Today the iPad pre-orders arrive and the iPad becomes available in stores. Yesterday reviews of "The New iPad" come out and overall they're very positive. Based on the success of iPad pre-orders, financial analysts have boosted their estimates of iPad sales for 2012. Some are now saying that Apple may sell a combined total of 65 million iPads or more this year.
One question is whether this lead will be so overwhelming that rivals will be shut out. So far the only successful Android tablet is the Kindle Fire and that success is largely based on its price. It's an inferior product, whose sales could be affected by the reduced price iPad2 ($399).
Yet IDC has projected that the iPad will be overtaken by Android tablets in 2016. IDC estimated that Amazon sold 4.7 million tablets in Q4 of last year.
The chart above reflects "shipments" and not actual sales. The logic behind this forecast showing Android overtaking the iPad is based on a simplistic analogy to the iPhone, and Android's growth over a period of years to a dominant market-share position. However, as several others have pointed out, the better analogy might be the iPod, which established a dominant market share and was never challenged.
In the US, Apple maintained an exclusive iPhone relationship with AT&T for three years after launch. That allowed Android to develop huge momentum. People were more inclined to buy an altenative smartphone than change carriers. The iPad has no such carrier constraints.
There have so far been well over 100 Android tablets and all but the Kindle and Nook have fallen flat. It's unlikely there are any new tablets on the horizon that will have great success -- Google's rumored 7" inexpensive tablet could be an exception. As I've written before, Android tablet OEMs are "boxed in" on pricing by Kindle on the one end and the iPad on the other. The lower-priced iPad2 makes their lives even harder.
The next test for the iPad will be the arrival of Windows 8 tablets, the first of which will probably show up for holiday shopping at the end of the year. But for at least three quarters the iPad will have little or no competition. That could enable Apple to sell 45 or 50 million more tablets.
Several years ago I met with someone working for PayPal and we talked about how the company could more deeply penetrate the small-business market. We talked about various ideas but everything seemed "hard." Cut to the arrival of Square; the solution is now obvious.
Square has blazed a trial that has been followed and copied by Intuit and now PayPal, with PayPal Here, a similar but triangular dongle that also fits into smartphones and iPads. In Q4 last year Square announced that it was processing $11 million in payments per day.
How will PayPal's service differentiate from Square? PayPal Mobile VP David Marcus (who came via the Zong acquisition) explained in a blog post:
So, you’re asking, how is this different from other small business mobile payment solutions? The key differentiator is that it comes from PayPal, a trusted brand in the online payments industry with more than 100 million customers around the globe and years of proven payment innovation, driving growth for millions of businesses globally. PayPal Here comes with our world-class fraud management capabilities, and our 24×7 live customer support. In addition to accepting more payment methods, PayPal Here offers a simple flat rate of 2.7% for card swipes and PayPal payments. Merchants are also given a business debit card for quick access to their funds and 1% cash back on eligible purchases – which means if you use the debit card, your fees are actually just 1.7%!
In other words:
Square's transaction fees currently stand at 2.75%. However I suspect Square will respond to PayPal's reduced rates.
Beyond the (somewhat smaller) transaction fees, if PayPal Here can deliver on its promises of security and customer support it could impact Square's growth opportunity. Yet Intuit has had a competitive solution for some time, and that hasn't really affected Square. More likely, PayPal's entry into the market will grow the overall payment-dongle market and affect banks and existing vendors that make money from merchant accounts and credit card processing.
Separately, payments startup BOKU received another substantial infusion of capital to focus more on the offline market. Companies like Zong and BOKU initially focused on virtual goods and online transactions. However the real action is offline -- a market that is many times larger than e-commerce and virtual goods.
The $35 million received by BOKU brings to roughly $75 million (per TechCrunch) the total funds raised to date. Spanish telco giant Telefonica is one of the investors in this latest round.
In the SMB segment, the growing number of payments options and startups will likely create confusion. PayPal and Square (and maybe Intuit) are the companies that will be able to rise above that noise given their brands. While Square doesn't have the same brand equity as Intuit and probably PayPal, it does have more momentum than either in the SMB mobile payments segment.
See related posts:
Mobile payments companies, apps and trials are launching so quickly -- a new company appears seemingly every week -- that it's tough to keep track of them all. Despite all the activity most consumers are basically ignorant about the entire mobile wallet phenomenon. Among those that are aware, many are simply not interested; 53% to be precise, according to a mid-2011 Retrevo survey, with another group (26%) who don't know enough to respond yea or nay.
Nonetheless there's a kind of land grab going on, as companies compete for commercial relationships, visibility and mindshare. There are basically three or four major categories of players: the carriers, the credit card issuers, the major independents (Google, Apple, eBay) and the startups. In almost every case the wallet or payments app/tool/platform backs onto a credit card account.
There's also a good deal of spin in the space. For example, LevelUp (the successor brand of check-in service SCVNGR) recently claimed to be "the nation's second largest mobile payment network (behind Starbucks) with 100,000 users across 8 U.S. cities." But that ignores Square, which is the true breakout company in mobile payments.
Source: Retrevo (Q4 2011)
Ultimately mobile payments will be relatively mainstream (probably in 5-7 years). But in the interim consumers and merchants must do the work of adopting a solution before that can happen. The motivation is there on the merchant side; less so for consumers.
Major retailers, grocers and brands will adopt mobile payments for the data, efficiency and potential loyalty and marketing opportunities. Smaller merchants will only adopt mobile payments if there's greater convenience, simplicity and/or reduced costs, which is starting to happen.
For consumers usability, trust and security are major issues. There have been several surveys indicating consumers have many concerns about mobile payments and don't necessarily see the benefits. (Time savings, convenience are benefits but people haven't yet experienced them.)
Ironically the users most concerned about mobile payments are some of the most sophisticated ones. That's according to a recent US consumer survey from Radius Global Market Research (2012, sample size not disclosed):
Interestingly, the segment most likely to make purchases via smartphone, consumers under 35 and those identifying as digitally savvy, are also the most likely to be concerned with security and fraud issues. Fifty-four percent of consumers under the age of 35 are concerned with fraud. That figure rises to 62% among digitally savvy consumers.
Again: 62% of "digitally savvy consumers" are concerned about security with mobile payments. By comparison the survey found that "only 14% say security and fraud don’t influence their future likelihood to make those purchases."
Another 2012 consumer survey from Market Strategies International (n=2,000) found that consumers considered their own banks the most trustworthy to deliver mobile payments solutions:
The fact that PayPal ranked higher than Amex and Mastercard surprised me here. I had previously argued that the PayPal brand would stand in the way of an otherwise compelling vision for mobile payments. Perhaps I'm wrong and consumers' simple familiarity with the PayPal brand provides the company with a major boost over no-name competitors and even credit cards.
Regardless of the provider, consumers will need to be provided with "zero liability" assurances to use mobile payments. In addition, any solution adopted by large numbers of people will need to be simple and generally ubiquitous. We're still a long way away from that.
Next Wednesday Apple will reveal the iPad3 (and potentially a new Apple TV), with an improved display and Siri among other features. Mobile ad network InMobi released consumer survey data last week finding that 29% of respondents were intent on buying the new iPad, with half of those reporting they don't currently own a tablet. Many people (44% of those intending to buy one) also said they wouldn't consider another brand.
Whether or not these survey findings turn out to be accurate they reflect the momentum and mindshare of the Apple tablet, which has sold nearly 60 million units on a global basis. However, when the first iPad was introduced in Q1 2010 it was met with considerable skepticism and predictions of failure. It was seen as an "unnecessary" product, delivering a "watered-down" Internet experience; it was also "too expensive" and "wouldn't fit in your pocket."
A year later Dell also predicted that the iPad wouldn't succeed in the enterprise. However in Q3 2011 Apple reported that 93% of the Fortune 500 were testing or deploying the iPad. By comparison Dell recently announced that it's exiting the consumer PC business. This juxtaposition is essentially a metaphor for state the PC industry as a whole.
Increasingly, instead of buying a second computer or laptop, US (and non-US) households will choose tablets. While there's still growth in the enterprise PC market the consumer PC market is flat-to-declining. Many analysts expect Apple to sell 50-60 million iPads this year. When iPads are considered "PCs" (which they are not), Apple becomes the largest "PC" vendor surpassing HP.
Mobile display advertising outperforms PC display according to considerable research from InsightExpress and Dynamic Logic. Beyond this, ads on the iPad and other tablets further outperform conventional mobile dislay advertising. Engagement with tablets is higher than PCs and consumers have shown a willingness to buy things through tablets in far greater numbers than they have on smartphones. There's also mounting evidence that people are spending more time with mobile devices and tablets than on the PC Internet and even with TV (in some geographies), according to recent data from Flurry and InMobi.
The totality of all this data leads to the inevitable conclusion that PCs will be outnumbered by smartphones and tablets within a year or two. PCs and the PC-Internet experience will merely be one form of Internet access and not the primary way people access the Internet (except at work). We truly are in a "post-PC" era. (That was a Steve Jobs marketing slogan that is becoming factually true.) Microsoft hopes to change the trend with the introduction of Windows 8 of course. But Windows 8 will also work on tablets. Moreover its consumer success, however, is far from certain.
Publishers and advertisers that fail to recognize these trends and act on them in the near term will be at a significant disadvantage. (Flash should be abandoned right now, for example.) Indeed, publishers and advertisers should shift the bulk of their attention and development resources away from the "PC Internet" and toward smartphones and tablet-optimized sites. Mobile and tablet site design should guide PC website design (as recently happened with the redesign of Kayak.) This is especially true for certain categories such as retail and travel.
The notion that mobile is just an extension of the PC-centric Web, which still prevails in many companies, is completely misguided.
We've known for several years how important and influential smartphones are in finding local business information, especially "on the go." However the latest Local Search User Study from Localeze, 15 Miles and comScore documents, among other things, the increasing role of tablets in the process of finding offline information.
Consistent with other consumer data in the market, the survey of 4,000 US adults found that the top reason for conducting a local business lookup on a mobile device/smartphone is the immediate need for information. Interestingly, the survey discovered that nearly half (49%) of smartphone and tablet owners were using apps for local business searches (e.g., Yelp, Urbanspoon, YP.com) vs browser-based search (e.g., Google).
The Local Search Study also found that while tablets were used "throughout the [local search] process," usage was concentrated in the early and middle stages (research + consideration) of the purchase process. This might be expected because of the analogy to PC usage. However comScore found that among the three groups (PC, smartphone, tablet users) tablet owners are the most engaged and active: "most tablet users conduct local business searches at least once a week . . . more frequently than PC/Laptop users and mobile phone users."
Another interesting finding: tablet owners had increased their usage of the devices over the past year. That wasn't equally true of smartphone owners. Part of the higher levels of tablet engagement can be attributed to the fact that tablets are more "immediate" than PCs but offer a larger display for "more complete information" -- as the graphic above reflects.
Consistent with this heightened engagement the study found that tablet owners were more likely to make purchases after local search activity (which in this case largely mean offline transactions) and spend more money on average.
A couple of weeks ago the MMA annouced 6 standardized mobile ad formats intended to reduce friction around mobile ad creation and media buying. The formats were directed toward smartphones and tablets alike. They didn't address the SMS/MMS market or rich media.
These MMA ad unit standards were the by-product of widespread industry input and comment. Below are the "final," recommended formats:
I asked when these units were announced whether it was premature to try and standardize ad formats for mobile. Ironically, today, competing trade organization the IAB released its own preliminary mobile ad unit standards. Guess what: they're not identical to those generated by the MMA -- though I have not sought to carefully identify areas of conflict and overlap.
Below is the IAB mobile ad units list, which will be subject to comment and then presumably "codified" among in the IAB Standard Advertising Unit Portfolio.
What we have now are like House and Senate versions of the same bill, which need to be reconciled in a conference committee. That is, unless the IAB is making a powerplay and ignoring the MMA's previously announced standards.
The two competing sets of standards will be self-defeating as "standards" unless the two trade groups come together and hammer out their differences. Current MMA CEO Greg Stuart was the previous head of the IAB.
ISIS, the as-yet-unlaunched US mobile payments inititative from T-Mobile, AT&T and Verizon has added new partners to its stable of credit card issuers and banks (BarclayCard, Capital One, and Chase), according to CNET. ISIS has been described as "Hulu for mobile payments."
I have been openly skeptical of the carriers' ability to mount a successful mobile payments intiatitive. But ISIS may turn out to be the tortise to Google Wallet's hare. The latter has been met with carrier resistence (which may be anticompetitive), security problems and limited consumer availability.
Google has been ahead of the market somewhat. But there are now also rumors that Google is internally disappointed with its Wallet initaitive and may be putting less effort into it. If so, it would be premature to "give up" on Google Wallet.
In two related mobile payents developments, PayPal (through its Zong acquisition) is launching what it calls PayPal Carrier Payment Network; and InMobi and Opera have joined for digital goods payments. The PayPal effort is designed to build on top of the Zong-carrier infrastructure (eBay acquired Zong last year) and expand carrier billing to encompass more types of transactions and larger dollar amounts:
Historically, carrier payment has been utilized primarily by online game developers and publishers to provide a fast and easy way for users to purchase goods directly in-app or in-game. While convenient for consumers, this method of payment has inherent challenges for other digital goods merchants – such as digital books, music, dating and content – to adopt as a primary payment method. Among the challenges is the cost of doing business – sometimes upwards of 40 percent – since transactions are processed through the carrier, merchants must share part of their revenue.
Similary InMobi and Opera announced that the latter will integrate InMobi's payments platform to enable virtual goods payments and purchases through Opera:
InMobi SmartPay will enable Opera users to pay seamlessly for digital goods in key markets around the globe, when they make purchases with some of the leading publishers that partner with InMobi. The two companies are committed to providing choice to consumers, mobile content developers and app developers, by building viable third-party monetization solutions in the mobile browsing and computing space.
Most US consumers have no experience with mobile payments and still need be educated about their benefits. However, large numbers of smartphone owners will eventually adopt mobile payments over time. Four tenents of success will be: simplicity, ubiquity, rewards and security.
The convenience of not having to sign credit card slips will be a welcome imrovement in the retail and restaurant worlds. The abandonment of signature requirements for transactions under $25 in many places has created demand and some experience with a simplified transaction experience. Merchants have incentives to adopt mobile payments as well for greater efficiency at the point of sale and, if don't correctly, greater security too.
Almost all of these mobile payments systems and platforms back onto a credit card. However, it's still early to pick winners and losers. As I indicate above, Google could wind up a loser and ISIS a winner -- though that's a bit counter-intuitive (given the challenges carriers face in execution generally). There are still others (e.g., Apple) that could enter the race at any point.
Today the smartphone world is essentially divided up between Apple and Google, much like Spain and Portugal divided up the known world in 15th century Europe. Right now, it's not clear whether Nokia-Microsoft will become a viable third platform. Palm's WebOS, though it has been open-sourced, is effectively dead and one could convincingly argue that Blackberry is dying as an OS.
Now Mozilla has emerged to challenge Apple but more specifically Android, with a new "truly open" mobile platform: Boot to Gecko (B2G). In many ways not unlike Google's browser-based ChromeOS for PCs, it was formally announced in Barcelona at Mobile World Congress. Deutsche Telekom and Telefonica are on board:
This week Mozilla is previewing open Web apps and Mozilla Marketplace, enabling the creation and distribution of apps powered by open Web standards like HTML5, CSS and JavasScript. We are also previewing Persona, the first identity system truly of the Web, including Browser ID. Each offering represents the latest tools available to developers and users to take control of their online lives.
Since the beginning, it has been our mission as an organization to develop and bring about a completely open and standards-based Web as a platform for innovation. Mozilla’s latest innovations are being proposed to the W3C for standardization, helping us move the needle to advance the Web and make it a more people-centric experience for all.
There are lots of questions about whether Mozilla can make this a viable platform; however the support of two global carriers lends immediate credibility to the initiative. It also shows that there's an appetite for alternatives to Android, which was itself initially embraced as an alternative to the iPhone.
Now Android is on its way to becoming the dominant smartphone platform. It was quickly embraced by carriers and handset OEMs who had no immediate response to the iPhone when it launched. Android became the de facto alternative, driving huge penetration and adoption. Now that Android is the dominant smartphone platform, demand is emerging for alternatives.
B2G is one potential alternative, especially for lower-end handsets. There are, however, many questions about whether Mozilla will be able to make B2G a viable, alternate smartphone platform. Microsoft sees Windows Phone as the true third alternative; however there's evidence of only modest Windows Phone success thus far (including the Nokia handsets).
While there's enormous momentum around iOS and Android the smartphone race is far from over and, especially at the lower end of the market, B2G could become an attractive alternative to Android.
While mobile payments is certain to become a multi-billion dollar market in the next several years, it's getting more difficult to predict who will gain traction. That's partly because there are now so many competitors jockeying for consumer and merchant attention that it's clouding and confusing the market. Indeed, we could see delays in adoption given the absence of any apparent standards or common platforms.
NFC could be one of those standardized plaftorms however most consumers in North America don't have handsets that are NFC-enabled. It will take one or two replacement cycles (2-4 years) for meaningful NFC-handset penetration to be reached.
In the non-NFC payments category, this morning JPMorgan Chase-backed GoPago launched. GoPago is a mobile app that offers mobile payments but also provides a range of additional services, including online ordering and a number of small-business marketing capabilities. The company has developed a cloud-based POS system that interfaces and integrates with existing POS systems. If the local business doesn't use a POS GoPago has other ways to work with merchants. The app is conceived as a holistic mobile storefront for SMBs that will enable ecommerce and not simply a payments solution like Square.
The JPMorgan partnership helps GoPago establish credibility and gain notice, which otherwise might elude the ambitious startup. However the JP Morgan backing doesn't guarantee adoption by consumers or merchants, especially given that eBay, Google, Visa, Amex, Intuit, Mastercard, Square and others are similary seeking adoption of their mobile payments tools and systems. GoPago said however that JPMorgan would help market and educate consumers and merchants about the service.
During the call with GoPago I discussed how the major players (PayPal, Google, Square) had effectively marginalized earlier mobile payments companies such as Bango (which just announced a deal with Facebook) and Boku. Another mobile payments vendor Zong was acquired by eBay. Somewhat ironically, Boku has made a renewed bid for relevance through a just-announced deal with Mastercard that involves its NFC-PayPass system:
BOKU, Inc., a leading global provider of on-line mobile payments, announced today a partnership that will enhance the shopping experience for consumers by allowing them to make payments, receive discounts and targeted offers, and monitor spending -- all via their mobile phones anywhere MasterCard PayPass is accepted . . .
Offered through a mobile subscriber's mobile network operator BOKU Accounts with MasterCard Prepaid gives consumers a convenient way to pay while on the go. Account holders use a MasterCard Prepaid card or PayPass-enabled device to make purchases anywhere MasterCard is accepted with a simple swipe or tap . . .
Boku also offers merchant loyalty and marketing tools in addition to payments functionality. Given all that's now happening I remain very skeptical of Boku and its ability to gain much adoption in this very noisy payments market.
Similarly LevelUp (from SVNGR) is trying to evolve into a payments provider as well. LevelUp (which used to be a couponing and loyalty program) links a credit card to a QR code that merchants then scan at the point of sale. LevelUp also offers a physical card in addition to apps. PayPal and Boku also offer physical cards -- which strikes me as strange. Why link a plastic card to another card or a checking account when one can use a credit or debit card at all the same merchants already? It's redundant.
There are value-added features for both merchants and consumers in using these systems but those features are probably not enough to justify adoption, especially given that they're being offered by "no name" brands. Here consumer trust is a significant issue and there are only a small number of companies, credit card issuers, handset makers and carriers, that consumers trust (to varying degrees) to handle payments.
Merchants, especially small merchants, are also being bombarded by marketing services and will be reluctant to implement a system that has little or no consumer scale. It's the classic chicken and egg problem: you need merchants to get consumers and vice versa.
A system like Square is simple and elegant and doesn't require any changes in consumer or merchant behavior. It simply removes much of the friction of accepting credit cards for small merchants. However, the many moving parts and seeming complexity of payments systems like those offered by Boku, GoPago and LevelUp means they will probably be slow to gain adoption -- if they succeed at all.
A report was just released by the US Federal Trade Commission about apps directed at kids. It's about privacy and data collection and it comes right in the wake of the iPhone contacts upload scandal involving multiple app developers.
Undertaken under the enforcement umbrella of the Children's Online Privacy Protection Rule, it contains a number of intesting findings and observations. One could argue the findings are limited to the special needs and circumstances of children. However in my view the FTC is seeking to establish principles that would apply more broadly to apps and developers in general. Accordingly there may be implications for in-app advertising if formal rules around data sharing disclosures and user controls are established. (Location-sharing permissions are a kind of model here.)
The FTC report found more than "8,000 results in the Apple App Store and over 3,600 in the Android Market" that resonded to the search query "kids." The FTC then analyzed 480 of the top kids' apps from both iTunes and Android Markets. The basic finding of the analysis is that kids apps do little to explain what functions of the phone they access or what data they capture (and share with third parties):
[A]cross the wide range of “kids” apps examined in the survey, staff found very little information about the data collection or sharing practices of these apps. Apple’s and Google’s mobile operating systems and app stores provide limited notice to users regarding app capabilities, and leave the bulk of disclosure to individual app developers. In most instances, staff was unable to determine from the information on the app store page or the developer’s landing page whether an app collected any data, let alone the type of data collected, the purpose for such collection, and who collected or obtained access to such data . . .
The FTC expressed disappointment with the paucity of information about "permissions" and data collection:
Of the 182 Android apps indicating they were intended for use by kids, only 24% specified that the app required “no special permissions to run” – i.e., that a child could use the app without the app accessing any information or capabilities from the mobile device. Conversely, 76% indicated that the app required at least one “permission” to run . . .
[The] Apple app promotion pages that staff examined provided almost no information on individual developers’ data collection and sharing practices. Similarly, the Android app promotion pages that staff examined provided little information other than the mandatory “permissions.” Only three (1.5%) of the 200 Android apps even attempted to convey information about the purpose for the “permissions.”
As a result the FTC wants more disclosures and more parental controls. It wants app stores (Apple, Google) to do a great deal more in the way of providing information to end-users:
- All members of the "kids app ecosystem" – the stores, developers and third parties providing services – should play an active role in providing key information to parents.
- App developers should provide data practices information in simple and short disclosures. They also should disclose whether the app connects with social media, and whether it contains ads. Third parties that collect data also should disclose their privacy practices.
- App stores also should take responsibility for ensuring that parents have basic information. "As gatekeepers of the app marketplace, the app stores should do more." The report notes that the stores provide architecture for sharing pricing and category data, and should be able to provide a way for developers to provide information about their data collection and sharing practices.
Even though this all comes under the specific banner of protecting children I see it as a template for something broader in the future that would potentially apply to all apps and developers.
If I'm correct a troubling aspect of all this, hypothetically, for app developers and publishers would be the required disclosure of ad-related data sharing and any requirement that consumers be given the option to block or opt-out. My guess is that most consumers, if they knew how, would probably block any such data sharing accordingly.
That option would compromise the efficacy of ad networks and their targeting capabilities. And while this is speculation on my part I don't think it's all that wild.
IHS iSuppli released estimates for tablet market share (using shipments as the operative metric). However in the case of Apple and Amazon shipments is the same as sales to consumers.
Apple previously announced that in Q4 it had sold 15.4 million iPads and a total of 55 million to date. But we didn't know the number of Kindle Fire devices that had sold. Some analysts estimated it was between 4 and 4.5 million. Now iSuppli estimates it was 3.9 million.
With strong Kindle Fire sales in Q4, Amazon zoomed past Samsung to become the number two player in the tablet market. Overall in 2011 Samsung "shipped" more tablets; however shipments does not equal sales to end users. Below are iSuppli's global tablet estimates, showing Amazon with 6% of the market at the end of Q4.
I simply don't believe that Samsung has actually "outsold" Amazon. It may have "shipped" more devices but those devices have largely sat on retailer shelves. Furthermore, Samsung's recent announcement of the Galaxy Tab 2 (7"), with Android 4.0, may be another miscalculation. While it appears to be a nice device, a reported $400+ price tag all but guarantees it won't sell. At that price people will opt for iPads.
As I've repeatedly argued in the past no 7" tablet maker can charge more than about $250 now and expect to compete with Kindle Fire. Samsung would likely be taking a loss if it were to do so. Another way to potentially compete and still preserve margins is to get carriers to subsidize tablets. However this strategy has not worked and consumers have largely shunned carrier-subsidized tablets in favor of WiFi-powered devices. (People simply don't want to give any more money to carriers.)
One of the interesting observations that iSuppli makes is that in Q4 people may have been choosing between the iPhone 4S and iPad. In other words, more iPads would have sold if the 4S hadn't just been released. If that's correct some number of people who actually wanted to buy an iPad may have opted instead for the Kindle Fire because of price sensitivity. Indeed, the Kindle Fire is a vastly inferior device but that inferiority is masked to a degree by Amazon's content ecosystem.
In a related piece of news, Nielsen released some survey data on how parents and kids use tablets: games, education, entertainment in that order.
Once allies, now enemies, Google and Apple are finally confronting one another in court. That result has come about via this week's approval of Google's $12.5 billion acquisition of Motorola Mobility, which happened yesterday. Both the European Commission and the US Justice Department gave their OKs (with some caveats and reservations) to Google to acquire the struggling hardware maker.
Google partly bought Motorola Mobility for its patent portfolio and partly to own a hardware company that would allow it do develop a range of new products and user experiences.
Motorola, prior to the approvals, had won a couple of patent victories in Germany against Apple. Subsequently Motorola demanded just over 2% of Apple's sales in exchange for licensing several "essential" mobile patents. As a practical matter that would mean turning over billions to Motorola -- now Google (Steve Jobs is rolling in his grave). Apple rejected that demand.
Apple recently filed suit against Motorola in the US with an eye toward the German litigation:
Apple sued Motorola Mobility in a U.S. court on Friday in an attempt to stop Motorola from asserting some patent claims against Apple in Germany, according to the lawsuit.
The suit, filed in a San Diego federal court, argues that Motorola's German lawsuit against Apple breaches terms of a patent licensing agreement between Motorola and Qualcomm . . .
In the latest lawsuit, Apple says that as a Qualcomm customer, Apple is a third-party beneficiary of Motorola's agreement with Qualcomm. Under that agreement, Motorola's rights under certain patents are exhausted, Apple argues.
Samsung had been Apple's chief proxy for Android/Google but now Apple gets to slug it out with Google directly.
It's an understatement to say that the entire mobile patent litigation situation is "out of control." Perhaps the direct confrontation between Google and Apple will accelerate some sort of broader settlement so that everybody can move on.
The problem is that firms not directly making money from device sales are using IP litigation and licensing as an alternative way to generate revenue. So far this has proven quite successful for Microsoft, which makes considerable money off of Android sales even as its smartphone share continues to decline.
Notwithstanding all the sophisticated technology being used today, most customer service just stinks. Most companies still don't understand the relationship between marketing and customer service.
Historically companies have practiced "call avoidance," trying to save money by discouraging live-agent access and sending people to the Web for "self service." The strategy has been about saving costs rather than delivering good service. Sometimes it works and sometimes a customer can't get satisfaction. But then again, sometimes the live agents are indifferent or incompetent.
Indeed, recent survey data from speech services provider Nuance indicate that a substantial number of people actually would prefer to "self-serve" because of long and frustrating hold times as well as other challenges in dealing with call center agents.
Today AdAge profiles evolving approaches to customer care in the airline industry. The article juxtaposes Southwest's people-centric approach with Delta's technology driven strategy. It also discusses how smartphones and apps can be used to improve customer service and reduce costs at the same time:
Consider the frazzled traveler running through security to catch a flight. At Southwest, gate attendants are instructed to keep an eye out for those red-in-the-face customers. Once spotted, Southwest employees are supposed to approach and reassure them, said Teresa Laraba, senior VP-customer services.
For Delta, however, the goal is to save that same traveler time and provide peace of mind by putting his or her boarding pass, flight status and bag-check information directly on his or her smartphone. PCWorld magazine named it the top tech-friendly airline in the U.S.
This discussion is at the center of a recently published report written by my Opus Research colleague Dan Miller. The document is called "Mobile Customer Care: New Paradigms and Practices" (.pdf summary). It devotes considerable time to how smartphone apps can at once do a better job of enabling self service, saving agent costs and time and improving the overall customer care experience.
Here are the key findings:
Customer care and e-commerce must accommodate mobile - There’s nothing distinctively “mobile” about care but a significant percentage of interactions originate from mobile devices and that provides customers with more options and requires companies to support multiple channels.
Smartphones + the cloud = better user experience – Downloadable smartphone apps offer a demonstration of the power of deep integration between mobile devices and the customer-care infrastructure. Smartphones coupled with cloud-based resources have also put more power into the hands of customers. This is serendipitous and a potential “win-win” for both sides -- if properly executed.
Customers often prefer self-service - Contact centers have long sought to erect barriers to live agent access for reasons of call and cost avoidance. Many consumers, put off by rigid IVR, extended hold times, poorly trained CSRs and repeated transfers have come to prefer self-service in many situations. Moreover, the promotion of speechenabled apps from Apple, Microsoft, Google and Nuance are conditioning the general public to expect to be able to use their voices to get results, not always with the help of live customer service representatives.
Customer control defines emerging best practices - This moment creates an opportunity to combine the cost savings of online self service with selective access to live agents where truly needed to resolve more complex problems or provide a higher level of service. Not just a small-screen substitute for the Web, smartphone apps offer more functionality and a potentially better experience than websites or live agents can independently. As we’ve tried to document in this report, there are a number of emerging “best practices” examples: Groupama, Genesys, Nuance, Fonolo, Lucyphone, HoldFree and others.
Time to “Flip the Model” (from B2C to C2B) - An app on smartphone that is tailored to help a person take control of the conversation is ideal. It provides mobile users with tools to indicate where they are, what they’re looking for and how they want to be reached. Brands and enterprises should enthusiastically embrace smartphones (and tablets) as a primary customer service platform
Earlier today Google released data from two related studies of US consumer shopping behavior during Q4 2011. The studies were both conducted online and fielded in January 2012. In both cases just over 600 consumers were surveyed. Both studies claim to be representative of their respective populations -- essentially e-commerce buyers who own smartphones (and tablets).
There were a great many datapoints in the material released. However, the bottom line is that consumers are now fully engaged with smartphones (and increasingly tablets) as part of their "online" shopping. Marketers and brands need to reach consumers in appropriate ways in each context -- mindful of the overall movement of users from platform to platform.
As a foundational matter, the internet was used as a shopping tool or research medium more widely than any other according to this research.
However "the internet" is not a single channel any more. Google and its research partner Ipsos found that consumers shopped and purchased via multiple device categories.
Beyond this basic insight the patterns quickly get very "non linear." The slide below reflects multiple categories of shoppers, some of whom start online and finish offline and some of whom visit the store only to purchase online or via mobile ultimately.
Google also said that 42% of respondents used more than one internet device simultaneously, while 68% started on one type of device or machine and then kept going or concluded on another (e.g., tablet-->smartphone). Interestingly, the content viewed on each category of device (PC, tablet, mobile) was basically consistent.
There were some differences in behavior, however. In this sample people used PCs much more than other devices to do price comparisons and to look for deals or coupons. And they were more likely to contact a retailer via smartphone.
Though not reflected above, video was heavily used by shoppers for product reviews/ratings, demos and to generally learn about products. But if you want to make video accessible to mobile or tablet users Flash must be avoided of course.
In addition these respondents used both apps and the mobile web to conduct research and to shop.
I could go on with more but the larger points are made already. People use PCs, smartphones and tablets to shop and buy. Brands must be prepared to interact with consumers at every point in the purchase "funnel," or perhaps more precisely: purchase continuum. That means being aware of how consumers use and interact with devices and offering device-friendly content and user experiences accordingly.
Mobile is no marginal or experimental experience for anyone any longer. Today, Forrester predicted that by 2016 there would be 1 billion smartphones on the planet. At that point the PC will be simply one of several ways that people get online.
And in the not-too-distant future hierarchy of devices and internet access methods it could well rank third out of three.
Earlier this week Google brought the Chrome browser to Android handsets (Android 4.0 only). It's reportedly faster than the current Android browser. Beyond this it promises consumers a number of benefits. Among them integration with the PC version of Chrome -- if you're signed in to your Google Account.
This was the vision for mobile Firefox, before the arrival of mobile Chrome: tabs and bookmarks on the PC browser would automatically be available on your smartphone. But Firefox mobile has very limited adoption in mobile. A full version of the Firefox browser isn't permitted on the iPhone and Chrome is likely to marginalize its chances for adoption on Android handsets.
The integration of PC and mobile browsers clearly offers convenience for consumers. It also offers competitive and strategic value for Google, as well as powerful potential features for Google advertisers.
All Android owners must have Google accounts. All Google account holders are being required to create profiles online. And Google is increasingly seeking to connect the dots.
We may collect device-specific information (such as your hardware model, operating system version, unique device identifiers, and mobile network information including phone number). Google may associate your device identifiers or phone number with your Google Account.
To receive the full benefits of mobile Chrome, users will have to be signed in. This will allow Google to see their movements from PC to mobile and all the corresponding activity on each platform. That data will provide Google with an incredible trove of information.
Google search and display advertisers will be granted a never-before-available cross-platform view of users and be able to target them as they move between screens. Users who begin product research on the Web and continue on smartphones in stores would be largely invisible to the majority of sites and online advertisers. But under the new system Google (and by extension its advertisers) will be able to "see" that movement, and consider the larger context and history in deciding which ads to serve.
Clearly the targeting and tracking capabilities of a cross-platform view of consumer behavior are very powerful. They may result in a better experience for many users but may also "creep out" others. It will also be difficult for competing ad networks and platforms to duplicate the data and targeting that Google will be able to deliver. Facebook is the only other entity, perhaps, with the capacity to match this personalized, cross-platform view of its users.
According to various analyses of Kindle Fire hardware production costs, Amazon is actually subsidizing the cost and taking a small loss on the sale of each device. This was undoubtedly a contributor to Amazon's "disappointing" Q4. The company said it sold millions of Kindle devices without providing any concrete figures.
However the company's strategy has been to use Kindle as a platform or tool to sell other content: e-books, video, music and apps. These are high margin products for Amazon.
A new survey (including 254 Kindle Fire owners) from ChangeWave argues that the company's Kindle Fire strategy is already paying off. Kindle Fire owners reported that they'll be spending more through Amazon in the next quarter than non-Kindle owners:
The relatively low cost of the device ($199) was shown to be the biggest driver of sales and the most "liked" feature of the product:
The chief "dislikes" were: no hardware volume button and no camera. The short battery life was also a complaint. Generally speaking, however, Kindle Fire users seem to be quite satisfied -- though not as satisfied as iPad owners.
Google has vowed to "fight" Kindle Fire and its bid to control the Android tablet market with its own "higest quality" tablet, which may be even more aggressively priced than Kindle.
Square continues to forge ahead in its remarkably successful run up to either a multi-billion dollar acquisition or IPO. Today, T-Mobile announced that Square credit card readers will be available for SMB customers in select stores in the US. It's the first wireless carrier to offer the mobile payments system to small business customers:
Today, T-Mobile USA, Inc. reiterated its commitment to small business as the first wireless carrier to offer Square credit card readers from San Francisco-based Square, Inc. in select retail stores. When T-Mobile’s fastest 4G smartphones running on America’s Largest 4G Network are combined with Square, small businesses can accept credit card payments in the U.S. nearly anywhere, anytime, with the money from transactions sent for deposit into their bank accounts the next business day. This easy-to-use solution, paired with T-Mobile’s affordable small business plans, aggregated business applications, equipment financing and trade-in services, and in-store support, allows small businesses to maximize their wireless investment and transform their business.
Square has several competitors using a similar smartphone-plug-in credit card reader for small businesses, including Intuit and the newly launched Payfirma. PayPal also targets the SMB market but doesn't offer a comparable smartphone or iPad card reader.
Meanwhile MasterCard's Ed McLaughlin may have spilled the beans on Apple's potentially impending move into payments. The next iPhone is widely expected to support NFC and an eWallet. Nokia, RIM and selected Android phones currently support NFC. Google Wallet has so far seen limited adoption because it's only available on one phone through one carrier in the US.
In an interview with Fast Company magazine McLaughlin said the following:
I don't know of a handset manufacturer that isn't in process of making sure their stuff is PayPass ready."
So that would include Apple then?
"Um, there are...like I say, [I don't know of] any handset maker out there," McLaughlin says. "Now, when we have discussions with our partners, and they ask us not to disclose them, we don't."
Apple has millions of credit card accounts on file. Every iTunes user must provide a credit card when an Apple mobile device is activated. That means effectively that in excess of 300 million people around the world have given Apple their credit card numbers, forming the basis for a payments program. Apple said on its last earnings call that there are now 315 million iOS devices in market, with 62 million sold in the last quarter alone.
Previously Retrevo found that Apple was more trusted than credit card issuers to provide a mobile payments solution.
Source: Retrevo (Q4 2011)
Other surveys have argued that 2012 will be a "breakthrough year" for mobile payments and NFC. I think 2012 will see an acceleration but not yet a consumer breakthrough.
See related: Obama and Romney Campaigns Adopt Square for Funding
Confirming what we've seen from a number of data sources in the past several weeks, Flurry Analytics shows how Kindle Fire has become the leading Android tablet in the space of about a month or so. Samsung has vowed to fight back with new devices, but Kindle's Success is about low pricing, content and the strength of the Amazon brand.
Samsung is outmatched when it comes to content and brand strength (at least with US consumers). It also probably can't match Amazon's loss-leader pricing.
Flurry had this to say about the chart below:
On the left, in November, we see that Samsung Galaxy Tab dominated application session usage on Android, with the Kindle Fire only having recently launched. At that time, the Samsung Galaxy Time was widely considered the only viable competition to the iPad, though a distant second. In January, after the holiday boom in devices and in apps, we see that strong adoption of Kindle Fire, combined with significant downloads driven from the Amazon App Store, resulted in a massive surge in session usage that just edges out the Galaxy Tab.
In some ways the Kindle Fire is less an Android tablet than it is an enhanced Kindle eReading device.
Sales estimates of the Kindle Fire, for Q4, now range from under 4 million to 6 million.
I have been fairly skeptical about PayPal's ability to win in the mobile payments space. However the methodology the company is using doesn't require any new devices, next-gen infrastructure or much consumer behavioral change. Today I received an email from PayPal telling me I could use PayPal to pay in stores (HomeDepot).
This is the first direct communication that PayPal/eBay has made to customers. There are two payment approaches being offered: a card and a user's mobile number + a security pin. Either can be used in the alternative. I wasn't previously aware of the card part; here's how PayPal explains it:
The PayPal payment card is one of the ways you can pay at any participating store locations accepting PayPal. It's a store only spending card linked directly to your PayPal account. The PayPal payment card can’t be used online or as a credit card.
You do not need the PayPal payment card to complete Store Checkout activation. We will automatically mail it to your home address 2-4 weeks after you activate Store Checkout.
The PayPal card isn't required and probably won't be widely used -- maybe it's a "training wheels" transitional product to get users comfortable with the system. The primary method is clearly the mobile + pin approach.
The following are the payment methods that can be associated with a PayPal account:
Here's the list of HomeDepot Stores that are now accepting PayPal (as well as others outside California):
Associating bank accounts and credit cards with PayPal is somewhat painful in the beginning. But if the accounts are already set up then this is a convenient and more secure way to pay than allowing a store clerk to swipe your card at the point of sale.
I haven't used it yet, but my perception is that it's pretty straightforward. Accordingly it could enable PayPal to gain faster consumer adoption than an NFC-based payments system like Google Wallet. We're in a bit of a land rush period right now, and if PayPal can gain broad acceptance at stores and restaurants it could become one of the winners in the segment.
I don't know what this looks like from the merchant side -- other than to assume that the new in-store payment system is subject to PayPal's standard merchant transaction fees.
From a functionality perspective Google and mobile carriers could do something quite similar: enable consumers to associate credit cards or bank accounts with mobile numbers and a pin. But there's a whole "infrastructure" that PayPal has set up that may not be so quickly duplicated by others (that's a bit of a blind spot for me).
Regardless this is a bold new step toward educating consumers and mainstreaming mobile payments.
This morning both AT&T and Nokia reported quarterly earnings. AT&T sold 9.4 million smartphones, including 7.6 million iPhones last quarter, but generally missed expectations and posted a loss (partly because of the blocked T-Mobile deal). The company ended the year with 103.2 million mobile subscribers in the US. Verizon earlier this week said that it had 108.7 million subscribers.
Nokia beat the market's low expectations despite announcing a $1.4 billion (€1.07 billion) loss. More importantly the company announced that it had sold more than 1 million Lumia Windows Phones during the quarter in Europe. That was consistent with analysts' projections and has boosted Nokia despite the accelerating decline of its Symbian platform.
Yet data from forecaster Kantar, discussed by Reuters yesterday, reflected that sales of Lumia handsets in all nine markets where the phones are available were "less than 2 percent." Accordingly there's a long climb up the mountain for Nokia to reclaim its former position as a market leader on the back of Microsoft's OS:
Kantar said Microsoft's Windows Phone share in all of the nine key markets it measures remained at less than 2 percent despite the high-profile launch of the Lumia range from Nokia.
Nokia's flagship Lumia 800 model failed to break into top 10 smartphones sold in Britain by the end of the fourth quarter, the researcher said.
Nokia said in November the model was off to an excellent start in Britain, and had seen the best ever first week of Nokia smartphone sales in the UK in recent history.
Microsoft and Nokia have an arrangement where licensing and royalty payments change hands. But basically Microsoft is paying Nokia billions over a period of years to use the Windows Phone OS.
Finally, in the battle over marketshare numbers, Strategy Analytics put out an attention-getting release this morning arguing, "Android Captures Record 39 Percent Share of Global Tablet Shipments in Q4 2011." This conveys the impression that Android tablets have captured substantial marketshare, which is inaccurate.
The chart below suggests that Android tablets sold 10.4 million units -- in part because Apple actually sold 15.4 million iPads.
Kindle Fire, a quasi-Android tablet (quasi because it marginalizes Google and the Android Market), sold perhaps 4 to 4.5 million units. If correct that would constitute nearly half the "shipments" in the chart above. Beyond this Nook, another low-end Android tablet, may have sold quite well in Q4 also. These are the bestselling Android tablets. All others have had negligible sales.
Previously the HP TouchPad was the bestselling non-Apple tablet because it was reduced to $99 by HP to move units.
Let's end talk of "shipments" as a market share metric. Devices "shipped" does not mean devices purchased by consumers. Nor do "shipments" stand as a proxy for purchases, although they do typically in the unique case of Apple devices.
The "shipments vs. sales gap" was most starkly revealed last year specifically in the case of Android tablets (and RIM Playbooks). Millions of units "shipped" but almost none actually "sold" to consumers. Instead they sat on shelves. Effectively then "shipments" is a discredited and invalid metric to measure market share.
Statistically valid consumer survey data would be more reliable as a measure of market penetration.