Last week Nielsen released data comparing US smartphone users' app adoption and usage vs. last year. Nielsen says that the average US smartphone owner in 2012 has 41 apps on his/her phone vs. 32 apps in 2011:
In just a year, the average number of apps per smartphone has jumped 28 percent, from 32 apps to 41. Not only is the 2012 smartphone owner downloading more apps, they are increasingly spending more time using them vs. using the mobile web — about 10 percent more than last year.
Nielsen also says that smartphone owners spend roughly 39 minutes a day using apps (vs. 37 last year). However this finding is much lower than Flurry's earlier declaration that smartphone owners spent 94 minutes per day in apps. It's not clear why these numbers should be so far apart. It may be that Flurry's data are behavioral (analytics based) and Nielsen's figures are based on self-reported survey data -- in which case the former would be more accurate. However, this is speculation.
Earlier this month comScore released data that asserted "4 in every 5 mobile media minutes" are spent in apps vs. the mobile browser.
According to Nielsen the top five mobile apps across smartphone platforms are Facebook, YouTube, Android Market, Google Search and Gmail. Finally, the measurement firm added that its surveys show users continue to be concerned about mobile privacy and location sharing:
[P]rivacy continues to be a concern with the vast majority (70% in 2011 and 73% in 2012) expressing concern over personal data collection and 55 percent wary of sharing information about their location via smartphone apps.
Ahead of Apple's quarterly earnings call next week, Fortune has rounded up analysts estimates regarding Q1 2012 iPhone sales. The consensus range is 30 to 35 million units:
The average among the Wall Street analysts is 30.5 million . . . To hedge our bets, we've singled out the six analysts who have turned in the most accurate estimates over the past five quarters. Their consensus: nearly 35.1 million units, an increase of 88.5% year over year.
Apple was the insurgent and Nokia the market leader. Now the roles have been reversed.
Nokia will report a loss later this week and expects a similar result in Q2. The bottom has fallen out of Symbian phone sales. However the company said it had sold 2 million Lumia handsets (globally) to date:
In the first quarter 2012, Nokia sold more than 2 million Lumia devices at an average selling price of approximately EUR 220 (reported within the Smart Devices business unit). Furthermore, Nokia has seen sequential growth in Lumia device activations every month since starting sales of Lumia devices in November 2011. Lumia has gained market share with both distribution partners and consumers. The Windows Phone ecosystem is also attracting developers and has expanded rapidly with more than 80,000 applications available.
Dpending on whether you think "it's still very early" or whether the company should have sold more units to date, you either conclude that the device is off to a good start or failing to take off. My view is in-between. I think it will sell moderately well to people interested in an inexpensive handset and not loyal to either Apple or Google.
The phone is apparently selling well on Amazon with overwhelmingly positive reviews, leading one person to question whether the reviews had been faked. I do believe that some of the reviews are fake; though many if not most are probably genuine. Nokia, AT&T and Microsoft have a great deal riding on the success of the handset, creating incentives for people to generate positive reviews.
I have used Windows Phones and found them to be good but not great. The chief problem is a lack of apps. I also don't favor the homescreen UI.
If Lumia is as great as the reviews suggest then sales should pick up considerably in the next quarter. This is the make or break year for both Windows Phone and Nokia as a company.
Beyond its February US smartphone marketshare data, released earlier today, comScore also exposed some additional, interesting data about WiFi usage among Android and iPhone owners in the US and UK. In general iPhone owners are apparently much heavier users of WiFi than Android owners. And UK residents are also generally bigger consumers of WiFi than their US counterparts.
In the US the percentage of Android WiFi users is half as large (32% vs. 71%) as iPhone WiFi users. But why?
As someone who owns both devices I can speculate about why this may be.
More Android handsets operate on 4G networks, whereas the iPhone is limited to slower 3G networks. The move to WiFi alleviates some of the frustration of being on slower networks for iPhone owners. Beyond this, on Sprint and Verizon in the US, iPhone owners can't access voice and data at the same time. Where WiFi is available they can.
In addition, whenever a new WiFi network becomes available iPhone owners get a prominent, even disruptive, notification that takes over the screen. iPhone owners are thus much more likely to be aware of the presence of WiFi than Android owners. The process of connecting to WiFi is also faster and easier on my iPhone than it is on my HTC Android phone.
There are two contradictory memes in the market about Android. One is that the platform is surging toward world domination; the competing narrative is that Android is losing adherents and is faltering.
ComScore boosted the first narrative today with a release (based on survey data) that shows Android crossing the 50% threshold in February. In other words, 50% of US smartphones now are Android handsets.
Interestingly comScore's data show only 44% US smartphone penetration, while Nielsen shows 50%.
In addition, Nielsen and financial analysts from Canaccord Genuity claim that the iPhone is "clawing its way back" among recent purchasers and closing the gap with Android. The Q1 2012 Appcelerator also appears to show mobile app developers losing some interest in Android.
These indicators suggest Android is losing some momentum, although the comScore data directly contradict that assertion. Regardless, it's clear that Android is on its way to replacing Nokia as the leading smartphone platform globally.
The comScore report also confirms the accelerating decline of RIM and shows that US consumers are not buying Windows Phones. We'll see what happens after the massive marketing campaign that's about to be unleashed by AT&T, Nokia and Microsoft.
Yesterday the Wall Street Journal published what amounts to a round-up of recent Google tablet rumors. None of the information was really new.
Previously Eric Schmidt confirmed that Google would be putting out a "highest quality" tablet at some point later this year. A Google-branded tablet (expected to be 7-inches) is intended to compete directly with the Kindle Fire. It's also a direct response to the failure of other Android tablets to date.
Here's are the quasi-factual nuggets extracted from the WSJ piece:
Earlier rumors suggested that the price might be $149. Either at $149 or $199 a decent 7-inch Google tablet is likely to be highly successful.
The Kindle Fire is actually quite a mediocre tablet compared to the iPad. It's well integrated with Amazon content but that's about it. Email and web surfing are quite painful on the device. Google almost certainly would make a more functional tablet for general purposes. It would also have the benefit of Google's voice actions.
Google also has nearly the content ecosystem that Amazon does (i.e., Google Play). It can also afford to subsidize the device because it will make money on search and mobile display advertising.
A $149 Google tablet would undermine Kindle Fire, compelling Amazon to lower its prices. Pricing here is a key variable. Regardless of whether it comes in at $199 or less, a cheap 7-inch Google tablet will be successful. The outlook for a larger tablet and direct iPad competitior would be more murky.
However I would predict that Google will sell millions of these smaller, highly subsidized devices.
Although the Pew Internet Project was the first to report that at least 50% of US mobile phone owners had smartphones, Nielsen waited until today to make the same statement: "Almost half (49.7%) of U.S. mobile subscribers now own smartphones, as of February 2012." This compares with 36% a year ago.
However if smartphone ownership is segmented by age and income, the numbers are much higher than 50% for some categories.
Nielsen says that Android's share of smartphones in February was 48% while Apple's was 32%. However among 90-day recent buyers, the numbers are much closer (48% vs. 43%), reflecting the popularity of the iPhone 4S and its availability from mulitple carriers.
All others, including RIM and Microsoft are under 20% collectively. However the trend is away from these platforms among recent buyers. Microsoft is hoping to reverse that with the expensive and high-profile launch of the Lumia 800 at AT&T next month.
Some US-based survey findings were released yesterday that show iPhone 4S owners use Siri regularly but only in limited ways. The survey of 482 iPhone 4S owners by Parks Associates reflected that people used Siri almost daily in many instances to send email, initiate calls and send texts. Other types of "more advanced" activities were not performed as often (e.g. setting up appointments or playing music).
Here's a very high-level overview of the findings:
Previously a ChangeWave survey in December found that Siri was the most "liked" feature of the new iPhone 4S.
Siri is clearly a work in progress; Apple has a "beta" label on it. Apple's chief mobile rival Google is working on its own "assistant" to compete with Siri. The rumor is that will include APIs for third party developers. So Google may out-Siri Siri if Apple doesn't keep moving.
The question now for Apple is how much to develop Siri into a broader utility and search or content discovery tool.
Apple removed Siri's earlier “transactional” capabilities, present in the app before Apple bought the company. Those earlier capabilities hint at what's possible. In other words, tapping directly into third party APIs to deliver content results and transactional pages without the interim step of a "search result." This was Siri's ambition when Apple bought the company. But will Apple press on?
In an ideal world Siri would develop into a kind of universal interface for finding and downloading apps, generating queries within apps on the handset ("Find me a flight from NY to Boston on Kayak on April 18") and perhaps initiating payments.
Clearly there are flaws in Siri's performance and it's imperfect, but it has enormous potential to be more than it is. I'm hopeful that Apple continues to invest in and develop Siri -- to help it realize its pre-Apple vision.
No more "early days" excuses will be possible if the Nokia (Windows Phone) Lumia 900 fails to deliver. The flagship Windows Phone will go on sale on April 8 from AT&T in the US for an aggressively discounted $99 (with a two-year contract). It will be the least expensive high-end smartphone on the market.
The price will help but it could still flop.
AT&T promises to support the launch with considerable marketing muscle. It's far from clear, however, that consumers will bite. Some no doubt will buy because of the $99 price. Aggressive pricing is key to Nokia's US market strategy.
The Lumia 710 has apparently done relatively well at T-Mobile (at either $49 or free). However, developer interest in Windows Phones remains muted. And without sufficient apps, Windows Phones simply won't be competitive.
Earlier this year I had predicted that Nokia-Windows Phone handsets would see modest but not spectacular uptake in the US market. If this launch is fumbled and fails to generate real momentum for Windows Phones it could be a serious blow to the outlook for the platform -- at least in the US market.
As a promotion Microsoft has mounted a Pepsi-Challenge like contest, inviting iPhone and Android users to take the $1,000 Windows Phone challenge and supposedly discover that Windows Phones are faster. But the PR value of the effort has already been compromised by a blogger named Sahas Katta.
Katta used his Galaxy Nexus and beat the challenge in a Microsoft store but was denied the $1,000 prize by store officials. He blogged about it and that post has now seen widespread attention.
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.
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.
According to new data out this morning from Pew, the US mobile market has reached an important milestone: 50% smartphone owners. In fact Pew's survey data, which the polling firm says is representative of the US population, indicates 53% smartphone ownership.
By comparison, Nielsen says the number is 48% and comScore says it's 42%. Among select segments, however both Pew and Nielsen say smartphone penetration is considerably higher than 50%. According to Pew, for college graduates, 18-35 year olds and $75,000+ earners, smartphone ownership has crossed 60%. Nielsen says for some of those groups it's even higher (75%).
The graphic below is Nielsen's US smartphone ownership chart by age and income segment. For example, if those over age 55 are excluded from the sample, US smartphone penetration rises to roughly 75%. For people between the ages of 25 and 44 and making $100,000 or more per year, Nielsen says 77.5% own smartphones.
The Pew findings are qualified and explained, given potential consumer confusion over what qualifies as a smartphone:
--45% of cell owners say that their phone is a smartphone, up from 33% in May 2011
--49% of cell owners say that their phone operates on a smartphone platform common to the US market, up from 39% in May 2011
Taken together, just over half of cell owners (53%) said yes to one or both of these questions and are classified as smartphone owners.
Tracking smartphone adoption and penetration was/is really a surrogate for other things: mobile Internet access -- people with smartphones behave differently than feature phone owners -- and the mobile ad opportunity. We should now collectively shift our focus to mobile operating system share (which people are obviously tracking) and mobile Internet adoption and frequency.
Last week I moderated an evening workshop about mobile ad exchanges and mobile advertising more broadly. The event was sponsored by DataXu and intended to introduce agencies to the concept and mechanics of mobile ad exchanges. It featured a mini-ecosystem of company representatives:
There were lots of interesting questions and issues discussed. It was a great event.
However I was struck by a comment made by Groupon's Iryna Newman during the session. I'm paraphrasing but she essentially said that she would pay a premium for as many lat-long mobile impressions as she could get her hands on -- but there simply aren't enough of them.
This seems a strange comment given the much-touted location targeting capabilities of mobile apps and ad networks, and the frenzy around LBS and "hyper-local" advertising.
There are still numerous barriers to delivering lat-long information to advertisers. Privacy is one, especially on iOS. But many mobile ad networks are offering location only at the country, state or DMA level, without any precision beyond that.
Some networks and publishers represent they can offer a lat-long but may in fact be "faking" it.
On the mobile Web you're typically only getting IP-based targeting; and that faces the same accuracy challenges in mobile that it does on the PC. There's also a perceived lack of demand from advertisers for "hyper local impressions." However, the Groupon remark contradicts that very clearly.
I was told by someone in a position to know that only about 5% to 10% of mobile ad impressions currently carry a lat-long. If accurate, and I assume it is, it's somewhat shocking given the rhetoric of mobile advertising and its targeting capabilities.
There are various ad forecasts now in the market that argue that a substantial minority or a majority of mobile ads will be geo-targeted in the very near future. The analyst firms that developed these forecasts may be largely unaware of these fundamental "plumbing" and infrastructure challenges (mostly on the display side). In search it's a completely different situation and the same is true for individual apps.
Google, with the advent of Chrome for mobile, is seeking to remedy this for Android-based handsets. It will follow users from PC to mobile and also have much more data about them when they're mobile.
As a general matter, there are display workarounds involving landing pages that can generate more location precision. But the industry currently faces a gap regarding what it says it can do and what it can actually deliver at scale.
Eventually there will be alignment. But I was quite surprised to learn about all these limitations.
Is RIM in a "death spiral" or not? It's being widely reported today that global energy concern/evil-doer Halliburton is dropping BlackBerry in favor of the iPhone on a global basis. While this means 70,000 fewer users it's more significant symbolically: a global corp. is shunning RIM.
As recently as a year ago corporations were still a stronghold for the company, but as more companies adopt "bring your own device" policies RIM is seeing increasing losses in the enterprise.
On the other side, RIM's Developer VP Alec Saunders told a RIM-friendly developer conference in Europe that not only are BlackBerry owners using apps, but that there are 6 million daily app downloads. In his effort at "myth-busting," he added that RIM's app world sees more paid downloads than the Android Market and that developers are making more money than with Android.
Regardless, there's a growing stigma associated with BlackBerry usage -- in much the same way that an AOL email address went from being a symbol of tech savvy to tech laggard status. That stigma now exists in the US for BlackBerry users and to a much lesser degree in Europe where the brand and usage still relatively strong.
Recent IDC Q4 2011 data are not quite as grim as the StatCounter data above, but directionally consistent.
New company CEO Thorsten Heins said that not much needs to be changed strategically at RIM. He's thus declined to do what Stephen Elop did upon taking over at Nokia: assert radical action was necessary to save the company. As a consequence, unless RIM's next handset is a blockbuster, we're going to see more erosion and a continuing downward spiral.
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.
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.
I've now had my Kindle Fire for about a month. It's the most successful Android tablet on the market (probably to the tune of about 4 million in sales) but much less of an Android tablet than others. As most people know, Amazon operates its own Appstore and users don't have access (w/o an awkward hack) to the Android Market proper.
My grade for device is "B." It's awkward as a web-browsing device. It's really awkward for email; the keyboard is sloppy and there aren't the customary Android alternatives (Swype, FlexT9, Swiftkey). It's good for reading eBooks and watching movies. In general, apps are what redeem its shortcomings as a web-browsing device.
The problem, however, is that not all Android apps are available. Surprise of surprises: Netflix, which competes with Amazon's own video service, is available. But the main New York Times app is not -- presumably because Amazon is selling subscriptions to the Times. I would expect that more Android apps will eventually become available, however.
The following chart was produced by SAI from survey data collected by RBC Capital Markets. It reflects that most people use Kindle Fire as they used the original Kindle: for reading eBooks.
Kindle Fire is an aggressive example of something that was always hypothetically always envisioned for Android: extreme customization by device makers and carriers. To that end, BusinessWeek has an article this morning about Kindle Fire and Chinese versions of Android on mobile handsets, which leave out many of the otherwise pre-installed Google apps:
Amazon.com Inc. and Chinese Internet giants Baidu Inc. and Tencent Holdings Ltd. are using Android as a building block for their devices, skipping preloaded applications such as Gmail, Google Maps and YouTube that generate ad revenue for Google, as well as its app store. Amazon’s Kindle Fire tablet, which is gaining ground on Apple Inc.’s iPad, comes with none of those apps.
The article makes the case that if more OEMs follow suit Google will lose revenue, citing a recent Cowen & Company report which estimates that Google makes roughly $7 per Android device sold. However that's not entirely true.
Most of Google's mobile ad revenue is from search -- although mobile display is growing -- and most of Google's query volume is via the browser. It's really only if there's a different "default" search engine on devices that Google will truly suffer. Accordingly, browser-based search is where Google is most vulnerable. However, third party apps that feature ads from Google/AdMob will also continue to money for the company regardless of whether Google-branded apps are on the phone.
Nonetheless, it's a provocative article and interesting to contemplate how many more hardware companies may emulate Amazon. For example, RIM or Nokia could take Android and build UIs that are very customized on top of the software. That's probably something RIM should start doing -- immediately. It would be potentially unique and provide access to the trove of apps that Android Market offers. RIM could even build its own Android appstore like Amazon. Without apps BlackBerry will fail.
Google, for its part, doesn't want to lose control of the Android ecosystem. It has responded to Kindle Fire's challenge by promising an aggressively priced, "highest quality" 7-inch tablet later this year.
Apple reports quarterly earnings today after the US market's close. Speculation about device sales and revenues is feverish. I'm less interested in whether Apple beats expectations than I am in getting a concrete sense of how many iPhones and iPads are in the market. Since earnings are a cat and mouse game in which the financial analysts try to predict sales and revenues and the company tries to surprise it's hard to say what will happen.
Revenues are expected to exceed $40 billion; consensus estimates are about $39 billion. Roughly 30 million iPhones have been sold according to the various estimates. One question mark is iPads. Were sales hurt by the cheaper Kindle Fire? The expectation is somewhere between 13 and 14+ million were sold last quarter. We'll know later today.
Meanwhile over in Windows Phone-land, early sales estimates for the Nokia Lumia line in Europe appear to be promising, with analysts estimating that the company sold more than 1 million phones since launch. Bloomberg averaged the numbers and determined the consensus is that 1.3 million units "shipped":
The Lumia handsets, which went on sale in Europe in November, probably sold 1.3 million units globally to operators and retailers by the end of last year, according to the average estimate of 22 analysts compiled by Bloomberg. The projections range from 800,000 to 2 million and only one analyst predicted sales of fewer than 1 million handsets.
Separately, another source shows that Nokia handsets already dominate Windows Phones that have actually been sold to consumers (vs. shipped). According to data compiled by WMPowerUser, Nokia-made Windows Phones now constitute nearly 50% of the active market.
Finally, as I had predicted early this month, RIM's co-CEOs were ousted or sacrificed to appease investors, who have punished the stock over the past year because of the company's performance and perceived complacency in the face of rapidly declining share. Remarkably, RIM's new CEO Thorsten Heins, a company insider, said that no new strategy is required to right the ship:
Mr. Heins has worked at RIM since 2007, most recently as the senior of two chief operating officers. On a conference call Monday, he immediately emphasized that he will mostly follow the path set by his predecessors, co-Chairmen and co-Chief Executives Jim Balsillie and Mike Lazaridis.
He told analysts not to expect "seismic changes" and ruled out splitting up the company. Mr. Heins (pronounced like Heinz ketchup) said he was focused on getting out the company's newest line of phones, to be run off its latest operating system, BlackBerry 10.
RIM and Nokia may turn out to be case studies with opposite outcomes. Nokia, having taken radical action, may turn around and regain momentum (though it's not clear yet). RIM, if Heins merely stays on course, may crash and burn.
RIM's OS and devices aren't competitive with the iPhone and Android at this point. It can no longer rely on the enterprise market and its product line is confused. Developers are also not writing for RIM. It thus needs to embrace the Android ecosystem in one form or another -- probably sooner rather than later.
Indeed, the company doesn't have that much longer to take some dramatic action. But by picking a loyal and apparently complacent insider in Heins RIM may have all but precluded that from happening.
PC sales are slowly eroding -- and mobile seems to blame. One could argue that the economy has taken a toll on PC sales, and that would probably be accurate. But mobile devices (smartphones, tablets) are gaining mindshare and sales at the expense of PCs.
Hardware watchers Gartner and IDC both said that Q4 PC sales fell -- somewhere around 1%. Macroeconomic conditions and component shortages are factors. But the big news is tablets and smartphones. Tablets (iPad, Kindle Fire, Nook) were among the most widely requested and given holiday gifts, to the tunes of millions in sales.
EMarketer rounded up third party data and estimates on iPad and Kindle Fire sales. Hardware tear-down firm iSuppli estimated that Amazon sold 3.9 million Kindle Fire tablets in Q4. Barclay's Capital estimated the number to be 4.5 million. The reality is probably in-between.
Meanwhile iSuppli argues that Apple "shipped" 18.6 million iPads in Q4. Shipped is a bogus metric, but with Apple products sales and shipments are closer than with other OEMs. The iSuppli estimate is probably high, but we'll find out when Apple releases its quarterly revenues on January 24.
Overall, iSuppli argues that global tablet shipments were 65 million units in 2011. Not only are tablets "sexier" but they're typically cheaper than PCs, notwithstanding price erosion in the Wintel PC market. Take a look at charts from Horace Dediu (the first one above via GigaOM), showing the decline of traditional PCs over the past couple of years.
Separately the Yankee Group conducted a US consumer survey (n=15,000), released earlier this year, which features some striking findings:
What that means as a practical matter is that only a small minority are considering another platform. While survey data shouldn't be taken as definitive, they indicate how people are thinking and, by implication, the challenge Microsoft and Nokia's joint marketing efforts face. Windows Phones are nice but struggling to grab mainstream consumer attention and interest.
In terms of tablets, Windows 8-powered tablets won't be out until later this year. Rumor has it that they could be more expensive than some Windows 8 laptops (to be determined). Windows Tablets face the same "outsider" problem that Microsoft confronts in the smartphone market. By offering laptop-tablet hybrids (like the image above), Microsoft might be able to justify a higher price and grab consumer interest.
However the totality of evidence suggests Microsoft is under intensifying pressure with Windows Phones and Windows 8. Indeed, can Windows 8 "bring sexy back" to the PC market?
It seems amazing to think that just a couple of years ago Samsung didn't really have a smartphone lineup. Now the South Korean company has become the dominant maker of Android handsets globally. Chief rivals HTC and Motorola (soon to be a part of Google) have been overshadowed by the larger company.
Hurt by competition (read: Samsung) last week HTC posted its first quarterly loss in the contemporary smartphone era. Motorola also said its quarterly results would be weaker than previously estimated, negatively impacted by smartphone competition (again Samsung).
Samsung has done a ton of marketing in the US and around the world for its Galaxy line-up of smartphones. Some of that appears to be paying off. According to a December ChangeWave consumer survey (US, n=4,073) more consumers are saying they're going to buy a Samsung handset than rivals (other than the iPhone).
So if it's the iPhone vs. Android (increasingly Samsung), who will occupy the "third ecosystem" slot? Obviously it will either be RIM or Nokia-Microsoft. RIM is not yet in free-fall but nearly so. Meanwhile Microsoft has received a great deal of positive coverage in advance of the introduction of the Nokia Lumia 900. Many financial analysts are now bullish on Nokia and Microsoft's mobile prospects.
This weekend the New York Times had an extensive and favorable piece on the development of the Window Phone OS:
Windows Phone, which began appearing in devices last fall, certainly stands out visually. It has bold, on-screen typography and a mosaic of animated tiles on the home screen — a stark departure from the neat grid of icons made popular by the iPhone. While most phones force users to open stand-alone apps to get into social networks, Facebook and Twitter are wired into Windows Phone. The tiles spring to life as friends or family post fresh pictures, text messages and status updates.
The design of Windows Phones is both a strength and a weakness -- because they're different. While it's very beautiful in some "areas," parts of the Windows Phone UI are over-designed. But in general it's an impressive achievement for Microsoft.
I saw and held the Lumia 900 last week; it's a very nice phone. Yet I don't believe that it will lure people at the "high end."
Those buying the iPhone 4S or the Galaxy Nexus are unlikely to switch allegiances. Nokisoft's best shot, in my view, is to capture those upgrading from feature phones and get them used to the unfamiliar Windows Phone UI. But that initial change from the iPhone look and feel (or Android which imitates it) will be somewhat jarring for many people.
The lack of apps is also a competitive disadvantage for Windows Phones. More apps will be developed over time, especially if consumers start buying Windows Phones. Another curiosity of Windows Phones: the IE browser doesn't seem to enable sites to detect a mobile device and show their mobile version. This is good in some cases but mostly a weakness.
This year will be "make or break" for both Windows Phones and RIM, though more so for RIM. Both will battle for enterprise and consumer hearts and minds and for this third ecosystem slot. My guess is that Windows Phones (and Nokia) will probably win.
Next year will be decisive for the "tier two" smartphone players: RIM, Nokia and Windows Phone. Specifically, if Windows and Nokia haven't gained meaningful traction a year from now their mutual strategy will largely be deemed a failure. And RIM has become a long, slow train wreck without much turnaround potential.
During the most recent quarter the company reported that it sold many millions of handsets outside the US market: "RIM shipped approximately 14.1 million BlackBerry smartphones and approximately 150,000 BlackBerry PlayBook tablets." RIM also claims 75 million users around the world.
The company slightly beat lowered analyst estimates but further lowered guidance for Q4 (a quarter when Android and iPhones are doing very well). It also said that its BlackBerry (OS) 10 smartphones won't be out until “the latter part" of next year (read early Q4). Investors promptly sold RIM, causing the stock to decline to its lowest point since 2004.
But RIM's shares have bounced back somewhat on talk that there were several suitors circling the company: Amazon, Microsoft and/or Nokia. However Amazon publicly disavowed the rumor.
It would be problematic for Nokia to buy RIM for several reasons. While the Finnish company would gain a stronger brand in North America and carrier relationships the value of RIM's brand is rapidly declining and its other assets are of limited value to Nokia. Similarly Microsoft would inherent a troubled company and put itself in a competitive position vis-a-vis handset partners including Nokia.
But would Microsoft be all but compelled to buy RIM if its current relationship with Nokia doesn't bear fruit?
Early reports from Europe in October suggested that the new Windows powered Lumia phones were selling quite well in the UK and Germany. However a more recent UK report argues that the Lumia 800 is not selling and represents only 0.17% of November handset sales in the UK.
The truth is probably somewhere in the middle: sales are mixed; not as successful as Nokia and Microsoft would have hoped but better than the dire scenario presented above. Lumia phones are coming to the US early next year. However it will take a herculean effort to get consumers to turn away from Android and iPhones (though some survey evidence suggests many US consumers are open to Windows Phones).
My prediction is that a year from now Nokia and Microsoft will have improved their respective positions somewhat but not dramatically. Nokia will be compelled to consider building a few Android handsets and Microsoft might have to look again at RIM as a way to gain market share. For its part, RIM will have to look at developing Android handsets itself (and perhaps experimenting with WebOS) to supplement BlackBerry 10.
Regardless, the outlook for RIM is fairly bleak. In the end the company will probably have to sell itself. And at the moment the outlook for Nokia and Microsoft's Lumia phones is not terribly much brighter (at least from what we can tell at this point).