Operating Systems

Smartphone Market: Apple vs. Samsung (Android) vs. Nokisoft?

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). 

ChangeWave smartphone buying plan survey

Source: ChangeWave

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. 

2012: End of the Mayan Calendar -- and Maybe RIM Too

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.

Blackberry phones 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 Seeing 'Hundreds of Millions' of Kindle Fire Ad Impressions

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.

http://www.retrevo.com/content/files/images/misc/pulse_11Dec15_chart2.jpg

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. 

http://www.retrevo.com/content/files/images/misc/pulse_11July13_1.jpg

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.  

Facebook Has Greatest 'Active Reach' of Android Apps

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. 

Screen shot 2011-12-12 at 10.03.54 AM

In September here's what Nielsen said about overall active reach of Android apps: 

Screen shot 2011-09-13 at 5.40.59 AM

Below is a chart (UK data from 12/10) that shows how dominant Facebook is in terms of time spent in aggregate minutes: 

Screen shot 2011-12-12 at 10.13.17 AM 

All Smartphone Owners Aren't Created Equal

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.

Screen shot 2011-12-01 at 11.51.21 AM

It found there were four main categories of smartphone users, by increasing level of activity:

  • Those that only use mobile for phone calls on a daily basis (Only Phone group)
  • Those that do 1 or 2 activities in addition to phone calls on a daily basis (1 or 2 Activities group)
  • Those that do 3, 4, or 5 activities in addition to phone calls on a daily basis (3-5 Activities group)
  • Those that do 6 or more activities in addition to phone calls on a daily basis (6 or More Activities group)

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.

Screen shot 2011-12-01 at 11.51.34 AM

Study: Tablets Are for "Couch, Bed and Kitchen"

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."

Screen shot 2011-11-30 at 12.02.44 PM

Other findings from the study:

  • The most frequent tablet activities are: email, games and social networking 
  • Usage was more compressed during the week and longer on the weekend (e.g., watching video)
  • 42% of tablet activities happened during other tasks or along side other media (i.e. watching TV). Email, games, social networking and search are the tablet activities most frequently done in front of TV 
  • Usage occurs mostly in the home, though some people use them on the commute and on vacation or work trips, “where they use them as a laptop replacement"
  • Google also discovered most tablets were used by single individuals; a smaller percentage were shared with family members

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.

Screen shot 2011-11-30 at 12.02.34 PM

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. 

The iOS-Android Duopoly and Overcoming Windows Phobia

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:

  • 44% of mobile subscribers in the US have smartphones (more than 50% for those under 45)
  • 71% of US smartphone owners have either Android devices or iPhones
  • 83% of app downloaders are using an iPhone or Android handset

smartphone-app-marketshare

ComScore reported last month that Microsoft's smartphone OS share had continued to fall in the US: 

Screen shot 2011-11-30 at 8.43.15 AM
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:

  • 44% "of smartphone owners, and those who intend to buy one, are considering purchasing a Windows Phone 7"
  • 45% of surveyed consumers are "still not aware of Windows Phone 7" 
  • Among those not interested in Windows Phones, 21% said the were "too invested" in another OS (iPhone, Android)

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.

Cutting through the Cyber-Monday Hype

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.  

Screen shot 2011-11-29 at 3.14.22 PM

For example, IBM said the following about mobile shopping and mobile traffic over the weekend:

  • Mobile traffic increased to 14.3 percent  . . . compared to 5.6 percent in 2010
  • Sales on mobile devices surged to 9.8 percent from 3.2 percent year over year
  • Mobile shopping was led by Apple (iPhone + iPad) . . . Android came in third at 4.1 percent. Collectively iPhone and iPad accounted for 10.2 percent of all online retail traffic on Black Friday.
  • Shoppers using the iPad led to more retail purchases more often per visit than other mobile devices with conversion rates reaching 4.6 percent compared to 2.8 percent for overall mobile devices

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:

  • Were mobile devices being used mostly in the home?
  • How much of the activity happened "on the go" and in stores? 
  • What percentage of people started with a mobile device and finished on a PC (and vice versa)? 
  • How many mobile purchases were made through mobile apps vs. the mobile web? 
  • What percentage of "mobile" purchases happened on the iPad vs. smartphones?
  • What percentage of mobile buying happened where the user had a stored credit card on file with the e-commerce site/app?   

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.

Screen shot 2011-11-29 at 5.13.44 PM
Source: Google-AdMob, March 2011; Nielsen Q1 2011

Google Maps Is Android's Chief Competitive Weapon Against the iPhone

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. 

Low-Priced Android Tablets Abound, iPhone Loyalty Exceeds

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.

Screen shot 2011-11-25 at 9.22.21 AM

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. 

http://royal.pingdom.com/wp-content/uploads/2011/11/ipad-web-browsing.0011.jpg

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:

  • 84% of iPhone owners would remain with Apple next time
  • 60% of Android owners said they would stay with Android
  • 48% said they would remain with RIM

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. 

Amazon Might Own Android Tablet Market

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.

Screen shot 2011-11-21 at 10.41.56 AM

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. 

The Decline of RIM and 'Consumerization' of IT

One of the big trends of the past few years has been the "consumerization of enterprise IT." This manifests in various ways, including the emergence of enterprise "social" tools that mimic consumer sites and user experiences (e.g., Salesforce's Chatter). Another way in which enterprise IT is changing is that workers now have more choice about the devices that they can use on the network.

RIM's stronghold and bulwark against irrelevance had been the corporate IT department, but that's no longer the case. The iPhone is now the top smartphone in the enterprise according to a new survey, the iPass 2011 Mobile Enterprise Report (based on 2,300 responses from workers at 1,100 enterprises globally).

Below are a selection of data presented in the survey report:

  • 95 percent of mobile workers now have smartphones, up from 85 percent in 2010
  • 91 percent use their smartphones for work, compared to 69 percent in 2010
  • Tablet ownership has grown to 44 percent of mobile employees, up from 33 percent in Q2 of 2011
  • The iPhone is now the top smartphone in the enterprise with 45 percent market share among mobile workers, up from 31 percent in 2010.
  • Only 28 percent of mobile workers are given no choice when it comes to smartphone selection; the majority of enterprises offer their employees some choice (62 percent) – 44 percent can select from a list of smartphones, and an additional 19 percent can use any device they choose to access corporate resources.

Current enterprise smartphone share:

 Screen shot 2011-11-17 at 9.21.01 AM

Intention to buy smartphones in 2012:

 Screen shot 2011-11-17 at 9.07.17 AM

Current tablet share in the enterprise: 

 Screen shot 2011-11-17 at 9.07.37 AM

Another interesting finding is that a growing number of workers (especially younger workers) leave their laptops at the office more frequently. Roughly 42% of workers said they left their business laptops at the office at least several days a week because they have alternative devices at home. 

Question: Do you leave your business laptop at work on weekends/evenings and just use your smartphone or tablet?

Screen shot 2011-11-17 at 9.08.01 AM
In tandem with the above finding the survey discovered that roughly 25% of respondents said they were using their laptops less today than a year ago. 

Report: Local-Mobile Ads Dramatically Outperform Online

Local mobile ad network xAd has released its first quarterly report on local mobile user behavior and ads. I've done a general write-up at Search Engine Land. The company collected the data from its 10 billion monthly ad impressions and 90 million monthly local-search requests. The data in the report were captured between July and September.

A couple of highlights: 

  • 75% of smartphone owners conduct local searches (other data reflect up to 95%) 
  • 62% of local-mobile users conduct at least two local searches per month, while 32% of users do at least five local lookups per month

 The top local search categories according to xAd data:

  1. Restaurants
  2. Gas stations
  3. Shopping
  4. Auto repair/dealers/rentals
  5. Fast food
  6. Cafes/coffee shops
  7. Travel & lodging
  8. Health & medical
  9. Bars & clubs
  10. Finance & legal

Most interesting to me was the discussion of ad performance and "secondary actions." CTRs on ads in apps were 8% vs. 5% for ads appearing in the browser.

 

When you consider that average online display ad CTRs are 0.09% you see that this performance is dramatically better. Indeed, InsightExpress and Dynamic Logic have both documented how mobile display outperforms online across all metrics. 

In addition to browser vs. apps differences, xAd documents ad performance variations between iOS and Android. While CTR rates on the iPhone and Android are roughly comparable, "secondary actions" are greater on iOS: calls, map/directions lookups and review drill downs. Interestingly calls are happen more frequently in a browser context. But they're also the most popular "post-search" secondary action (62%) across the board, followed by maps and directions lookups (35%).

Previously xAd reported that its CPMs average $30. Other specialized US-based local-mobile ad networks include CityGrid, AT&Ti, Verve Wireless, Navteq, JiWire, LSN Mobile, Chitika, Marchex and Where.com. 

Android Dominates Q3, iPhone Top Device

According to Gartner, phones running the Android OS "sold" (read: shipped) at dramatically higher rates in Q3 than competing platforms. As the chart below reflects, Android's share of Q3 smartphone shipments more than doubled vs. last year. Nearly all others declined.

The iPhone was almost at parity with Symbian, which declined by more than 50% vs. 2010. RIM and Microsoft also declined. 

 Screen shot 2011-11-15 at 5.53.38 AM

Looking at overall mobile operating system share on a global basis, StatCounter shows Symbian still leading. Apple's iOS and Android are essentially tied about 10 points behind Symbian.  

Screen shot 2011-11-15 at 5.59.53 AM

In the US, NPD Group said that in Q3 Apple had the top-two selling smartphones: 

  1. iPhone 4
  2. iPhone 3GS (now free)
  3. HTC EVO 4G
  4. Motorola Droid 3
  5. Samsung Intensity II

Report: WP7 Passes RIM, Kindle Scorches Galaxy Tab re Developer Interest

Appcelerator released its Q4 developer survey this morning (n=2,160 developers). It does the survey quarterly in conjunction with IDC.

There are a number of findings but the big ones are: Kindle Fire has rocketed past other tablets in terms of developer interest and Windows Phones similarly moved past RIM:

  • Kindle Fire moved ahead of Samsung Galaxy Tab as the most popular Android tablet in North America and has become number two globally
  • Microsoft's Windows Phone 7 passed RIM to become the third largest OS after iOS and Android

Despite their enthusiasm for Kindle Fire, developers expressed concern about increasing fragmentation in the Android universe.

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It's important to keep in mind that these findings are based on perception and not an indication of actual market share; however they're correlated with consumer adoption in many cases. Developers are excited about the Kindle Fire's low price point and perceived demand. It also appears that developers have largely given up on RIM. However if new RIM devices showed consumer traction we'd see these figures change again. Consumer adoption and audience size are the key drivers of developer interest followed by capacity to monetize their apps.

Another finding of the report is that there's relatively little developer interest in "connected TV" (e.g., Google, Apple TV) -- at least until consumers show interest at scale. 

Why Kindle Fire Will Do Well: Price, Brand

By almost all measures Android tablets have been a flop so far. The most "viable" of the Android tablet family, Samsung's Galaxy Tab line, offers a weak software experience and poor hardware-software integration. But the Kindle Fire -- and to a lesser degree the Nook line -- may vindicate Android in tablet form.

However the success of those devices has little or nothing to do with Android. This is especially true with Kindle Fire. (Amazon has probably compensated for the software shortcomings of Android on tablets with its own layer on top of the OS.)

The apparent popularity of the Amazon device is about two things: its $199 price tag (the major driver of sales) and the Amazon brand. The latter gives consumers confidence that it will likely perform as promised and builds on Amazon's successful track record with Kindle.

According to Retrevo survey data, there's a sizable group who might substitute the Kindle Fire for the iPad during the holidays. 

 

While there have been other cheap Android tablets in the past, the difference here is that the Amazon brand and promise of content through Amazon Prime gives people confidence to buy it sight unseen. Amazon Prime would otherwise cost $79 per year. Indeed, with that factored in as "opportunity cost," Amazon is going be losing money on Kindle Fire. We should thus see the device more broadly as a marketing vehicle and loyalty play for Amazon. It will help Amazon sell more stuff in general. 

 

The survey also found that a meaningful number of people may add a second tablet to their growing inventory of gadgets. Here the 7" form factor and perceived benefits of having the Amazon device may cause people to buy a Kindle Fire if they already have an iPad. 

The anticipated success of the Kindle Fire tablet could light a fire under the 7" tablet segment more broadly but not unless those devices are priced competitively. Those 7" tablets (e.g., from HTC, Samsung) that cost more than $250 will probably sit on the shelves. And those 10" Android tablets that cost $499 or more will be seen largely as copies of the iPad and sit on shelves as well. 

The strength of the Amazon brand, the success of earlier Kindle devices and the aggressive pricing (including Amazon Prime) will create success where other Android tablets have failed. The Android "brand" may even be something of a liability in the tablet segment right now. And most Kindle Fire prospects and early buyers probably have limited or no awareness of the device's operating system at all. 

The 'Speech Interface' Now a Must-Have on Phones (and Tablets)

Earlier my colleague Dan Miller wrote up the news that Amazon had acquired speech provider Yap yesterday. So begins a ridiculous "Siri Killer" meme.

What's more interesting however is how Siri, less than a quarter out in its current form, is already reshaping the calculus of what features and capabilities mobile devices must have or offer their users. Call it the "speech interface."

Dan Miller, who is probably the foremost analyst-authority on voice and speech services, has much deeper knowledge of speech recognition and its related manifestations than I. However in my more limited experience I can tell you that Siri offers the best speech user-experience I've encountered to date. (Nuance provides the voice recognition for Siri.) 

As a long-time Android user I've had good experiences with Google's voice search and voice actions and I've had very frustrating ones. Siri (+Nuance) is better. And the way that Siri is integrated into the iPhone 4S (with more to come) is much more compelling than a voice overlay. Siri's "personality" matters as well. It's not only driving engagement and usage it has become a major differentiator and sales-driver for what was otherwise a less-than-compelling product release. 

Sure Android has "voice actions." But Apple has "Siri." You get the difference. 

Google and Microsoft already have considerable speech assets but both will need to "up their game" to compete more effectively. Accordingly we can expect more acquisitions in the voice segment as these companies (and others) create their own versions of the speech interface. This will eventually extend to TVs, cars and other "appliances."

I suspect "virtual assistant" Vlingo will be acquired, because it provides the "assistant" capability as well as speech recognition. (However litigation between Vlingo and Nuance operates as something of a cloud over any potential takeover.)

In a presentation I gave on a range of topics yesterday at the Local Social Summit in London I said Siri is to voice commands and “voice search” what the iPhone was to smartphones in 2007: a breakthrough experience that forces competitors to respond. I guess Amazon just did. 

Amazon, which doesn't have a smartphone, will clearly be integrating voice control and commands into Kindle Fire. Siri isn't yet available for the iPad but that's probably one of the new features that will be bundled into iPad 3. 

Does the Market Want Another Open OS to Compete with Android?

I would argue that Android owes its success directly to the iPhone. Putting aside the claims that Android "stole" the iPhone's look and feel, carriers and hardware OEMs had no response to the iPhone in 2007 other than Android. Hence the carrier and OEM embrace of the Google OS. It was something of a marriage of convenience.

Despite the incredible success of Android, handset makers' relationships with the platform might be described as "ambivalent." They want to avoid becoming merely "commodity producers" of Android devices and reduced to the fate of their desktop brethren, which essentially became vendors of nearly indistinguishable "gray boxes" running PC Windows. Accordingly HTC, Samsung and Motorola have tried to develop, unsuccessfully I would argue, proprietary software on top of Android to differentiate from one another. 

While the new Windows Phone OS represents an alternative to Android, none of the hardware makers other than Nokia has enthusiastically embraced it. If it sells well for Nokia we might see that change. But there are those who also argue that Microsoft risks alienating other hardware OEMs with its Nokia favoritism. 

All this makes me wonder if the market wants yet another open-source OS as an alternative to Android. Reportedly Mozilla, maker of the Firefox browser, is working on a mobile operating system "based on the Web, as opposed to what the project’s wiki calls 'proprietary, single-vendor stacks.'” But this doesn't appear to be viable in the near term as an Android alternative.

What about WebOS? HP was going to kill it. But since the abrupt replacement of CEO Leo Apotheker with Meg Whitman many of his decisions are being reversed. The fate of WebOS is unclear right now and may be decided this year or early next. But what about making WebOS an open-source Android competitor? 

I'm not a developer or engineer but WebOS was and is positively regarded by the developer community; it has just been mismanaged and poorly marketed. But my view is that if HP were to turn it into an open-source mobile operating system there would be takers and it could gain new life. My suspicion is that makers would be interested in a high-quality alternative to Android to further diversify their handset lineups and give themselves some additional leverage vis-a-vis Google. 

WebOS's app ecosystem is paltry by comparison to iOS and Androids but that could be rectified over time. 

I think an open-source WebOS is intriguing; however HP doesn't have a direct way to benefit from it as Google benefits from Android with advertising. Whatever it decides about the fate of WebOS I hope HP doesn't kill it outright.

iPhone Anticipation Builds to Fever Pitch

At 1pm Eastern time we'll know how many of the iPhone 5 rumors are true. We'll learn whether Sprint has "bet the company" on the new iPhone and whether it's getting some form of exclusivity. (Extended exclusivity would be foolish for Apple.)

We'll know whether there are two devices or one and whether one of those is a different (larger) form factor than the iPhone 4. A larger screen is very much in demand, especially with Android devices now routinely exceeding 4 inches. 

We'll also hear more about the anticipated "Assistant," built on the earlier Siri acquisition. Some people have called it a "game changer" but that very much remains to be seen. Siri itself was novel and sometimes useful but not a "game changer."

We'll also discover whether the new iPhone (or iPhones plural) run on both CDMA and GSM networks. The new device(s) won't be 4G enabled, however, according to the WSJ. This is certainly a disappointment to many. 

Surveys have shown "unprecedented pent-up demand" for the next iPhone, leading some financial analysts to anticipate or predict that sales records to be "shattered." It will all be contingent on what Apple actually delivers. 

Although many others don't agree, I believe that the iPhone(s) being introduced today is/are critical for Apple, which now has a less-than-annual refresh cycle. If there's only a "4S" device or one that doesn't reflect obvious improvements it will fail to generate sales that live up to the outrageous expectations that have grown up around the launch. 

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Android is now dominant in terms of sales and market share, though Net Applications data reflect that iOS dominates all other mobile operating systems combined in terms of Internet access. 

Regardless Apple's early multi-year commitment to AT&T exclusivity in the US was a strategic mistake, allowing Android OEMs to establish momentum with "good enough" copies of the iPhone. However now, larger Android screens, 4G capabilities and other features make Android handsets preferable for many people. And for this reason and others, a Sprint-exclusive iPhone 5 won't cause many (or any) to change carriers. 

Android phones are now strong enough that Apple's brand strength is not enough if the next iPhone doesn't "wow." The pressure is on the company and new CEO Tim Cook. There are only a couple more hours to wait. 

Microsoft Could Make $1B per Year off Android

Earlier this morning Microsoft announced it had negotiated a far-reaching patent licensing deal with Samsung. Here's what the company's General Counsel Brad Smith said in a related blog post about the deal: 

The Samsung license agreement marks the seventh agreement Microsoft has signed in the past three months with hardware manufacturers that use Android as an operating system for their smartphones and tablets. The previous six were with Acer, General Dynamics Itronix, Onkyo, Velocity Micro, ViewSonic and Wistron.

Together with the license agreement signed last year with HTC, today’s agreement with Samsung means that the top two Android handset manufacturers in the United States have now acquired licenses to Microsoft’s patent portfolio. These two companies together accounted for more than half of all Android phones sold in the U.S. over the past year. That leaves Motorola Mobility, with which Microsoft is currently in litigation, as the only major Android smartphone manufacturer in the U.S. without a license.

So that makes Samsung, HTC, Acer, General Dynamics Itronix, Onkyo, Velocity Micro, ViewSonic and Wistron. Next up Motorola Mobility?

Ironically Motorola is in part being acquired by Google ($12.5 billion) for its patents. However, if Microsoft succeeds in its litigation against the company it will have extracted fees from all the major Android OEMs. And it would be getting fees directly from Google (as the owner of Motorola). The rumor is that Redmond is trying to charge between $5 and $12.50 per Android handset.

Let's do some simple math. If there are 550K handsets activated daily and Microsoft secures fees from effectively all the major OEMs, the company could earn $1 billion or more annually from Android licenses. The more Android's market share increases, the more money Microsoft gains from Android OEMs.

This emerges as a major "insurance policy" if Microsoft's Windows Phones fail to take off with the Nokia partnership. The company is rolling out the long-awaited "Mango" update now, which offers a broad range of feature upgrades. However it's not clear that Mango will substantially boost demand in the near term for Windows Phones. 

A combination of more hardware OEM participation and better software will almost certainly boost market share but the question is by how much? For the foreseeable future however Microsoft will probably make a great deal more money off its IP licenses around Android devices than it will its own mobile operating system.