindle Fire is a nice upgrade from regular Kindle reading devices but a lousy tablet overall for other than accessing Amazon's content universe. The Nexus tablet is likely to be a much better device for Internet browsing with a larger app library. Android non-tablet apps will look better on a 7-inch device than they did on the 10.1-inch Android Galaxy Tab. 

Those not loyal to Amazon will be inclined to choose Google's tablet over the Kindle Fire -- all things being equal. However we may see Amazon respond with a price cut, which would be very interesting since the company already looses money on every Kindle Fire sold (but makes it back on content and other sales). 

Siri and Voice UIs Are Reshaping Consumer Expectations

Ever since Siri was released with the iPhone 4S last Fall -- although it seems much longer than that now -- it has been reshaping expectations both among consumers and to some degree in the enterprise. Few people are aware of all the work going on around virtual assistants and customer care in the enterprise. It's a very dynamic segment and Siri has become a reference point. 

In addition to Siri there are dozens of voice-based intelligent assistants for Android. There are also Siri competitors in the iTunes store, including Assitant (Speaktoit), Evi (TrueKnowledge) and Kngine. But there are probably about 12 - 15 more apps that present themselves as voice tools or intelligent assistants. 

Having a voice UI and/or intelligent assistant is now becoming a strategic capability for smartphones -- even "table stakes." Witness Samsung's new "S-Voice." However, while the Samsung GS III has received rave reviews, S-Voice has emerged as its weak link. LG is also introducing a voice capability for its handsets. It's not clear why they're doing this because Google's speech recognition and voice actions are baked into the Android OS.

Some of the smaller consumer-facing "assistant" companies and startups (e.g., Speaktoit) become near-term takeover targets as carriers and OEMs recognize the new importance of voice as a UI and, beyond voice, the need to offer an intelligent assistant capability to match Siri and fulfill the new expectations it's creating.

Google and Microsoft have yet to move beyond pure voice input and embrace the "personal assistant" metaphor, though Google has been working on something for some time -- often referred to as "Majel," after Star Trek creator Gene Roddenberry's wife. Nuance, which powers Siri, has Vlingo and Dragon Go!, which sit between what Google and Microsoft offer and Siri in terms of capabilities. 

Notwithstanding intelligent keyboards such as Swype (another Nuance product now) and Swiftkey, voice will emerge over the next year or two as the primary interface for most tasks on smartphones. Most iPhone users use only limited functionality on Siri and Apple has been trying to educate them about its full capabilities. By contrast, keyboards are likely to become secondary tools or used in very specific situations: entering numbers or correcting typos. 

As one colleague put it late last year, if speech is the "new mouse" then voice is the new touch.

What Exactly Is Microsoft Surface and What Impact Will It Have on the Market?

No doubt you've already read a great deal about Microsoft's new hybrid tablet-PC, Surface. It's being described as Microsoft's challenge to the iPad. Some have already called it a "game-changer." But that remains to be seen. It's also probably more of a challenge to Microsoft's own hardware partners than to the iPad.

Surface is a "new family of PCs." There will be at least three versions of the computing device, sporting slightly different specs and features. The screens apparently will all be 10.6 inches. All will come with a version of Windows 8. Perhaps the most compelling feature of the device is a "smart cover" that also operates as a keyboard. 

Unfortunately at yesterday's press conference, which I was not present for, the company provided no release date or pricing information. The latter is critical. However Microsoft said that Surface devices would be competitively priced. In the case of Surface for Windows 8 Pro, the company said it would be priced “on par with Ultrabook-class PCs." Right now Ultrabooks run from about $700 to $1,000

If Microsoft hopes to compete with the iPad, the lesser Windows RT version will have to start at $499. 

Screen shot 2012-06-19 at 6.40.32 AM

There are some who believe that Microsoft took the bull by the horns in creating Surface, frustrated that its partners were not building compelling hardware while the iPad increasingly stole PC sales. It may well be that this will be the "kick in the pants" that Dell, HP, Acer and the rest need to start developing sexier machines. 

However it's more likely that this device -- provided it works well and delivers against its promise -- will compete with those same hardware partners. It could well capture sales that might have gone to Ultrabooks. I would also imagine that enterprises will adopt these machines, it's not as clear that consumers will. That's where price comes in. 

Another factor is Windows 8 and the public response to the new OS and UI. Microsoft is no longer in the position it has enjoyed for the last 15 years: when it released an OS update people bought it (until Vista). Now Android tablets and iPads do provide a viable alternative for those not doing heavy duty Office-oriented PC content creation.

Windows 8 has so far received mixed to negative reviews. While its Windows Phone OS has been critically praised, the devices aren't selling. This is partly because the UI and OS are unfamiliar to smartphone owners who've already become accustomed to the look/operation of iOS and Android. There are also too many competing options. Android has taken Microsoft's place in the smartphone world; it has become the alternative-to-Apple software supplier.

If consumers find Windows 8 jarring they may delay buying or avoid it. That's why price is so important. Surface is a sexy little device that must be priced very aggressively to get consumer attention. Otherwise, Surface could go the way of the Zune or the even shorter-lived Kin.

Survey: 74 Million Tablets in Use in US Today

The Online Publishers Association followed up its 2011 tablet users survey with the release of an encore study (n=2,540 online adults). It contains a rich trove of data about US tablet usage among adults. According to the survey Android and the iPad have roughly equal shares of the US tablet market. This finding is contradicted by other data sources that show more than 90% of all US tablet traffic comes from the iPad. 

The survey found that 31% of the Internet audience (vs. all US adults) owned a tablet today -- or 74.1 million users. Here are a selection of other findings: 

  • 90% of tablet users are "very satisfied" or "satisfied" with their tablets
  • 60% of tablet owners use the device several times a day, 14 hrs per week on average
  • Home is the dominant use location; majority of usage comes between 5pm and 11pm
  • Top usage categories: accessing content/information, Internet and email
  • 85% of tablet owners are two-screen multitaskers; 66% are three-screen multitaskers.
  • 61% of tablet owners have purchased content

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Tablet owners have bought plenty of apps but they prefer ad-supported free apps if given the choice. Below is the list of paid-content categories, according to the survey: 

  • Magazines -- 10%
  • Entertainment -- 8%
  • Sports -- 6%
  • Weather -- 6%
  • Shopping -- 5%
  • Newspapers -- 5%
  • Fitness and Health -- 5%
  • News -- 4%
  • Business/professional -- 4%
  • Fashion/Beauty -- 4%
  • Travel -- 4%
  • Finance -- 4%
  • Lifestyle -- 3%
  • Reference -- 3%

The following were the top product-research categories on tablets:

  • Consumer Electronics -- 37%
  • Restaurants/Fast Food -- 36%
  • Media and Entertainment -- 35%
  • Retail and Apparel -- 35%
  • Food and Beverage -- 30%
  • Sports/Recreation/Hobbies -- 30%
  • Travel Service -- 30%
  • Personal Care and Beauty -- 28%
  • Automotive (incl. Parts) -- 25%
  • Health, Healthcare and Pharma -- 24%
  • Fin.Services, Insurance, Real Estate -- 23%
  • Telecom., B2B/B2C Services -- 22%
  • Home Furnishings -- 21%

Generally speaking attitudes and response to advertising are positive among tablet owners, with large numbers using the devices for research and buying. According to the survey, tablet owners spent an average of $359 buying products on tablets in the past year. 

There are also plenty of indications in the survey that people prefer their tablets to other devices for the various activities they're engaged in. 

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Will Microsoft Be Forced to Buy Nokia?

We can now say that the Microsoft-Nokia partnership isn't working for either company. Nokia's woes are well documented: more job cuts, more losses, more deterioration in the core business. Lumia sales are weak on a global basis, especially in North America where Nokia was plotting its comeback. The company is in an accelerating state of decline, much like RIM now. 

For Microsoft, which gave Nokia preferential treatment and established a special relationship, Nokia's fall has to be particularly disconcerting. Redmond is already providing billions to Nokia in support and marketing help. Just like the struggling economies of Europe, Nokia needs a bailout. The company is now a takeover target

That raises the question: Will Microsoft be forced to buy Nokia, defensively? Most of the Asian handset makers have favored Android over Windows Phones. Indeed, Nokia should consider adding Android phones to its lineup -- unless precluded by its agreement with Microsoft. And that's probably the case. 

Right now Nokia has about $12 billion in cash in the bank. Absent a takeover, that cash will prevent the company from disappearing any time soon. But it can't continue to operate in the current manner. Its exclusive relationship with Windows/Microsoft simply hasn't worked. Enough time has passed to make that statement. 

There's almost no chance, given the current state of things, that Windows Phones will become the number two smartphone OS, as predicted by Gartner and IDC. Those forecasts were largely based on the reach and perceived brand strength of Nokia. That brand strength doesn't exist in North American and it's declining in other markets.

The chances are growing that someone will bid for Nokia. Rumors are circulating that it could be Samsung (denied by the company) or China's ZTE. However Microsoft will probably be forced to buy Nokia if it comes to that. By default the company would then be following the advice of several tech bloggers who suggested the same to compete with Apple with a more holistically integrated device. 

Microsoft's Bing Maps also rely increasingly on Nokia's data and backend, another reason Microsoft may want to acquire the company. Nokia also holds valuable patents that enhance the takeover value of the Finnish company (and Android licensing value for Microsoft). 

There will likely be some radical change to Nokia (sale or replacement of CEO Elop) by Q4 of this year if sales don't dramatically improve -- and they're not likely to with the iPhone 5 and Galaxy S III coming. 

Apple Expands Siri, Gets Into Local With Maps

With today's keynote announcements coming out of the Apple developer conference the company has expanded Siri's range of capabilities, including into navigation and local search. The latter accompanies the introduction of new Apple Maps, which entirely replace Google's mapping product as the default provider on iOS devices. 

When Apple bought Siri it did a wider range of things than what Apple introduced a year ago with the iPhone 4S. Siri's original plan was to integrate numerous third party APIs and allow Siri to be a front end for task completion across a range of categories. As of today that earlier vision is partially restored.

There now more datasets available to Siri (sports, movies, app search, local search). Users can also, once again, make OpenTable restaurant reservations. In addition users will be able to find/launch apps using Siri.

 

With Apple Maps the company now enters the local search market in a big way. Without having the benefit of having used the product, I can only speak in the abstract. However it appears very competitive. There are a wide range of data providers that Apple appears to be working with across a broad array of international markets, including TomTom, Yelp, Localeze, Acxiom, Urban Mapping and Waze. 

Assuming a relatively good product, Apple would quickly become the number two player in local-mobile search. And having Siri as the front-end to this experience will potentially reinforce Siri usage and introduce people to the broader concept of Siri as a search tool or potential Google substitute in many instances. While Siri already could already offer directions and find nearby businesses it didn't provide a very good local search experience overall. 

To see how widely seen and used Siri was as a search tool, we recently conducted a survey (n=503, 6/12) of iPhone users and asked them:

Which of the following do you use MOST OFTEN to search the web on your phone?

  • I visit Google.com to search --  44.9%
  • I use search in the Safari toobar -- 26.4%
  • I use the Google mobile app -- 19.3%
  • I use Siri to search the web -- 11.1%
  • I use Bing and/or Yahoo -- 6.6%

According to these results more people use Siri to search than use Bing or Yahoo. Siri could inch up that ladder if people begin to understand how the tool can be used beyond the relatively narrow range of functions it has been used for to date -- and if Apple rewards people with good results.

Tablet Market Exploding: How Is It Affecting PC Usage?

In January of this year the Pew Internet Project released survey data that showed 19% of US adults owning tablets (iPads). That was up from just 10% only a month before in December. Now comScore has released data showing that roughly 24% of smartphone owners also have tablets.

If we extrapolate these numbers, the Pew data suggest that there are roughly 42 million tablet owners in the US (as of January 2012). The comScore data argue the number is now 55 million. These figures seem entirely reasonable. Apple CEO Tim Cook reported 55 million iPads sold to date in February. 

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People use the term "tablet" but the market remains largely about the iPad. The only other two models with any traction are the Kindle Fire and the Samsung Galaxy Tab. According to Gartner Apple's share of the tablet market will be 61.4% at the end of the year. IDC says Apple had a 68% share of the global tablet market in Q1 2012.

Both of these figures are incorrect and largely based on shipment estimates. Shipments don't equal sales to consumers. 

Perhaps I should say instead that people may be buying other devices but it still doesn't matter. According to ad network Chitika, based on an analysis of millions of impressions in the US, the iPad "accounted for 94.64% of all tablet based traffic." By contrast Chitika said that the nearest competitor, the Samsung Galaxy tablet, "boasts a lack luster market share of 1.22%."  

Late last week ad network InMobi released its own tablet data, showing gains by the Kindle Fire and total Android tablet ad-impression share of 28%. That argues the iPad controls a 72% share of the total tablet market. 

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We're likely to hear an update of tablet numbers this morning from Tim Cook during the Apple WWDC keynote. 

Back to the comScore tablet data: the company says that just over half of tablet owners are watching video on the device, while nearly 10% are doing so every day. 

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A year ago in March AdMob found, based on a survey, that 77% of tablet owners were using their PCs less. In addition 28% of respondents said that the tablet had become their "primary computer." Clearly tablet ownership does cannibalize PC usage, while smartphone ownership may complement it. Roughly 80% to 90% of tablets are used mainly at home. 

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Once Microsoft puts Office on the iPad it will become a true PC substitute.

Nielsen: Average Number of Apps per Smartphone Now 41

Last week Nielsen released data comparing US smartphone users' app adoption and usage vs. last year. Nielsen says that the average US smartphone owner in 2012 has 41 apps on his/her phone vs. 32 apps in 2011:

In just a year, the average number of apps per smartphone has jumped 28 percent, from 32 apps to 41. Not only is the 2012 smartphone owner downloading more apps, they are increasingly spending more time using them vs. using the mobile web — about 10 percent more than last year.

Nielsen also says that smartphone owners spend roughly 39 minutes a day using apps (vs. 37 last year). However this finding is much lower than Flurry's earlier declaration that smartphone owners spent 94 minutes per day in apps. It's not clear why these numbers should be so far apart. It may be that Flurry's data are behavioral (analytics based) and Nielsen's figures are based on self-reported survey data -- in which case the former would be more accurate. However, this is speculation. 

Flurry_App_versus_WebUsage_Dec2011

Earlier this month comScore released data that asserted "4 in every 5 mobile media minutes" are spent in apps vs. the mobile browser. 

According to Nielsen the top five mobile apps across smartphone platforms are Facebook, YouTube, Android Market, Google Search and Gmail. Finally, the measurement firm added that its surveys show users continue to be concerned about mobile privacy and location sharing: 

[P]rivacy continues to be a concern with the vast majority (70% in 2011 and 73% in 2012) expressing concern over personal data collection and 55 percent wary of sharing information about their location via smartphone apps.

Payments Land Grab Continues: PayPal Annouces More Retailers, Groupon Preps Service

It absolutely makes sense for Groupon to launch a Square-like payments platform for its merchants -- part of its effort to diversify more holistically into local commerce. A payments tool for merchants (first reported by VentureBeat) would also support and complement its recently expanded Groupon Rewards loyalty program.

According to VentureBeat Groupon would seek to gain rapid merchant adoption by undercutting the fees on similar services from Square, PayPal, Intuit and the recently launched Sail. Reportedly there would be a 1.8% transaction fee and $0.15 transaction charge, which are lower than any of the fees from other, competing services. Groupon's payment platform would utilize the iPad and iPhone in a way similar to Square.

In this "race to the bottom," where merchant card fees are concerned, we're seeing the rapid commoditization of payment processing especially at the SMB store level. I was told that companies like First Data are very concerned about this development and are trying to "get closer to the consumer" as a result. 

Meanwhile PayPal yesterday morning announced an expansion of its in-store payments program. Previously it had a single retailer, HomeDepot, now there are 15 more national retail chains:

Abercrombie & Fitch, Advance Auto Parts, Aéropostale, American Eagle Outfitters, Barnes & Noble, Foot Locker, Guitar Center, Jamba Juice, JC Penney, Jos. A. Bank Clothiers, Nine West, Office Depot, Rooms To Go, Tiger Direct and Toys “R” Us. 

I have yet to use the system but it will need to provide substantial efficiency and convenience and/or "value adds" (e.g., loyalty rewards) to consumers to get them to use it vs. traditional payment cards. PayPal ultimately has to "back onto" either a bank account or a credit card. 

My informal understanding is that the HomeDepot trial wasn't entirely successful because of low consumer awareness and low usage accordingly. This broader roll out should help awareness greatly.

Through these retailer relationships PayPal will glean enormously valuable consumer data and purchase history information that it can use potentially as inputs into its PayPal media network targeting capabilities. This data mining hasn't been confirmed to me but I suspect that consumers who use PayPal in stores will have that transaction data factored into future ad targeting if they're using any of the eBay/PayPal properties. 

Just as with the commoditization of merchant payment services, services such as PayPal are creating a potential intermediary or "gateway" relationship between consumers and their credit card companies. Card companies will ultimately be forced to respond -- Amex is ahead of the curve -- with amp'd up loyalty and deal programs themselves. 

We're in an acclearating "land grab" phase of mobile payments. Multiple providers can and will exist but all the coverage, announcements and general "noise" in the market right now has the paradoxical effect of both raising consumer awareness but also delaying adoption of any individual solution.

Nielsen: Windows Phone Has a 1.7% Share in US

Nielsen has released some smarpthone market share figures for March. The metrics firm says that 50.5% of US mobile phone owners now carry smartphones. The data show the following breakdown by operating system:

  • Android OS -- 48.5%
  • iOS -- 32.0%
  • Blackberry -- 11.6%
  • Windows Mobile -- 4.1%
  • Windows Phone -- 1.7%
  • Other -- 2.1%

Here's comScore's March data for comparison purposes:

  • Google -- 51.0%
  • Apple -- 30.7%
  • RIM -- 12.3%
  • Microsoft -- 3.9%
  • Symbian -- 1.4%

Comscore puts smartphone penetration at 45.2% in the US by comparison. 

There's a meaningful difference in the numbers in terms of Android and iOS market share percentages in both data sets. In addition Nielsen shows 5.8% penetration of Windows, while comScore shows 3.9%. That's also a fairly significant difference. 

They both agree however that the Windows Phone platform so far hasn't moved the needle and Microsoft's overall share of the smartphone market is declining. 

Facebook Has Bought Gowalla, Instagram and Now Glancee

A couple of days ago local-social startup Glancee announced that it was being acquired by Facebook:

We started Glancee in 2010 with the goal of bringing together the best of your physical and digital worlds. We wanted to make it easy to discover the hidden connections around you, and to meet interesting people. Since then Glancee has connected thousands of people, empowering serendipity and pioneering social discovery. We are therefore very excited to announce that Facebook has acquired Glancee and that we have joined the team in Menlo Park . . . 

Glancee, which is really just a 2.0 version of the original Loopt, adds to Facebook's growing arsenal of mobile assets. The social network has identified mobile as both an area of vulnerability and opportunity. In the Facebook IPO roadshow video COO Sheryl Sandberg calls out mobile as "a key area of growth for Facebook." 

What she's talking about is revenue rather than usage. The company already has more than 500 million active mobile users. And Flurry Analytics recently said that social networking activities now consume as much daily mobile app munitues as games, the former number one category. Much of that activity takes place within Facebook. 

Flurry Mobile App Time by Category

The purchase price of Glancee was not disclosed but we can assume it was an "acquhire," rather than a technology acquisition -- though there may have been a bit of technology that motivated the purchase.

Glancee was part of a group of "passive" or "ambient" location startups that include the over-hyped Highlight and a dozen others. I have argued in the past that ordinary people (as opposed to those in the tech industry) don't want to continuously broadcast their locations even to close friends and colleagues. Accordingly these friend finding and pseudo-dating apps are destined to fail unless the offer some other angle or utilitarian functionality. 

Facebook may choose to use some of Glancee's capabilities as part of a new version of its app. But my guess is that Glancee, like Gowalla, will be completely shuttered and that Facebook won't turn its app into a ambient friend finder. That would complicate the privacy picture for Facebook -- though I expect geofencing and geotargeted advertising to be part of what Facebook eventually develops for mobile marketers.

We're likely to see more acquisitions from Facebook as the company continues to build up its mobile capabilities. What the company hasn't figured out is how to make money in mobile, commensurate with its mobile usage. It now pumps Sponsored Stories through its users' news feeds, having just introduced mobile advertising. However that by itself won't fulfill the mobile ad revenue imperative about to be imposed on Facebook by its IPO.

Why TGI Friday’s Might Drive More Mobile Payments Adoption than PayPal

As we all wring our hands over the slow and uneven development of mobile payments -- and watch the contest between PayPal, Google Wallet, Square, LevelUp, Boku, mobile carriers and others – it's possible that mobile payments might become mainstream in less anticipated ways. Individual retailers and franchises, for example, might be much more successful in motivating consumers to adopt the technology than the major payments players taking a “horizontal” approach.

Starbucks was a trailblazer with its mobile app and wallet functionality in the US. Home Depot recently enabled PayPal to be used in selected stores. And TGI Friday’s has just followed with iPhone and Android apps that include a mobile wallet. The casual restaurant chain has 600 locations in the US and roughly 350 of them are now equipped to let customers pay by app. Startup Tabbedout provides the payments capability in the new TGI Friday’s app.

After the app is downloaded the TGI Friday’s customer opens a tab. She or he receives a code through the app, which is then shown to the server who enters it in the restaurant’s POS system. No card swipe means greater security for the consumer. (I once had my credit card number stolen by a waiter in a high-end restaurant.) A consumer credit card is associated with the app, which is where the payment comes from.

In addition to paying in the restaurant, the app helps users find restaurant locations, see the menu and receive offers. Payments become a kind of hook for a broader set of services and loyalty efforts. While TGI Friday’s is the first restaurant chain to adopt mobile payments (after Starbucks), expect others in the segment to follow relatively soon.

Fast casual and so-called “quick service” restaurants (fast food) will likely duplicate this move in short order. One can easily imagine a McDonalds or Chipotle app with a restaurant locator and mobile payments. Chipotle already allows mobile ordering.

The integration of mobile payments into loyalty apps by major brands is likely to help educate US consumers, “socialize” mobile payments and drive consumer adoption much more quickly than abstract initiatives from PayPal or Google or mobile carriers. The consumer doesn’t have to think about which merchants or stores will accept mobile payments in the single-store scenario. In other words, the consumer “why” of mobile payments is answered much more readily in a specific context, like the one presented by TGI Friday’s.

UC Berkeley Report on Mobile Payments Discovers Highly Negative Consumer Attitudes

A recently published study from the UC Berkeley Law School about mobile payments and related issues finds some significant consumer resistance -- at least in the abstract. A survey discussed in the report found that "over three-quarters (74%) of Americans said that they are 'not at all likely' or 'not too likely' to adopt mobile payment systems. Just 24% say that they are likely to adopt mobile payments."

Enthusiasm or resistance to mobile payments varied by age. Interestingly the people most enthusiastic about the technology were those in the 35-44 age range -- not the youngest adults. Yet attitudes and behavior are often distinct and surveys don't always reflect what people actually do in concrete situations in the world. Still the data potentially reflect a stiff uphill climb for mobile payments purveyors. 

Services like Square and PayPal Here may be exceptions because they don't require a change in consumer behavior. The consumer is still swiping a card; it's the merchant experience which is changed. 

A 2012 consumer survey conducted by the US Federal Reserve found that 12% of respondents had made a “mobile payment” within the past year. However “payment” was broadly defined to include online bill paying, m-commerce, charitable giving and money transfers, among other transactions. Online bill paying was by far the most common “mobile payment” activity according to the survey.

(Source: US Federal Reserve Q1 2012, n=1,780 US adults)

Concerns over security and the lack of apparent/clear benefits were the top two obstacles to mobile payments adoption according to the Federal Reserve survey.

The UC Berkeley survey looked at related areas surrounding mobile payments adoption. It explored location tracking and other privacy related issues (i.e., giving merchants information as part of the mobile transaction). Among other things, the survey asked consumers about how much information they were willing to give to merchants and how comfortable they were allowing their movements in or around shopping areas to be tracked by retailers or other entities. 

The report says that, "Americans overwhelmingly oppose the revelation of contact information (phone number, email address, and home address) to merchants when making purchases with mobile payment systems. Furthermore, an even higher level of opposition exists to systems that track consumers’ movements through their mobile phones." An overwhelming 96% of survey respondents say they objected to having their movements tracked by merchants or retailers; and 79% said they would “definitely not allow” it, with the remaining 17% saying they would “probably not allow” it.

Again this may be an abstract fear that dissipates if consumers realize concrete benefits from permitting themselves to be tracked or by divulging information. Regardless, mobile payments vendors and merchants will need to overcome the catalog of user fears and offer very concrete benefits to drive adoption. There are a large number of people who not only don't see mobile payments inevitable, useful or convenient but see it as a net negative.

That perception will need to be overcome to mainstream the phenomenon. And that will probably happen by getting a sufficient early adopter critical mass of people who can then proselytize and educate their friends, family and colleagues. 

Google: Android Users Conducting 2.65 Mobile Searches per Day

One of the keys to estimating mobile ad revenue is making valid assumptions about consumer-user behavior. Mobile search advertising (mostly benefiting Google right now) is currently the single largest mobile ad revenue category in the US market. The key drivers of mobile search revenue are CPC pricing, advertiser volume and user query volume.

In data revealed during the the Google-Oracle litigation, Google (in Q1 2010) projected mobile ad revenues based on an assumption of 1.1 mobile searches per day per user, or roughly 30 searches per month. However additional data released suggest that Android users are actually conducting 2.65 mobile search queries per day, or more than 60 mobile searches per month. 

Estimate how many times EACH MONTH you search Google on your mobile phone? 

Screen shot 2012-04-26 at 9.29.18 AM
Source: Opus Research (4/12 n=1,522 US adult mobile users)

However this mobile search volume is inconsistent with what user surveys reveal about query volume. For example our most recent survey indicates that a majority of mobile users don't search Google on their handsets. This sample included non smartphone users so the numbers are more skewed than if this sample was smartphone users exclusively.

Other surveys report that most smartphone owners conduct fewer than 20 mobile searches per month, though a meaningful minority are power users and do more than 20 or 30 mobile queries on a monthly basis. In our survey above, 81% said they performed fewer than 20 searches per month and most performed fewer than 10.

Accordingly there's a disconnect between Google's apparently actual 2010 behavioral data about Android user mobile search volumes and what users report on surveys about their mobile search activities. 

InMobi: iOS Leading Android on Network

Each of the ad networks presents somewhat different data on the question of who's got more market share iOS or Android. Nielsen reported that recent sales of iPhones have been "closing the gap" between Apple's handset and the "Android army." However networks Millennial Media and JumpTap show Android impressions being roughly 2:1 what iOS impressions are on their networks.

This morning inMobi released new data (for February and Q1) showing that the iPhone has a greater share of impressions on its network vs. Android. According to inMobi, "iOS has maintained its dominant market position over Android in North America since January this year, with iOS total share of impressions for the quarter at 37%, against Android at 34%."

Screen shot 2012-04-23 at 9.03.05 AM

The top three devices on inMobi's network in North America are: 

  • iPhone -- 19.7%
  • iPod Touch -- 12.2%
  • iPad -- 4.9%

The network also reported that on a global basis, Nokia still had the largest percentage of ad impressions (35%), "although its OS share of impressions decreased slightly over the last quarter."

Will Payments Apps Become Next-Gen Local Directories?

Despite all the activity and hype in the segment, mobile payments and mobile wallets have been adopted by relatively few consumers in North America to date. It's well below 10% of the smartphone population according to data I've seen. Lack of availability, lack of awareness and consumer security fears are among the reasons.

Despite slow consumer adoption of mobile payments, companies such as Square, PayPal and Intuit are making major inroads on the merchant side. For example, Square is processing millions of dollars of payments per day at local businesses.

Its main product relies on a traditional card swipe, so the consumer does nothing new and needs no new apps or equipment. PayPal and Intuit have essentially copied Square's product. In particular PayPal's brand awareness and footprint have helped the company generate significant, immediate demand for the new PayPal Here product. 

These and other mobile payments apps (e.g., Levelup) include directories of merchants using their payments systems. It leads me to think these payments apps could become the next generation of LBS or local directory apps. It's natural for them to try and build out more comprehensive local listings, as well as get more deeply into offers and deals (not to mention analytics and CRM). 

It also makes sense for a company like Foursquare, which already has a large user footprint, to acquire or create a mobile payments capability itself -- as a complement to its positioning as a loyalty tool for SMB marketers.