Nokia's Lumia handsets represent about 80% of Windows Phone's sales. However Nokia was continuing to lose share to Android and iPhone in key markets across the globe. By the same token Windows Phones had failed to enable Nokia to re-enter the US smartphone market in any convincing way.
Since the inception of the Microsoft-Nokia deal in early 2011, we had been arguing it was a serious mistake for Nokia to not offer an Android phone. However the terms of the agreement between the companies precluded that. In 2014 the deal was set to expire. But before that deal was renegotiated, Microsoft acquired Nokia's phone hardware business for roughly $7.2 billion.
In the middle of last year we speculated that Microsoft might be compelled to acquire Nokia for defensive reasons. When the acquisition was announced a little over a week ago, I argued had Nokia embraced Android it would not have been so weakened and forced to sell itself. I also speculated this summer that Nokia would be compelled to come out with Android handsets if it wanted to survive:
My view is that Nokia will be compelled -- notwithstanding contractual exclusivity with Microsoft -- to adopt Android at some point in the not-too-distant future or remain stuck in what amounts to neutral.
Now the NY Times is reporting that Android Lumia phones were in development:
A team within Nokia had Android up and running on the company’s Lumia handsets well before Microsoft and Nokia began negotiating Microsoft’s $7.2 billion acquisition of Nokia’s mobile phone and services business, according to two people briefed on the effort who declined to be identified because the project was confidential. Microsoft executives were aware of the existence of the project, these people said.
There are two overlapping potential scenarios: Nokia was developing Android handsets in part to add leverage in negotiations with Microsoft (for renewal or acquisition); and/or Nokia was developing Android handsets in earnest and would have rolled them out -- forcing Microsoft to avoid that outcome through an acquisition.
Regardless it appears that the idea of Nokia marketing both Android and Windows Phones was a potential disaster that Microsoft sought to avoid at great cost -- literally. As I've written elsehwere, however, it remains unclear that Microsoft's $7.2 billion have been well spent.
The Apple iPhone event just concluded. Everything that was announced at the event had been leaked or written about beforehand, including:
However that last item, the "Touch ID" fingerprint sensor, was the stand-out announcement in my view. It will enable users to both unlock their phones and confirm iTunes purchases instead of entering a password:
Put your finger on the Home button, and just like that your iPhone unlocks. Your fingerprint can also approve purchases from iTunes or the App Store.
What I mean by the headline is that Touch ID is to the 5S what Siri was to the 4S: a kind of "wow" feature that helps it stand out from other smartphones. It partly compensates for the fact that Apple didn't introduce a larger screen, which everyone now wants. That's coming with the iPhone 6.
Apple's iPhone launch event is confirmed for September 10. It will take place at Apple's HQ in Cupertino, California. The company is expected to announce multiple devices at the event, including a new iPhone 5S, potentially an iPhone 5C and possibly an iWatch wearable device. There may also be new iPads.
The iPhone 5C is real and may come in a variety of colors (5 is the rumor) -- hence the colorful bubbles in the invitation. The forthcoming 5S is supposed to come in a champagne or gold in addition to traditional black and white. Pricing of these devices is uncertain, though the 5S will likely follow past pricing ($199 with 2-year contract, etc.).
Some reports have suggested the 5C will cost between $400 and $500 unlocked. Carrier subsidy pricing is TBD. The real question surrounding the 5C is how appealing will it be? How "good" wil it be?
Apple is walking a tightrope.
The 5C is intended to make Apple more competitive in developing markets and at the "lower end" of the market where there's more price sensitivity. If the phone is "good enough" and cheap enough -- does the "C" stand for "cheap" or "China" or "color"? -- it could potentially cannibalize sales of the 5S. But if the phone is not of sufficiently high quality it will fail and Apple's brand will suffer.
I suspect that Apple will include a previous-generation chip in the 5C (perhaps the current 5 chip), whereas the 5S will get a new more powerful processor. There may also be memory limitations with the 5C. However the apps and app ecosystem should be the same.
The primary differentiators will thus likely be price, color, materials (plastic) and processing power/speed. But how does Apple build an attractive product that is competitive but doesn't overshadow its more profitable flagship product? That's the dilemma.
Kantar Worldpanel ComTech reports that Windows Phone has made gains across major EU markets and now stands as the solid #3 platform behind Android and Apple. Windows Phone success in Europe is largely due to its association with Nokia, which remains a strong brand in Europe.
Germany, UK, France and Italy are Windows Phones' strongest markets. Gains in those countries helped elevate the Microsoft OS's share of the smartphone market in the "EU5" to 8.2%, up from 4.9% a year ago. That's an impressive gain. Mexico and Australia are also big markets for Windows Phones, according to Kantar.
Here are a comparison of the Kantar smartphone market-share data for the US, China and EU5 markets:
As indicated above, Kantar says that Windows Phone has a 3.5% share in the US. However, comScore shows a smaller gain and share (as of June 2013):
The Kantar data show a significant loss of share in the US for Android -- nearly 8%. Given this I'm skeptical that the data are truly reflective of the broader US market. However Kantar boasts that its panel is the largest and its data are the most accurate in the industry.
In Europe, BlackBerry and Symbian have lost a combined 7.4%. That's more than the gains enjoyed by Windows Phones. Accordingly the question arises: to what extent are those defecting BlackBerry, Symbian and "other" adopting Windows Phones? The Kantar data strongly imply that's where Windows Phones' EU gains are coming from.
Last year Google brought in ad revenues of $43.7 billion. This year, thus far, the company has made roughly $24 billion. For the full year 2013 Google is likely to earn $50 billion in advertising revenue. That may be a low projection, however.
EMarketer today released some estimates on the breakdown of PC vs. mobile and search vs. display revenues for Google. According to the estimates, search will generate 82% of Google's overall revenue this year with just under 20% of search revenue coming from mobile.
By comparison 2% of display ad revenue will come from mobile.
Over time the data aggregator sees more than 40% of Google's total ad revenues coming from mobile (search + display).
Let's look at what these breakdowns (if accurate) would mean in real terms, assuming $50 billion in total projected ad revenue for 2013:
The other way to view those revenues is the following:
If the standard US (45%) vs. international (55%) ad revenue distribution holds for mobile then the following will be the rough figures for Google mobile ad revenue by geography (approximately):
Despite the above, Google's US mobile ad revenue is likely to be somewhat stronger than its mobile revenues from outside the US. Accordingly I would probably flip those percentage figures when it came to mobile.
Last year the IAB reported that mobile ad revenue in the US was $3.4 billion. This year it's likely to hit $7 billion according to our estimates. If that's correct then the Google figure above is too aggressive.
Given that Jumptap has now sold itself to Millennial Media it's not clear whether we'll get many more of the company's monthly Mobile STAT reports. The August report focuses on device market share by traffic on the Jumptap network.
It's interesting to contrast the Jumptap traffic figures with survey based market-share data from comScore. First the Jumptap numbers:
Jumptap sees Apple devices (iPhone + iPod Touch) generating 56.8% of smartphone traffic on its network. Collectively Android devices are responsible for roughly 35% of traffic according to the slide above.
By comparison comScore (based on consumer survey data) says that Android has a US smartphone market share of 52% vs 40% for Apple -- almost the reverse of the Jumptap numbers. Millennial ad network data are more consistent with the comScore figures below.
The tablet traffic data provided by Jumptap show the iPad remains well ahead of other competing devices, though the Galaxy Tab and Nexus 7 have grown since last year. The "headline" from the chart below is the dramatic decline in Amazon Kindle traffic in the past 12 months.
Compare tablet traffic data from Chitika, another mobile ad network. It shows an even greater margin (June 2013) between the iPad and its rivals.
Finally Jumptap reflects the relative traffic split between the mobile web and apps. The Jumptap data show that ad requests from apps now generate 84% of the traffic it sees vs. 16% from the mobile web. This is consistent with data from both Nielsen and comScore that show a roughly 80-20 split between apps and mobile web traffic in favor of apps.
However 2012 survey data from Nielsen, xAd, Telmetrics reflect differing levels of app usage by category. And in retail the mobile web is used more than apps as a general matter. So despite app dominance in the aggregate, in particular verticals the story may be quite different and much more nuanced.
Android's share (of smartphone shipments) across the globe is gaining momentum according to the latest IDC numbers. By contrast there's evidence that Android's US share may have "peaked" according to analysis from Asymco's Horace Dediu.
Below are IDC's estimates showing global market share for Q2 by shipments:
Thus Android stands near 80% of global smartphone shipments, which aren't identical with sales. But it's a directional indication of actual sales.
However in the US market the story is different; Android's share is flat (per comScore):
Dediu points out that over the past six to eight months in the US the iPhone has gained more usage than Android (11M vs. 6.6M users). So it would appear that Apple's US and international fortunes have significantly diverged.
However we also have research from CIRP, which finds (via survey data) that "first time smartphone buyers" in the US (meaning those buying smartphones for the first time now) tend to be older and more price sensitive. They buy "secondary Android brands" (e.g., LG) and keep their phones longer.
Apple's strategy for more price-sensitive consumers has been the iPhone 4 and 4S, which has been reasonably successful to date. However rumors suggest a low-cost "plastic" iPhone for emerging markets and more price-conscious consumers.
When looked at in the context of overall computer operating systems (including the PC), Android will be the dominant OS by 2015 on a global basis -- far outstripping Windows. By comparision, Apple's overall OS share (iOS + Mac OS) is expected to nearly match Windows.
There are a number of interesting things about Googlerola's just-released Moto X. First, it emphasizes design over specs. The latter had always been the hallmark of Motorola's previous Android ("Droid") phones. The new phone also allows for an unprecedented degree of customization:
In fact, the way the phone is presented on the Motorola site makes it effectively into a fashion accessory. However that's how many people do treat their smartphones today. The customization, which is smart, is apparently made possible because the phone is manufactured in Texas (rather than China).
But beyond those things, the phone can be activated or invoked without touching it. Users can speak commands to the phone and get responses or create reminders, set alarms and so on. Like Google Glass, Google Now can be initiated with a "wake up" phrase: "OK Google Now." This effectively turns the entire phone into a personal assistant. The TV spot linked below demonstrates this positioning and the functionality in action.
Previously Google Now and voice actions on Android devices had to be initiated by touching the screen: swiping up or touching the microphone icon. That's not required here (I haven't had a chance to use the device). Google/Motorola are using this "always ready" assistant capability to make the device stand out from both the iPhone and other Android devices. Below is one of the new TV commercials for the Moto X, which showcases how Google Now is now being "personified" -- much more like Siri than in the past.
Moto X is priced at $199 with a two-year carrier contract in the US. There will be a Google Play edition but there's no word at this point on unlocked pricing.
Apple just reported a $35.3 billion quarter, which was somewhat better than a year ago and beat financial analyst expectations -- largely on the strength of iPhone sales. The company also announced profit was $6.9 billion (vs. $8.8 billion a year ago). Sales outside North America accounted for 57% of revenue.
The company sold 31.2 million iPhones (vs. 26 million a year ago). But it sold fewer iPads than expected:14.6 million. Mac sales were down but Macs outperformed the PC industry as a whole, which is slumping badly.
Below are two charts that show the distribution of revenues by segment/geography and by product line (figures in $billions):
Unit sales of iPads were a concern for many financial analysts. The company sold 14.6 million tablet devices compared with 17 million last year and more than 19 million last quarter. While this implies market share erosion or shift away from the iPad, today Chitika released data showing that in North America at least, the iPad's web traffic share had grown since April and now stands at just over 84%.
While Apple continues to generate huge quarterly revenues growth has slowed or declined in some cases. Accordingly there's enormous pressure from investors to bring out new products or create new product categories: TV, wearables, etc. On the earnings call Apple CFO Peter Oppenheimer said, “We are on track to have a very busy fall" though he wouldn't elaborate.
New iPads and iPhones are expected to be introduced. There may even be "surprise" products such as the rumored iWatch.
As the global market for smartphones matures, it is clear that the default keyboard platform is going to be key for product differentiation. That's why it is so interesting that up-and-coming Chinese OEM, TCL Communications Technology Holdings Ltd, has expanded its licensing agreement with Nuance, making Swype the default keyboard for its line of Android-based smartphones sold in the U.S. In its latest report of device shipments, TCL claims sales volume of smartphones grew 126% in June, when compared to the same month last year, exceeding 1.3 million units. Of the nearly 21 million phones sold globally in the first six months of 2013, over 18 million were sold outside the Chinese domestic market. 4.3 million were smartphones, selling under the he Alcatel OneTouch brand as well as TCL's own Idol X branding.
Like Samsung, TCL is a well-diversified consumer electronics manufacturer with a major presence in the flat-screen TV market. Its management expects the geographic expansion of its smartphone sales to fuel growth and profits in the coming years. If it does so, it will be at the expense of Samsung, HTC and Google's own Motorola brand. Matt Revis, Vice President of Dragon Devices at Nuance, points out that the company had its choice of a number of less expensive alternatives to Swype to support touch-based input, including the "free" default keyboard that ships with the Android operating system.
"This is representative of a situation where you have a company that is positioned to grow globally and looking for an innovation partner to make it a category leader," Revis explained. "They are working with Nuance."
Indeed, it is a signal event for Nuance and Swype, which is already available for free download from Google Play. While Nuance would not provide revenue estimates for the licensing agreement, the impact can be expected to be significant, given TCL's ambitious growth expectations in the coming year. A virtuous circle has been established whereby an aggressive manufacturer recognizes that innovation will be key to growth and has recognized the need to cement a relationship with a firm that has been steadily investing in improving the technologies that support touch-based and multimodal input - both through internal development and acquisition.
Against the backdrop of a sweeping reorganization at Microsoft, intended to promote greater collaboration and faster time-to-market, hardware tracker IHS reported that PCs "delivered the worst second-quarter performance in 11 years."
The firm said that global PC shipments were down 7% vs. a year ago. IDC reported in Q1 that PC shipments were down 14% year over year. I suspect that when the IDC and Gartner hardware figures are released we'll see greater declines for Q2 than what IHS is reporting.
IHS said that during the first half PC sales, globally, suffered "a harsh 11.2% contraction compared to the same six-month period a year ago."
Tablets and smartphones have clearly eaten into the PC market and put downward price pressure on PCs. PC replacement cycles are getting longer. A more intangible thing has also happened: PCs have ceased to be shiny new objects coveted by consumers.
They've become instead pure utilitarian items without the ability to evoke the device-desire they once had.
Yesterday Kantar Worldpanel ComTech reported that the iPhone has gained on Android in the US market. The firm said the relative market shares of Android, iPhone and Windows Phones are now as follows:
The iPhone is the bestselling individual smartphone in the US, though not across the globe.
Kantar asserts that its survey data are more accurate than other sources because it operates "the largest continuous consumer research mobile phone panel of its kind in the world, conducting more than 240,000 interviews per year in the U.S. alone."
For comparison purposes comScore reports the following (May, 2013) smartphone market share in the US:
Comscore shows Android and the iPhone gaining in the US and all other operating systems losing share vs. last quarter.
While the iPhone may have gained in the US that trend does not appear to be global. Kantar reports that Android's share is now nearly 70% in Europe and even higher in China.
The mobile payments space is a little like the local market: lots of promise, lots of money but very hard to crack. Yesterday a young entrepreneur and his payments startup Clinkle received a $25 million vote of confidence from a group of celebrity investors.
This was reported to be the "largest seed round ever." Whether it is or not $25 million is a lot of money for yet another mobile payments app. While it's true that nobody in mobile payments has "broken through," Clinkle will have a tough slog as it tries to build both merchant adoption and consumer usage.
Once again it's the "cold start" or "chicken and egg" problem.
However, according to the NY Times, there's no merchant hardware requirement for Clinkle and the go to market strategy involves a Facebook-like focus on college campuses and surrounding businesses. That may be a key decision and help the startup gain some quasi-critical mass in selected markets among students.
Beyond the hardware issues surrounding NFC adoption, the central issue with mobile payments has been a lack of perceived need among consumers. Mobile payments are being used in selected contexts and commerce situations (e.g., Starbucks) but the public at large hasn't seen the need to replace plastic payment with app-based payment that relies on stored credit cards or bank accounts.
That brings me to indoor location and marketing. When discussing these topics, and the absence of technology standards, I often use mobile payments as an analogy. Yet there is a critical distinction. The difference between the two segments is that while mobile payments still largely requires a shift in consumer behavior, indoor marketing does not.
Large majorities of consumers are already using their smartphones in stores to look for price information, product reviews and coupons. The idea of brands and retailers communicating with them in stores will be built on this existing behavioral foundation. Accordingly indoor marketing won't require consumers to adopt new technology or approaches to shopping -- unlike mobile payments.
The "heavy lifting" in indoor marketing is on the merchant side, where WiFi or other sensor infrastructure needs to be in place. Fortunately in most major retail environments the rudimentary infrastructure already exists.
But don't take my word for it. We'll be discussing the competing indoor location technologies and hardware requirements for indoor marketing (as well as their accuracy) at Place: The Indoor Marketing Summit this fall in San Francisco. It will be an event anyone in the mobile or location-based marketing space won't want to miss.
BlackBerry posted a "suprise loss" (based on analyst forecasts) in fiscal Q1 of $84 million. The company announced that it had shipped 6.8 million smartphones. However of those only 2.7 million were BlackBerry 10 handsets (Z10 and Q10).
The much-touted Z10 all-touchscreen phone seems to be a complete flop. The more "traditional" Q10, with its hardware keyboard, may wind up being more successful; it has only been on the market a few months.
These phones, it now seems clear, won't save the company. And BlackBerry is becoming increasingly marginalized in the smartphone and tablet world -- even in the enterprise it's traditional stronghold.
In terms of tablets BlackBerry said that it shipped 100,000 Playbooks in the quarter. BlackBerry CEO Thorsten Heins has dismissed tablets as mere fashion. He doesn't think the devices will exist in five years. While the iPad may not reign forever tablets will continue to exist certainly. Heins is mistaken.
The Playbook won't be getting an OS update and is effectively dead in the water. In North America it delivers less than 1% of overall tablet traffic, according to ad network Chitika. The chart above reflects the "tier 2" tablets that lag the iPad, Kindle and Galaxy in terms of web traffic. (The iPad delivers 82% of North American tablet traffic.)
Gartner's global OS projection for 2014 shows BlackBerry having an almost non-existent market share.
Source: Gartner (6/13)
The hard question to answer now is "what next?" The transition-turnaround story clearly won't play to investors anymore. The stock is off 27% following the earnings releas.
Selling the company or taking it private are two options. But who would buy it? (Certainly BlackBerry would be acquired at the "right price.") Microsoft has flirted with the idea but it probably wouldn't serve Redmond because BlackBerry hardware isn't prized in the market and would be unlikely to advance Windows Phones.
Another "nuclear" option would be to start putting out BlackBerry Android-powered phones. However that would turn the company into a commodity provider of Android handsets without any meaningful differentiation. That was what Nokia was concerned about (although Nokia would have had more success with Android.) And it would be almost impossible to compete with Samsung globally.
The company is almost out of options.
Nokia paid for product placement in the wildly popular Dark Knight films and released a special Batman-themed Lumia 900 when The Dark Knight Rises was released. The short answer: no, it didn't really "work."
Nokia Windows Phones (Lumia 925) also appear several times in the also extremely popular Man of Steel. Apparently in the alternate reality of Metropolis Nokia-made Windows Phones are the only smartphones in existence. However even the Man of Steel with all his remarkable alien abilities and strength probably won't do much for Lumia handset sales.
The Superman film is opening in China this week and Nokia is offering a Chinese "Superman Limited Edition" Lumia 925 with the "hope" (S) insignia on the back. Depending on how excited the Chinese are by Man of Steel there may be some sales lift. However the Chinese market is dominated by Android devices.
Meanwhile over in the Marvel universe (Superman is a DC Comics character), Iron Man's Robert Downey Jr. is reportedly being paid $12 million in a two-year deal to promote HTC smartphones. It doesn't look like the Iron Man character is part of the deal or will appear in the ads.
Downey is a recognizable and popular celebrity but he probably isn't powerful enough -- at least without the Iron Man suit -- to compete with Samsung's Galaxy juggernaut (The Avengers might collectively have a shot at defeating it). The Korean company spent over $400 million in 2012 to achieve and maintain its Android smartphone lead. That compares with HTC's $46 million and Nokia's almost non-existent $13 million.
Microsoft has been in a kind of "double-bind." It has been trying to use Office integration with Windows Phone and Surface tablets to differentiate those products vs iOS and Android. However they haven't been selling particularly well (save in a few isolated countries). Yet the longer Microsoft held Office back from iOS (and Android) the more it faced the prospect of people getting used to alternative software or (Google) docs in the cloud.
Rumored for a very long time, today Office officially comes to the iPhone in app form (though not the iPad). In order to use the app iPhone owners must be subscribers to Office 365. It also requires iOS 6.1 as well and works on the iPhone 4 and above.
The product appears to require a SkyDrive account in addition but that may be a built-in feature of Office 365. (I'm not a subscriber.)
The new iPhone app allows users to view and edit Word, Excel and PowerPoint documents. However you can only create Word and Excel documents on the app. Users will also be able to edit docs "offline" and they will sync when the connection is resumed (think airplane flight). Microsoft promises that "formatting and content remain intact" on the iPhone and back to the 365 documents in the cloud.
As mentioned, there's no Office for iPad app but that will ultimately come in all probability. For the time being iPad users can access Office 365 through the browser. So effectively Office is available for the iPad.
There are now hundreds of millions of iOS devices in the market globally. This year more tablets are expected to ship than laptops and by 2015 more tablets than PCs in general. In the aggregate there will be more "mobile device" users than PC users in the very near future. Thus Microsoft was all but compelled to bring Office to iOS (Android users can access via the browser).
After Windows, Office is Microsoft's most important and lucrative product -- generating rougly $25 billion in revenue last year. The rise of mobile devices puts enormous pressure on both product lines. However the arrival of Office for iOS means there's less reason to buy a Surface tablet.
It's fascinating to watch Google evolve from a "search engine" into something much more interesting and complex. The rise of mobile, the launch of Google Now, the improvements in voice search and the more recent, conceptual introduction of what Google is calling "conversational search" all point to where search at Google is headed.
The search metaphor is giving way to the personal assistant metaphor. The entry of Siri in the market roughly two years ago was the trigger of the transition.
Google search boss Amit Singhal was deeply enamored of Star Trek as a boy and, like others at Google, has openly fantasized about building the "Star Trek computer." In other words, a computer one could simply speak to naturally and get correct and complete information.
Google Now, also sometimes called "predictive search," tries to go beyond that purely "conversational" scenario by anticipating user needs and interests based on big data and personal search history (and movements). Google Now is highly imperfect but when it works it's impressive.
While Google has only recently sought to move in the direction of "personal assistant," Siri has always been an "assistant" but only recently aspired to be a search utility. Siri was explicitly conceived as a tool that would enable the accomplishment of specific tasks and not simply the retrieval and display of information.
As Apple has added more structured data feeds to what Siri can access it has improved -- much of Siri's value for users still comes from controlling the device and initiating calls, texts and emails rather than "searching" -- however the great "Achilles heel" for Siri has been its limited dataset and lack of flexibility.
Although it wasn't true when Siri was first introduced, Google has now exceeded Siri by bringing its web-search capabilities and into the virtual assistant equation. Google has a much deeper (albeit mostly unstructured) knowledge base to call upon vs. Apple. Thus for numerous questions where Siri didn't have a structured response it would have to default to web search (i.e., Google): "I didn't understand XYZ [query], shall I search the web for XYZ."
Google would then ride to the rescue. In the Google universe it can bring increasingly structured answers to the same user queries but also its full index as a backup.
With the coming integration of Twitter, Wikipedia and especially Bing into Siri's roster of data sources with iOS7, Apple adds a full web index and much more breadth to what Siri can do without having to hand off to a third party search engine (i.e., Google). And unlike current scenarios where users typically have to explicitly ask Siri to "search the web" to obtain XYZ information, soon they'll just ask for "XYZ" -- and Bing will supply the necessary or desired information.
The deal has potential to dramatically broaden Siri's utility and usage frequency. Equally it could, if successful, significantly increase search query volume coming to Bing from iPhone users. The integration will need to be very "elegant" to win over users, who are accustomed to either using apps or Google in the Safari toolbar to "search the web" on the iPhone. Users will need to be educated about Siri's new capabilities.
The integration of Bing's search capabilities is a "crossing the Rubicon" of sorts for Apple as it declares that comprehensive data and search capabilities are necessary to fully deliver on the promise of the personal-virtual assistant.
More than three out of five (61%) mobile subscribers in the U.S. owned a smartphone during the most recent three-month period (March-May 2013), up more than 10 percent since smartphones became the mobile majority in early 2012.
Comscore, for its part, says that the percentage of mobile users with smartphones is slightly less: 58%. Overall we're talking about 140 - 150 million people in the US now with smartphones.
In terms of OS market share, Nielsen reports that Android has 53% of the US smartphone market, while Apple controls 40%.
No one should ever bet against Microsoft. But amid a flurry of new Android based "convertables" and tablets (some of which were announced today), Windows is facing a tougher fight than ever. Only the enterprise and Office stand between the company and a dire-looking market.
PC sales are off and it doesn't appear they'll turn around soon. Yet, Microsoft is hoping that its 8.1 Windows update fixes many of the problems and complaints with Windows 8, which have contributed to disappointing sales. Microsoft, with its many billions in quarterly revenues, is clearly the ironic underdog in the new world of mobile computing.
Redmond got a bit of good news from WPP research subsidiary Kantar Worldpanel ComTech earlier today. The firm found that Windows Phones had gained nearly 2 points since a year ago (however comScore data show much smaller gains). It's not clear, however, whether the needle is really moving for Microsoft given that Windows Phones generate less than 2% of all mobile OS based web traffic in the US.
Source: Kantar Worldpanel
The company's Surface tablets have also been a disappointment thus far. RT starts at $499 and Pro starts at $899. Both are going to need to come down by at least $200 before most consumers will consider them.
ASUS today said it was releasing a 7-inch tablet for $149 (outside the US there will be a 8GB version for the equivalent of $129). ASUS is the maker of the popular Nexus 7. Over time a large percentage of tablet sales will be concentrated in the 7-inch to 8-inch range and those tablets will almost without exception -- the exception being the iPad -- be priced below $200.
Regardless of how full featured Surface tablets are price is a major driver of purchase behavior.
Accordingly, in response to declining tablet prices and sluggish sales, Microsoft is going to lower its software licensing fees to enable hardware OEMs to bring down prices of their Windows devices. But it may not be enough to boost sales. In addition the absence of a native version Office on the iPad or Android hasn't boosted Surface either.
One interesting question to ask is whether Microsoft's past success has mostly relied on its ubiquity and near-monopoly status as an operating system (together with Office). If there's even a shred of truth in that question it's a serious problem because once people are no longer "compelled" to buy Windows machines a substantial number of them won't.
The following slide, presented as part of venture capitalist Mary Meeker's semi-annual internet trends report, is very surprising and revealing:
At the Google developer conference in San Francisco a couple of weeks ago, Google demonstrated "conversational search" on the PC. It was one of the clear highlights of the nearly three-hour keynote. What the demo showed was Google's voice search (and audio read back) capability together with "context awareness" of previous query results.
For years Google has very self consciously been trying to replicate the "Star Trek computer." Now Google is making some meaningful strides toward that objective.
In the demonstration at the Google event, we saw the capacity to search for a person, place or thing and then do follow-up searches using pronouns or otherwise building on the previous query. The Google representative spoke to the computer and planned a trip to the Northern California beach community of Santa Cruz. She spoke queries to her PC and got voice-response answers from the Google "assistant."
This kind of "context awareness" or "conversational" capability is present to varying degrees in Siri today (and other "assistants") as well as other "AI" driven call center and customer service solutions.
Following the lead of Siri and then going beyond it, Google is transforming conventional search into a personal assistant experience. This is the clear future direction of the market. Google's voice search and Google Now information or answer "cards" illustrate this trajectory. As of late yesterday some of those same capabilities have been brought over to the Chrome browser on the PC.
If users update their Chrome browsers to the latest version they'll find a prominent new voice-search experience on Google.com (it isn't yet available from the URL bar search). Many of the answers or results are "read back" to you (where there's an answer card or Knowledge Graph entry). However this doesn't happen all the time. And in my quick testing, the ability to follow up with secondary searches using pronouns and queries referencing previous results was very limited.
Still, the spoken read-back (as in mobile search) is fun and as Google develops this contextual and conversational capability further you may be inclined to start having more verbal interactions with your computer.