Operating Systems

Lessons of the TouchPad Frenzy and the Future of Tablet Pricing

Looking to move unsold inventory over the weekend, HP chopped TouchPad pricing down to $99.99 and $149.99 from $499 and $599. It ignited a well-documented buying frenzy that melted the HP servers. BestBuy and other stores are now sold out.

The way that people snapped up these devices reveals that for other than iPads consumers are highly price sensitive. As we argued early on and often, the way to compete with Apple's device was on price.  (I also earlier argued that smaller tablets could succeed as well, though have reconsidered that position.)

Amazon is about to enter the tablet fray and it may be able to succeed where others have not. However to date all of Apple's main competitors (RIM, Samsung, HP, MOTO, HTC) have failed to generate more than token sales of their tablets. Part of the reason for that is that these non-Apple devices perceived as imitators. So far they also generally offer a poorer quality user experience -- this includes the Samsung devices -- and have priced their tablets at or above (e.g., Xoom) the cost of Apple's iPad.

E-readers Kindle and Nook have succeed in part because they are single-purpose devices, though the Nook has broadened its scope, and they're relatively cheap (sub-$250). It remains to be seen what Google can do for Android tablets after it acquires Motorola. Right now, however, it appears that nobody selling a $499 tablet is going to make inroads against Apple.

While the HP TouchPad $99 frenzy may not immediately impact the market, over the long term it will probably mean that Android and other tablets (regardless of size) will have to come in under $400 without carrier subsidies and much less with them (sub-$250). That also means that non-iPad tablets are likely to become very low margin commodity products -- like PCs today.

And that's not a very attractive market. 

Could WebOS Become the 'New Android'?

Last Monday, when I was out on vacation, Google dropped a bomb on the mobile ecosystem: it entered into an agreement to buy Motorola Mobility for $12.5 billion. Everyone is more than familiar with the story and there's been a ton of analysis in the intervening seven days.

Here's the crux of that analysis:

  1. Google was compelled to buy MOTO because of its IP (17,000 patents) after competitors attacked Android with bigger patent portfolios 
  2. Microsoft was after MOTO as well 
  3. Google wanted more control over the final product and Apple-like hardware-software integration 

The response to all of this is yes and yes. While I don't know the actual truth of the Microsoft acquisition rumor (I believe it) all of these motivations likely played a role. Now regulators must approve the deal, which I suspect they will do.

Google said that the acquisition shouldn't change anything among its other hardware partners or the Android ecosystem generally (Samsung, HTC, LG, etc). Here's the quote from the press release:

Our vision for Android is unchanged and Google remains firmly committed to Android as an open platform and a vibrant open source community. We will continue to work with all of our valued Android partners to develop and distribute innovative Android-powered devices.

But it clearly does change things. Hardware OEMs will be taking a harder look at Windows now to "hedge" and "diversify." But what about WebOS? 

The other bombshell last week was HP's announcement that it's getting out of the PC business and potentially going to unload WebOS. In April last year HP (under a different CEO) bought Palm for $1.2 billion, chiefly to get WebOS. Now it may sell the software assets and it's possible to imagine several parties being interested.

It has been suggested by some that Facebook should buy WebOS. But one could imagine HTC, Samsung (even with Bada), LG and others -- including Nokia -- being interested the platform if the price were right. But what if HP were to hold onto WebOS and open-source it or license it on very friendly terms? Indeed, HP is now saying or clarifying that it will hold on to WebOS and continue to support and even license the software.  

The platform, which was early on regarded as platform most competitive with iOS, could gain new life as an alternative to Android for nervous handset OEMs. With a post-MOTO Google competing with its partners in a new, more direct way the market could well be ready for a new "open-source" Mobile platform. It's a long-shot and HP could still sell Palm/WebOS to a single buyer. If that were to happen WebOS would likely continue to languish and ultimately disappear.

However open-sourcing the platform or offering friendly, low-cost licenses to various hardware makers could give WebOS new vitality and a future. 

Disruption Diary: Google to Buy Motorola Mobility for $12.5 billion

Google's purchase of manufacturing partner Motorola Mobility is about to establish itself as the most favored hardware platform for the Android operating system. Even though Google CEO asserts (in a press release) that the join endeavor "will create amazing user experiences that supercharge the entire Android ecosystem for the benefit of consumers, partners and developers," it is a tacit acknowledgement that today's status quo for Android provides a user experience that is uneven at best. Some of the work by its developer network is brilliant, but thanks to its free-wheeling approach to application development and delivery (when compared to Apple's terms and conditions for its App Store) the overall experience falls short of "amazing."

Google is paying a 63% premium over the current stock price for Motorola Mobility. It is a statement that the company expects direct ownership of the manufacturer to accelerate scales and promote proliferation of the Android OS. But Google's management is underestimating the impact of its action on other manufacturers who have endorsed and support Android as they must now regard Google/Moto as a direct competitor and not just a benign endorser of an "open" OS. 

This post by long-time industry follower Mike Cane captures the probable outcome in the simple statement: "Google pulls a Zune." He refers to Microsoft's decision to begin making its own MP3 player after spending a few years endorsing and supporting the PlaysForSure digital rights management platform. Musicians and publishers who believed that Microsoft would stay "hardware agnostic" dealt with the news by understandably abandoning the product. HTC, Samsung and the other manufacturers in the Android camp must be looking more closely at alternatives. 

I agree with Mike Cane that this will lead other manufactuers to evaluate their OS strategy. It is a disruptive move that could benefit HP, for example. I very much like the idea of it creating a new market for WebOS as a licensed product for manufacturers who are now concentrating on boosting their Android sales. Market share projections under the old regime are almost meaningless.

Will Amazon's Cloud Reader Open the HTML5 Floodgates?

Much has quickly been written about the just launched Amazon HTML5 "Cloud Reader." It's a "web app" that could be used to replace the native Kindle iPad and iPhone apps. It's being widely read as a response to Apple's more restrictive App Store terms about in-app purchases/subscriptions. (Amazon has removed the button linking to the Kindle store from the most recent version of its iOS apps.)

I agree with John Gruber and others who believe this has been in the works for longer than Apple's more restrictive terms around in-app purchases. Cloud Reader does, however, completely side-step Apple and its App Store terms. The Financial Times and Walmart's Vudu also recently did something similar. More publishers and developers will follow, who don't want to give money to Apple or simply don't want to worry about Apple's rules. 

An added benefit is compatibility with all mobile platforms. However developing native apps is relatively easy these days because, unless/until Windows Phones break out or BlackBerry stops its slide, only two operating systems matter: iOS and Android. 

In contrast to some of the rapturous reviews I've seen Cloud Reader is not as strong as the Kindle native app. It works well and allows users to read books offline (e.g., on the iPad). But it's not as responsive or fast the native app.

Yet for certain types of sites or publications HTML5 will be fine and quite usable. However for higher functionality a native app is better, even necessary (e.g., games).

But now that several companies have "validated" the HTML5 strategy will we see the migration from apps to HTML5 that the industry has always anticipated? Not exactly. I think what we'll see is continued development of native iOS, Android (later maybe Windows Phone) apps and HTML5 from everyone else. However Apple doesn't help its cause with all its rules and restrictions.

Will Survey Data Translate into iPhone Sales?

There are two competing mobile handset stories running simultaneously in the tech press right now. The first is how Android is increasing its dominance over other operating systems including iOS. The second, which largely contradicts the first, argues that Android will potentially lose meaningful market share when the next iPhone comes out. 

Below is the data that the "pro-Android" stories are built on; first Nielsen

Google’s Android operating system (OS) now claims the largest share of the U.S. consumer smartphone market with 39 percent. Apple’s iOS is in second place with 28 percent, while RIM Blackberry is down to 20 percent.

 Then Canalys:

Android, the number one platform by shipments since Q4 2010, was also the strongest growth driver this quarter, with Android-based smart phone shipments up 379% over a year ago to 51.9 million units . . .

http://blog.nielsen.com/nielsenwire/wp-content/uploads/2011/07/june-2011-smartphone-share.png

Now the survey data on which the "pro-iPhone" stories are based:

Roughly two weeks ago ChangeWave came out with survey data that argued those planning to buy a smartphone in the next 90 days expressed a preference for the iPhone over Android 46% to 32%.

Then, earlier this week, Piper Jaffray released some survey data (which got way too much play for its tiny and unscientific sample) suggesting that most mobile phone owners would be buying an iPhone next. Indeed, the data argue that Android will see less than 50% retention: 

http://common4.ziffdavisinternet.com/util_get_image/31/0,1425,i=312304,00.jpg

No doubt many people are interested in the next iPhone but attitudes and survey responses don't always translate into concrete behavior. For the overheated claims to come true ("iPhone 5 could double iOS market share") Apple will need to unveil a true blockbuster.

Likely Smartphone Buyers Prefer iPhone, RIM Takes Nosedive

A new US-centric ChangeWave consumer smartphone survey (n= 4,163) looks at mobile operating system preference and specifically iOS vs. Android. Accordingly those planning to buy a smartphone in the next 90 days expressed a preference the Apple product to Android 46% to 32%. 

The perhaps most striking finding -- and grim news for RIM -- is that only 4% of respondents say they intend to buy a new BlackBerry device.  

In terms of customer satisfaction the following graphic reflects the percentage of current smartphone owners who say they're "very satisifed" with their current handsets. Again Apple and Android lead. 

However ChangeWave noted the following about improvement for Windows Phone 7 vs. Windows Mobile:

We continue to see a big difference between the high Very Satisfied rating for Windows Phone 7 (57%) vs. the much lower rating for Windows Mobile OS (14%). Even so, the higher Windows Phone 7 rating has yet to produce a sustained momentum boost for Microsoft in term of buyer preferences.

ChangeWave also said that demand for Motorola Android devices was down (8%; down 4-pts) after the iPhone had come to Verizon:

After benefitting tremendously in the years Verizon subscribers were barred from the iPhone market, Motorola is now seeing a loss of market share at least partially attributable to the Verizon iPhone release that occurred earlier this year.

Android the Gateway to Smartphones -- Report

There are a number of articles reporting recent European findings about smartphone ownership based on quarterly survey data from Kantar Worldpanel ComTech. They reveal some interesting insights into what's driving Android sales and the danger to Apple if it doesn't create a lower-cost iPhone.

The high-level data include the following:

  • Android is now the leading smartphone platform in most of Europe, being driven by non-smartphone owners upgrading in many cases
  • There is little switching between Android and iPhone: Just over 1% of new Android owners are former iPhone owners
  • The iPhone is the top selling smartphone in the UK but also the most expensive (Android has 45% of the market in total)
  • Even as RIM is foundering in the US it's having great success in the UK among mobile subscribers upgrading: 85% of new RIM customers are former feature phone owners
  • Smartphones in the pre-paid market in the UK have grown dramatically; in 2010 they were 18%, now they're 32% of all smartphones
  • 63% of UK mobile subscribers are still on feature phones
  • Nokia still has loyal customers in Europe but increasingly its owners are trading in Symbian for Android handsets

It appears from the data that as users upgrade they're generally migrating to Android and RIM handsets (in the UK at least). Price is a significant consideration for many of these buyers.

This makes the iPhone a less attractive option than Android. The strong platform loyalty (at least for iPhone and Android) argues that Apple faces major challenges if it cannot grab some of these upgrading price-sensitive users.

Tablet Sales Sputter As Amazon Readies Assault on Fortress iPad

Tablets aren't taking off as fast as some analysts expected and the iPad is still the only tablet that matters. However Amazon is reportedly preparing a full-frontal assault on the iPad's market dominance. Unconfirmed reports suggest that Amazon has placed orders for up to 1.2 million Android-based tablets for sale in Q3 this year. 

Meanwhile Net Applications reported earlier this week that the iPad now represents 1% of all Internet browsing globally; 2% in the US market. The same report shows that iPad-based traffic is orders of magnitude ahead of tablet competitors, which have so far foundered. Net Applications also says the iPad delivers 25% of all mobile Internet browsing and is the third largest source of mobile Internet traffic, after the iPhone with 35.2% and Android with 31.6%.

In June the Pew Internet Project reported that "8% of adults report owning a tablet computer such as an iPad," while 12% said they owned an eReader (e.g., Nook). Between November 2010 and May 2011 eReader ownership doubled and tablets saw growth of only 3% according to the Pew survey.

Growth over time

The difference in sales is most likely due to price, given the relatively lower cost of eReaders vs. Tablets. The ad-supported Kindle is just $114, while the iPad retails for $500. But for the first time Nook has dethroned Amazon's Kindle as the best-selling eReader, according to IDC. The firm also said that tablet shipments were coming in well below its previous lofty forecasts:

For 1Q11, the seasonal trends typically found in more mature consumer electronics and computing categories had a notable impact on the burgeoning media tablet market . . . The eReader market (which IDC counts separately) experienced similar seasonality, undergoing a sequential decline in shipments to 3.3 million units as the post-holiday season proved to be challenging for that category. However, eReaders enjoyed 105% year-over-year growth . . .

Apple's iPad and the recently introduced iPad 2 continue to dominate the media tablet market, as other vendors have had a more difficult time finding market acceptance for their products. But even Apple's shipments for the quarter were well below expectations . . .

The firm pegs Android-based devices at 34% of the overall tablet market. That figure is probably way off, however, and may suggest its other numbers are wrong too. The weight of other evidence points to Android tablets being a much smaller part of the overall pie. 

For example, the chart immediately below shows Google's own data reflecting the different Android operating systems in the market and their relative shares. Android 3.0 (and 3.1), which are on the new Android tablets, represents less than 1% of all Android devices in the market. 

Screen shot 2011-07-09 at 7.43.42 AM
The original 7" Galaxy Tab runs Android 2.2, which is the most common version of the OS and on almost 60% of all Android devices today. The 7" Galaxy Tab is also the best selling non-iPad tablet.

Apple said in May that it had sold 25 million iPads. If the iPad is 66% of the market (vs. Android's 34% per IDC) that means approximately 13 million Android tablets would have been sold globally. And the overwhelming majority of these would have to be the 7" Galaxy Tab given the chart above (and other data).

In January 2011 Samsung itself announced it had "sold" 2 million 7" Galaxy Tab devices. However these were not actual consumer sales but shipments to retailers. It's very unlikely at this point that the 7" Galaxy Tab has sold even 5 million units to consumers (as opposed to retailers). If anything sales of the 7" Samsung tablet have slowed because of a broader range of Android-based competitors. 

Beyond this comScore data argue that Android tablet devices are not a significant source of Internet traffic compared to the iPad. According to comScore, in June, the iPad represented “89 percent of tablet traffic across all markets.” In the US the figure is 97 percent. Those figures suggest that Android tablets are much closer to 10% of the market, if that. 

The "totality of evidence" thus argues that the IDC Android sales estimates are way off. In terms of the larger market, however, it's not hard for me to believe that tablet sales are down or, perhaps more accurately, not keeping pace with analysts' previously aggressive estimates. This may have less to do with the actual popularity of tablets than it has to do with analyst firms being too starry eyed about their sales projections.

We'll see what happens when Amazon, with its brand strength and marketing capabilities, introduces its iPad competitor. As I've argued before pricing with be a key driver of success or failure.

Right now Android tablet software and the overall UX remain inferior to the iPad; so until the OS catches up (which may or may not happen) and there are some Android tablet apps, which are still MIA, price will be the key success variable in Amazon's tablet effort. 

As a final note, I have previously been an advocate of the 7" tablet as a segment where Android could shine, especially given that Apple doesn't have an entry. And while it's certainly more "mobile" than 10" tablets, I'm now of the view that 7" is not sufficiently larger than a smartphone to warrant buying one.

I spent some time with the HTC Flyer recently. And while I like the device a lot -- much more than the Galaxy Tab -- most smartphone owners are probably not going to buy it. Indeed, if you're going to carry around or own two devices the second one needs to be considerably different than your smartphone. Alternatively if you could use a 7" Android tablet as a phone it might make the devices more attractive. Right now you could use Skype with a carrier data plan but that's not going to be desirable for most people.

My guess is that over time we'll see smartphone screens get somewhat larger (4.5", 5") and all tablets smaller than about 9" will go away, unless they're purchased as mobile gaming devices. 

App Downloads Show Complexity of Mobile Usage: It's Not All about Local

Many people (including some analysts) make simplistic assumptions about the mobile market: for example that mobile and local are all but synonymous. I'm obviously a big advocate of local but I see mobile usage as quite complex and defying easy conclusions about usage or the future direction of the market.

There are lots of functions and activities that people perform and do on mobile handsets that have nothing to do with their immediate surroundings or local. For example: games, news, entertainment, music, sports, social networking and so on.

A new set of Nielsen data about app downloads/usage in the past 30 days reflect that mobile is a platform that is complex and diverse in its usage. While local content and apps are well represented in the hierarcy a large number popular app categories have nothing to do with location.

Instead they probably reflect that people are using mobile as a "generic" Internet access tool. Games, the most popular category, is a phenomenon unto itself. 

http://blog.nielsen.com/nielsenwire/wp-content/uploads/2011/06/mobile-gaming-chart-1.gif

Most purchases occur in the physical world. So most mobile ads will either direct people to actual stores or, in the case of most future display campaigns, offer a dealer or store locator -- at a minimum. Mobile will be a huge branding medium, irrespective of any localization component. And there will be many awareness ads that have a location component as secondary or perfunctory matter. 

Moreover we get into an "accounting" problem in defining what is a "local" ad in mobile.

Is a Klondike Bar ad that contains a store locator buried two clicks down a "local ad"? What about mobile click-to-call ads for a florist network, which sends users to call center to place an order fulfilled locally? Is a mobile-video brand campaign for Hilton Hotels that can direct you to the nearest property if you initiate a search or lookup?

There's a lot of gray in determining what is a local ad. We might want to "require" localization in the ad creative before we consider mobile ads as "local." Just a thought.

But just as people often fail to recognize how local or offline purchase intent permeates a great many things that happen on the PC it's equally the case that non-local activity/interest is very much tied up in mobile activity. The chart above nicely illustrates that. 

Report: Mobile Ads Show Better Performance than PC for Display -- Across the Board

MediaMind, formerly Eyeblaster, released the results of an extensive study examining roughly 230 million mobile ad impressions in Q4 2010 and Q1 2011. The company affirms or confirms that mobile outperforms PC for display advertising. There's no search data in this report but it's also true for search CTRs. However there are others who have data that contradicts these claims (e.g., iCrossing). 

Below are some of the top-level findings in the report: 

  • Apple’s iOS beat Android by 2X in terms of ad performance, RIM by 5X (this is consistent with other data in the market; e.g., Smaato and Jumptap)
  • Mobile ads saw a CTR of 0.61%, while PC banners see/saw a CTR of .07%.
  • PC activity peaks during between 9 am and 5 pm, mobile browsing soars during the evenings (there's lots of data on mobile dayparting in the market, some of it inconsistent).
  • Mobile CTR reaches its peak during the evening, but is higher than PC CTR at any time of the day.  
  • Mobile CTR is also above average between 7pm and midnight, peaking at 8pm. 
  • Top performing mobile verticals: entertainment, retail, financial, B2B (surprise), travel. Restaurants, the top local-mobile search category, was lower on the list

There's a big practical mobile advertising takeaway from the report: "Serving ads in the evening can prove much more effective as compared to earlier in the day, and can reduce the cost per click of mobile."

Screen shot 2011-07-06 at 5.42.08 AMScreen shot 2011-07-06 at 5.43.09 AMScreen shot 2011-07-06 at 5.43.23 AMScreen shot 2011-07-06 at 5.57.21 AM

Selective Zip-Level Targeting Produced 85% Lift

Mobile ad network Jumptap released its second MobileSTAT issue for June earlier today. It's very much like the Millennial Media SMART reports or the AdMob Metrics reports that began the trend. There are a range of interesting findings in the document; I excerpt and summarize some of that material below.

Among smartphone operating systems, Android leads the iPhone by a margin of 42% to 30% on the Jumptap network. This 12 point margin is consistent with the Nielsen-reported 11-point margin between the shares of the two operating systems in the broader US mobile market. 

Screen shot 2011-06-30 at 5.27.59 PM

Compare Nielsen's data released earlier today:

http://blog.nielsen.com/nielsenwire/wp-content/uploads/2011/06/mobile-OS-share2.png

A relatively unique piece of data in the report is the "content consumption" breakdown between apps and the mobile Web (below). There's no discussion of this graphic in the report so one would need to speculate on whether this is based on where Jumptap ad impressions were served or whether this is somehow a broader measure of consumption trends on mobile devices. 

Screen shot 2011-06-30 at 5.29.18 PM

According to a recent report from mobile analytics company Flurry, which some have disputed, mobile apps have overtaken the Web (PC and mobile) in time spent. Regardless of whether that's precisly accurate, plenty of data indicate users are spending increasing amounts of time with mobile apps. 

There's also considerable data in the report about CTRs on mobile ads. The first graph immediately below shows Jumptap's CTR by smartphone OS. The Apple iOS platform shows CTRs that are almost double those of Android and other platforms except the Palm webOS. 

Screen shot 2011-06-30 at 5.29.12 PM

Mobile ad exchange/mediator Smaato offers a similar chart (global, Q1 2011), which shows Windows Phones leading the CTR pack followed by Symbian and then Apple, et al.  

Operating System Click Through Rate Worldwide Q1 2011

Jumptap also said that people between 50 and 70 years old clicked on more ads than members of other age groups. This is an interesting and somewhat curious finding. I would be interested in seeing age-CTR segmentation data by handset type. I suspect that for smartphone owners it would skew younger. 

Screen shot 2011-06-30 at 5.30.39 PM

Mobile subscribers with incomes above $50K clicked on ads quite a bit more than those with incomes under that threshold. Again I would suspect that higher incomes correlate positively with smartphone ownership and that's going to factor in to this data.

Screen shot 2011-06-30 at 5.31.08 PM

There's now a fair amount of data from various sources about what time of the day/week mobile users are most active. In the Jumptap chart below ad clicks start to grow in mid-morning (with increased mobile activity generally) and peak at about 6pm. 

Screen shot 2011-06-30 at 5.31.26 PM

Local-Mobile network Verve Wireless also recently put out findings about consumer behavior on its network. The company said that nearly 60% of page views on its network occurred during the afternoon commute hours and in the evening (between 7-10pm).

Another very interesting data set released by Jumptap is based on a mobile ad campaign with "a major auto advertiser," which targeted selected, demographically qualified zip codes "that are more likely to purchase their brand." According to Jumptap these zip-based ads showed terrific lift "over ads broadly targeted in almost every campaign" -- as much as 85%. 

Screen shot 2011-06-30 at 5.30.15 PM

The final bit of data I'm including from the report shows the "post-click activity" or objectives of advertisers. Sixty seven percent of users clicked from an ad to a mobile Web-based landing page (or site), while 18% clicked to call and 15% downloaded something (probably an app).

Screen shot 2011-06-30 at 5.31.38 PM

Because we don't now when it says "click to Web" whether these are just PC sites on a mobile browser or HTML5 optimized landing pages we can't evaluable how sophisticated these advertisers are. As a general matter however I would speculate that we'll see a movement away from "click to Web" as marketers try and maximize the effectiveness of their mobile campaigns. 

Is There a Tablet Market or Just an iPad Market?

The tablets keep coming but none of them -- including the RIM Playbook -- have so far seemed to affect the momentum of the iPad or had much of an impact on consumers. As I've said before I now have the Samsung 10.1" tablet (courtesy of Google) and found it lacking compared to the iPad2.

I do think that some of the 7" tablets may do well. And lower-priced 10" tablets may also see some success. But there are many who would now argue that the tablet market is becoming like the MP3 player market of the last decade: all about Apple. While there were lots of MP3 players there was only one visible product and brand: the iPod. 

It's still too early to say that the tablet market is already won, but there are signs that despite the best efforts of Motorola, Samsung and RIM, the iPad remains the most desired tablet by a factor of 4X or more. Survey data released on Monday by Bernstein Research found that consumers were far less interested in rival tablets than the iPad. 

 Screen shot 2011-06-23 at 6.01.45 AM

The same survey found that the 7" tablet form factor wasn't very interesting to consumers either. I'm a bit surprised by this finding and continue to believe Android will see some success with the smaller size. By contrast the 10" tablets feel very derivative of the iPad -- although we haven't yet seen the HP TouchPad in action yet. But it too will probably be shunned by consumers.

According to comScore, the iPad currently accounts for 97% of all tablet-related web traffic in the US. That number is 89% on a global basis

As a consequence of rivals' disappointing tablet rollouts, they have scaled back sales estimates and reduced orders for parts. This includes Motorola's much hyped Xoom and the more recently released Playbook. There are at least a dozen companies bringing tablets to market now and later in the year. Most will probably fail because they seem like imitators of the iPad. (At a low enough price point, i.e., 250, clones can succeed.) 

I've argued elsewhere that the most competitive Google device vs. the iPad is probably the recently launched Chromebook (from Samsung, Acer). However Amazon, which is poised to bring out full-blown color-screen Android tablets, could prove a formidable competitor to Apple over the long term. 

According to a recent report in Taiwan-based DigiTimes:

Amazon is poised to step into tablet PCs and will launch models as soon as August-September, with targeted global sales of four million units for 2011, according to Taiwan-based component makers.

The timing of launch is to meet the peak sales period prior to Thanksgiving in the US and the year-end holidays in the US and Europe, the sources pointed out.

Amazon adopts processors developed by Texas Instruments, with Taiwan-based Wintek to supply touch panels, ILI Technology to supply LCD driver ICs and Quanta Computer responsible for assembly, the sources indicated. Monthly shipments are expected to be 700,000-800,000 units.

One can assume that Android will get better on tablets. Currently Android 3.1 offers an overall inferior user experience to the much more polished iPad software and environment. Improving software, combined with Amazon's Android appstore and the company's brand, distribution and marketing muscle could make Amazon the number two tablet player by early next year.

However success or failure will still largely depend on the quality of the device and how much it costs.

How Would Nokia Feel if Microsoft Bought RIM?

Once again RIM is a takeover (talk) target. The recent drop in the company's stock value, declining market share and newly announced layoffs have rekindled discussion among financial analysts of a potential Microsoft acquisition. The following appeared today in Bloomberg/BusinessWeek:

Research In Motion Ltd. has lost so much value that an acquirer could pay a 50 percent premium and still buy the BlackBerry maker for a lower multiple than any company in the industry.

RIM, once worth $83 billion, fell more than 80 percent from its record three years ago as Apple Inc.’s iPhone and Google Inc.’s Android platform siphoned off smartphone customers. The Waterloo, Ontario-based company, which plunged last week after saying quarterly sales may drop for the first time in nine years, closed yesterday at $25.89 a share, or 4.7 times earnings next year. That’s less than any communications-equipment provider, according to data compiled by Bloomberg.

The BlackBerry maker's market cap is currently about $14.6 billion. It's quite possible that a private equity fund could rush in and try to buy the company. But putting that aside Microsoft is always mentioned as the logical buyer (because of RIM's enterprise foothold and the hardware business). 

Yet Microsoft just spent $8 billion on Skype and more than a billion (reportedly) on its deal with Nokia. Would Microsoft turn around and now spend $15 billion or more on RIM? Beyond the cost, it would probably undermine the deal that Microsoft and Nokia have just done -- or at least trust between the companies. Suddenly Microsoft would be directly competing with Nokia, it's premier handset partner. 

I suspect Microsoft won't make a move to buy RIM in the wake of Nokia. If it were to do that Nokia might rethink "betting the farm" on Windows Phone. After all Nokia just released a pretty nice looking handset (N9) based on MeeGo. In fact the demo looks so good it makes one wonder why Nokia felt compelled to do the Microsoft deal in the first place. 

Screen shot 2011-06-21 at 12.00.33 PM

Survey: 79% Not Interested in Mobile Wallets

An online consumer survey from electronics site Retrevo finds that most US mobile users are ignorant of or otherwise not interested in mobile wallets. However, among those interested, iPhone users are quite a bit more enthusiastic than Android users.

This is curious because Google is, so far, is the most visible proponent of mobile payments. And Google Wallet is only available for Android handsets right now. Before I speculate about what's behind the findings, I'll provide a basic overview of the survey data. 

Retrevo found that 79% of respondents were either "not interested in mobile wallets or don’t know what a mobile wallet is." Of the 21% indicating interest, Men were more interested than women (27% vs. 15%) and younger users (18-35) were more interested than those over 50. Among those ignorant or not interested, "nearly half  . . . [said] they wouldn’t trust any of the companies [on the suggested list]." That list included credit card companies and mobile carriers, as well as mobile platform providers such as Google and Apple. 

 Screen shot 2011-06-20 at 9.15.32 AM

For the minority interested in mobile payments, awareness and demand was about 15 points higher among iPhone owners than Android owners. 

Screen shot 2011-06-20 at 9.15.09 AM

Apple and Google were more trusted than credit card issuers and wireless carriers to manage a mobile payments platform. Apple was much more trusted than any other company on the list. However Android owners don't trust Apple. Indeed, for many savvy mobile users they bought Android as a reaction against Apple and its brand image. 

Screen shot 2011-06-20 at 9.15.23 AM

Beyond the simple observation, "mobile payments vendors have their work cut out for them," a more interesting question to explore is why Apple beats Android so handily in this survey?

My view of the answer is that Android is still a weak brand and the carrier often overshadows Google and Android among consumers. The "Droid Incredible" is at least as closely associated with Verizon as it is with Google, for example. And the EVO at least as closely associated with Sprint as it is Google. Carriers are generally disliked by their subscribers in the US. This could account for the lack of trust. 

Alternatively, Android handsets have multiple brands associated with them in a way that the iPhone does not. This might create a certain consumer confusion or "dilution" of trust. With the iPhone it's just Apple and the carrier. And of the two the Apple (iPhone) brand is dominant.

Usability will be key to the success of mobile wallets, as will be coverage and breadth of acceptance in the physical world. However, all things being equal, these survey data are an indicator which companies' initiatives might get traction and which ones might not (hint: ISIS). 

Survey Reveals Tablet Mania: Majority Claim to Want One

To promote the launch of the Galaxy Tab 10.1 Samsung conducted an online consumer survey (n=1,000). The results show that a majority of US adults are potentially interested in buying a tablet in the future.

The press release makes the somewhat misleading statement: “The survey revealed that 90 percent of U.S. consumers either already own a tablet or would consider buying one.” It's misleading because only a small fraction of the population owns a tablet.

Among other things, the survey examined what people do with their existing (mostly iPad) tablets: 

  • 76% read the news or books
  • 64% watch TV shows or movies
  • 61% listen to music
  • 56% update their social networking profiles
  • 53% of survey respondents would choose to use their mobile tablet to play games instead of on a PC or standalone video game console.
  • 41% video chat with loved ones

The iPad and iPad2 together constitute roughly 82% of all tablets sold in the US according to Nielsen. Apple said yesterday that it had sold 25 million iPads globally to date. I'm unable to find the breakdown of North American sales vs. international.

According to several sources tablet penetration in the US is about 4%-5%. So clearly most US adults don't have tablets and there's considerable room for growth. The Samsung survey suggests that the remaining well over 200 million US adults are interested in buying one. 

Survey responses and behavior are often distinct things. But if the pro-tablet sentiment is as widespread as suggested by the survey it will mean huge tablet sales and potentially diminished PC sales over the next couple of years accordingly. 

What We Still Don't Know about 'Google Wallet'

In advance of Google's press conference this morning, we already know a great deal about Google's NFC payments initiative, which will apparently be called "Google Wallet." A leaked internal memo from The Container Store showed up online yesterday:

Google will launch a test of "contactless" payment through a mobile device--so customers will be able to just tap a special device and pay with their phone in stores at POS! And this Thursday, Google will announce all of the innovative retailers who will be participating in their test--and guess who is on that list? You got it right! We are! And how cool that Google thought of us, The Container Store!

Stay tuned for many more details regarding this test of Google Wallet and the participating markets. We won't start this program September 1st, but thought that we should all have the heads up on this neat opportunity now because we expect it will receive a lot of press in the upcoming weeks when Google makes its official media announcement about this initiative.

When: this summer

Where: apparently five cities initially . . . San Francisco, Los Angeles, New York, Chicago and Washington D.C.

Partners: so far Sprint, Citigroup, MasterCard, Verifone and ViVOtech

Retailers: Container Store, Macy's, American Eagle Outfitters Inc., Subway (incomplete list) 

As I've said I'm sure there are more retailers/stores on the list of launch partners. It's not clear (to me) how many Android phones currently in the market are NFC compatible. The Sprint Nexus S clearly is; and the next-generation of Android phones now coming out are supposed to be. 

Google has more tricks up its sleeve than simply the announcement I would imagine. Accordingly I suspect we'll see offers tied in to help motivate people to use the system. 

Initially however it will be accessible to a relatively small group of people and there will probably be several months where Google and its partners are watching the consumer reaction and working through bugs and kinks. 

Simply because Google has built it doesn't mean that consumers will come; however this is sure to help accelerate the broader industry move toward mobile payments. 

Google's NFC Payments: Details Emerge

One of the most fascinating areas of mobile to observe right now is payments. No one really knows how it will all turn out or which companies will ultimately succeed -- but there's tremendous activity and change is coming. For example, the recent launch of Square's new payments tools -- Square Register and Card Case -- are intended to radically change how stores and consumers pay for things at the point of sale.

Square's system doesn't rely on a new infrastructure (i.e., NFC) and the apps are simple to understand and adopt. Yet while they're innovative, these tools may not get serious consideration by enough merchants to sustain them. By the same token near-field communications (NFC) has a lot of momentum and buzz but it's not clear how soon NFC-based systems will be disseminated in the US and Europe. 

In a consumer survey MasterCard recently found that younger mobile users were comfortable with the idea of paying for things with their phones:

  • 63 percent of 18-34 year olds would be at ease using mobile phones to make purchases versus those age 35 or older (37 percent).
  • Consumers ages 18-34 (65 percent) feel more naked without their phones than their wallets, compared to 34 percent of those in the 35 and older group.

Apparently they're about to get their chance, as Google is set to announce a formal test of NFC payments with a few high-profile retailers. The announcement is supposedly coming on Thursday. Bloomberg broke the news; however it was already understood that Google was working with retailers in New York and San Francisco to lay the groundwork (with new payment terminals). 

The Wall Street Journal reports more specifics on the trial: 

The program will launch first in New York, San Francisco, and potentially other locations, followed by a broader rollout, said a person familiar with the matter. Participating retailers include Macy's Inc., American Eagle Outfitters Inc. and the Subway fast-food chain, said a person familiar with the matter. Retailers that participate in the program will have upgraded terminals at the point of sale that can read the mobile devices and provide special offers.

Other vendors reportedly involved include Citigroup, Verifone, ViVOtech and MasterCard.

It's not clear whether Google will participate directly in the transaction and/or capture any direct revenue. My guess is probably not. Rather, Google will probably use the platform to boost mobile ads and offers, as well as capture data on user purchase behavior. 

Here's the scenario: a user sees an ad (search or display) on a mobile device including an offer to be redeemed at the point of sale. She goes into the store and uses the offer, paying with her Android phone. This is a closed-loop and both Google and the retailer gain valuable data about ads that drove in-store traffic and their ultimate outcome at the register. 

Indeed, meaningful deals/offers or other incentives will need to be offered initially to get people (Android users with Gingerbread) to utilize the system. Previous reports indicated that Google was footing the bill for the upgraded payments terminals.

When the annoument is formally made there will be considerable discussion and speculation about the outlook for NFC payments in the US and Google's role in the system. I would be cautious. 

Mobile payments will definitely come; however no single approach or system is a foregone conclusion. And it usually takes quite a bit longer for new behaviors to become established than pundits expect.

While consumers are generally ahead of marketers with mobile usage, it took almost a decade longer than Forrester expected for ecommerce to become mainstream. It won't take anywhere near that long for mobile wallets to take hold. But it could still take up to five years. 

See related posts: 

Tablet Wars: Which Non-iPads Will Be Here Next Year?

Non-iPad tablets are starting to proliferate and some of them are getting positive reviews. For example, ZDNet's Matthew Miller has given the new HTC Flyer 7" Android tablet a very positive review. It features the HTC Sense UI and some other proprietary software tweaks. However its main differentiator is a stylus/pen (sold separately) that works with the tablet.

This is unique in the market and could be a nice feature for artists and those who want to draw on the device -- or students making notes while reading or in classs. 

Android Central gives the new Samsung Android 10.1" tablet a very positive review as well. However I find the 10.1 size, which favors the portrait angle, awkward. With a smaller form factor I would be more enthusiastic. Beyond this, however the software experience simply doesn't stand up to the iPad. My biggest pet peeve is that all websites are read as mobile, which doesn't take advantage of the larger form factor. In addition almost none of the Android apps have been optimized for tablets at this point. 

If I'd never used an iPad the Samsung device would be impressive in many respects. However one must get used to the navigation, among other things, on the Honeycomb device. I've said this many times in the past but I think the winning Android tablets will be 7" especially given no Apple entry in that smaller category. 

The RIM Playbook is 7" and appeared to be selling well according to some preliminary reports. However a new report suggests that the device is actually not selling very well and experiencing a high return rate. We'll have to wait until the next RIM earnings report to learn the truth. The Playbook is supposed to be able to run Android apps, which was a shrewd and critical decision by RIM. Otherwise it would be DOA. Even so, it may not survive. 

The first Android "flagship" tablet, the 10" Motorola Xoom, is effectively a flop. And HP/Palm is making lots of boasts and claims about its forthcoming TouchPad (which will be priced at $499 and $599). However the 9.7" device also likely to fail if it tries to go head to head with the iPad. 

Putting aside eReaders, by this time next year there will probably be three categories of tablets: 10", 7" and a smaller category that will include everything else: iPod Touch, Galaxy Player, Dell Streak, etc. Almost all non-iPad tablets (unless they're very inexpensive) will fail at the 10" level.

However there will be several viable mostly Android competitors at the 7" level, chiefly because Apple isn't present. Apple has said it's not ceding any segment but it's unclear if/when an "iPad Nano" will show up. This creates an opportunity for Android tablet competitors to control this 7" segment. Pricing is a big issue, however. Most of the "quality" 7" tablets remain too expensive (without a carrier subsidy) to drive mass adoption at this time. Most people don't want to buy another data plan as well. Amazon may change that; we'll see. 

Below is data from Nielsen comparing how various connected devices are used. Smartphones are used relatively evenly throughout the day and in various locations; however tablets are used heavily during TV watching and in bed. By contrast eReaders are used most heavily in bed. 

http://blog.nielsen.com/nielsenwire/wp-content/uploads/2011/05/connected-devices-2.jpg

Those who would argue that tablets are a "fad" are simply mistaken. Ultimately 30% to 50% of PC usage will shift to smartphones and tablets in my opinion. 

Android Tablets: 7 Inches Is Right Form Factor

In the non-iPad tablet category we now have RIM's Playbook, the forthcoming WebOS tablets, the Samsung Galaxy Tab(s) and a wide range of other Android-based tablets that are less well-known. Amazon is set to release multiple devices based on Android, according to a "stay tuned" remark made by Jeff Bezos in a Consumer Reports interview:

Asked today about the possibility of Amazon launching a multipurpose tablet device, the company's president and CEO Jeff Bezos said to “stay tuned” on the company’s plans. In an interview at Consumer Reports' offices, Bezos also signaled that any such device, should it come, is more likely to supplement than to supplant the Kindle, which he calls Amazon’s “purpose-built e-reading device.” 

While Amazon could certainly build a terrific device (or devices plural) the truth is that, among the alternative tablets out right now, none rise above the level of iPad "wannabe" or imitator -- save the 7-inch devices. And that's all about the hardware not the UX, which also falls short. That's the inescapable conclusion of my informal experiences with each of them. 

Somewhat paradoxically Google has made Honeycomb quite different than iOS. I would imagine this is partly a function of "organic" decisions about how Android should work on a tablet and partly a self-conscious effort to differentiate from iOS. But it makes using the new wave of Android tablets like learning a new language in a way; it's not very intuitive. 

Generously Google gave away the forthcoming Samsung 10.1-inch Galaxy Tab to attendees of its developer event, Google I/O, which was held in San Francisco last week. I was there and excited to receive one and try it. I've since been attempting to use it regularly during my recent travels. I also have an iPad 2 with me, which often seduces me away from the Samsung tablet. 

Screen shot 2011-04-28 at 7.45.27 AM

This isn't a review so I won't go into a lengthy discussion of features or compare the devices in detail. While the Samsung 10-inch "Tab" is quite thin and nice in many respects the overall user experience is weak compared to the iPad 2. Android tablets will become more competitive over time but currently they're not. However the 7-inch hardware makes for a differentiated form factor. (I also quite like the 5-inch Galaxy Player.)

As I've argued in the past, the smaller 7-inch devices are compelling because they're more portable than the 10-inch iPad or Android devices of comparable size. The 10.1-inch Samsung is long and wide (pictured above, right), making it perhaps good for watching wide-screen movies but otherwise "out of proportion" for viewing websites and many other uses. 

Some proof of what I'm saying comes in the form of fairly strong 7-inch Galaxy Tab sales. That device, not yet equipped with Honeycomb, offers a large-screen version of the UX found on Gingerbread Android handsets. But people are buying it because they can take it with them in a way that they cannot with the iPad. 

The iPad currently dominates the tablet market and because of its size most people use it at home: 

Screen shot 2011-05-15 at 8.55.55 PM

But the smaller form factor, with potentially more aggressive pricing, is a perfect place where Android can play and establish a "beachhead." People will consider these smaller tablets because of their portability and right now Apple has no offering to compete with them and may not for the foreseeable future. We may see a larger iPod Touch come along at some point or a smaller iPad. But that's pure speculation at the moment.

Going directly after the iPad right now with comparably sized devices is fruitless because the overall Android tablet UX, though improved, is still not strong enough.

ComScore Says Check-ins Have Grown, Now 17% of Smartphone Users

Last year Pew and Forrester both came out with reports arguing that LBS check-ins (e.g., Foursquare) were being embraced by only a small fraction of the mobile audience. In July Forrester asserted that "geolocation applications like Foursquare" were only occasionally being used by 4% of all Internet users.

In November Pew released findings from a telephone survey (n=3,001) that argued a similar 4% of PC Internet users and 7% of mobile Internet users were on LBS services. However 4% of online adults actually turns out to be a big number. It's roughly 8 million people, using the ~200 million online audience base of comScore.

In the aggregate, in 2010, there were probably several million people in the US checking in on Foursquare, Gowalla, MyTown, Whrrl and others, including Google Latitude.

Today Foursquare says it has 8.5 million users alone and many others, including Yelp and Facebook, offer check-ins. Facebook has not released official numbers but claims it is "by far" the largest check-in site out there. So the numbers are clearly growing. 

ComScore released data yesterday asserting that, now, nearly 17 million mobile users are engaged to some degree with "check-in services": 

16.7 million U.S. mobile subscribers used location-based “check-in” services on their phones in March 2011, representing 7.1 percent of the entire mobile population. 12.7 million check-in users did so on a smartphone, representing 17.6 percent of the smartphone population.

ComScore defines this category to include Facebook Places, Foursquare and Gowalla. It's unclear what the full list of sites was or whether beyond a couple of examples, the definition of check-in sites was left up to user interpretation. 

As one might expect smartphones were the primary source of check-ins, constituting 76.3% of all usage. Here's the smartphone "check-in" OS breakdown: 

  • Android: 36.6% (vs. 34.7% overall market-share)
  • iPhone: 33.7% (vs.  25.5% market-share)
  • RIM: 22% (vs. 27.1% market-share)
  • MSFT, Palm, Symbian: each had less than 5% of check-ins; collectively they represented 7.5% of check-ins (vs. 12.6% market-share collectively) 

Screen shot 2011-05-12 at 9.21.14 PMOverall comScore says that these check-in users "showed a high propensity for mobile media usage, including accessing retail sites and shopping guides, and displayed other characteristics of early adopters, including a stronger likelihood of owning a tablet device and accessing tech news, when compared to the average smartphone user." 

One surprise according to the survey data is that women overall outnumber men on check-in services, in contrast to last year's Forrester findings that showed a wide gap favoring men.

Anecdotal evidence, notwithstanding the growth comScore proclaims, suggests that a large number of early users of check-in services have walked away and are no longer using them on a regular basis. 

Deals and loyalty programs -- such as one just announced between SPG and Foursquare -- are the key to keeping check-ins alive. In the absence of such rewards or incentives the check-in will either die or have to dramatically evolve and deliver some other type of value to survive.