Operating Systems

Android Users: Natural Born Clickers?

I'm an Android EVO user and I rarely click on ads, but that's apparently not true of my Android brethren and sistren. According to ad network Chitika, "people on the Android OS clicked on ads 81% more often than people on the iPhone." Chitika quickly comes to the conclusion that 'Android users [are] 80% more valuable than iPhone users." However I wouldn't equally jump to that immediate conclusion. 

CTR of Android vs Apple

Ad mediator/exchange Smaato previously found, similarly, (in February) that Android users clicked-through more than iPhone users: 

 Smaato Mobile Advertising Metrics

But later Smaato reports, as Android penetration grew, saw its CTR position decline. Compare July numbers for the US and then globally:

 Smaato Mobile Advertising Metrics
Smaato Mobile Advertising Metrics

There may be some novelty around mobile advertising for many Android users, especially if they've upgraded from feature phones and this is their first smartphone. However, the Smaato figures suggest that the Chitika numbers will similarly change in a few months after the newbie Androids become jaded and embittered.

Once again, however, this all begs the question of whether we should be paying any attention to CTRs on mobile ads (other than paid search). If there's a lead-gen form on a landing page or a store locator, then arguably yes. But otherwise CTR is probably the wrong metric.

It's an easy, lowest-common denominator metric so people gravitate to it. But comScore has repeatedly argued and shown that CTR is the wrong metric to assess the efficacy of onlne display advertising. That should equally apply to mobile. 

There are a range of metrics that mobile marketers can and should be using to assess the success of their campaigns, depending on their objectives. The generic CTR is not necessarily very helpful or meaningful in terms of brand lift, purchase intent or other actions that mean something in the real world. 

Nokia Buys Analytics Firm Motally

As is being widely reported, Nokia has bought San Francisco-based mobile analytics firm Motally. According to the press release:

Nokia (NYSE: NOK) today announced it has signed an agreement to acquire Motally Inc., a privately-held US-based company. Motally's mobile analytics service offers in-application tracking and reporting, and is designed to enable developers and publishers to optimize the development of their mobile applications through increased understanding of how users engage. The service offering is planned to be adapted for Qt, Symbian, Meego and Java developers, and Nokia plans to continue serving Motally's existing customer base.

"The acquisition underpins Nokia's drive to deliver in-application and mobile web browsing analytics to Ovi's growing, global eco-system of developers and publishers, enabling partners to better connect with their customers and optimize and monetize their offering," said Marco Argenti, Vice President, Media, Nokia.

This appears to be a pretty straightforward effort to bring analytics to the Ovi store for developers. The company offers both mobile Web and app analytics.

Terms of the deal were not disclosed. Motally was founded in 2008 and has eight employees. 

The Americanization of Nokia

An article in today's NY Times discusses three how three Americans are now in key positions at Nokia: Mary T. McDowell, Jo Harlow and Richard Green. In particular the piece focuses on McDowell, Nokia's "chief development officer." The idea is that these and perhaps other Americans to come will help revive Nokia's high-end smartphone business especially in the US.

Nokia is still by far the dominant OEM globally but has a declining share in the US market. Along those lines, here's a statement in the piece, attributed to McDowell, that's not entirely accurate in my opinion:

She added that Nokia’s problems in the United States stemmed from its failure to work closely with U.S. mobile operators to tailor devices to their needs, rather than from any shortcomings in the phones themselves. 

Nokia's failure to work with carriers is perhaps one of the critical explanatory variables behind its current US predicament. However the user experience is definitely part of the challenge Nokia faces in the US.

Unless the company makes super-affordable, "good enough" smartphones and/or dramatically improves its user experience overall Nokia won't see any gains in the US. Around the world, especially in developing countries, it's a very different story; Nokia dominates.

Yet Android poses a serious threat to Nokia in those developing markets over time. Nokia has been almost exclusively focused on finding an "answer to the iPhone." But as I've argued before it's really Android that Nokia should worry about globally. 

I would argue that the US market is an important market to Nokia not because of revenues but because it's now the smartphone leader and much of the "coverage" is driven by what's happening here. There's more symbolic value here for Nokia in succeeding or failing.

Nokia's failures in the US may also reveal "cultural" issues within the company that need to be addressed. It may be something of a useful mirror that Nokia should use to diagnose those internal questions and problems. I'm not sure that simply having Americans in key positions is the answer. 

After all, Microsoft, which faces its own significant hurdles in the mobile market, is an American company. 

Survey: iPhone 4 Satisfaction High, AT&T the 'Achilles Heel'

ChangeWave has released some US based iPhone 4 customer satisfaction research. The bottom line is that iPhone 4 has very high satisfaction scores -- the screen resolution is the most liked feature -- though not as high as its immediate predecessor the 3GS.

Some people are complaining about the antenna (24%) but it's the minority -- though a substantial minority. The biggest sources of dissatisfaction appear to continue to be related to AT&T and its network.

Here are a few of the charts that illustrate these points: 
























Interestingly, FaceTime is low on the list of features that people really like; Apple is really selling FaceTime as a differentiator vs. other smartphones. Also "faster web browsing" doesn't really seem to rate highly. Yet iPhone 4 is much faster than 3G and noiceably faster than 3GS. 

In terms of dislikes . . . 
















In case it wasn't already crystal clear to Apple, for myriad reasons the company needs to open up iPhone availability to other carriers.

Compare Nielsen's recent satisfaction data for the top three smartphone platforms in the US market: 


Why It May Be Time to Buy Skyhook

The news that Skyhook's triangulation data had been replaced on iOS 4 with Apple's own proprietary system is seemingly very bad for Skyhook Wireless. Apple was the company's sexiest and most visible client. I confirmed that had happened last week with founder Ted Morgan.

Here's how the WSJ presented the news this morning:

Beginning with iPhone operating system version 3.2, which was released in April, Apple began using its own proprietary database of WiFi access points to help determine the location of a mobile device. Apple disclosed the change in a July 12 letter to U.S. Rep. Edward Markey and Rep. Joe Barton. The congressmen had asked Apple to explain its privacy policy after the computer maker alerted users in June that it would be collecting location data in order to provide location-based services . . .

The move is a blow to Skyhook, a startup that helped pioneer the practice of mapping WiFi networks to determine location. In 2008, Apple tapped Skyhook to provide WiFi-based location services for the new iPhone and iPod Touch. In the same letter to Congress, Apple also said it has stopped using Google for location data.

But this is also a moment of opportunity for Skyhook and the time may be ripe for an acquisition by a third party. Skyhook arguably has the best location database in the market -- Morgan says so and believes it. It's undoubtedly better than Apple's new system and better than Google/Android (for sure).

Skyhook has raised (by my count) just under $17 million in funding and so would not be terribly expensive for an Apple, a Google, a Nokia, a Samsung or a Microsoft to pick up, given the strategic nature of location on mobile devices. Skyhook's challenge, however, may be the perception that its database can be replicated or recreated with sufficient time and effort. 

Apple is perhaps unlikely to make the Skyhook acquisition given the recent development, so perhaps Google or Microsoft should step up and buy the company. Google would certainly benefit immediately from Skyhook's assets and creativity around location products. I'm not sure Skyhook CEO Morgan would like to be a Google employee but perhaps if the price were right . . .


Update: Another reason to buy the company is that it has 15 patents around location and locaton detection.  

Verizon Becoming Synonymous with Android

The allure of the iPhone at AT&T peaked and this past quarter. Verizon signed up more subscribers than its main rival: 665K vs. 496K.

And while talk of a Verizon iPhone continues it appears somewhat less likely than it did just a short time ago. In addition the carrier's Droid campaign is all about bashing the iPhone ("Droid Does" [i.e., the iPhone doesn't]).

This past weekend I was at a mall in Los Angeles and went in to the Verizon store to observe and play with the Droid X (impressive large screen but generally felt "insubstantial"). Verizon is very aggressively associating its brand with Droid handsets and has eclipsed T-mobile USA, which once positioned itself as the Android carrier. Given that history it's ironic that T-Mobile may become the first carrier beyond AT&T to get the iPhone

Verizon's focus on and marketing on behalf of Android is bad for RIM/BlackBerry and other handset OEMs. RIM in particular will suffer from the "second class status" it now occupies in the carrier's positioning. While RIM doesn't rely on one carrier -- it's broadly available from all the major carriers -- Verizon is the largest and most important. Bing, which struck a major "default search" deal with Verizon (except on Droids), also suffers by extension.

As an aside, as RIM rolls out BlackBerry OS 6 and more iPhone and Android-like touchscreen handsets (I assume), it risks straying from its "franchise" -- the text-friendly keypad. This is the dilemma for the Waterloo, Ontario-based company. 

I also observed the lonely Palm display in the Verizon store. Unless or until HP adds more handsets or revamps the software (which they've said they're going to do) Palm remains dormant. 

Making the iPhone available to Verizon is the shrewdest thing that Apple could do to blunt Android's rise and competitive challenge. But because of the investment that Verizon has made in "Droid" (and being anti-Apple) if Apple were to make the iPhone available it might be difficult for the carrier to accept the offer. 


Related: BlackBerry’s Era May Be Ending


iPhone 4 World Tour: 17 More Countries Friday

Apple has announced that on Friday (July 30) the iPhone will be available in 17 more countries:

Australia, Austria, Belgium, Canada, Denmark, Finland, Hong Kong, Ireland, Italy, Luxembourg, Netherlands, Norway, New Zealand, Singapore, Spain, Sweden and Switzerland. iPhone 4 will be available for purchase through Apple’s retail and online stores and Apple® Authorized Resellers. 

Here's Apple CFO Peter Oppenheimer discussing iPhone 4 sales on last week's earnings call:

We were very pleased with iPhone sales of 8.4 million, including over 1.7 million iPhone’s 4s in the initial five countries where it was launched. This represents 61% year-over-year growth and is considerably higher than IDCs latest published estimate of 38% growth for the global Smart Phone market overall in the June quarter . . .

Recognized revenue from iPhone handset sales, accessory sales and carrier payments was $5.33 billion during the quarter compared to $3.06 billion in the year-ago quarter, an increase of 74%. The sales value of iPhones alone was about $5 billion, which yields an ASP of about $595.

At the end of the June quarter, we had iPhone distribution with 154 carriers in 88 countries. We continued to experience very strong year-over-year growth, particularly in Asia, Europe and Japan. Additionally, we continued to be very pleased with strong sales growth from both long-standing and new carrier partners. During the quarter, we surpassed cumulative sales of 100 million iOS devices.

During the earnings call Q&A there were questions about iPhone returns and "Antennagate." Here's the gist of what was said by Apple:

Gene Munster – Piper Jaffray

And just last question and I will turn it over. Since the issues with the antenna have you seen any changes in demand or what changes have you seen in demand for iPhone 4?

Tim Cook

We are, Gene, let me be very clear on this. We are selling every unit we can make currently.

Some people credit Apple with distracting from the iPhone's antenna design by roping other handsets into the controversy. While tech journalists and bloggers debate the validity of these comparisons the public doesn't seem as interested.

Anecodtoally I've heard a few consumers hesitate because of press accounts they've read or seen regarding the iPhone 4's antenna problems. But the sales figures apparently indicate that demand is still extremely high. But most of these sales happened before Antennagate. We'll see what happens internationally now.

Google Q2 Earnings Call: Android Search Up 300% in 1H

Google released its second quarter 2010 earnings today. You can read the full release and see the earnings slides here. I'm going to focus only on the mobile comments made during the earnings call.

All of the remarks below are from Google SVP Jonathan Rosenberg:

On Android growth: 

  • We are now activating over 160,000 Android devices every day. This is up from 65,000 last quarter.
  • The Android market is also open of course, and now has over 70,000 apps. That was around 30,000 in April.

On mobile search growth:

  • Android search grew 300% in the first half of 2010. So, yes, search on Android devices is exploding.
  • The most popular app is a browser. And what do people do with the browser on these devices? They search an order of magnitude more than they have on any previous type of smartphones, which they had in years past. So, the combination of people browsing on these smartphones connected on very, very fast networks, and searching on them is basically the formula around how Google makes, how Google succeeds.

On click to call ad performance:

  • The click to call ads on the high end mobile phones are doing very well. The click through rates go up 6% when you put ads with a phone number, 8% when you put a local address. 

On mobile search not cannibalizing the PC:

  • I think there are also slightly different usage patterns across desktop and mobile. You tend to see more use of the mobile devices on weekends, which is not surprising but they don’t actually have any more specific data that proves those observations or that hypothesis. 

While mobile search volumes are growing from a small base, the numbers very quickly can become very large.

Citi's Mark Mahaney estimated that mobile search volumes are now roughly 10% of Google's overall monthly search queries in the US. That may be aggressive but if it's close that would mean more than a billion searches a month on mobile devices. And if we consider that the bulk of those are coming from smartphones (21% - 23% of the market), the growth potential is huge.

Nokia Should Fear Android More Than Apple

Apple and Google/Android have become the GM and Ford -- or Toyota and Honda, depending on what part of the world you're in -- of smartphones. Neither has the most unit sales or marketshare but they're both ascendant. Nokia, Microsoft, Palm (HP) and BlackBerry are either static or declining.

Nokia has largely focused on and been unfavorably compared to the iPhone and Apple by critics and investors. "Three years later the company still has no answer for the iPhone" is the refrain often appearing in Bloomberg or Reuters articles about the Finnish company. But in some sense Android may be a much larger threat to Nokia on a global basis. 

Take a look at the following chart showing smartphone marketshare distribution (based on AdMob network data). This doesn't exactly replicate the actual numbers in these countries but shows you generally where things stand.

Nokia/Symbian strongholds are Africa, Asia and Eastern Europe, Latin America to a lesser degree. The places where Nokia is strongest are largely developing countries in other words.

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The New York Times ran an article this weekend about Android's strategy for emerging markets. In it there was discussion of a range of new, cheap smartphones for these developing markets:

Smaller Chinese manufacturers, which account for about 10 percent of the global supply of mobile phones, are also adopting Android, seeking to gain market share with lower-priced devices.

Many pin their hopes on MediaTek of Taiwan, which supplies chips for lowcost phones sold in Asia, Africa and South America. The company has joined the Open Handset Alliance, the group that promotes Android, Google said. Devices based on MediaTek may cost carriers as little as $70 each . . . 

Apple can't and won't offer lowcost handsets to the market in these places; it's the premium brand and wants to ensure a uniform experience. Eventually we might see a single lower-cost handset from Apple (something like the iPhone Nano perhaps). But that won't be coming very soon, if ever. 

Google by contrast doesn't have any of those same brand-related concerns. If there are lousy Android handsets in the market it doesn't really diminish Android the OS as a whole. There's room for much more experimentation on Android.

Apple has charmed and captured the "high end" of the market. Google and its OEMs are competing there but can also compete at the lower end with lower price points as the Times article suggests. That's the area where Nokia is dominant. But for how much longer? 

That Was Fast: R.I.P. KIN

According to this story in the Todd Bishop's blog on TechFlash (Seattle), Microsoft has officially stopped marketing the Kin, its brand of mobile phone launched, with much fanfare, a scant six weeks ago. The brief, publicly-released statement from Microsoft said simply:

We have made the decision to focus on our Windows Phone 7 launch and we will not ship KIN in Europe this fall as planned. Additionally, we are integrating our KIN team with the Windows Phone 7 team, incorporating valuable ideas and technologies from KIN into future Windows Phone releases. We will continue to work with Verizon in the U.S. to sell current KIN phones

The major conclusion to be drawn is that unit sales through Verizon Wireless's channel were so dismal that the phone could not serve as a showcase for Microsoft's "mobile/social" experiment. To review the chronology, Microsoft held a major press event to introduce the world to the Kin, and play up its ability to support search, communications and photo sharing among a social graph that mainly included attractive 18-30 somethings. It was a radical enough effort to differentiate that I sensed a lot of fundamental market research went into quantifying the propensity of that particular demographic to (1) buy a special purpose mobile device and (2) carry out all the hip, participatory activities that are depicted in the Kin's introductory video.

If anything, the failure of Kin and its attendant features and services, proves that you can't manufacture a social graph and you sure can't use that non-existent group to promote sufficient sales of what turned out to be a single-purpose device. Even the Danger Hiptop (aka T-Mobile Sidekick) sought to leverage the addictive nature of text messaging in a new form factor. The Kin, by contrast, seemed to limit the options of a generation of users who like to share their stuff (location, photos, check-ins) on popular services which they pick-and-choose from diverse sources through appstores or browsers.

Let's hope that the product managers for Kin learned what they needed to from the alleged 500 people who bought the device and join the Windows 7 team with the same enthusiasm they had for social/mobile activity. It is an area that is poised to heat up, but cannot be partitioned into a small, self-identifying group of people who happen to own the same device.

Google Trying to Blur Apps, Mobile Web

The truth is Google doesn't really like apps, not just because Apple promotes them as an alternative to search but because they fragment the mobile world. Google is all about scale and scalability across (mobile) platforms. Thus the company is pushing for a future in which HTML5 overcomes that fragmentation and helps make mobile websites look and operate more like apps.

People continue to debate the "apps vs. mobile Web" question. The answer is that both will co-exist -- and the mix of apps vs. mobile will be different on different platforms. However "web apps" have emerged as a third category in the mix. There is nothing especially new here. But in certain cases these Web apps are getting better and better, and very close to native apps in their functionality. 

The new GMail for the iPad is an example of that -- improved usability for composing messages. It's a small change, but useful and it makes the GMail site on the iPad much more like using GMail through the iPad's mail app. 

 Picture 20

We'll see these three content categories co-exist into the future: apps, traditional PC Internet sites, which don't really work on mobile but work well on the iPad, and "Web apps." 

Apple's iOS 4 Updgrade Out Today

Apple's software upgrade to iOS 4 is out today. Here's what Apple says about compatibility:

iOS 4 works with iPhone 4, iPhone 3GS, and iPhone 3G. Not all features are compatible with all devices. For example, multitasking is available only with iPhone 4 and iPhone 3GS.

It also works with second and third-generation iPod touch devices.

iOS 4 adds a range of new features, including multi-tasking (not for all devices), digital camera zoom, email improvements, folders and bluetooth keyboard support:

Picture 10

Android, iPad Grow in Latest 'Mobile Mix' Report

Mobile ad network Millennial Media is now putting out two reports on a regular basis: one about mobile advertising (SMART) on its network and the other about devices (Mobile Mix) on its network. Consistent with other networks and data vendors in the market, Millennial has seen considerable Android growth. But the iPad is also growing dramatically.

According to Millennial:

  • Android requests grew 15% month-over-month, and have now grown 338% since January.
  • The Apple OS remained the leading operating system on the Millennial network, but it had a month-over-month decrease of nearly 14%
  • iPad requests grew 160% month-over-month
  • For individual manufacturers, HTC received the largest share increase month-over month for the second consecutive month

Below are some of the report's charts, showing the hierarchy of devices and operating systems on Millennial's network. In addition, the company shows the percentage breakdown of developers working on the various smartphone operating systems.

Picture 8

Picture 7

Picture 9

Compare AdMob's most recent mobile metrics report (April, 2010) in terms of devices and operating systems on its network:

 Picture 11

Other than the iPhone and the top three Android phones, there's a different array of devices on both lists. The top Android device on Millennial's list, the Nexus One, doesn't event show up on the AdMob list. The AdMob list shows no RIM devices among the top group, whereas the BlackBerry Curve is the number two phone over at Millennial. 

Comparing operating system share on the network also reflects the differences between Millennial and AdMob. Below is AdMob's US operating system share graph for April:

Picture 12

Millennial (top four):

  • iPhone: 48%
  • RIM: 19%
  • Android: 15%
  • Other: 8%

AdMob (top four):

  • Android: 46%
  • iPhone: 38%
  • RIM: 9%
  • Palm: 3% 

Each of these company specific reports needs to be taken with some caveats and caution. The discrepancies and differences between the networks illustrate this. However, both companies show similar trends: the growth of Android handsets, which makes sense give how many there now are, and the rise of the iPad (AdMob discussed that last month).

ComScore Releases More Mobile Data

Interestingly comScore has been releasing more mobile data recently. Today they put out some new US hardware OEM numbers, together with high-level mobile user activity data. Most of the data are flat vs. numbers they put out just a month ago.

Top US handset OEMs (total market, not smartphones): 

  • Samsung -- 22.1%
  • LG -- 21.8%
  • Motorola -- 21.6%
  • RIM -- 8.4%
  • Nokia -- 8.1%

Activity, comparing April with March release:

Picture 18

Here's a recap of recently released comScore data on mobile app and browser usage by content category:

 Picture 19

Finally here's recently released Nielsen data showing the hierarchy of apps utilized on US smartphones and feature phones:

Picture 20

Is Palm Going to Become HP's Netscape?

Is Palm going to become the equivalent of Netscape for HP? I'll explain in a minute.

I read a comment from HP CEO Mark Hurd, reportedly made at a Bank of America Merrill Lynch technology conference yesterday. According to ZDNet, Hurd said that the company wasn't going to make smartphones but instead would make a range of "connected devices":

We didn't buy Palm to be in the smartphone business. And I tell people that, but it doesn't seem to resonate well. We bought it for the IP. The WebOS is one of the two ground-up pieces of software that is built as a web operating environment...We have tens of millions of HP small form factor web-connected devices...Now imagine that being a web-connected environment where now you can get a common look and feel and a common set of services laid against that environment. That is a very value proposition.

There are a couple of responses to this. The first is that many small, connected devices can easily become phones with Skype. So the distinctions between a small tablet or other comparable device and a smartphone are increasingly less meaningful. 

Hurd might be shrewd and smart, figuring that Palm couldn't build meaningful share in the smartphone market so just avoid that entirely. But it might also be a strategic blunder to not build smartphones. Here's where the Netscape analogy comes in. 

When AOL bought dominant Web browser Netscape in 1998 (for $4.2 billion) it didn't continue to invest (or even use Netscape on its own AOL network) and Netscape essentially languished. Its browser share declined quickly as did the value of the Netscape brand and the investment overall, until there was almost nothing left and AOL turned Netscape into a cheap dial-up ISP. 

Palm still has considerable brand equity and goodwill. But will HP's strategy turn Palm and WebOS into something far less valuable that it is today? 

One could argue that to preserve the value of the investment as well as to fully realize the potential of WebOS HP needs to continue to make smartphones. The Pre failed partly because of the software -- and miscalculations about the importance of apps -- but also because of the hardware. HP (and Palm with hindsight) could fix that in a range of new and interesting smartphones. 

HP could potentially build a number of interesting tablet devices that are a hit with consumers -- maybe -- but the category will be very crowded very quickly. And without the smartphone visibility and distribution to keep app developers interested in WebOS those HP tablets are less likely to compete successfully with the iPad and Android, unless they're dirt cheap. 


Update: Apparently HP will be making smartphones after all. 

Not Quite a Browser, Firefox to Launch 'Home' on iPhone

After Apple permitted the launch of the Opera Mini browser on the iPhone, the question was: would Firefox follow? For several technical reasons a number people argued it would not. However Firefox is apparently about to launch an application called "Firefox Home."

Not quite a browser it syncs with Firefox online and provides access to tabs and bookmarks (based on Firefox Weave, now Sync) from the PC. It's a clever workaround Apple's technical restrictions.

According to a Mozilla blog post:

Firefox Home for iPhone is part of a broader Mozilla effort to provide a more personal Web experience with more user control. For devices or platforms where we’re unable to provide the “full” Firefox browser (either technically or due to policy), we aim to provide users with “on the go” instant access to their personal Firefox history, bookmarks and open tabs on their iPhones, giving them another reason to keep loving Firefox on their desktops.

Why is this useful?

  1. Left work in a hurry? You can pick up where you left off with access to the list of tabs you just had open on your desktop.
  2. Need those directions to that restaurant you were just reading about on your desktop? The confirmation code for your flight? Just start typing in the Awesome Bar and those pages will be right at your fingertips.
  3. Does it drive you crazy to have  to enter the full URL on your iPhone that you’ve visited several times from your desktop? You won’t need to anymore with this app.

This PC-->mobile sync feature is highly valuable and a competitive advantage for Firefox, which is now battling Google's Chrome browser for mindshare among the early adopter crowd. Mobile Firefox is important, though perhaps not absolutely critical, to the ongoing health and success of Firefox overall. The Android Platform should permit the launch of a full Firefox browser. Frankly I'm surprised it's not out yet. 

Here's a video that shows a bare bones demo:

 Picture 27

Apple's Market Cap Symbolic of New Mobile Era

A number of blogs and media outlets have trumpeted the fact that Apple surpassed Microsoft's market capitalization earlier today. According to the NY Times' report:

As of Wednesday, Wall Street valued Apple at $222.12 billion and Microsoft at $219.18 billion. The only American company valued higher is Exxon Mobil, with a market capitalization of $278.64 billion. The revenue of the two companies are comparable with Microsoft at $58.4 billion and Apple at $42.9 billion.


But Microsoft is sitting on far more cash, $35.7 billion to Apple’s $23 billion, which makes the value assigned by the market to Apple — essentially a bet on its future prospects — all the more remarkable.


It may not stay that way for long -- especially if investors are disappointed by the announcements at Apple's forthcoming developer conference on June 7. But the relative market capitalizations of the two companies is symbolic of the changing of the guard and of a transition from the fixed Web to wireless devices and the mobile Internet. 

We are in an era of cloud computing and mobile devices, where consumers bounce easily from PCs and laptops to smartphones and now tablet devices. This is the idea behind "Internet2Go."

As Google's Vic Gundotra said last year in discussing some of Google's mobile initiatives: "We're at the beginning of the beginning of a new era in computing."  

New Android 'Pads' Ready to Challenge Apple

A slew of Android-based tablets are ready to challenge Apple's ascendant iPad. The challengers will compete on one or both of two fronts: they will run Flash and most of them will be cheaper than the $499 entry level Apple tablet.

Digital photo frame maker Pandigital announced a 7-inch color screen eReader, with Barnes & Noble in tow. Barnes & Noble also offers its own eReader: Nook. Another company, Taiwan-based Via Technologies said that it will come out with Android tablets in the $100 to $150 price range later this year. 

Beyond these two there are probably a dozen other companies at least that will release Android tablets. Most of them are unlikely to measure up to the iPad; however if they're cheap enough or otherwise "good enough" they will likely succeed. 

More broadly tablets are here to stay. Apple has validated the market. Apple's myriad competitors, who were burned by the iPod and later the iPhone, are much quicker now to copy and release their own clone devices. Apple no longer has the 1-3 year lead time it once did. 

How will tablet sales affect netbooks and mobile phones? That remains to be seen, although there are suggestions that netbook sales are being affected already by the iPad and the impending flood of tablets.

Amazon, one of the two original eReader makers, is now trying to develop its own iPad-like color-screen device. The ultimate tablet market will probably be bifurcated: low-end, inexpensive devices used primarily as eReaders but which also allow Internet access and more full-featured devices that are used for a wide array of functions -- represented by the iPad. 

Palm for Sale: Now It Gets Interesting

Bloomberg reports this morning that Palm is putting itself up for sale and seeking bids "as early as this week":

The company is working with Goldman Sachs Group Inc. and Frank Quattrone’s Qatalyst Partners to find a buyer, said the people, who declined to be identified because a sale hasn’t been announced. Taiwan’s HTC Corp. and China’s Lenovo Group Ltd. have looked at the company and may make offers, said the people. 

The venerable company's market capitalization is less than $1 billion though the company has almost $600 million in cash on hand. So I'm guessing a purchase price would be in the $2 to $4 billion range. Keeping the price down is the fact that the company's real asset is WebOS, which itself isn't worth billions. It's sad in a way that the company that pioneered mobile computing is meeting this fate. Whether the Palm brand survives will depend on the particular buyer and its position in the market: a mobile OEM will kill the brand a PC hardware OEM will likely keep it.

As I mentioned this weekend, it's been quite clear to us from almost the launch of the Pre that the company would ultimately be sold to a larger player. As suggested, the list of potential buyers includes all the major computer hardware OEMs (with Dell and Lenovo as lead candidates), Nokia and Microsoft as possibilities. Microsoft is less likely to bid today given Windows Mobile 7 and Nokia may feel with MeeGo (Intel + Maemo) that it doesn't need a new (third) mobile OS to work with. In my view Nokia would be smart to grab Palm. 

Chief Executive Officer Jon Rubinstein has been quoted several times saying that the market has room for five smartphone players. That may be true on a global basis, but in the US it's really more like three or four (maybe). Right now those three are Apple, RIM and Android.

A company with greater financial muscle could help propel WebOS into that list of successful smartphone contenders. HTC is really interesting to consider here; the company has been seeking to establish its own brand but remains overshadowed to some degree by Android. While it's probably not going to be the ultimate buyer it would shake up the market and might impact Android, as the leading Android OEM. 

However if I had Nokia CEO Olli-Pekka Kallasvuo's ear I'd say: dump Symbian, buy Palm and shift 2011 smartphones to WebOS. 

A Verizon iPhone Would Blunt Android's Rise

Android is a good operating system, getting better all the time. Its success in the US (it now has 9% of the smartphone market) has been built on a few key factors: millions of dollars in promotion by Verizon ("Droid Does"), lots of handsets from multiple OEMs and a few features (mainly multi-tasking) that the iPhone didn't offer.

Meanwhile the iPhone's growth in the US appears to have stalled -- largely because it's only available through AT&T. 

Picture 141

Verizon would clearly welcome the iPhone, but there are questions about whether this will happen before 2011.

It's not clear what agreements, promises and "quid pro quos" exist between Apple and AT&T. It's possible that a CDMA iPhone could still arrive at Verizon later this year. Apple should be aggressively seeking that relationship. Making the iPhone available on Verizon's network in the US would serve two goals:

  • It would make the device available to the largest US carrier and to many who would otherwise buy Android devices because they don't want to switch carriers
  • It would stop Verizon's aggressive anti-iPhone ad campaigns

Some number of Verizon Android buyers -- I'm going to speculate that it's greater than 50% -- would buy the iPhone if it were available on Verizon. In my speculative scenario the market would likely see renewed iPhone adoption and subscriber growth and a corresponding flattening of Android's growth.

But for whatever reason Apple is holding back (at least for the foreseeable future) -- to its detriment and Android's direct benefit.