My Birthday Gift: The Kindle Fire, and Why It’s The First Credible Android Tablet

Over the past 6 months, I’ve been watching perplexed as vendor after vendor launched Android Tablets into the market with no success. Perplexed for a simple reason – I could not understand how they expected consumers to buy their $559, $499 or even $399 tablets when they could get an iPad 2 for $499 and get the real deal – the TRUE status symbol, the best content & app eco-system. What were Samsung, Motorola, Dell and Asus thinking, I was wondering. Was it a shortage / price of components that pushed them to that price bracket? Was it protecting the brand at all costs, even failure?

A couple months ago, I asked a question on Quora and the results were staggering – over 20:1 for iPad.

So what has changed?  The $199 Kindle Fire. You can get two of those, and still have money for another holiday gift.

Amazon’s Kindle is an ecosystem, not a device. Amazon sees it as a way to make sure you buy all your content – books, music, TV – from Amazon. Just yesterday they announced the streaming deal with FOX TV - more free content for Amazon Prime subscribers. Guess which devices will feature it? Remember Sony’s Howard Stringer’s announcement a few weeks ago – “Apple makes an iPad, but does it make a movie?“. Amazon doesn’t make them, but it sure-as-hell moves them around. In a move right out of Steve Jobs’ books, Amazon is tying it all together – device, app store, content store, streaming rights (with free content for Prime members), e-commerce for physical goods, payment options (from one-click to credit cards), cloud storage, even a loyalty program!

Kindle now touches everything Amazon does, and so many other companies. It threatens Netflix streaming – Amazon is securing more content for Prime members, and has a sound pay-TV model with a complete eco-system around it and it obliterates all other Android tablet manufacturers volume forecasts for the holiday season (a $200 rival with a strong brand behind it).

And it’s a credible contender for Apple’s eco-system. It is as broad, as far reaching, and goes even further with physical e-commerce embedded.

Probably the only risk is execution. If the software / hardware is good enough (defined as – better than most Android implementations), this will make a huge dent in the market. iPad will become the high-end product, but Android, through Kindle, could be the mass-market. Not so different from iPhones and Androids, actually.

My pre-order is in.

How I Got It All Ass-Backwards, or How Android Got Free Again

Free!

Last week I wrote a piece about the huge cultural gap between Google and Motorola, and how Motorola is such an bad fit for the Google organization, and what it will do for it’s relationship with Android licensees. I also stated that if Google acquired Motorola for the patent portfolio alone – that’s not such a big deal in the marketplace.

Well boy was I wrong. A person who’s very close the story saw fit to fill me in.

Google’s acquisition of Motorola was indeed all about the patents. But not necessarily Google’s lack thereof, but really its licensees’. What Google is trying to do to the handset market is what Microsoft did to PCs – give the hardware market to cheap Chinese / Taiwanese / Korean manufacturers, and thereby own the software platform. The catch? The incumbents – Nokia, Apple, Microsoft (and Motorola) own restrictive patents. And they sue / charge these manufacturers to a point where they are agnostic between Google’s “free” OS and Microsoft’s “pricey” one. The only player in the Android camp who was relatively safe was Motorola, who owns a nice portfolio developed over many years.

Solution – Google buys Motorola and promises Android licensees a defensive umbrella – it will fight their patent wars for them with its newly acquired arsenal.

Right there and then, Android is free again.

So what is Google to do with the Motorola organization one might ask?

This is where it gets pretty interesting. You see Motorola is in Illinois. The state a certain president (and his associated mayor) come from. And 2012 is an election year. Who wants to see 10,000 layoffs in Illinois on an election year? Certainly not someone who wants to Do No Evil…
2012 Election

Google acquires Motorola. Say again?!

With so many so-called experts (read: people who use Google and used to have a Motorola RAZR phone) providing different angles on this acquisition, I figured it’s time to chime in. I have a pretty good handle on Motorola (you can Google that!) and think I know something about Google too.

And what I don’t get is the culture clash. Truly. Motorola, like it or not, is an 83-year old Chicago (well Schaumburg) company, and no, the split to MMI and MMS did not change that. It is a slow mover 18,000-employee corporation, with an organization that takes years to design products, and even under Sanjay Jah that could not change much.
You see, when a company is hit as bad as Motorola Mobility was hit in 2008-2009 (and by the way – that happened through their complacence over the success of the RAZR), the good, dynamic, innovative people tend to leave. Especially in a market where Google, Facebook and Groupon are snatching all the good people who’d still like to work for a “safe” company. The culture has not changed all of the sudden, nor was there a good reason for great people to join lately.

Google is, or aspires to be, a fast-mover Silicon Valley company with a flat hierarchy, a market-driven (really numbers-driven) no-nonsense approach, with little respect for old-world processes. And it wants to retain this culture while growing to 25,000 employees.

See the issue?

So if, as some people have suggested, Google is only after the patents and will spin out Motorola again as a stand-alone device manufacturer, not so much has happened in the market (but congratulations to all the lawyers, accountants, bankers and management consultants who’re going to get the fat checks).

But if Google is truly looking to become the anti-Apple and the Motorola team is its weapon-of-choice… well, good luck with that.

P.S.: I especially like the theory that Microsoft was going to buy Motorola which forced Google to buy them first. It’s just lovely.

Amazon’s Android Appstore (Tries) To Take Care of Business

So – the fabled Amazon Android Appstore (not App Store! That’s an App-le trademark!) is here. And almost as expected – these guys get the big things right, but the small things…

First thing you’ll notice -The Amazonian design. Besides the obvious branding elements, It is a much more effective design than Google’s. It is meant to generate sales. As soon as you open the store, you’re faced with credible alternatives – stuff you may well want to download, cause everyone else does. The screen space is used efficiently, and navigation is simple and easy. Very little innovation over, say iTunes, but also no clear disadvantages. The desktop web store is similar in approach, and not very far from the Amazon website that is so effective with retail shoppers in general.

The main attraction is a featured, “bonus” download, updated every day (i.e. a product that is usually not free being given away for free). Amazon takes care of business. To make an app store a business, you need paying customers. This requires people to have a payment method. That’s a hassle. That requires an incentive – give them something for free. But force them to connect a payment method to get the free stuff. Makes perfect sense. And gets me Angry Birds Rio for free. It also keeps me coming back every day for something else. Yes, it costs Amazon something. But probably not a lot. You see app developers have a great incentive to be providing these downloads for virtually (or literally) free – that day you were featured and provided as a free app, is going to put you very high in the Top Downloads chart – which will get you paid customers the following weeks (note the Top Downloads in the screenshot – yesterday’s free download, and today’s…). So even if Amazon pays virtually (or literally) nothing – it’s still a great deal. Everyone wins.

Caveat emptor – this also needs to work. The Appstore requires you to set up one-click mobile purchasing to get the download (as it should). However – no matter how many different ways I tried to do it, and despite the fact that all my info is shown, and my account shows mobile one-click purchasing activated (even when I connect on my desktop through a browser) – it still asks me again and again to “please add a payment mehod in your 1-click settings”. Now I am a loyal Amazon customer – Prime, Amazon Store Card and all that. My guess is that Amazon is not accepting its own store card on its own Appstore. Otherwise I don’t see how such a blatant bug could have slipped their people.

So – as expected, these people mean business, and know how to do it. They’ll have to cross a few t’s and dot a few i’s before they do, however.

Post MWC: Android’s Tour-de-force. Is that the shape of things to come?

Over the last week I’ve had several discussions with colleagues about MWC 2011. The general gist of things was “wow, how far Android has gone”. And indeed, Android’s presence at the conference was impressive, to say the least. The usual Android suspects were there, of course – HTC, Motorola, Samsung and others. But what was even more impressive was the vast number of unknown Android manufacturers, mainly Chinese, who’ve flocked to the free platform en-masse. Known names like ZTE and Huawei were to be expected, but upstarts like Malata (who seems to make impressive Android tablets, incidentally) were there by the dozen. And of course – given Nokia’s and Apple’s absence, and RIM’s limited presence, it sometimes seemed like Android is the only game in town.

Malata Android Tablet

The Nokia / Microsoft news just fanned the fire. Essentially while it is a feather in Windows Phone’s cap (not necessarily a beautiful peacock feather, incidentally), it means that Nokia will be out of the smartphone game for a long time. And to judge by the employees’ reaction – could be long indeed.

The general conclusion I heard drawn, then is simple – Android is taking over the market, Android will define the shape of things to come, Android is where to take your mobile start-up / corporate mobile app first cause that’s where all the users will be. Right?

Sorry, it’s not that simple. Contrary to what some people think, Android to phones is not going to be Windows to PCs. At least not in the next 2-3 years. There are many reasons, but I think the most important one lies in the personal relationship between consumers and their phones. Unlike PCs (at the time), phones are a means for personal expression both explicitly (as in what you put on them / use them for) and implicitly (as in making sure your peers know what you have – just like cars). Most smartphone users associate their phone selection and habits with their identity. And with identity, a “one size fit all” strategy doesn’t work, fortunately. So as long as there are technologically credible alternatives with a well differentiated product (e.g iPhone, BlackBerry), they will draw significant audiences.

Furthermore, the wider Android spreads as a mid-market solution, the less appealing will it be to some of these people who seek to distance themselves from “the middle”. Think the Mac cult of the ’90s and early ’00s but at a wholly different level. After all – these devices are used in the open. People see what you use, so better pick the “right” one.

So clearly – the fragmentation in the smartphone space is going to continue. Each platform’s market segment will be different demographically and psycho-graphically,  and these compositions will continue evolving. I expect we’ll keep seeing Android pandering mostly to the mid-market (with of course a meaningful number of power-users and high-end customers too). iPhone will generally remain a high-end phenomenon. BlackBerry may well lose its hold on the enterprise, but acquire new audiences amongst the young and price-conscious (free messaging). And when Nokia eventually rolls out Windows Phone handsets, it is quite possible that their considerable distribution clout in European and Emerging markets will make this a meaningful platform for those audiences.

I believe a very similar phenomenon will be seen in tablets. While Android tablets are improving, the good ones are still not meaningfully cheaper than the iPad. Apple only needs some minor improvements with the anticipated iPad 2 in order to stay in the lead. Only when significantly cheaper tablets (probably running Android 3.0) will come to the market can the balance be upset. And what will we have then? A similar market structure with iPad as the premium product and Android tablets as cheaper, “good enough” devices for mid-market consumers.

Where does this leave the Android makers? With the proliferation of Chinese manufacturers with great pricing power, we will see the PC-wars re-enacted. Margins will drop to low single digits for most manufacturers, probably leading to consolidation and elimination of key brands.

So essentially – nothing earth-shattering really came out of MWC. We will see even more Androids, Symbian and MeeGo are dead (duh!) but little change to the fabric of the market as we’ve known it in 2010.

In Smartphones: Google is King but Apple is Rich

A couple of weeks ago, the inevitable was announced. According to Canalys, a leading mobile market research firm, in Q4 2010 Android has overtaken Symbian as the world’s most-pervasive smartphone platform. According to Canalys, 33.4 Million Android phones were shipped by Google licensees in the quarter – more than double the iPhones or BlackBerries.

While this has been touted with much fanfare, some seemingly contradictory information is “common knowledge” to mobile application developers. It is still much easier to get traction and especially monetize iPhone apps than Android apps. How come? With such momentum for Android, you’d expect it to be at least as successful as iPhone.

The answer, which I’ve been proclaiming for awhile now, can be summed up this way – “Android is the new Symbian”. Now I’m sure some Googlers will resent this, so maybe a different way to put it is – “Android is the new MS-DOS”.

What I mean by this are really two things. First, that Google’s strategy with Android is to reach as far and as wide as it can. That’s one of the reasons it is free to licensees, open-source etc. Google intends to eventually leverage Android by tying it to its other assets and ultimately use advertising to monetize it. This means you can build cheap Android phones and target the mid-market, not just the high-end as other smartphones have (in truth, Android hardware requirements are still relatively high, but Moore’s law is taking care of that cost). Furthermore the abundance of licensees means that a price war is evident – and indeed we now see free (subsidized) Android phones on many operators portfolios. So – Android is becoming the dominant player in the mid-market, with high-end presence too, and ultimately low-cost aspirations. This is exactly the path Symbian took in 2004 – 2008, becoming the world’s leading smartphone platform by volume – but dwindling in consumers’ eyes to a point where it drives low-margin devices, with BlackBerries (initially) and iPhones (later) commanding the high-end, high-margin sector. In 2008, a Nokia executive told me personally that Nokia learned the hard way that the top 10% of the handset market commands 50% of the margin. Think about it – if one company takes over the top 10%, it can be worth as much of all the other companies combined (who sell in aggregate 9 times as much as it does). Right? So this is the second point – a smartphone platform that is focused on mass is doomed to become a low-margin platform. Google doesn’t mind. But it’s licensees are doomed to fighting over scraps.

Now this is a tall order claim, that I couldn’t really publish before, until I ran into this analysis by Asymco’s Horace Dediu:

Which brought to mind Noam Wasserman’s “Founder’s Dilemma” metaphor about Rich vs. King. Apple’s startegy with the iOS devices, just like with the Mac before, is to aim for the top 10-30% of the market. The people who can spend, the people who care deeply about the product they are buying and using. Google’s strategy is more like carpet-bombing. If we can get to 80% of the people, we’ll surely find a way to monetize that.

So is this just an interesting business case? Or Valley gossip?.

If you’re involved in this business in any way – you might be an app developer, a marketer wanting to reach mobile device users through mobile ads or a mobile app / website etc., or a service provider who is pushed to provide a service to his customers through their phones, this is critical info. Cause it means that you are going to reach a different demographic and psychographic when you target the different platform. In the Apple case, your demographic will be skewed towards high-income, users may be more engaged with the product, and there may be more willingness to pay. On the Android platform you will eventually reach more people, but engagement and purchasing intent will be different. And your adoption ratio (compared to the total available Android market) will be different, as many of these users are much less enthusiastic about their phones. Yes – they bought a smartphone, but maybe because “everyone else is getting one” or because “it was free, so why not”. So choose your audience wisely, and plan your marketing moves with consideration for its composition.

Why Amazon Needs An Android App Store – A Different Take

A couple of weeks ago, Amazon’s opened it’s App Store to developers, and promised to actually open the store to consumers “this year”. While TechCrunch’ Jason Kincaid has done some good work explaining the premise to consumers and the overall eco-system, a clear answer to the question “Why” remains open. After all, if this brings about further market fragmentation, if it’s going to be that hard to get the store pre-installed on phones which is the only sure-fire way to generate market traction, and if the direct returns from running an app store are generally not meaningful – i.e. the app store is a means to facilitate activity on your platform and make it competitive, (smartphone, e-reader, whatever), much more than a system to generate revenue from commerce.

So why does Amazon, which does not have a smartphone platform (Kindle aside), and certainly no platform / device stake in Android, need an Android App Store? The only attempt at an answer I’ve seen came from Gizmodo, and left much to be desired.

While it is entirely possible that the simple answer is “it doesn’t” and this is just a mistake carried too far, here is a  more strategic explanation.

An App Store Is About A Billing Relationship With Users

The biggest advantage the iTunes store had on prior online music stores, and the iTunes App Store on various other app download sites, is the immediacy of transactions that is enabled by the requirement to have a credit card registered with iTunes from the get-go, and by the support for $0.99 micro-payments. This made one-click purchasing a reality, and made the iTunes App Store such a hit with people looking for a quick-fix to their boredom, as well as entertainment app developers of all sorts. Competing app stores which did not have that billing relationship with customers never created a similar volume of sales – including the Android Market itself.

In the same token – while initially most of the business executed on the iPhone App Store was through a pay-before-download model, it seems like more and more of the business is now tied to in-app payments, i.e. “download for free and then pay for digital goods” – be they more levels of play, various items to use in-game, premium content etc. . For instance if you look at the iTunes’ App Store’s “Top 10 Grossing” chart today you will find the FREE game “Zombie Farm” – a game that monetizes only through in-app payments, facilitated through the iTunes micro-payment capabilities.

Amazon is all about a billing relationship for retail. It has made simplifying payment and delivery key pillars of its strategy. It keeps your credit and debit cards on file, and even issues its own store cards for many users. For a very high percentage of existing Android users, this means an Android App Store is a store where they could immediately purchase and download apps based on their existing payment cards stored with Amazon. This is a key advantage Amazon likely hopes to put to use.

But even more importantly for Amazon – Android is a smartphone platform that is already penetrating new global markets en-masse, and if Amazon manages to become a de-facto standard app store, then the billing relationships created with new Android users will then be mined to sell other digital goods – and later physical goods. i.e. the “Amadroid” app-store has the potential of recruiting new Amazon customers in massive volumes, internationally. And that’s a major strategic opportunity.

Amazon Has Better E-Commerce Credentials

Most every existing platform app-store has managed to miss some critical aspects of optimal merchandising experiences. Whether it’s the billing relationship question, the discoverability issue (that I wrote about before, e.g. here), the lack of personalization and so forth – it looks like no one, including Google, has built a great commerce experience that entices users to buy more. In Google’s case a cursory examination would show you apps in languages you don’t read, prices localized to sums like “$3.13″ which make little marketing sense, an arbitrary or random list of proposed apps. Compare to your average Amazon display – where once you get into the site, shows you products that YOU are likely to be interested in, suggests add-on or replacement products should you not like the ones on display, and tells you what other people are buying. Amazon with an eye for detail and a knack for optimization is well positioned to create a better customer-trap. This is good for customers, good for developers, and good for the platform. Amazon is betting that if they can build a better store, ultimately Google will not fight back. After all, that is not the reason Google built Android, nor is it how they intended to monetize it.

So Amazon has a better shot than Google at building an effective store (for Apps or any other digital content or physical goods), and certainly better than wireless carriers or some of the other contenders. And there are very good reasons to do so – regardless of the size and commercial dynamics of the app market itself.

It’s a Platform, Silly

Taking this a little further – let’s look at in-app payments again. If this model, facilitated by the store, is adopted by apps selling other goods – digital or otherwise, and especially if Amazon can make the commercial terms more flexible based on what is being sold and by whom – this is really a new mobile commerce platform that Amazon can run, and will allow other innovators to use Amazon as an enabler platform.

That is exactly where Amazon wants to be. It’s the philosophy behind Amazon Marketplaces, Amazon Web Services and several other Amazon initiatives. Amazon wants to be the e-commerce platform for the web – including the mobile piece of it. The more end users are reached, the bigger their total market share is going to be. Period. Having a successful mobile app store for Android or any other platform will help them get farther, faster.

What Have I Learned at DiscoveryBeat 2010?

Stop counting Downloads / Measure Engagement

Don’t charge up-front / Go for In-App Payments

The biz is on iPhone / But Droid’s on the work-plan

You need Analytics / Cause numbers’ the game, man!

I ain’t generally a lyrical guy, but they were running a poetry contest, so I took a crack (darn if I understand how I didn’t win that iPad!)

So in a nutshell – these are the main points, really:

Platforms: iPhone and Android are all that’s interesting to this crowd – and iPhone seems to be monetizing ten times better. Even though the trend for Android as a platform is great, it is not monetizing well through paid apps (and there’s no in-app payments). With this type of revenue driving most of what’s happening on the iPhone – Android developers have slim pickin’s… BlackBerry and others were all but ignored by most everyone, except for Flurry CEO Simon Khalaf who says for the last three months he’s been seeing significant developer investment in Windows Phone 7 – driven by Microsoft’s basically committing to minimum revenue numbers (i.e. directly paying them to take the risk).

Business Models and User Behavior: Most revenue still comes directly from the users, but lately more through in-app payments than pay-per-download. Advertising dollars are growing, according to Google’s AdMob, but are still secondary, especially on iPhone. Now whether it’s ads or in-app payments, to get this revenues flowing, you need engaged users, who will use (and pay) over time. People will download everything, but also discard it immediately – apps typically churn overnight… if you can’t keep your users for weeks and months, you have very little, whether it’s by way of payments or advertising. This makes analytics critical if you want to know what works and what doesn’t.

What works for promotion?  A huge percentage of downloads on iPhone result from being on the “Top X” charts – these drive 80% of downloads according to TapJoy co-founder Lee Linden (!). This means that to effectively promote, you need a concerted effort that drives your app to the chart – which then gets you a virtuous cycle of user exposure -> download -> you remain in the chart. Developers with multiple apps can then cross-sell their new apps to their existing user base via in-app ads, email etc. In fact – having multiple apps is a key driver of revenue, as when you “spike” with one you can successfully spillover to the others if you cross-market well.

Virality is great if you can get it, but getting it is far from simple. Advertising works but is costly, so it only makes sense if you can spend enough to get your app into the charts – and then have it remain there on the virtue of its quality. So you need to “buy many thousands of users” at a high CPA so that you will get into the charts – and then get many more organically. If you can’t spend enough to reach the chart, or if you immediately drop out of it due to your app not being good enough / priced low enough / presented well enough – it was all wasted money.

Flurry, who seems to be doing very well by the way, presented their AppCircle product as an alternative – lower CPA due to better targeting, which can then be economical even at a small scale. Some other points made by panelists focused on the limited merchandising possible in the App Store – sometimes even changing the app icon can bring a huge boost in downloads… Appolicious too pitched themselves as a distribution platform for developers, albeit with much less of a structured methodology around it to my mind. If you’re interested in that model, also check our AppsFire. Tapjoy (formerly OfferPal), claimed a great ability to help iPhone developers get traction, with “up to 200,000 downloads per day for the top spot” – and then to monetize via virtual goods. Some other interesting comments from their co-founder include that the app icon has a significant effect on people – sometimes by improving it you can get a 10x increase in downloads!

Android is a little different. First, the Android Market is not as driven by the “Top 25” listings as iTunes. It is also a multi-channel market with many competing App Stores (Android Market vs. Carrier app-stores vs. direct downloads / GetJar etc.) Angry Birds launch, which was done exclusively at GetJar for the first 24 hrs was of course a topic for discussion – further highlighting the issues the audience and panelists raised regarding the Android Market. When asked “which platform you’re focused on”, less than 10% of the audience responded “Android”. Most importantly – it is much harder to monetize on Android. Between the different user demographics, the missing credit card info, and the ability to “return” an app and get a refund – users are so much less likely to pay for the download. Add to that the missing in-app payments, and your market is reduced by an order of magnitude. The general consensus was that on Android it is easier to monetize via ads than via payments.

In retrospect – I have to say that this reminds me a lot of the PDA applications market circa 2001 – after the first wave, come the big aggregators (mainly Handango at the time) whose charts dictate the market . Concerted marketing efforts are focused on getting into the charts (hard) and then remaining there (not so hard if your product is both relevant and good), which you often do by engaging with your existing audience and get them to download something new on the same product SKU… Many other points of similarity too. All-in-all a very valuable conference – Kudos to the VentureBeat people for pulling this off.

Building and Marketing Your Mobile App: How To Select Your Mobile Platform

iPhone? Android? Blackberry? or is it the new Windows Mobile 7?Over the last couple of months, I’ve been urged by a couple of people to write a “Tutorial for mobile app developers”. They figure that as I’ve been doing this since ‘99 I must know something that’s of interest to some other people. Now I’m generally a little too lazy to take on a project like that, so I figured I maybe take it on in installments, kind of one chapter at a time. But I didn’t really get around to it until today, when after moderating the Mobile Track at the Eye For Travel Distribution Summit I realized the audience still has some pretty big questions and promised I’ll do my best to answer them, so here goes.

Still wondering about an App vs. a Mobile website? Wait for the next article.
Frankly, that topic requires a discussion on its own, but that’s not what I want to talk about here. So generally speaking I should say that if you want persistence – whether it’s of information on the device (e.g. such that it’s available offline, or immediately available when the app is accessed) or just of your basic brand presence and UI, or if you want a best-of-breed user experience, an application is the way to go, at least at this stage. If you’re still not sure – you’ll have to wait for a subsequent article.

Mobile Platforms – What’s Out There?
Unfortunately – much too much. Speaking strictly about Smartphone OS – In North America, there are three dominant platforms and one potential – Android, BlackBerry, iPhone (iOS) and Windows Phone 7. Elsewhere in the world, Nokia’s Symbian is highly prevalent, and MeeGo may replace it soon. If we extend our view to feature phones, we have to consider J2ME, BREW, Samsung’s bada and DoCoMo’s iAppli. I will not discuss those latter platforms at this time.

A few words about each OS (listed Alphabetically to avoid misleading prioritization):

  • Android – Google’s mobile Linux variant. Provided for free to many device manufacturers and heavily promoted by Verizon to counter the iPhone. Currently the fastest growing market. Supports a variety of device form factors and screen resolutions
  • BlackBerry OS – RIM’s proprietary operating system. Drives all BlackBerries, but not the upcoming PlayBook tablet. BlackBerry is the leading platform in the US from a market share perspective. Even though there’s one brand, there are many OS versions, device form factors and screen sizes in the market.
  • iOS (iPhone OS) – Apple’s proprietary OS. Harbinger of the App revolution and leads the App economy in many ways.  Apple always has only one device model in production (currently iPhone 4) and there is great uniformity regarding form factor and screen size.
  • Symbian – Nokia’s long-time mobile OS, once licensed (and co-owned) by many other manufacturers but since then dropped by all of them. Mostly drives mid-market phones in the non-US market nowadays, with dozens of form-factor / screen size combinations.
  • Windows Phone 7 – Microsoft’s latest attempt to reclaim the mobile market, lanched last week. Openly licensed to many manufacturers (most of them also sell Android phones). This is a brand new platform, not really backward compatible with previous Windows Mobile OS. This time, Microsoft dictates a pretty uniform form factor.

Remark: At this point in time I ignore Palm’s Web OS – which is sort of “dormant” in the market right now.

Gartner presented this chart a few month ago:
Share of 2010 Q2 smartphone sales to end users by operating system, according to Gartner.

How The Platforms Differ in The Marketplace
While there are some meaningful technical differences, the most important ones from a business perspective are the different audiences they reach – geographically, demographically and psychographically. Here are the main point for each:

Android: Android is trying to be for Smartphones what MS-DOS and later Windows are to PCs (see for instance what Fred Wilson writes about it). This results in a platform that reaches a very varied demographic / psycho-graphic, with a world-wide distribution. While this is good for Google, for you it may mean that much of the audience is composed of people who are inclined to use their Smartphones as feature-phones – not necessarily App-savvy / quick to spend on Apps. This is why many developers who develop both on iPhone and Android, for instance, claim that iPhone Apps monetize an order of magnitude better.

BlackBerry: RIM is traditionally very strong in enterprises – as a tool furnished to executives and managers as well as many other professionals. This represents an upscale demographic. However, as many of these people see the BlackBerry as a tool provided by their employer, and also because of its inferior App search / download / install capabilities compared to iPhone for instance – the propensity to download Apps and especially to buy them is lower. Lately, RIM has successfully penetrated the consumer market in many countries, reaching new audiences – not as affluent, and not necessarily focused on the “Smartphone” capablities but more on the pure communication / messaging capabilities of the platform.

iPhone: Riding on the coat-tails of the iPod and Apple’s brand, the iPhone reached the US “creative class” first. Coupling this early adopter / high-income audience with a great App download / purchase / install user experience, iPhone users download more apps then any other platform’s so far. However with the iPhone moving further down the adoption graph and wider geographically, the demographics today are more varied.

Symbian: As shown above, Symbian has the largest worldwide footprint – with North America taking a very small part in that. In actuality, much of the Symbian volume goes to mid-market phones used much less as smartphones than the other platforms, resulting in a varied, dispersed audience with (on average) a mid-market demographic. Couple that with the relatively weak experience of its Ovi Store, and you have a platform where the total use of applications is probably no bigger than the other platforms’ (with smaller volumes), dispersed worldwide (from the UK to China) and much less willing to spend on paid apps.

Windows Phone:  A brand new entrant to the game, it remains to be seen what audience it will draw and where. An informed guess would suggest it will be similar to Android’s, as we’re looking at the same set of manufacturers more or less, and the same target markets.

What’s Hard, What’s Easy
Without diving too deep into techno-speak, there are two main factors affecting how much it costs to develop and maintain an App on each platform:

  • How easy it is to develop software on the platform – which depends on the language used, the quality of the development tool suite, the richness of the “canned software” provided as libraries with the OS, and the idiosyncrasies of the platform
  • How uniform is the target phone base – for instance iPhones all have the same screen resolution, vs. Symbian devices that exist in at least 6 resolutions and 3-4 form factors (actually iPhone 4 introduced a new one but it’s still backward compatible and the same aspect ratio)

Some of my favorite developers like to use the following rule-of-thumb:

 

What costs 1 man-month on iPhone, will cost 1.5 man-months on Android, 2 on BlackBerry and 4 on Symbian

… Windows Phone is new, but as it’s Silverlight based and has a uniform screen / device layout, I guess it will be somewhere between iPhone and BlackBerry – once some developers develop the skill set.Relative ease / difficulty of development defines your fixed cost. But how hard it will be for you to penetrate the market effectively will affect more important variables – your actual success, or at least your variable cost (if you’re going to pay for marketing). This makes the market dynamics for each an even more important factor.

One area where they differ is the hurdles you need to jump in order to distribute your app. On the iPhone, an application has to be certified by Apple, which will take awhile to test it and may reject it (sometimes without even notifying you) for a number of reasons, the chief ones being objectionable content, not enough real functionality, or business conflict with Apple’s goals. On other platforms while there are submissions processes to the store, in actuality there’s very little filtering. In most cases you can also directly distribute (via a mobile web download) without ever going through the store. While this is a marked difference between the platforms – unless your application is in direct conflict with something Apple is doing, it’s not really a significant point.

More significant are the competitive environment, and how the distribution channel (mainly the App Store / World / Market) is managed.

The Competitive Environment for Apps: Circa 2010
iPhone claims 200-250,000 Apps in the market. While this shows that some people have been successful there (drawing a lot of other who haven’t), it also means that almost every idea is already represented there, often with mature products of high quality. The sheer volume of apps also means that yours will be buried down a database where serendipitous discovery of it is not very likely – kind of like a new website on the Internet. If you are a brand that people will search for anyway, or if you have an established audience you can direct to your App, you are likely to acquire users easily. But otherwise you will need to resort to any of the key digital marketing methods known on the web – advertising, PR, viral marketing etc., and your success, at least initially, will be predicated on these.

I say “initially” because the App Store has a memory, and the best way to draw downloads is by being ranked in the “Top 25” charts. This constitutes some of the most valuable exposure to end users. If you can break it into the Top 25 in a category (or better – overall), then you can remain there for awhile with limited further investment. And if your App and / or Brand are very good – then only meaningful competition can unseat you. However, do note that this is not easy. One of the reasons is that the iTunes App Store takes into account two main factors – Velocity (how fast has your app been moving in the last 24 hrs more or less) and Total Downloads. So incumbents have an advantage – unless the new App shows people are crazy for it.

Taking all this into account, one would argue that it may make sense to first try in another, more virgin territory, where the competition is not as fierce, and the incumbents are not as strongly established. With Android claiming about 60,000 apps, and BlackBerry a fraction of that, you theoretically have a better chance to compete. That is right, but you also need to consider the target audience and market dynamics. Android users tend to buy much less. This is due to a combination of factors including iTunes being more effectively hooked to a payment mechanism (all iTunes users must input their credit card details and payment is a one-click process) and the iPhone audience being more conditioned / more open to paying. So if that’s your business model, the returns may not be as good. BlackBerry users download less. However those who do, are willing to pay more. Whether or not that offsets the lower downloads, will depend on your specific case, and the overall product and marketing mix. With Symbian the distribution game is more complex – with the Ovi Store being just one channel to the market, and alternative stores (e.g. GetJar) and direct downloads being in many cases an important channel too. However in general the propensity to pay for Symbian Apps is much lower than on the other platforms, in my experience (and WorldMate has millions of pretty up-market Symbian users…).

So how to factor all of this into a decision? In my next post I will try to give some examples of how such a decision should be arrived at.

... Questions? request? post your comment below and I’ll try to address it in the next installment!
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