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).
Millennial Media is out this morning with its latest "Mobile Mix" devices report. The report reflects the distribution of devices and corresponding operating systems on Millennial's network. Over time the percentage of smartphones on Millennial's network has grown dramatically and now stands at 70%. By contrast smartphone penetration in the US is about 44% according to the latest Nielsen figures. The other 30% of devices on the Millennial network are feature phones (14%) and so-called "connected devices" (16%): iPod Touches, Kindles, iPads and other tablets.
Connected devices are the main focus of Millennial's newsletter this time, in particular the Kindle Fire. Millennial confirms the popularity and apparently significant sales of the Kindle Fire, saying that the company is seeing a "monthly run rate of hundreds of millions of impressions":
Since its release in mid-November, the Kindle Fire has made an impact on the connected device market right out of the gate with early signs of strong consumer adoption.
On the Millennial Media platform, impressions from the Kindle Fire have grown at an average daily rate of 19% since its launch several weeks ago. We’re not just seeing millions of impressions, we’re seeing a monthly run rate of hundreds of millions of impressions.
The Kindle Fire’s impression growth on our platform has slightly outpaced that of the iPad when the iPad launched in early 2010. Though the Kindle Fire has been introduced into a more mature tablet market than the market which greeted the original iPad, the integration of Amazon’s robust digital entertainment library and the $199 price point may also have helped drive this early use by consumers. (emphasis added.)
The question raised in the excerpt above is whether "the $199 price point may [ ] have helped drive this early use by consumers." It's pretty clear the answer is "yes." The Amazon brand has certainly been critical, but it's mainly the $199 price that is responsible for the device's huge sales. The iPad created the new market for tablets and Kindle unlocked demand among those who we're more price sensitive and resisted buying "no-name" lower-priced Android tablets.
Among the smartphones on Millennial's network, 50% are Android based handsets. However, save the Nook and Kindle Fire, Google/Android tablets have had almost no success for reasons of price and quality.
Retrevo presented some interesting survey data yesterday showing consumer tablet demand is greatest for the iPad, followed by the Kindle Fire and then the B&N Nook. Retrevo shows that there is a market for Android tablets -- the Kindle Fire has already confirmed that -- provided the price is right and at least $100 less than the iPad.
Putting aside quality for a moment -- Android Honeycomb was a major disappointment from a UX perspective -- price is the major variable that consumers are responding to in Kindle Fire (but with the confidence of the Amazon brand behind it). The problem is that it's almost impossible for most tablet OEMs to get prices low enough to make any margin on them and be price-competitive.
If they match the iPad pricing they're perceived as imitators (e.g., Motorola Xoom, Samsung Galaxy Tab). But mobile carrier subsidies, which bring down the prices of smartphones, have not worked so far stimulate Android tablet demand -- mainly because consumers don't want another two-year carrier contract and the associated data fees. They're buying WiFi tablets instead.
Android-based tablets that have been priced at or below $200 in the past have been made by companies that are unfamiliar to consumers and received poor quality ratings from experts and consumer reviewers alike. Even though Kindle Fire has had its share of problems and disappointed many reviewers, consumers know and like Amazon.
It was also shown that Amazon was taking a loss on the sale of every Kindle Fire, to establish a beachhead in the tablet market and because the company figured it could make up the loss and much more on content sales.
There are rumors that Apple will introduce a 7" tablet next year to compete with the Kindle Fire, just as Amazon will go "up market" and deliver a 10" tablet.
Google, for its part, has suggested that it will respond to lagging Android tablet sales by bringing its own "higest quality" tablet to market next year. We'll see whether this is with an OEM partner or Google-branded (i.e., Chrome or Nexus tablet). Google is clearly another company -- one of the very few -- that could offer the combination of brand-instilled consumer confidence and subsidized pricing.
Nielsen has published data on the Android apps with the greatest "active reach" by age group (US market). Active reach means "percentage of Android owners who used the app within the past 30 days." After the Android Market app itself, Facebook is dominant across age categories.
After Facebook, Google occupies the next four slots with slight differences by segment. But basically it goes: GMail, Google Maps, Google Search and YouTube. In the top 100 free apps in the iTunes store, Facebook comes in at #24, Twitter at #48 and Google at #61.
In September here's what Nielsen said about overall active reach of Android apps:
Below is a chart (UK data from 12/10) that shows how dominant Facebook is in terms of time spent in aggregate minutes:
InsightExpress is out with some Q4 data collected during late October and early November from roughly 1,300 US survey respondents. There's a terrific QR discussion and set of case studies that I won't talk about in this post, but you can get the entire document here.
The survey showed 41% of respondents owned smartphones; Nielsen recently said that its surveys show the number to be 44%. InsightExpress then segmented smartphone users by activity level, which was generally correlated to age and device type.
It found there were four main categories of smartphone users, by increasing level of activity:
The survey also found that 58% of those in the "6 or more" highest engagement category were 18-29 years old, while 33% of those in the "only phone" group were over 50. This makes intuitive sense, although smartphone owners have skewed older and more affluent than other types of digital consumers, at least in the past.
In terms of devices, what InsightExpress found is that those in the "1 or 2 activities a day" category are more likely to be Windows owners (it's not clear if this includes the new Windows Phones). Smartphone owners reporting mid-level activity (3, 4 and 5) tended to own BlackBerry devices.
Android and iPhones were more typically owned by those in the highest engagement category: "6 or more activities" per day.
Tablets are for fun, entertainment, relaxation, while laptops are for work says a new study from Google. The company is releasing some very interesting (and more nuanced) data today on tablet usage, which has come into sharp focus following all the post-holiday analysis.
The data in the Google study are based on self-reported dairies consumers kept over a two-week period (sample size undisclosed). Google found an emerging bifurcation between tablet and PC usage, as well as some other interesting consumer behaviors.The bottom line here is that tablets are used in the home primarily, mostly by one person for leisure activities and often along side other media.
Most consumers in the study "use[d] their tablets for fun, entertainment and relaxation while they use[d] their desktop computer or laptop for work." Just over 90% of usage turned out to be personal (email is an exception perhaps). Google added, "When a consumer gets a tablet, we’ve found that they quickly migrate many of their entertainment activities from laptops and smartphones to this new device."
Other findings from the study:
Tablets are, according to Google, “mobile within the home, with the highest usage taking place on the couch, from the bed and in the kitchen" (see first graphic above).
Google also offers some implied recommendations for publishers: “For many people, websites and apps designed for smartphones just don’t cut it on tablets" In other words have sites and apps optimized for tablets. That's somewhat ironic given how few tablet apps exist for Android -- they're mostly stretched smartphone apps (which will change hopefully soon with Ice Cream Sandwhich).
In a parallel vein, Google said that consumers expect more interactivity from ads on tablets:
Consumers are engaging with useful, relevant and rich ads that take advantage of the touchscreen interface on tablets. Some consumers expect more interactivity from ads on tablets than they do from ads on their desktop computer.
Interestingly, most activities carried out on tablets were limited to tablets, according to Google. Only 18% were conducted across platforms (on PCs or smartphones).
With the iPad topping wishlists and millions of Kindle Fires being sold this holiday season the influence of tablets will only grow. This seems to be further confirmed by Google's finding that tablets were mostly used by one person. This argues for subsequent tablet purchases by other family members so "each can have his/her own."
And in a bad economy those purchases will likely come at the expense of PCs.
Yesterday Nielsen reported data reflecting that the US smartphone market is essentially a duopoly. That's not news exactly but the degree of iOS-Android dominance is. Here are the important data points:
ComScore reported last month that Microsoft's smartphone OS share had continued to fall in the US:
However there are some encouraging signs for Microsoft in the recent "sell out" of Nokia's new Lumia 800 in the UK. This may have somewhat more to do with the Nokia hardware and brand than the Windows Phone OS, though it's clearly a contributor. A Symbian or MeeGo-powered Lumia 800 wouldn't have seen the same level of demand.
Windows Phone is a solid OS; however arguably its biggest obstacle in North America is lack of consumer familiarity. While Android mimics much of the iPhone look and feel and functionality, Windows Phones are really different. And they needed to be. But this creates something of a challenge: different enough to stand about but different enough to also be unfamiliar.
Accordingly Microsoft has set up a mobile demo site to get a simulation of the OS on iPhone and Android handsets themselves. However most consumers are unlikely to find the site and try the demo on their handsets as a practical mater.
According to recent survey data from The NPD Group, among those seeking to buy a smartphone within the next six months, a meaningful percentage of would-be smartphone buyers are considering a Windows Phone:
I continue to believe that apps and pricing are the key to getting new smartphone upgraders interested in Windows Phones. There are roughly 40K apps now in the Windows Marketplace. It will take a very long time for Windows to catch the App Store and Android Market so Microsoft must ensure that the "headline" or "marquee" apps are in place to lure users.
Familiar apps will help "overcome" the unfamiliar Windows Phone interface and user experience.
IBM, eBay, comScore and others have been pouring out data reflecting revenue gains over the weekend and on Monday for e-commerce and specifically mobile. In particular comScore says that Cyber Monday became the biggest online shopping day in US history clearing $1.25 billion. PayPal said that it saw a 552% increase in mobile payment volume vs. last year and a nearly 400% (397%) increase in mobile shopping.
There are a range of other statistics that reinforce the fact that there was a great deal of shopping on mobile devices over the weekend and on Monday.
For example, IBM said the following about mobile shopping and mobile traffic over the weekend:
IBM added on that on Cyber Monday mobile represented 7.7% of all online sales, up from 2.2% last year.
So what does all this mean exactly? As a basic matter, it means that people are using smartphones and tablets to shop for products and some are making purchases on them.
We need to ask several questions, however, before we can take the full measure of what happened:
Answering at least some of these questions will give us a better sense of what's really going on in terms of mobile behavior. Screen size, location, time and the immediacy of user needs are all variables that contribute to a larger consumer-behavior context. For example, a tablet (iPad) user at home is very different from a smartphone user in a store, and so on.
While marketers and publishers can't address all these variables and nuances, they need to strive to better understand them to be effective and understand where mobile sits in the new cross-platform shopping paradigm.
Source: Google-AdMob, March 2011; Nielsen Q1 2011
Google Maps are on both the iPhone and Android smartphones -- but they're increasingly very different products. Today Google added the beginnings of extensive interior mapping to the new version of Google Maps for Android. It provides floor plans for a number of shopping malls and retail stores in the US such as Home Depot, Macy's and IKEA. It also provides maps for quite a few major airports.
Google has said this is just the beginning of an ambitious project to map interior spaces. It complements Google's effort to bring interior business photography online. For the time being the new floor plan maps are only available for mobile devices, and only for Android.
I recently switched from an Android EVO to an iPhone 4S as my primary phone. The screen is smaller and there's no Google Navigation; however overall the experience is superior. I do however miss the Google Navigation, although there are many navigation apps for the iPhone.
Google knows that Maps (including Navigation and related content) is a key differentiator for Android vs. the iPhone. That's why it has never allowed Navigation on the iPhone and why it's in no rush to bring interior maps to the rival platform. Google might incorporate interior floor plans into an HTML5 version of Google Maps, in which case it would appear via the mobile Web. However it would have far less functionality than the version that's rolling out for Android Maps 6.0.
Apple has been building up mapping assets suggestive of a total replacement for Google. But so far we haven't seen a product. If or when Apple's mapping offering appears it will need to be pretty sophisticated to satisfy users and compete with Google Maps.
Tablets are at the top of many holiday wishlists and smartphones aren't very far behind. Both are being aggressively promoted online and in stores this weekend in the US. Heavy price discounting should move a lot of Android tablets (and handsets). Laptop and PC sales generally may suffer as a result.
Below, for example, US wireless carrier Verizon is selling the Motorola Xoom 10" and Samsung 7" tablets for $199 and $149 respectively. Both require commitment to a two-year contract, something most US consumers have thus far shunned.
Online retail giant Amazon is featuring a broad range of discounted tablets, beyond its own Kindle line, with many under $300 and some falling under $100. So while the iPad has the overwhelming share of tablet-based traffic today it's almost certain that will be diminished after the holidays.
Aggressive price discounting has emerged as the key to driving non-iPad tablet sales (first the HP TouchPad and then Kindle Fire). But this is a very dubious blessing for Android tablet OEMs, who may find their margins on tablets reduced to almost nothing. Apple by contrast has not had to lower prices to get attention or maintain share. We'll see what happens after the holidays.
What we're seeing now is the bi-bifurcation of the tablet market. There's a higher-end segment ($500 and above) dominated by the iPad, with almost no competition, and a lower-end segment ($250 and below) dominated by Amazon's Kindle line and Nook. Other OEMs are getting squeezed in the middle, unable to compete on quality at the high end or price at the low end for the most part. There are some "no-name" tablets priced lower than Kindle.
This looks like the smartphone market, with inexpensive Android models driving rapid penetration across carriers and the iPhone appealing to higher-end consumers. There are obviously exceptions and some of the "flagship" Android devices have done well. Yet Android has not yet been able to establish the kind of brand identity and loyalty that the iPhone has enjoyed.
A recent survey by GFK found that:
GFK also found that content and apps were keys to device/operating system loyalty:
As consumers build digital ecosystems and their own world of content on handsets, the study shows that their loyalty to their smartphone brand increases with the number of apps and services they use. The research reveals that the tipping point for loyalty is when a consumer uses seven or more services on their device.
Consumers in the US are the most likely to use seven or more services (61%), followed closely by China (56%) and Brazil (53%). In comparison to this, European countries use fewer services on their smartphone; France and Italy (46%), Germany (45%), Spain (43%) and the UK (42%)
This survey also reveals the uphill battle that Windows Phones now face as they try to "break in," although more than 50% of the market still don't have smartphones -- which remains a substantial opportunity.
I've not had my hands on an Kindle Fire but the reviews are generally fair to negative, except in the context of its price: "a good tablet for the price" is the consensus. And consumers are responding to that price in large numbers. Amazon will sell millions of Kindle Fire tablets to existing Kindle owners and to some would-be iPad buyers seduced by the $199 price and the assurances of the Amazon brand.
Amazon is also intending to release a larger version of the Kindle Fire next year, though it won't be quite as large as the iPad. Putting aside the Nook and hypothetical Windows tablets, Amazon's Kindle Fire is instantly the most successful tablet after the iPad by a huge margin.
Until someone else comes along with a cheaper, better Android tablet Amazon owns the market. So when the dust settles early next year after holiday sales are over it will effectively be a two tablet market: Apple vs. Amazon. I say "Apple vs. Amazon" because Amazon has effectively obscured all Android (and Google) branding. Most people buying a Kindle Fire don't know or care that they're buying an "Android device."
It's possible that Samsung or HTC will build a competitive tablet featuring Android 4.0 ("Ice Cream Sandwich"). But the current crop of Gingerbread and Honeycomb tablets simply "blow" (as they say in the vernacular) by comparison to the iPad. It would also be very challenging for any Android tablet maker to match Amazon's pricing given that the company is effectively taking a loss -- sellig the device for less than it costs to make on the assumption that it will increase product and content sales for Amazon.
There is a scenario where wireless carriers give away some future, stellar Android tablet in exchange for two year contract commitments. However, consumers are basically loathe to enter into a second set of wireless contracts beyond the ones they already have for their smartphones. WiFi tablets are more popular than carrier-subsidized tablets. It's therefore a much longer shot.
Recent consumer surveys from Retrevo, Nielsen and ChangeWave have shown increasing demand for tablets, with the iPad leading the group but with Kindle also in the clear second position.
As tablets replace PCs for some people the question of how other PC OEMs repond to the Apple-Amazon challenge becomes a major, strategic question. As Samsung, Dell and others have already shown, they can't (so far) match Apple on quality or hardware-software integration. And they can't match Amazon on price.
Thus until the forseeable future it's a two tablet race. And right now Amazon owns Android.