Other Mobile Devices

First iPad Apps Arrive Ahead of Hardware

As has been reported, the first iPad apps showed up late yesterday in the iTunes store. I haven't bothered to try and count but the Wall Street Journal says there are 2,300 at launch. As expected, many of the paid apps cost more on average than on the iPhone -- larger device, larger price. 

Since people don't have these new devices yet in their hands, we don't know exactly how they'll be used in different or similar ways vs. the iPhone/iPod Touch. While people have repeatedly said that the iPad is like a big iPod Touch, that description fails to appreciate that there will be a range of new use cases here -- especially for the enterprise and business users -- and it will "diverge" from iPod Touch use cases fairly quickly. 

Given the generally (very) positive reviews we can assume the device will go on to be a success. It probably won't be a "mainstream" success until the price comes down somewhat, following the pattern of the iPhone. Like the iPhone also the iPad will probably represent the beginning of a new phase of computing. 

But how will these devices be used and what types of apps will really succeed here? They won't be used like smartphones in most cases, but neither will they be used just like laptops. They will travel with people but they mostly won't be used "on the go," though perhaps in the car by kids in the back seat. 

In this very preliminary moment I imagine the iPad as a reader and media/entertainment device (books, news and video). It will also likely emerge as a supreme (catalog) shopping platform I would imagine -- NearbyNow's Scott Dunlap discussed with me yesterday some of his company's efforts in that direction for the iPad -- and as a phenomenal platform for magazine publishers and their equivalents. 

I also suspect that many people will have these in the kitchen over time, with all the implications that conjure up: quick Internet search, weather, news, recipes, video, VoIP calling and so on. There will also likely be a wider range of uses for this device than the iPhone. The immediate "killer app" however is Netflix -- Pandora to a much lesser degree here than on the iPhone. 

It will be fascinating a year or two from now to look back. Will the iPad have created the kind of impact on the market that the iPhone did? My belief is yes but we'll see. 

Meanwhile Flurry Analytics shows that develop interest in the iPad continues to grow:

For reference, we compare this to pre-iPad ratios to demonstrate how much developer interest the Apple iPad is attracting. Specifically, we compare averages taken across 2009 vs. the last 60 days, pulled earlier this week.

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One of the less recognized strategic benefits for Apple of the iPad (and its probable success) is that it keeps more developers and development resources tied up with the iPhone OS -- less bandwidth to develop for competing platforms. Appcelerator and Rhomobile: get cracking. 

We can expect to see Android/ChromeOS-based imitators of the iPad (with Flash) come out in fairly short order. The HP Windows 7 slate device (absent an aggressive price point) will likely fail. But Asus has announced a device and there will be others later this year and early next year. 

Google, for example, was going to put out a cloud-only netbook by end of year in time for Xmas shopping. I suspect the strategy will shift somewhat now, both among hardware OEMs and at Google, in the same way that the original Android prototypes looked like BlackBerry phones but post-iPhone adopted the iPhone's full touch-screen form factor. 

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Related: Apple's list of iPad-ready sites (read: HTML5 video in place). 

iPad Early Review Consensus: "It's a Winner"

There are the fanboys, the indifferent and, as Sarah Palin might describe them, the "haters." Those categories probably capture the "polarized" camps -- to use David Pogue's word -- surrounding the iPad, which becomes available this weekend. Many were expecting it to flop as an expensive new toy that was seemingly unnecessary and lacked features (e.g., Flash).

However the customary early reviews are in and they praise the device with some reservations. The NY Times' David Pogue "cops out" and writes effectively two reviews, one praising the device and one for its geek-detractors who lament the absence of hardware features. 

Here are the major reviews and some excerpts . . .

Mossberg/WSJ:

So I’ve been using my test iPad heavily day and night, instead of my trusty laptops most of the time. As I got deeper into it, I found the iPad a pleasure to use, and had less and less interest in cracking open my heavier ThinkPad or MacBook. I probably used the laptops about 20% as often as normal, reserving them mainly for writing or editing longer documents, or viewing Web videos in Adobe’s (ADBE) Flash technology, which the iPad doesn’t support, despite its wide popularity online.

My verdict is that, while it has compromises and drawbacks, the iPad can indeed replace a laptop for most data communication, content consumption and even limited content creation, a lot of the time. But it all depends on how you use your computer.

David Pogue/NY Times  (the detractor):

The bottom line is that you can get a laptop for much less money — with a full keyboard, DVD drive, U.S.B. jacks, camera-card slot, camera, the works. Besides: If you’ve already got a laptop and a smartphone, who’s going to carry around a third machine?

David Pogue/NY Times (the fan):

The iPad is so fast and light, the multitouch screen so bright and responsive, the software so easy to navigate, that it really does qualify as a new category of gadget. Some have suggested that it might make a good goof-proof computer for technophobes, the aged and the young; they’re absolutely right.

And the techies are right about another thing: the iPad is not a laptop. It’s not nearly as good for creating stuff. On the other hand, it’s infinitely more convenient for consuming it — books, music, video, photos, Web, e-mail and so on. For most people, manipulating these digital materials directly by touching them is a completely new experience — and a deeply satisfying one.

The bottom line is that the iPad has been designed and built by a bunch of perfectionists. If you like the concept, you’ll love the machine.

USAToday (Ed Baig):

The first iPad is a winner. It stacks up as a formidable electronic-reader rival for Amazon's Kindle. It gives portable game machines from Nintendo and Sony a run for their money. At the very least, the iPad will likely drum up mass-market interest in tablet computing in ways that longtime tablet visionary and Microsoft co-founder Bill Gates could only dream of. 

Chicago Sun-Times:

After a week with the iPad, I’m convinced that it can do damned-near anything I’d use a notebook for. I’m leaving tomorrow for a few days in New York and I plan on leaving my notebook behind. I’m using the iPad as my sole computer. 

Netflix streaming will also be available on the iPad at launch, which wil give a huge "mainstream" boost to the device. The fence-sitters will likely be out this weekend at Apple and BestBuy stores trying to get a "hands on" look or to actually buy one. It's likely that whatever inventory exists at these stores will sell out and we'll see a press release to that effect on Monday. We'll see. 

We're also likely to see the clones arrive en masse now as Apple establishes tablets as a legitimate category for computing. 

AdMob Metrics Offer Preview of Market Future

AdMob put out its February data early this morning. Among the things its shows -- as an indication of future industry trends -- is:

  • The growth of smartphones as a percentage of the market
  • The growth of Android in particular
  • The growth of non-phone Internet devices (MIDs)

First it must be repeated that the data AdMob gathers is from its network and it does not represent an objective view of the mobile Internet as a whole. Still the trends are going to be broadly consistent with the mobile market and Internet more generally.

To that end, I see several things that are interesting about where the market is headed. First: the overall traffic trends on the AdMob network; smartphone share growing (48%), so is the share of MIDs: 

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Smartphones are now approaching 20% of the installed user base in the US. Smartphones and quasi-smartphones will likely come to be dominant (51%) in 3-5 years. In terms of MIDs, here's what AdMob says:

The mobile Internet devices category experienced the strongest growth of the three, increasing to account for 17% of traffic in AdMob’s network in February 2010.  The iPod touch is responsible for 93% of this traffic; other devices include the Sony PSP and Nintendo DSi. In absolute terms, mobile Internet device category traffic increased 403%.

If the iPod Touch is the proof of concept, the iPad will spur growth in this category. There are probably going to be 10 relatively high profile tablet devices in the market. All of them will offer browsers (ultimately) and fall into this MID category. The iPad is likely to be the leader but we'll see.

The challenge with these tablets is how to count and account for them. Are they like laptops without the physical keyboard or are they more like smartphones? Do ads on the iPad, for example, count as "mobile" or will they be counted as Internet ads? It will probably depend on whether the ad is in-app or mobile Web. Even then there will be new ad units for these devices. The use cases for MIDs/tablets will be varied and interesting to watch develop. 

Here's market share data for February 2010 and immediate below AdMob data from a year ago:

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Here's the breakdown:

  • Nokia/Symbian global share: 43% (2/09) 18% (2/10)
  • iPhone OS: 33% (2/09) 50% (2/10)
  • Android:  02% (2/09) 24% (2/10)
  • RIM: 10% (2/09) 04% (2/10)

Among other things what these data show is a three or four way race for smartphone dominance among iPhone, Android, RIM (in the US) and Nokia (internationally). Look in particular at the traffic declines for Nokia, as a percentage of overall AdMob traffic. Palm is dead unless there's a miracle of some sort. And the new Windows (7) Phone isn't out so we can't assess its prospects yet.

Survey: 15% 'Seriously Considering' Buying iPad

Another iPad-related consumer survey: this time comScore has just come out with data from a poll of 2,176 US adults, conducted earlier this month, about interest in the iPad and purchase intent. The survey shows the same levels of aided awareness for the iPad and Kindle; and, interestingly, it shows that 6% of respondents have purchased a Kindle while 1% report purchasing an iPad.

In the next three months, the survey reports, 14% of respondents are "seriously considering" buying the Kindle and 15% of respondents are considering the iPad. Here's some discussion of the findings from the release:

Consumers were asked several questions regarding their awareness of various e-readers and tablet devices and their past purchase behavior or intent to purchase these devices. The results showed very high awareness of the iPad out of the gate, with an aided awareness of 65 percent, the same as that of the Amazon Kindle e-reader. Overall, consumers have demonstrated a high level of interest in these types of devices with between 58 percent and 69 percent of consumers having conducted online research of the top five devices. Amazon Kindle rated highest in terms of current device ownership at 6 percent of all Internet users, followed by Sony Reader at 4 percent. The iPad rated highest in terms of consumers seriously considering purchase over the next three months at 15 percent of Internet users, with the Kindle at 14 percent.

As the quoted passage above reflects -- and perhaps the most striking numbers in this survey -- 66% and 69% of users said they had conducted online research about the iPad and Kindle respectively. If those numbers can be extrapolated at all it means that there's potentially substantial demand that could be unlocked if the iPad turns out to be at all worthwhile.

Here are a few additional findings (verbatim from the release):

  • Male and female survey participants had nearly identical favorability around the choice of the name “iPad” In the case of both genders, approximately 49 percent had a positive impression of the name, 27 percent were indifferent, and 24 percent had a negative impression.
  • While ownership of an iPhone or iPod Touch was a strong predictor of those who have already ordered an iPad, it was not a strong predictor of purchase intent. 3 percent of iOwners had already purchased the iPad compared to 1 percent of non-iOwners, but 15 percent of each consumer segment indicated an intention to purchase the device in the next three months.
  • iOwners had significantly higher awareness of the iPad than non-iOwners, with 84 percent of iOwners having heard of the iPad compared to 61 percent of non-iOwners. 22 percent of iOwners also indicated they had seen an iPad commercial on TV compared to just 12 percent of non-iOwners.
  • The most important device attributes (top 2 boxes on a 7-point scale) that consumers indicated they would like to have included in the iPad were: ability to use multiple applications/programs at once (43 percent), having a screen the same size as a laptop or desktop computer (37 percent) and having a built-in camera (34 percent). Among iOwners, the percentages were substantially higher at 56, 66 and 51 percent, respectively.

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Below are the stated usage intentions. People appear to be, at least at this stage, less interested in this device as a gaming platform than as an Internet and email device, as well as a media pad for consuming magazines, newspapers, video and music. 

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Last week the Wall Street Journal cited unnamed sources for the proposition that Apple had already sold "hundreds of thousands" of iPad units. I suppose the truth will out. 

HP Slate Readying iPad Attack: 'The Full Web'

Adobe is in full damage-control mode as it seeks to convince the world that Apple and not Flash is the true pariah in the new world of mobile computing. In the first new imagery since its introduction by Microsoft CEO Steve Ballmer at CES, HP and Adobe present the forthcoming HP slate device and demonstrate how it provides users with access to the "full Web and not just a part of it" -- as opposed to Apple's "incomplete" Web capability.

Notice in the video below, which is a "preview of Flash player and [Adobe] Air on HP's slate device," the repeated indirect critical references to the iPad without the mention of Apple or its anti-Flash devices:

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My belief is that the iPad will be a success and devices that merely reproduce the PC experience on a slate without a keyboard will fail because they're a weaker version of a laptop -- that is unless they're very cheap.

A Wave of 'Kindle Remorse' As iPad Approaches

Recent ChangeWave survey data shows considerable demand for the forthcoming iPad and, interestingly, a wave of "buyer's remorse" among some of those with other tablets and eReaders. According to the survey of "3,171 consumers, conducted in the aftermath of that Apple announcement (Feb 1-10)," 57% of eReader owners are either uncertain about their purchase or would have bought an iPad.

Here are the data: 

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Here's ChangeWave's "bottom line":

While the iPad launch is likely to strengthen overall e-Reader demand, the survey suggests Amazon and its competitors could well find themselves relegated to playing catch-up within just a few quarters if they don't preemptively move quickly to upgrade their own e-Readers.

iPad Coming to Stores on April 3

Yesterday I said the good folks at Gartner were effectively clueless about whether or not the iPad would sell in quantity this year. But soon we'll find out what the preliminary (early adopters, fanboy) demand will be.

Apple announced this morning that pre-orders will happen on March 12 and the "magical and revolutionary" device will become available on April 3:

Apple® today announced that its magical and revolutionary iPad will be available in the US on Saturday, April 3, for Wi-Fi models and in late April for Wi-Fi + 3G models. In addition, all models of iPad will be available in Australia, Canada, France, Germany, Italy, Japan, Spain, Switzerland and the UK in late April.

Beginning a week from today, on March 12, US customers can pre-order both Wi-Fi and Wi-Fi + 3G models from Apple’s online store (www.apple.com) or reserve a Wi-Fi model to pick up on Saturday, April 3, at an Apple retail store.

There's lots of conflicting speculation and survey data on demand. Pre-orders and early sales will give the market a pretty good sense of whether this is going to be another hit or not. Price, which could be reduced, will also play a role. The "low-end" iPad, which will be the most successful of the many options, comes in at $499. This price was the big surprise at the launch event and much cheaper than the speculated $800-$1,000. 

If you recall once the iPhone gained its subsidy sales took off. I think there's no question that at the right price, which for the iPhone was sub-$200, this device will sell well. 

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As this device moves into the wild, it will be interesting to see how people use it. AT&T CEO Randall Stephenson doesn't believe he'll get a lot of 3G subscriptions off the device. And I would agree; the "use case" is going to be at home, in hotels and other places that have WiFi (maybe in the car for kids and movies/games). In addition the people that buy this will have smartphones already for access to the mobile Internet "on the go." 

Gartner Has No Idea How Many iPads Will Sell

IT consulting firm Gartner said today that global PC shipments will increase by 20% this year:

Worldwide PC shipments are projected to total 366.1 million units in 2010, a 19.7 percent increase from 305.8 million units shipped in 2009, according to the latest preliminary forecast by Gartner, Inc. Worldwide PC spendingis forecast to reach $245 billion in 2010, up 12.2 percent from 2009.

That kind of projection is relatively safe given that the economy is improving and there's pent up demand among consumers and enterprises (especially) for new machines. But Gartner goes on to say:

Apple's announcement of its upcoming iPad has created much discussion in the marketplace regarding market opportunities for traditional tablet PCs and next-generation tablet devices, such as the iPad. Gartner's initial thinking is that vendors could ship up to 10.5 million traditional tablets and next-generation tablet devices worldwide in 2010.

Here's where it all breaks down and falls apart.

Tablet computers have historically failed. The Kindle is a hit but it's not a PC. The many competitive eReaders (also not PCs) have yet to enter the market (except Nook and Sony effectively). The iPad (also not a PC) will be successful in my view but its success is highly speculative at best right now. 

There will be a range of Android tablets (Nook is one such device) that may succeed (depending on price). These are also not PCs.

True tablet PCs -- flat panels or slates running Windows 7 -- are again destined to fail. That's because people will opt for Windows 7 netbooks or laptops instead, which are more functional. Tablet computers such as the HP Windows 7 device unveiled at CES are not going to sell (unless they're dirt cheap).

As for the non-PC iPad and its non-PC slate competitors (other than Kindle and Nook), any projected sales figures are completely speculative and pulled from the ether or someone's posterior. 

Mobile Ads: Best of Times, Worst of Times

Brands, agencies and marketers of all stripes are increasingly interested in mobile advertising (or so surveys reflect), especially in the last six months. However "a fragmented landscape of different devices, operating systems and application storefronts" is confusing to many: What should we buy and how?

Companies such as Velti, Amobee and others aim to simplify mobile advertising with "end-to-end" solutions. But confusion remains. 

Meanwhile the data continue to show that mobile outperforms online by almost 5X in terms of most brand performance metrics. Those that get in now will reap the benefits while others remain on the sidelines whining and scratching their heads. 

Here are recent data from a broad survey of Insight Express-monitored and measured campaigns:

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Here's what the press materials said about these metrics:

The study used norms developed in online ad testing as a benchmark to draw conclusions around the performance of advertising on mobile devices. InsightExpress compared the two using InsightNorms, the company’s normative database containing over one thousand online ad effectiveness campaigns and over one hundred mobile ad effectiveness campaigns . . .

InsightExpress found mobile campaign norms were 4.5 to 5 times higher than online norms against measures of unaided awareness, aided awareness, ad awareness, message association, brand favorability and purchase intent.  “Online campaigns continue to offer exceptional reach, flexibility and variety,” said Joy Liuzzo, Senior Director of Marketing & Mobile Research at InsightExpress.  “However, the high levels of engagement, the explosion in technical capabilities, low levels of clutter and the novelty of mobile advertising all likely contribute to increased brand impact.”
 
A comparison of three different mobile media types (Mobile Internet, SMS and Mobile video) revealed that Mobile Internet is the current powerhouse. Mobile Internet campaigns resulted in increases of 9 percentage points for unaided awareness, 9 percentage points for aided awareness and 24 percentage points for ad awareness . . . SMS campaigns generated increases of 5 percentage points for unaided awareness, 10 percentage points for aided awareness and 18 percentage points for ad awareness.    

SMS offers the greatest reach, followed by mobile Web and then apps and video. 

Satisfaction Higher for eReaders than Netbooks

An NPD Group survey has found (n=1,000) that 93% of eReader owners are “very satisfied” or “somewhat satisfied” with those devices. The survey didn't break out the devices (or at least what I saw). However most of those devices are going to be Kindle or Sony tablets at this point. 

From the publicly released portions of the report:

  • 60% of owners said wireless access was their favorite feature on their e-Reader; touch was mentioned by 23% of owners (these folks are not the Kindle owners)

Suggested improvements:

  • more book title availability -- 42%
  • longer battery life -- 39%
  • color screens -- 34%

The survey also found that "about three-in-ten owners say they use at least one another device for reading e-books, such as a PC or a smartphone." 

Compare this to a Q2 2009 survey of netbook owners by NPD: 

  • "58% of consumers who bought a netbook instead of a notebook said they were very satisfied with their purchase, compared to 70% of consumers who planned on buying a netbook from the start."
  • Among those 18-24, "65% said they bought their netbooks expecting better performance, and only 27% said their netbooks performed better than expected."

This higher level of dissatisfaction among netbook owners goes to expectations of buyers who anticipated more than what they actually received. There were undoubtedly different and fewer high expectations of eReaders. However the iPad may face very high expectations. By the same token it addresses some of the "wish list" of features above.

NPD in August last year also put out survey findings that asserted 37% of consumers were interested in purchasing an eReaders. Other surveys closer in time to the iPad launch showed much higher demand/interest.

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Related: Amazon Said to Buy Touch Start-Up (to better compete with iPad)

Considering iPad vs. Chrome Netbooks

The "post-mortems" on the iPad launch and related disucssion of the potential success or failure of the device makes me think in turn about the Google Chrome OS and the forthcoming Google netbooks that will come to market "by the holiday shopping season" this year. By that point iPad will have been out for about nine months. In addition other tablet competitors and eReaders will be flodding the market; winners and losers will start to emerge.

Netbooks have been enormously popular with consumers, because of their lower pricing. I previously argued about the Google netbook that pricing was critical to success here too:

Google knows that to succeed a Google/Chrome netbook will need to come in at less than $400 at the highest end and potentially around $200 to really take off. The economics of that lower price point may be very difficult to achieve. Accordingly Google & partners may need to distribute via subsidized mobile carrier relationships to bring the price down to the point where it will really get consumers’ attention. I would speculate that Verizon, given the Google-Android relationship, is almost certainly going to do this.

A Chinese company called Hivision has produced an Android (not Chrome) netbook that might sell for less than $200 in the US. It's unclear what the demand would be for this machine, but that pricing (without a carrier subsidy) certainly gets attention. 

The Chrome OS netbook won't have any software on the machine; it's all about the Internet. So is the iPad, but it will have plenty of software on the device, including iPhone apps. The range of tablets, slates and eReaders will offer the Internet and varying levels of software support. Some of them will be suitable as a laptop or netbook replacement and some will not.

Netbooks have effectively made it difficult for PC makers to charge much more than about $650 for their larger machines. (Apple is the lone exception here.) But the fate of netbooks is uncertain in the wake of the new slate/tablet category. It will take at least a year for all this to play out, but netbooks could suffer if the iPad and its kin succeed. 

As a kind of microcosm of this, the iPad and Chrome netbooks may wind up competing directly as portable Internet devices. Chrome will have more features and capabilities, but overall the iPad will be a more versatile and appealing device (depending on the software) as a "second computer."  

Now back to price: the cheapest iPad is $499, the most expensive is $829. Apple is going to see most of its sales fall in the realm of $499 to $629. For Chrome OS netbooks to succeed they'll need to top out at $500. If they come in at less than $300 Google will probably see these devices sell. But, when considering a "second computer" (and this is a point to emphasize), if the prices are generally comparable -- in this case that means a $400 to $500 price point for both the Chrome netbook and the iPad -- I'd probably go with the iPad. 

I wonder how many others would too? 

The iPad, AT&T and Advertisers

On the morning after the iPad unveiling people are still trying to figure out whether consumers will want the device, what it might be good for and even what it is. The mule (half horse, half donkey) of mobile computers, it seeks to create (or solidify) a new category of devices that offer the benefits of smartphone mobility, but with a larger screen is are lighter and more elegant than a laptop or netbook.

A number of companies rushed out releases saying they would build apps for or support it. In the mobile advertising realm JumpTap, Greystripe and Mobclix were among the first to make announcements or public statements. Motally said it would provide analytics for the iPad. 

Because of the high expectations there are a fair number of disappointed people. I'm relatively bullish on this device, but I see the confusion and hestitation as partly justified. 

Many of those disappointed have characterized it as just "an iPod Touch on steroids," using the tired metaphor. But is it? The iPod Touch analogy and the fact that it runs iPhone apps suggests that many/most of the advertising options will be comparable. I believe, however, that there will be many more and more varied opportunities for advertisers on this device -- assuming it sells. 

The 9.7 inch screen size means that ads on websites viewed through the Safari browser will be "viable" in a way they aren't currently on the iPhone or other smartphones. But it equally means that ads appearing within iPad-specific versions of magazines and newspapers will be more compelling and interesting than they could be within an iPhone app or on the mobile Web more generally.

Video will be central to the user experience, and so will video advertising. This is really the first device where mobile video advertising could get really interesting. 

And then there's retailing and catalog sales; this could be another very interesting opportunity on this device. Imagine the Macy's catalog on this device with embedded e-commerce -- not the Macy's e-commerce website but a visually rich version of the catalog, where users can turn pages as do in the physical, paper catalog. 

As these examples seek to illustrate the larger visual "canvas" will be a potential "game changer" (to use another tired metaphor) for marketers. 

Another striking element about the iPad is the pricing of the 3G plan from AT&T. Many (including me) had expected a more expensive devices with a cheaper version subsidized by a two-year carrier commitment. Instead the device offers two options: $14.99 and $29.99. The latter is "unlimited" and unlocked; there's no contract required. 

This pricing scheme may be a new precedent: low-monthly unlimited data on a non-phone connected device (Kindle doesn't count here). This isn't exactly like a dongle or wireless card. (BTW: this device can be used as a phone with a VoIP app.) However this lower-priced model for data could enable a wide range of new connected mobile devices. It could also bring competition from carriers like Sprint with additional capacity, looking for new revenue streams.  

Could IDC Be Really Wrong on Android?

IDC's recent prediction that Android would be the second most numerous smartphone OS in the world by 2013 has garnered much uncritical coverage. Here are the IDC bullets:

  • Symbian will retain its leadership position worldwide throughout the forecast period. Due primarily to the strength of Nokia in markets outside of the United States, Symbian continues to lead all other mobile operating systems.
  • Android will experience the fastest growth of any mobile operating system. Starting from a very small base of just 690,000 units in 2008, total Android-powered shipments will reach 68.0 million units by 2013, making for a CAGR of 150.4%. Android will benefit from having a growing footprint of handset vendors supporting it and will finish second to Symbian in shipments by 2013.

Before IDC Gartner made the same prediction, but by 2012. Both of these firms could turn out to be wrong -- very wrong.

It makes sense that Android will continue to gain, given the number of OEMs building and releasing devices with the OS. Indeed, Google SVP Jonathan Rosenberg, on the Q4 earnings call, said "Android started 2009 with just one device and is now at 20 in 48 countries." And the Verizon Android Droid is credited with dampening some of the iPhone's recent sales momentum: the iPhone sold "only" 8.7 million units vs. the 9.1 - 9.5 million that some of the most bullish Wall Street analysts had anticipated. 

OK, Apple sold 8.7 million iPhones in the most recent quarter, but it also sold sold 21 million iPods. The company doesn't break out iPod Touch sales. But while iPod sales are declining, iPod Touch sales are up. At the end of the last quarter there were almost 60 million iPhone OS devices around the globe (including the iPod Touch). Morgan Stanley estimated the number at 57 million in early December. 

So let's assume that 5 million of those 21 million iPods are iPod Touch devices. That would put the combined sales of the iPhone OS units at more than 70 million today. So the iPhone OS (not the iPhone itself) has already beaten the IDC Android unit sales projections for 2013. 

What happens tomorrow with the iPhone is important for the future success of the platform in the US market. Regardless of whether there's a new iPhone OS or 4G device, if Apple announces that AT&T exclusivity is through and that the handset will be available from Verizon and/or others, we're likely to see Android momentum falter. If not, Android will continue to gain steam.

Apple executives made some comments yesterday, however, that suggested AT&T exclusivity may not be done. They expressed confidence in AT&T and its ability to "fix" network problems that have frustrated and infuriated iPhone users. That kind of remark doesn't sound like one from a company about to walk away from its exclusive relationship with AT&T. But we'll see. 

If Apple fails to "cut the chord" tomorrow and broaden iPhone distribution in the US it will cede millions of users to Android. I would be happy using the Nexus One rather than switching to AT&T, with its network's mortally wounded reputation, to get the iPhone (I have an iPod Touch). And while it's not as intuitive or "elegant" as the iPhone, and the apps are not as polished, the N1 generally substitutes. Its speed and screen are better than the current iPhone as well. And the voice-text input features are compelling. 

Apple may not see this timing issue as critical. It will exit AT&T exclusivity at some point. If it does so now, it will establish itself on a trajectory to become the dominant smartphone in the US market and Android's rise will be blunted (though perhaps not RIM's, the current market leader). If it waits for 2011, US iPhone prospects will likely have moved on or set their sites on other handsets. All the defectors that are going to head to AT&T for the iPhone have already done so. 

As suggested, RIM is a wild card in this discussion and so is Windows Mobile, which is declining now but could get a big boost from WinMo 7. Nokia, regardless of Symbian UI upgrades, will continue to lose share in the US and Europe in the coming 12-18 months. It will remain strong in Asia, Latin America and Africa -- emerging markets that seek lower-cost handsets. Palm, I'm afraid, will be largely an also-ran in this race. 

The market for smartphones, however, is very much evolving and in flux. What happens tomorrow (from Apple) could be very significant for both the iPhone and for Android's future in the US. It might be that Apple makes the wrong choice, falters and Android benefits. The thinking that Android will automatically grow to be the world's number two, however, is simplistic. 

Apple Results Out: Best Quarter Ever

The release is just out, here are the numbers:

  • $15.68 billion in revenues vs. 11.88 billion a year ago
  • Sold 3.36 million Macintosh computers during the quarter, representing a 33 percent unit increase over the year-ago quarter.
  • Sold 8.7 million iPhones in the quarter, representing 100 percent unit growth over the year-ago quarter (but somewhat lower than expected)
  • Sold 21 million iPods during the quarter, representing an eight percent unit decline from the year-ago quarter (however iPod Touch sales are up)

Listen in on the earnings webcast at 5 Eastern if you're hungry for more.

Selected bits from the call:

  • iPhone in 86 countries now. Sales worth more than $5B in the quarter. 
  • COO Tim Cook says that "AT&T is a great partner," doesn't take bait to suggest that there will be wider availability for iPhone in US
  • Tim Cook: China iPhone sales: 200K units activated to date. "We're building the brand for the long term, we think there's significant potential there." 
  • Tim Cook: 70% of the Fortune 100 deploying or testing iPhone (in US)
  • No comment on Nokia IP litigation
  • Tim Cook: "Joy of surprise at our latest creation" re Wednesday product launch
  • Tim Cook: re iPhone . . . when we add carriers in markets, growth and share increases
  • Apple CFO re Quattro: "We wanted to offer a seamless way for our developers to make more money on their apps, especially those providing free apps." 
  • CFO Peter Oppenheimer: We work with Google in some areas and compete with them in others. Mobile advertising "is in its infancy." 

Will Apple's iPad Get People to Pay for Content?

There have been many rumors and articles in the past several months about Apple courting "old media" for its tablet launch. The Wall Street Journal devotes much of its article from yesterday on the forthcoming Apple tablet to the topic:

Apple has recently been in discussions with book, magazine and newspaper publishers about how they can work together. The company has talked with New York Times Co., Condé Nast Publications Inc. and HarperCollins Publishers and its owner News Corp., which also owns The Wall Street Journal, over content for the tablet, say people familiar with the talks.

New York Times Chairman Arthur Sulzberger declined to comment in an interview Wednesday on its involvement in the new device except to say, "stay tuned."

Apple is also negotiating with television networks such as CBSWalt Disney Co., which owns ABC, for a monthly TV subscription service, the Journal has reported. Apple is also working with videogame publisher Electronic Arts Inc. to show off the tablet's game capabilities, according to one person familiar with the matter . . .

Apple pitched media companies on a "best of TV" subscription service to television networks under which customers would pay a monthly fee for on-demand access to programs from a bundle of participating TV networks, giving consumers another way to readily access television content.

Clearly people are buying books and newspapers via the Kindle. But Apple may be uniquely positioned to pull off this pay model because of the "culture" of paid apps for the iPhone and its iTunes payment platform. It may be the case that out of the gate to get specialized, formatted content on the tablet you'll have to pay. 

However, undoubtedly there will be a Safari browser. And with an Internet connection many people might navigate around the pay wall to the desired publisher's free Internet site. As the anticipation builds toward launch, how can the company possibly live up to the hype?

We'll see next week. But in the meantime, here's a scenario to consider . . .

Are people going to have an iPhone or other smartphone, a laptop (with a dongle) and now a tablet (with a plan)? That's a lot to ask and probably closing in on $300 in monthly connectivity fees. That's not counting the home ISP charges starting at $30 per month at the low end.  

But let's say that Verizon or other carriers offer a reasonable subsidy, bringing the device down to under $500 with a two-year contract. An all-you-can-eat data plan or MiFi hotspot (as an alternative) might run $40 per month. What if this tablet could truly be a netbook substitute (with a dock and USB keyboard) as well as have a gallery of apps like the iPhone. That would be pretty interesting. 

You could potentially do VoIP calling (Skype, Truphone, Vonage, Google) and entirely ditch the carrier voice plan. Most people won't pursue this, but it's quite possible. This also argues for a time in the next three years where people are only interested in a fast data connection and are less and less willing to pay for voice . . . 

Here is a roundup some of the latest speculation:

Ahead of Apple Tablet Launch, Kindle Repositions As Apps Device

Next week Apple is launching its much anticipated tablet/media pad device. There is much speculation that the device is coming to Verizon and that it may cost $800 "unlocked" and roughly $600 with a two-year service agreement. That price is going to be high for most people. By contrast, the basic Kindle is about $250 and the DX (larger format) is about $500.

The eReader market is getting more competitive by the day. The Apple device is going to be much more than an eReader, however. It allegedly will have a docking station or capability and the option to plug in a keyboard; so it may double as a netbook alternative. But the pricing of the device will be largely determinative of how successful it is. Kindle's $250 price will help it survive vs. $600 or $800 for the Apple tablet. 

In September of last year there was discussion and speculation about whether Kindle would open up (a la the iPhone) to third party developers. At the time we said: 

Yet, to succeed long term, opening up and building an ecosystem like what the iPhone has done is precisely what Kindle must do . . . 

Apple's forthcoming tablet will likely be compatible with iTunes and iPhone apps and provide most of the eReader functionality that Kindle has. It will be expensive, relatively speaking, but Apple's brand strength can support a higher priced media tablet, provided the functionality is there. Amazon is thus likely to confront a host of competitors with color screens and broader capabilities on the one side and cheaper models on the other.

Now Amazon has done just this and introduced an SDK:

Today, Amazon announced that it is inviting software developers to build and upload active content that will be available in the Kindle Store later this year. The new Kindle Development Kit gives developers access to programming interfaces, tools and documentation to build active content for Kindle--the #1 bestselling, most wished for, and most gifted product across all categories on Amazon. Developers can learn more about the Kindle Development Kit today at http://www.amazon.com/kdk/ and sign up to be notified when the limited beta starts next month.

This is the only direction for Kindle to go to make itself more broadly useful and ensure its survival. It now becomes, potentially, a competitor to the iPod Touch. There's speculation that Amazon has sold roughly 1.5 million Kindles to date. That compares with 70 million (roughly) iPhone OS devices around the world. Still a million devices is enough to get many developers interested. 

If they bite and we see a rich ecosystem of apps (need a color screen too) then Kindle becomes much more useful. Kindle can survive the Apple challenge by being more broadly useful, offering a color screen and being cheaper. On the other side of the fence, it can survive the challenge of Nook and others by developing an apps ecosystem. 

Apple has historically said that the company can't really sell a full-blown computer for less than $500. That's disappointing because if it really wants to push its tablet into the mainstream it would price it around that level or just above, with a carrier subsidy taking the price down to $300. But then you'd have iPod Touch cannibalization. 

Apple sees the device serving a wide range of goals, presumably to justify the higher price point. But if Kindle's SDK strategy succeeds it may ultimately put pressure on Apple to lower the price of the iPad or whatever it turns out to be.

____

Related: Retrevo survey on most desired features/content for Apple Tablet. 

Report: 'NetTabs' to Sell Millions This Year

Consulting firm Deloitte contends that ''NetTabs will be purchased by tens of millions of people in 2010." NetTab is an awkward term coined by the firm to refer to the emerging category or tablet or slate computers.

In September last year electronics shopping site Retrevo published the results of a US survey (n=771) that asked about eReader buying intentions:

Planning to buy an eReader this year?

  • 21% yes (Males vs. females: 26% vs. 17%)
  • 79% no

What brand are you going to buy?

  • 62% Amazon Kindle
  • 32% Sony
  • 6% Other 

The Kindle and Sony devices are not Internet access devices at this point. Many new tablets/readers (including the Nook) have been introduced since this survey was conducted. However it's not clear to me that what Deloitte is arguing will come to pass. Much remains to be seen, including whether the Apple Tablet can be a mainstream device and "market maker."

Tablet computers have actually been around for a long time but failed to catch on. The new category of "bigger than a smartphone, more convenient than a netbook or laptop" is what we're talking about here. So far, however, none of the devices introduced are all that exciting (other than the pure eReaders like Kindle). Accordingly there's no indication that the category that Deloitte is talking about will take off -- at the moment. 

January 27: Will Apple's Tablet Dazzle or Disappoint?

What exactly will show up at the Apple event on January 27? Will the tablet/iSlate/iPad? Almost certainly. Will we get a new iPhone? Maybe. Will there be other stuff announced too? Probably.

It's almost impossible for Apple to deliver a tablet device that lives up to the intense hype that has been more than a year in the making. But at the end of the month in San Francisco the heavily anticipated tablet computer, eReader and media player will likely be revealed. Will it dazzle everyone and usher in a new era of mobile Internet devices that sit between smartphones and netbooks/laptops? Or will it disappoint by offering features too common among all the tablets and slate devices emerging in the market? 

What about the price?

The "sweet spot" for the device is more than the $399 64G iPod Touch, but less than the $999 macbook laptop. That would put it between $600 and $700 dollars. There might be a lower-end and higher-end device to create an entry level price point around $500. 

Whatever turns up there will be lust for the device among Apple's core fans. However, pricing will determine how mainstream it becomes. Recall that the iPhone didn't take off until the AT&T subsidy brought it down to under $200. Speaking of which, what of connectivity and carrier subsidies? Might we see the same thing: a low price point on the hardware with a two-year contract (e.g., on Verizon)? 

We'll see . . . Regardless, the waiting will finally be at an end.

Kids, Mobile Phones and eReaders

Last month Mediamark released survey data on kids with mobile devices as well as demographic data on the 2.1 million owners of eReader devices in the US. Mobile phones are now deeply penetrated in the tween segment and eReaders are for the affluent according to the data, which follow. 

First kids and mobile devices . . .

The data come from the company's "2009 American Kids Study, with approximately 5,000 participants from households included in the Survey of the American Consumer." Here were the top activities among kids on their mobile phones:

  • Call my parents: 88.1%
  • Call friends: 68.1%
  • Emergency Purposes: 55.7%
  • Text Messaging: 54.1%
  • Play Games: 49.0%
  • Take Pictures: 47.8%
  • Listen to music: 34.4%
  • Picture messaging: 24.2%
  • Download ringtones: 16.5%

Picture 166

eReaders:

Mediamark says there are approximately 2.1 million US adults who own eReaders. The firm said that owners are "more likely than the average adult to be well-educated and have high incomes . . .They are also far more likely to be heavy Internet users." This of course makes sense, given that these are largely luxuries or "frivilous" devices right now. 

Percent More Likely Than Average U.S. Adult to….

  • Have accessed the Internet outside the home via WiFi or wireless connection (in last 30 days): 199%
  • Have household income of $100,000 or more annually: 87%
  • Have accessed the Internet with a cell phone or other mobile device (in last 30 days): 154%
  • Be a Heavy Internet User: 116%
  • Have a Bachelor’s or Post-Graduate Degree: 111%
  • Be between the ages of 35-54: 20%
  • Be male: 16%

According to Mediamark:

At 56.3% of e-reader users, men outnumber women (43.7%).  Adults ages 35-54 are the “sweet spot” for this product, as they are 20% more likely than the average adult to own an e-reader.

These data from from MRI's Fall 2009 Survey of the American Consumer, which is based on 26,000 interviews of US adults. 

Tablet, Slate or eReader: What Will Survive?

One of the amazing things about CES is the number of tablets and eReaders that were announced or showed up before and during the event. It's almost difficult to keep track of them all. In addition to Kindle, Nook and Alex, there is now Skiff, QUE, HP tablets (Windows, Android), Lenovo, Gii Nii, Dell, Camangi Webstation-- and on and on.

BusinessWeek covers the segment asking the question which ones will be around a year from now? And of course there's the highly anticipated Apple tablet, allegedly coming at the end of this month. 

Consumers have failed to adopt tablets in the past but with the success of the iPod Touch (in particular) and Kindle the market has been conditioned for these devices. As with animal species that didn't survive evolutionary pressures many of these tablets will die off. Perhaps a better analogy is the MP3 market. After iPod there were only a few competitors that had any share at all.

If the pricing rumors about Apple's Tablet are correct and it's up near $800 or $1000, however, it may not become a truly mainstream device. But the anticipated full functionality (color screen, media player, lots of RAM, WiFi-enabled, Internet browser) that it will offer will become the standard for one surviving line of these devices. Another surviving group may be lower priced eReaders focused primarily on reading without the color screens and media player capabilities. At a sub $300 price point we may seem them flourish and there may be two or three devices that succeed here. 

There will be a shakeout, probably after Xmas this year that will see a few tablets and eReaders emerge as winners and others fade into obscurity. Yet netbook tablet substitutes that do nothing elegant with the form factor will likely fail because they will simply be seen as less-functional alternatives. One of the interesting things to see will be how Apple solves the keyboard issue for this larger iPod Touch. 

Another question: will the Web-enabled versions of these devices be more analogous to the PC or to smartphones, with accompanying widgets and apps? Some of the Android tablets will offer Android marketplace apps. The rumored Apple Tablet is supposed to have a developer SDK; does this mean a new category of apps? That would seem foolish on Apple's part. 

In addition, most or many of the WiFi-enabled devices will become phones with Skype, Vonage, Truphone or Google Voice. So the success of tablets may also be a boon for these VoIP companies. 

Related: A Deluge of Devices for Reading and Surfing