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.
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:
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:
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.
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.
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.
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:
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.
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:
Overall 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.
As a long-time Android user I can tell you two specific areas where Android beats the iPhone's otherwise superior user experience hands down: speech and navigation. All text fields on Android devices are speech-enabled, including email, SMS and the search box on any site.
The iPhone offers "voice control commands" that allow users to initiate a call or play music with speech. But the breadth of what you can do on the iPhone with voice is much more narrow. There is of course voice search on the Google and Bing apps, but that has to do with Google and Microsoft's own technology and nothing to do with Apple.
This morning several outlets are reporting that there's some sort of new or renewed discussion going on between Apple and leading speech firm Nuance. Nuance provided the front-end speech capability to Siri, which Apple acquired almost exactly a year ago. Nuance also offers speech-powered apps (e.g., Dragon Search) for the iPhone and has an excellent speech-enabled keyboard in FlexT9 for Android.
One can safely assume that Apple clearly understands a lack of broad "speech enablement" is a competitive weakness for the iPhone. This argues that Apple is moving to fix that in a deal with Nuance.
Some have speculated that this deal would be an outright acquisition (and there was a rumor last year to that effect). However Apple doesn't need to acquire Nuance to get the benefit of its technology. Apple probably also doesn't have to worry that Google or Microsoft would buy Nuance, because they already have major speech assets. Any acquisition price would perhaps be prohibitively high (more than $6 billion) and include an enterprise business that is generally unrelated to anything else Apple is doing. So some sort of speech licensing deal with Nuance is more probable.
The rest of this post is at Search Engine Land.
ComScore put out its now monthly estimate of mobile market share today (based on a user survey of 30K respondents). As with IDC's numbers released earlier, Samsung is the top overall hardware maker in the US market. Among smartphone operating systems Android is number one and has been since roughly January 2011.
Below is the smartphone breakdown for March 2011:
Microsoft continues to struggle and does not seem to be gaining traction with Windows Phones (although some have pointed out that the rate of decline has slowed). Palm is entering the Nokia zone in terms of near disappearance from the US market. And the iPhone is flat according to these data.
Seemingly contradicting the data above, comScore earlier put out metrics that showed iOS in the US and Europe to have a reach that greatly exceeds Android. The iPad and iPod Touch make all the difference it would appear.
For comparison purposes here's the same comScore smartphone market share data for July 2010:
In the roughly nine months in-between RIM's share of the smartphone market has dropped about 12 percentage points.
Below is another view of mobile OS market share in the US from StatCounter:
UK-based Taptu started as a search engine for mobile websites and has wisely evolved into a news reader-aggregator like Flipboard and Zite. Its tagline is "DJ the news."
Taptu offers iPhone and iPad apps. There's also an Android phone app and, as of yesterday, an app for Android tablets. The company says that it built the new Android tablet version "from scratch rather than just porting an iOS version to Android."
It has a number of features that the iPad version does not have. For example:
Using the Instapaper API, Taptu gives users the ability to archive articles to read later via their Instapaper accounts. With the new Taptu themes, users can also switch between dark font on a white background, or white font on a dark background—allowing customers a better option for reading during the day or at night. Taptu 1.4 also takes advantage of the larger tablet screens with the ability to full screen article cards.
Here's a screen from the Android app:
The iPad universe is already crowded with news readers -- Flipboard, Zite, Pulse, Apollo -- and there are still more on the way (Google, AOL, Yahoo). Taptu hopes that by being one of the first news readers on Android it can get out in front of competition as the Android tablet market grows.
The only problem with that logic is that right now is that Android tablets aren't really selling. According to a recent US-based tablet-owners survey by Nielsen 82% of tablets in market are Apple iPads.
IDC has reported some revised Q1 smartphone numbers and they're pretty dramatic. Apple has become the number two smartphone maker, just behind Nokia, and in Europe Apple has overtaken Nokia in terms of Q1 sales. In Western Europe Samsung is now the top handset maker overall (feature phones + smartphones).
The Q1 sales numbers are not the same thing as overall market share but they show momentum. And the numbers show how far Nokia has fallen in just a couple of years. In Q1 2009 Nokia had 39% of the smartphone market, while Apple had 11%. As recently as Q1 2010 Nokia still maintained about 39%.
Source: IDC, 2009 Q1
Immediately below are IDC's global 2011 Q1 numbers, showing that Nokia has fallen from almost 40% share to 24.3% in a year. Unless the company brings out its Windows Phones fast (and unless they're good) it will continue to lose share to Apple and the Android OEMs.
Below are the Western Europe numbers, showing Apple passing Nokia in Q1 (not overall market share). Here the decline has been even more dramatic as Nokia lost 15 share points in a year (from 40.6% to 19.6%). RIM continued to grow, but HTC and Samsung saw huge gains, mostly with Android handsets.
The app vs. mobile Web debate is over; there's a kind of detente in place. Google and others had originally expressed hope and the expectation that apps were transitional and HTML5 would supersede them over time. While that's still possible in the long term, the superior UX of apps, their sheer numbers and their revenue-generating capability mean that they're here to stay -- for at least the foreseeable future.
Yet apps remain optional for publishers, marketers and merchants, while an optimized mobile website is an absolute must now.
Today the app stores that matter are iTunes and Android. RIM's own App World will likely disappear over time as the company embraces Android apps, as it has done preliminarily with the Playbook tablet. Nokia-Microsoft is a bit of a wild card. Nokia has its own apps store in Ovi, which may atrophy over time as well.
Microsoft is aggressively courting iPhone developers and trying to make it easy for them to port their existing apps over to Windows Phones. It remains to be seen if this strategy succeeds. However apps are ultimately critical for near-term consumer appeal and the success of Windows.
IHS/iSuppli has estimated app revenues growing to more than $8 billion by 2014, with Apple dominating and Android growing fastest. Here's what the firm has said:
Total download revenue from games and other applications are projected to continue rising in the next few years, jumping to $5.6 billion in 2012, $6.9 billion in 2013 and $8.3 billion in 2014
Apple, according to these estimates, currently owns more than 75% of app-store revenues. However IHS projects faster growth by Android, with revenues reaching roughly $425 million this year.
Apple reported that iTunes revenues (which includes movies and music) were $1.4 for the first three months of 2011. Assuming no growth that would mean total 2011 iTunes revenues of $5.6 billion. IHS says Apple's app-related revenue in 2011 will be $2.9 billion vs. $1.8 billion last year.
One reason Apple has more app-store revenues vs others (beyond sheer app numbers) is that it has a higher proportion of paid to free apps and its users download more apps than other smartphone owners. In addition there's less friction (vs. Android) in buying paid apps in the iTunes app store. Below are data recently released by Nielsen, comparing app consumption.
The most appealing device in the Samsung "tablet" lineup may be its 5" "Galaxy Player" introduced at CES this year. I had read about it but hadn't seen one until yesterday. In fact I saw the full array of Samsung tablets at AppNation. (The Galaxy Player is on the left in the picture below.)
The larger tablets are much less appealing than the iPad, both in terms of hardware and software. The 7" Galaxy Tab is somewhat appealing because of its more portable "on the go" form factor. But I was surprised how drawn I was to the 5" device.
Supposedly an iPod touch competitor the WiFi Galaxy Player looks like a giant Galaxy S Android phone but the additional screen real estate offers a better user experience than comparable Samsung smartphones. It can also still fit "in your pocket" in a way that even the 7" device cannot.
My belief is that if it were to be made into a phone it would be the perfect all-in-one device, with a larger screen for apps and internet use but small enough to still functional effectively as a phone. (With a data plan one could use Skype as the phone.)
I was unable to get any pricing information out of the Samsung representatives I spoke to. However pricing is going to be a mess for the company with so many tablet devices. Ultimately perhaps only two or three sizes will survive and the others will fall away for lack of demand/sales.
If the 5" device were priced below $200 and marketed properly it could become very successful and could become a true challenger to the iPod Touch.
Apple issued three unrelated press releases this morning about the arrival of the mythic (and overhyped) white iPhone 4, the iPad 2 and its arrival in Asia and other countries and, finally, about the location-tracking controversy with a promise to fix the matter.
Apple today announced that the white iPhone 4 will be available beginning tomorrow. White iPhone 4 models will be available from Apple’s online store, at Apple’s retail stores, AT&T and Verizon Wireless stores and select Apple Authorized Resellers.
Apple today announced that iPad 2, the second-generation of its breakthrough post-PC device, will arrive in Japan on Thursday, April 28 and Hong Kong, Korea, Singapore and eight additional countries on Friday, April 29. iPad 2 will be available at Apple retail stores at 9 a.m. local time, select Apple Authorized Resellers, and online through the Apple Store beginning at 1 a.m. Additionally, iPad 2 with Wi-Fi will be available in China beginning Friday, May 6.
Here's the unusual Q&A press release verbatim:
1. Why is Apple tracking the location of my iPhone?
Apple is not tracking the location of your iPhone. Apple has never done so and has no plans to ever do so.
2. Then why is everyone so concerned about this?
Providing mobile users with fast and accurate location information while preserving their security and privacy has raised some very complex technical issues which are hard to communicate in a soundbite. Users are confused, partly because the creators of this new technology (including Apple) have not provided enough education about these issues to date.
3. Why is my iPhone logging my location?
The iPhone is not logging your location. Rather, it’s maintaining a database of Wi-Fi hotspots and cell towers around your current location, some of which may be located more than one hundred miles away from your iPhone, to help your iPhone rapidly and accurately calculate its location when requested. Calculating a phone’s location using just GPS satellite data can take up to several minutes. iPhone can reduce this time to just a few seconds by using Wi-Fi hotspot and cell tower data to quickly find GPS satellites, and even triangulate its location using just Wi-Fi hotspot and cell tower data when GPS is not available (such as indoors or in basements). These calculations are performed live on the iPhone using a crowd-sourced database of Wi-Fi hotspot and cell tower data that is generated by tens of millions of iPhones sending the geo-tagged locations of nearby Wi-Fi hotspots and cell towers in an anonymous and encrypted form to Apple.
4. Is this crowd-sourced database stored on the iPhone?
The entire crowd-sourced database is too big to store on an iPhone, so we download an appropriate subset (cache) onto each iPhone. This cache is protected but not encrypted, and is backed up in iTunes whenever you back up your iPhone. The backup is encrypted or not, depending on the user settings in iTunes. The location data that researchers are seeing on the iPhone is not the past or present location of the iPhone, but rather the locations of Wi-Fi hotspots and cell towers surrounding the iPhone’s location, which can be more than one hundred miles away from the iPhone. We plan to cease backing up this cache in a software update coming soon (see Software Update section below).
5. Can Apple locate me based on my geo-tagged Wi-Fi hotspot and cell tower data?
No. This data is sent to Apple in an anonymous and encrypted form. Apple cannot identify the source of this data.
6. People have identified up to a year’s worth of location data being stored on the iPhone. Why does my iPhone need so much data in order to assist it in finding my location today?
This data is not the iPhone’s location data—it is a subset (cache) of the crowd-sourced Wi-Fi hotspot and cell tower database which is downloaded from Apple into the iPhone to assist the iPhone in rapidly and accurately calculating location. The reason the iPhone stores so much data is a bug we uncovered and plan to fix shortly (see Software Update section below). We don’t think the iPhone needs to store more than seven days of this data.
7. When I turn off Location Services, why does my iPhone sometimes continue updating its Wi-Fi and cell tower data from Apple’s crowd-sourced database?
It shouldn’t. This is a bug, which we plan to fix shortly (see Software Update section below).
8. What other location data is Apple collecting from the iPhone besides crowd-sourced Wi-Fi hotspot and cell tower data?
Apple is now collecting anonymous traffic data to build a crowd-sourced traffic database with the goal of providing iPhone users an improved traffic service in the next couple of years.
9. Does Apple currently provide any data collected from iPhones to third parties?
We provide anonymous crash logs from users that have opted in to third-party developers to help them debug their apps. Our iAds advertising system can use location as a factor in targeting ads. Location is not shared with any third party or ad unless the user explicitly approves giving the current location to the current ad (for example, to request the ad locate the Target store nearest them).
10. Does Apple believe that personal information security and privacy are important?
Yes, we strongly do. For example, iPhone was the first to ask users to give their permission for each and every app that wanted to use location. Apple will continue to be one of the leaders in strengthening personal information security and privacy.
Apple says that "sometime in the next few weeks" the company will issue a software update that:
It also says the "next major iOS software release" will encrypt the location data cache on the iPhone.
Apple has been sued (as usual) for the alleged involuntary tracking and storing of user location data. However there are arguably no damages at this point. As the Q&A above indicates Apple denies user tracking and, in accordance with the bullets above, says it will implement more privacy controls soon.
I was in a conference session yesterday when Apple's fiscal Q2 results came out. They've been widely covered but they're worth repeating:
Verizon said this morning that it activated 2.2 million iPhones during Q1.
By almost all measures this was a dramatic quarter for Apple. The mystery is the iPad, which "underperformed" (almost 5 million sold for $2.8 billion in revenue) in the context of the perhaps overheated expectations associated with the product.
Here are some iPad and Android-related comments from the earnings call. Regarding Android RBC analyst Mike Abramsky poses the question: isn't Android like Windows PCs and the iPhone like Mac?
Apple CFO Peter Oppenheimer:
We sold 4.7 million iPads during the March quarter, launching iPad 2 in U.S. on March 11 and in 25 additional countries on March 25. Customer enthusiasm has been tremendous for iPad 2 and we're working hard to get it into the hands of customers as quickly as possible.
Including both the original iPad and iPad 2, we had distribution in 59 countries by the end of the March quarter. Given the very strong customer demand and despite the increased geographic distribution, iPod (sic) [iPad] channel inventory declined by 400,000 from the beginning of the quarter, implying sell-through of about 5.1 million. This resulted in ending channel inventory of below 850,000, which was below our target range of 4 to 6 weeks. We sold every iPad 2 that we could make during the quarter and would have liked to end the quarter with more channel inventory. Recognized revenue from sales of iPad and iPad accessories during the quarter was $2.8 billion.
Employee demand for iPad in the corporate environment remains strong and CIOs continue to embrace iPad in an unprecedented rate. In just over a year since its debut, 75% of the Fortune 500 are testing or deploying iPad within their enterprises . . .
We're extremely pleased with customers' response to iPad 2 and are working hard to get it into the hands of customers as fast as we can.
Most financial analyst questions were directed at trying to figure out why Apple sold fewer iPads than they had forecasted. COO Tim Cook said that the company was backlogged with orders and it was trying to meet demand as fast as it could. Japan was not a factor.
Mike Abramsky - RBC Capital Markets, LLC:
It may not be a perfect analogy but just wondering with the rise of Android, what might be some of the similarities and differences you see versus the rise of Windows PCs in the 1990s versus Mac? And I'm just wondering if you think in the U.S., particularly Android, could become a possible headwind to your U.S. smartphone business, and how do you maintain such incredible growth in the space of that shift?
Apple COO Tim Cook:
On a worldwide basis, we just did 18.6 million iPhones, which is up 113%, which is materially faster than the market rate of growth. And we launched the iPad 2 and sold everyone of them that we could make. As we've said before, we're gaining traction in Enterprise on both the iPhone and iPad with astonishing 88% and 75%, respectively, of the Fortune 500 companies deploying or testing these. We've got the largest App Store with over 350,000 apps for iPhone and over 65,000 iPad-specific apps on iOS versus what appears to be fewer than 100 on Android. And so we feel very, very good about where we are and we feel great about our future product plan. We've also paid over $2 billion to developers, and we've had well over 10 billion applications downloaded. And so our business proposition is very, very strong.
As we've said before, we continue to believe and even more and more everyday that iPhone's integrated approach is materially better than Android's fragmented approach, where you have multiple OSs on multiple devices with different screen resolutions and multiple app stores with different roles, payment methods and update strategies. I think the user appreciates that Apple can take full responsibility for their experience, whereas the fragmented approach turns the customer into a systems integrator and few customers that I know want to be a systems integrator.
Cook's answer doesn't really address Abramsky's analogy. To many observers it does appear that Android will dominate the market vs. the iPhone just as Windows did vs. the Mac in the 1990s. However the iPad and iPod touch are two devices that extend Apple's reach and defy the analogy to a degree.
There has yet to be a really compelling Android tablet to challenge the iPad -- though eventually one or more will probably emerge. It will probably be smaller than 10" (probably 7" - 8"), "good enough" and priced at less than $400 (w/o carrier subsidy).
While there are dozens of forecasts out there, most of them with aggressive predictions of growth, no one knows really how big the tablet market will be. Much of that will depend on pricing. Regardless, tablets are not a fad and there's considerable evidence that they're starting to impact PC usage for their owners. (Smartphone usage still generally seems to be "additive" to PC usage.)
The latest tablet usage data to come out is from AdMob (Google), based on a March 2011 survey (n=1,430) in the US market. Google doesn't break it out by device, but respondents were probably more than 90% iPad owners.
According to the findings, "77% of respondents reported that their desktop/laptop usage decreased after getting a tablet" and 28% now call their tablet their "primary computer." In a related finding "43% of respondents spend more time with their tablet than with their desktop/laptop."
A majority (68%) of users spend at least an hour a day with their tablets, while most tablet usage is at home, at night, during the week. In terms of activities, here's what the survey revealed about most and least popular:
Microsoft released some new Windows Phone numbers a year after the new OS was first previewed to the public. Here are some of them:
IDC predicted, probably inaccurately, that Windows Phone would surpass the iPhone in terms of global market share by 2015. While 2015 is a long time away and anything could happen, the prediction is based on the assumption that the Nokia relationship will propel Microsoft's OS. Nokia and Microsoft would certainly be happy if that happened.
It's still not entirely clear how many Windows Phones have been sold to the public. The OS seems to be doing better in Europe than the US. In the US market Microsoft continues to lose share:
There are claims that Microsoft has sold roughly 3 million Windows Phones since launch. Microsoft said in January that it sold 2 million handsets. However these numbers refer to shipments and not necessarily to consumer purchases.
The main way that Google argued its mobile operating system, Android, was superior to Apple's was its "openness." Google was merely the anchor of an open ecosystem of developers, OEMs and others. However that was never exactly true and it's less and less true today.
An article in Bloomberg BusinessWeek reveals the degree to which Google is taking over Android to prevent "fragmentation," as well as advancing other goals and interests. The company sees the operating system as a strategic key to its future -- even though there's little direct revenue associated with it. Yet Android devices are Google search and advertising devices and the company has quickly come to dominate mobile advertising, in part because of Android's early success.
Here's an excerpt from the article:
Google says its procedures are about quality control, fixing bugs early, and building toward a "common denominator" experience, says John Lagerling, director of global Android partnerships at Google. "After that, the customization can begin."
Over the past few months, according to several people familiar with the matter, Google has been demanding that Android licensees abide by "non-fragmentation clauses" that give Google the final say on how they can tweak the Android code—to make new interfaces and add services—and in some cases whom they can partner with. Google's Rubin says that such clauses have always been part of the Android license, but people interviewed for this story say that Google has recently tightened its policies.
Facebook, for example, has been working to fashion its own variant of Android for smartphones. Executives at the social network are unhappy that Google gets to review Facebook's tweaks to Android, say two people who weren't comfortable being named talking about the business. Google has also tried to hold up the release of Verizon Android devices that make use of Microsoft's rival Bing search engine, according to two people familiar with the discussions.
The problem is not Google's efforts to ensure quality or establish standards. It's the rhetoric of openness and the apparent reversal of that now, as detailed in the article. There's also a perception of capriciousness on Google's part around Android.
The wide and enthusiastic embrace of Android by third parties is responsible for its popularity and success. However when the iPhone emerged Android was effectively the only place to turn for Motorola, HTC and other OEMs. Symbian wasn't competitive and neither was Windows Mobile at the time.
HTC, Motorola and Samsung bet big on Android. That's partly why it will capture the top smartphone OS spot this year, according to IDC. Had Android not started out as an "open" platform, with the promise of third party "tweaks" and modifications, it probably wouldn't be where it is today.
There are indications that when Google is threatend or unhappy with a development in the Android ecosystem it will intervene to protect its own self interest. This is the gist of the BusinessWeek article. However there's a darker version of this in the facts alleged in a lawsuit filed by Skyhook Wireless.
There, Google allegedly used its control over Android to disrupt economic relationships Skyhook had with two major Android handset OEMs. If true the case is very disturbing and directly contradicts Google's efforts to cast itself as the benevolent shepherd of an "open" software platform.
Meanwhile Samsung and Motorola, key Android partners, are contemplating ways to lessen their dependence on Android. Samsung has a homegrown mobile OS (Bada) and Motorola is contemplating developing one as a hedge against too much reliance on Android. However neither of these is likely to succeed at the level that Android has.
As Google control over Android grows some partners have become upset, prompting complaints to the US Justice Department, the article reveals. The Justice Department (or FTC) may take up a near-term investigation but almost certainly the Europeans will at some point. They're currently conducting an antitrust investigation about Google's dominance of search on the PC. However Google is even more dominant in mobile search.
I first (somewhat radically) predicted in December that Google would eventually be separated from control over Android. Given the information in the BusinessWeek piece, absent renewed "restraint" by Google, I'm increasingly led to believe my prediction will come true.
The huge error that the Motorola Xoom made at launch was its $799 price tag. RIM is coming out on April 19 at $499, which matches the iPad 2's entry level WiFI price.
What's not apparent to most non-tech-insiders is that RIM's Playbook is 7". In one way of looking at it the Playbook is more expensive than the iPad. No doubt, if the 7" version succeeds a 10" version will appear later.
Psychologically the $499 entry level price point is critical for iPad competitors, in the same way that smartphones priced above $199 (w/contract) are essentially DOA. Consumers will now be willing to consider the Playbook at $499 and then will discover it's smaller.
Somewhat paradoxically, though it makes the device more expensive in some respects, the 7" size gives the Playbook a fighting chance vs. the iPad because it's more portable. A 10" competitor from RIM out of the gate would likely fail in the same way that Xoom is failing to build momentum.
Many enterprises will probably give the Playbook serious consideration and the smaller form factor will be appealing to many consumers as well. The Galaxy Tab sold on the strength of its smaller size -- not the UI/UX, which was crappy.
Like a Hollywood movie the Playbook will get a wide release on April 19, going on sale at more than 20,000 stores in the U.S. and Canada. Among them are BestBuy, RadioShack and Staples, in addition to carrier stores.
Battery life has been a rumored issue for the Playbook. But given the strength of RIM's brand and its price point, I would imagine the Playbook will be a modest hit when it comes out.
As you've seen Amazon's Android Appstore launched this morning. Reportedly it has 3,800 apps at launch, a far cry from the nearly 200,000 now in Google's Android Market. But the fact that this is Amazon and that it has stored credit cards on file should give Google a real "run for its money" -- literally.
The online version of the Android Market is an improvement over the mobile version of the store. And the over the air downloads from the PC are great. However Amazon is likely to do a much better job with the overall user-experience and helping consumers discover Android apps. It's also likely over time to sell more paid apps for developers than Google itself will.
Google has struggled in the past to sell apps because of friction around billing, primarily because of a lack of Google Checkout adoption and inconsistent options across countries and carriers. Amazon alleviates those challenges for developers because it has millions of consumer credit cards on file. One-click buying will apply here just as it does across Amazon on more conventional goods.
Amazon will be using its vaunted, if imperfect, recommendations algorithm and collaborative filtering to help users learn about apps based on purchase and browsing history. It will also be doing some additional things to promote apps: giving away a "free app a day" and allowing users to "test drive" apps online before they buy. They'll get access to an online simulator that will show them what the app is like.
My experience in buying a couple of apps this morning was relatively easy. However the first time you download an app (and the Amazon Appstore app itself) it's a pretty non-intuitive process. That's a criticism I have of Android in general. Thereafter it becomes much simpler.
Amazon's trusted brand, stored credit cards and more user-friendly online experience should make the appstore a big success. It will be very interesting to see how Google reacts if my prediction is correct and Amazon becomes a bigger seller of paid apps than Google itself.
The tech/telecom world is still focused on AT&T-Mobile and its prospects this morning. Meanwhile Sprint has gone "all in" with Google Voice. The carrier also introduced the Google Nexus S (Samsung) 4G handset with NFC capability.
In terms of the Google Voice integration, Sprint and Google Voice users can:
It's a little bit confusing at first blush. In the former case Google Voice number becomes your Sprint mobile number (this is number porting). In the latter scenario, the existing Google Voice number is replaced by the Sprint phone number.
This is another step toward Google as "carrier 2.0" and the mainstreaming of Google Voice. For users the benefit of this is more control over how calls are received and routed. Google explains how it works:
Sprint customers will be able to use their existing Sprint mobile number as their Google Voice number and have it ring multiple other phones simultaneously. So now, calls to your Sprint mobile number can easily be answered from your office or your home phone, or even your computer through Gmail. Calls from Gmail and text messages sent from google.com/voice will also display your Sprint number. This basically gives Sprint customers all the benefits of Google Voice without the need to change or port their number.
Alternatively, Google Voice users can choose to replace their Sprint number with their Google Voice number when placing calls or sending text messages from their Sprint handset. This feature works on all Sprint phones and gives Sprint users all the benefits of Google Voice without the need for an app.
In either event Google Voice will replace Sprint voice mail. There are international calling benefits (via Google Voice) as part of the deal as well.
Millennial Media's "Mobile Mix" report for February is out. It reflects device usage on Millennial's ad network, which the company says (per IDC) is the largest "independent" network, after Google and Apple. Among the stats offered by the company:
Moving on, there are a number of interesting observations to be made from the "Top 30 Mobile Devices" chart below.
The Galaxy Tab is the number 7 device on the list. In January Samsung announced that it had sold two million of the devices. However it was later forced to clarify that those were not sales to consumers but sales to distributors. The actual consumer sales figures are significantly less -- perhaps less than half the announced number. Indeed, while I've seen them in stores, I have not seen one in use in the world by an actual person.
Take a look at the "Google Insights for Search" chart below. This is for the last 30 days but it looks very similar going back. There is effectively no demand, as reflected in search volume, for the "Xoom" or the "Galaxy Tab." Accordingly, given all the available evidence, we can safely assume that almost all consumer sales of the Galaxy Tab have stopped or declined to a trickle.
There are likely relatively few Galaxy Tabs actually in the market. This probably means that to be in the seventh position on Millennial's chart those few devices are getting very heavy usage -- especially in comparison to other Android smartphones.
Alternatively it could mean that sales of those devices below the Tab on the chart were fewer than the Tab itself. That would probaby be an incorrect interpretation however. More likely the data reflect that the Tab is being used much more than other Android devices and all the BlackBerry handsets, for mobile Web access.
This brings to mind InsightExpress' comment in its recent consumer insights report that there's a new "a middle category" of mobile users who technically own smartphones but don't engage with them as fully as, for example, iPhone owners. InsightExpress equally observed that this middle group doesn't act like feature phone owners either.
Extrapolating from the position of the Galaxy Tab vs. other Android devices on Millennial's network it would appear that a large percentage of Android users fall into this new middle category.