The Android UI Dilemma: Unify or Differentiate?

[The UI of Android mobile devices is at the epicenter of a conflict between Google and the OEM struggle for differentiation. Guest author Ben Hookway analyses why Google’s UI strategy will be paramount to its proliferation as Android moves to multiple screens]

The Android UI dilemma - unify or differentiate?

The topic of User Interfaces always solicits strong views. It’s a bit like TV – everyone is an expert on it because everyone uses it. Those who have been in the mobile industry a while have seen the tide of UI control flow in and out.

In 2002 operators are demanding custom UIs from handset OEMs in the form of Vodafone Live and Orange SPV. Naturally, most OEMs resist, trying to capture consumer loyalty to the handset, not the network.

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Three years on, and OEMs are opting to customizing Windows Mobile and Symbian powered handsets rather than creating all-out new UIs. At the same time, network operators are seeing poor returns from UI customization and are dissolving their teams.

With the iPhone big bang in 2007, the UI is back to being the hottest topic in mobile. Post iPhone, almost all tier-1 OEMs are developing their own UI layers, namely HTC Sense, Motorola Blur, Sony Ericsson Rachael, Samsung TouchWiz and LG S-Class. In parallel, network operators are building bigger teams to attempt more control over the UI again; Vodafone, Orange and T-Mobile have 100+ person teams working on ‘signature’ applications and UI definition, while the trend seems to have spilled over to the other side of the Atlantic with Verizon and AT&T opening up multi-million software development centers. Behind the scenes there is also a good deal of demand for UI technology and expertise such as TAT’s Cascades and Mentor’s Inflexion products.

The latest development in the UI saga is the rumoured tighter control being exerted by Google on the Gingerbread release of Android. The aim of this appears to be to reduce API fragmentation issues caused by custom OEM UIs and deliver a more consistent UI brand across different manufacturer devices.

This is not going to go down well with Google’s partners. There is a core commercial conflict on how Google wants to take Android forward. Google wants an Apple-like level of control over the device appearance with their Android handset compliance definition encompassing hardware features, software performance, and service bundling (see the recently published CTS and CDD documents).

However the Apple and Google business models could not be more different.

–       Apple controls the semiconductor, hardware, and software make-up of the iPhone all the way to ad services, branding and retail pricing, whereas Google only controls the software.

–       Apple makes its own devices (at a rate of 1 new model per year), whereas Google relies on partner OEMs to produce 100s of new models per year.

–       Apple spends big advertising dollars in communicating a consistent brand experience across products, while Google co-markets its Experience handsets but puts no money (or effort) in partner handsets.

Most importantly, unlike Apple, Google relies on OEM partners to bring these devices to market.

In the OEM world of survival of the fittest and thinning margins, there are two differentiating factors: price and UI. Yet, both of these factors are being constrained; price is continually declining (standing at 100 GBP unsubsidized for Android handsets) thanks to ODMs willing to sacrifice margins; and the UI is apparently being locked down by Google in the Gingerbread release.

The economic model of handset OEMs necessitates UI differentiation and Google is taking that away. For Google to expect Apple-like control on a fundamentally different business model is just unrealistic.

And it’s only getting worse.

Battling across 4 screens
The next battle (if we are not already in it) is going to be about platforms for your whole life – not just your mobile, TV, PC in isolation, but as one joined-up world; Experience Ecosystems made up of multiple screens where experience can easily roam from one screen to the next.

Browsers are already bridging the gap across laptops, phones, tablets TVs and cars, while the ‘app’ paradigm is taking this further.

To have mobile, TV and PC seamlessly join up requires consistency of the user experience. Apple is the obvious role model here. The Mac, iPhone, iPad, all use similar gestures and interactions, come with similar application design guidelines and are connected to the same centralized service cloud of iTunes and MobileMe. Apple is again the role model in creating the first Experience Ecosystem.

In the Android camp, Google recently announced Google TV. A consistent user experience across mobile and TV is going to be not just important but paramount. Don’t be surprised to see mobile handset OEMs to extend use of Android to other consumer electronics from picture frames and DECT phones to set-top boxes and hi-fis.

But how is Google going to achieve this consistency without an Apple-like hardware control? Hardware control gives you complete user experience consistency in terms of UI responsiveness, screen quality and more. In the next release of Android (Gingerbread) the UI is apparently going to be more locked down; an attempt by Google to gain more control without resorting to hardware manufacturing.

Imagine browsing content on your BrandX Android based tablet and then synching it to your BrandX TV set for viewing over the air. Consistency of experience between the 2 devices will be key. The web browser provides this consistency of interaction and is the best lowest-common denominator right now. But the app phenomenon is outperforming the web by leveraging on location, micropayments, personal user information and intuitve discovery. As one of the main engines behind the app phenomenon, Android could well be powering the battle of the smart living room.

The industry tension over the UI customization of Android is not going to go away anytime soon – rather its going to amplify as more and more manufacturers leverage Android in creating smart, connected and differentiated consumer electronics devices.

OEMs need to plan for their differentiated UI to span multiple devices. Having a familiar experience across devices can be a key driver of brand loyalty and is strategically important to each OEM in creating their own Experience Ecosystem. Competitive pressures make this a key pillar of differentiation that cannot be wasted. It cannot be done half-heartedly. There need to be clear benefits to consumers and clear continuity across as many devices as possible. But the benefits of the larger Android community also need to be maintained, for example having unrestricted access to the Android Market and consistent consumer marketing as to the differentiation offered by the OS itself.

Google needs to accept that UI differentiation is a strategic requirement for its partners, offer alternative differentiation strategies or fundamentally change how it brings Android to market.

Question is, does Google see this as a challenge to the proliferation of Android, and if so, what will they do about it?

– Ben

[Ben Hookway is the CEO of Vidiactive, a company bringing web video to TV, using an open and multi-device approach. He consults on user experience technology and trends, having been founder and CEO of Next Device, which was acquired by Mentor Graphics. Get in touch with Ben: ben.hookway (at) vidiactive.com]

The Tortoise and the Hare: The tale of Android evolution

[Android is moving too fast with software releases – too fast for the smartphone ecosystem to follow. At the same time, Android is moving too slow, as CE vendors are taking it outside of its mobile comfort zone with the introduction of form factors from tablets to in-car terminals. Guest author Tsahi Levent-Levi outlines the market forces straining the Android ecosystem and Google, as it moves away from smartphones to additional devices.]

Android evolution pic

Android is all the rage these days. In my meetings and correspondences with consumer electronic vendors around the world it is as if they have totally forgot about the “old“ “embedded operating systems” – pSOS, VxWorks, MontaVista, Nucleus, OSE, or any of the Linux and Unix variants that people have been using for years now.

While there are a few Meego strongholds and some Embedded Linux developers, most of the market has shifted to using Android. And it’s not just about mobile phones. It’s televisions. And tablets. And media phones. And set-top-boxes. And DECT phones. And DVRs. And Digital Picture Frames. And In Car navigation and entertainment systems. Every device that has a screen is now a prime suspect for migrating to Android.

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Chipset vendors have taken notice of Android. Chipset vendors who aren’t catering for mobile devices had no Android in their near future for plans for early 2011. That was 3 months ago. Today, these chipset vendors are joining the bandwagon and are updating their roadmaps and strategy by embracing Android – they have figured that it is better to join the club than to fight the tide.

The Hare: Moving too fast
While this is happening, Google is shifting gears. In 2010 they have shortened the release cycles for many of their products and are raising a new challenge to companies who wish to stay ahead of the game and compete in the market.

With 5 or 6 releases of their operating system in a single year, it may seem that Google is moving too fast with Android. While that is definitely true, Google and Android are also moving too slow at the same time.

Android Version Release Timeline

If you look at the mobile handset arena, Google is definitely not waiting for anyone.

The sheer amount of releases places handset vendors in an uncomfortable position of being unable to follow suit. Sony Ericsson released their Xperia X10 with Android 1.6 on August 2010. Dell out-did them with Dell Aero running Android 1.5 on August 2010. Older devices were launching with Android 2.1: Motorola Droid X released on July 2010 and HTC EVO released on June 2010 are such examples.

At the same time, Google has had to cope with different implementations of their API set for developers by the different handset vendors through their CTS (Compatibility Test Suite) program.

These changes between Android versions are not only additions – some of them are infrastructure changes that affect developers and break compatibility across versions. Take for example the addition of Stagefright – a new media framework released alongside OpenCore in Android 2.2 – will Google be keeping OpenCore moving forward or will they deprecate it in future releases?

Andy Rubin, VP of Mobile Platforms at Google said in an interview that their launch cycle “will probably end up being once a year when things start settling down”. Is that going to happen any time soon with iOS innovations and the introduction of Windows Phone 7? Unlikely.

The Tortoise: Moving too slow
On the other hand, Google hasn’t been able to address the hockey-stick market demand for the Android platform.

Back in 2007, Google created the OHA (Open Handset Alliance) consortium as a governance framework where Google could establish handset compliance requirements and thereby run the show (see their CTS and CDD requirements recently published. Following the same philosophy, they set up Google TV for Android-powered televisions. The next product category that Google will focus on will be tablets. But what about in-car systems, set-top boxes or media phones? Enter the OESF.

The OESF (Open Embedded Software Foundation) is an open alliance formed in Japan and active throughout Asia Pacific. It is the first non-Google consortium initiative for Android. Its charter is to define new API sets that cover the products that Google doesn’t. In that regard, the OESF has already introduced its own Market Place SDK and is making strides in areas related to home networking, VoIP communication, security stacks, automotive and more.

Google have decided in the past that tablets should be running their Chrome OS – a networked based operating system – and not Android. They also stated that vendors should wait for Honeycomb Android release and not use FroYo or Gingerbread for tablets. Vendors have not been convinced, preferring to use Android instead, with its currently available version. In September 2010, during IFA Berlin , a slew of new Android-based tablets have been introduced: Toshiba Folio 100, E-Noa’s InterPad Android tablet, Elonex eTouch tablet, ViewSonic’s ViewPad 7, Archos’ tablets and Samsung’s Galaxy Tab. Deutsche Bank’s Jonathan Goldberg has compiled a list of 30 tablets planned to launch by the end of this year alone.

The Samsung Galaxy Tab released to the market with much fanfare last month is the first Android tablet that comes from a large vendor and backed by Google through its Android Market. This clearly shows Google’s new stance with tablets. The application layout issues that are expected with this tablet due to different resolutions than those available on mobile phones are going to cause headaches to both users and developers in the short term.

Factor into it the growing hype in China around Android and we are bound to see innovation happening out of Google’s campuses around Android.

Will these issues be solved in Android’s next release – Gingerbread, or only in the one after that – Honeycomb? Will Google try pushing vendors to Chrome OS instead for tablets? These open ended questions show how slow Google is in addressing non-smartphone markets.

This issue of form factors is the second dimension of Android’s fragmentation. There are three more dimensions: implementation fragmentation, user experience fragmentation and codebase fragmentation. If Google wants to retain their control over the Android platform, they will need to solve all of these five dimensions of Android fragmentation.

The crystal ball
Google is moving fast with Android and at the same time are trying to solve fragmentation issues of their platforms: they are working hard on reducing the amount of handsets running older versions of Android, they are trying to solve implementation fragmentation with their CTS suite and they are now focusing on user experience issues.

It is not going to be enough. The Android platform has captured CE vendors of all types. Any device requiring a user interface to operate is either moving to Android or will move to Android soon. By ignoring these devices, Google is leaving a wide door open for other vendors and organizations to cater for their needs: the OESF are doing that on the standardization front, while new entrants to this market such as Amazon may become the ones providing the application stores for such devices.

At the end of the day, Google will be able to focus and control a relatively small number of form factors: smartphones, televisions and maybe tablets. The rest of the market will be using the Android platform without Google’s direct assistance and control; we should see other application stores enter this market, which is a genuine opportunity for the likes of the Amazon app store (Android-based, white label Kindles, anyone?) and all the other service providers out there to compete with Google’s services on Google’s own home turf.

– Tsahi

[Tsahi Levent-Levi is Director of Technology and Solution at Radvision. He has been involved with the mobile video telephony market for 8 years, dealing with design, development, standardization, interoperability and marketing of such technologies. You can follow him on twitter or through his personal blog at http://blog.radvision.com/voipsurvivor/.]

Symbian is dead. Long live Symbian

[Is Symbian coming to the end of its shelf life? Research Director Andreas Constantinou dissects the motivations behind Nokia’s strategy and why Symbian is getting a new lease of life]

Only two short years and four months since it was announced, the Symbian Foundation is shutting down. With it dies Nokia’s second effort at creating a licensable application platform for mobile phones (the first one was S60) and to compete against Android. While Nokia is shunning to make the closure official, the last OEM supporters – Samsung and Sony Ericsson – have officially killed plans for Symbian products (see here and here) and Symbian staff are being given redundancy notices and making career moves on LinkedIn. [update: On November 8, it was announced that Nokia will regain control of the Symbian governance process and that the Symbian Foundation will be reduced to a licensing team]

The writing has been on the wall since early 2010, when Nokia took out a €500 million loan to (among other things) help sustain funding into the Symbian Foundation, whose membership fees were due to be renewed in April 2010. Symbian Foundation relied on OEMs shipping handsets to take on the operational costs at the tune of 5 million GBP per OEM. The final blow came with the departure of SyFo’s CEO and co-architect, Lee Williams.

The death of Symbian
Symbian Ltd., the OEM-backed consortium that funded Symbian development between 1999-2008 had long been suffering from an imbalance of power and poor strategic decision-making. There were three things wrong with Symbian Ltd.

Firstly, with Nokia owning 48% of Symbian Ltd. shares, the Finnish OEM had been driving the agenda at Symbian to the detriment of its OEM partners, Secondly, since the UI was severed from the base OS in 2001, Nokia had been squeezing the value out of the Symbian operating system and into its own S60 UI, middleware and applications suite platform. This meant that other OEMs had to spend considerable effort integrating Symbian with their own UIQ or MOAP layers and filling the gaps that Nokia left – effectively leading to handsets which were expensive to build.

Thirdly, with the decision to have Symbian baseporting owned by the OEM and not Symbian Ltd, each manufacturer had to spend millions to get Symbian ported onto the hardware platform, in essence reinventing the wheel. While this naturally gave Nokia the edge in producing more Symbian models more often, it meant that for other OEMs most of the budget was spent in baseporting (i.e. getting the phone to work), rather than in differentiation. In 2007 Symbian Ltd. was desperately in need of a major governance re-engineering operation.

The coup de grace arrived with the launch of Google’s OHA in November 2007, signaling two major changes in the phone industry: firstly, that open-source development (inspired by mobile Linux) was now supported by a major cash-rich backer, and not an operator consortium (LiMo) or a loose congregation of Linux system integrators and design houses (Azingo, Purple Labs, WindRiver and Montavista). Secondly, that zero royalties were now the norm and operating system development was turning from a revenue generator to a loss leader. With Android changing the rules of the game, Nokia knew that for Symbian to compete in this new world, it had to be both open source and zero royalty.

Seven months on from the Android disclosure, Nokia announced that it would be buying the remaining Symbian shares outright, paying up the equivalent of 2.5 years of royalties or 2x the revenues of Symbian Ltd – a paltry evaluation for the top smartphone OS. For Nokia it was a financial and strategic move; it made financial sense because Nokia would slash its Symbian maintenance costs (from 100 million GBP of annual license fees to 5 million GBP of annual membership fees) by sharing the SyFo costs with other OEMs on the board. It made strategic sense because with the ownership change, Nokia convinced Sony Ericsson and DoCoMo to abandon UIQ and MOAP respectively and marginalised Windows Mobile which was still royalty-based. Meanwhile, Nokia could still exert the majority influence into the Symbian roadmap by employing most engineers and most package owners (effectively well into 2010).

In retrospect, Nokia failed with both S60 and Symbian Foundation by insisting on a winner-takes-all mentality, i.e. taking roadmap control away from its OEM development partners which long-term destroyed the value in the partnerships. This winner-takes-all-mentality is nothing new; it was already harming Symbian as we had argued back in 2005. The full open sourcing of the Symbian platform in February 2010 or the cute playful new brand did not succeed in stopping neither the developer defection (see our Developed Economics report) or the OEM defection from Symbian.

With Nokia shares performing miserably over the last four years, the Finn-led board took the bold decision to oust Olli-Pekka Kallasvuo and bring in a Canadian, Stephen Elop to turn the boat around. 41 days into the job, Elop announced the cutting of 1,800 jobs at Nokia and the adoption of Qt as the main development environment on top of Symbian handsets.

For Nokia, Qt presents both an opportunity and a challenge. On one hand it’s the most capable cross-platform application environment today boasting reach across mobile, PC and STB – plus depth with Qt providing a complete API wrapper on top of the native OS (and much wider API coverage than GTK to which it’s often unfairly compared). On the other hand Nokia has notoriously mismanaged the Trolltech acquisition of January 2008, with the troll CEO, CTO and key engineers abandoning ship. Meanwhile, Nokia has created a Qt break across Symbian and MeeGo UIs and not managed to fully deploy Qt on Symbian 2.5 years after the acquisition (note how Qt Mobility APIs are still way incomplete).

Long live Symbian
With Symbian Foundation soon to be diagnosed dead, the rumours about Nokia replacing Symbian are rampant. Many industry pundits are prognosticating that Nokia will adopt Android – which in 2010 is going stronger than ever – or Windows Phone 7, which comes with the freshest UI since the widget based paradigm popularised by the Jesus phone. Despite the prophecies, Symbian will live on for many years to come. As the French expression goes, Le Roi est mort. Vive le Roi.

There are two reasons why Nokia won’t be abandoning Symbian anytime soon.

Firstly, Symbian is tightly integrated with Nokia’s variant management process. Nokia is the only OEM that has mastered variant management, i.e. being able to generate 100s of variants (SKUs) at the press of a button. That’s how Nokia can deliver 100s of customised smartphones to operators and retailers around the world. This variant management process is ‘hardcoded’ to Symbian, which means that replacing Symbian would seriously compromise Nokia’s ability to cater to operator requirements around the world and it would seriously hurt its market share.

Secondly, Nokia’s economies of scale rely on in-house control of core components, and the operating systems is one of them. If Nokia were to license Windows Phone it would reduce its differentiation to industrial design and Ovi alone. In the case of Android, Nokia would have to branch Android (and to sustain the cost of Android development), port Qt on Android which means another 12+ months for a stable implementation. While this remains a long-term possibility, it is still a gamble when Nokia’s priority should be to focus on killer devices and not a killer OS. Qualcomm’s BREW MP is another candidate but only when Qualcomm has a good developer platform story and that means waiting for BREW MP to launch a web-based platform akin to RIM’s WebWorks.

Symbian may no longer be a symbiotic system, but will live within Nokia for many years to come as the workhorse under the hood of Nokia smartphones.

The King is dead, long live the King.

– Andreas
You should follow me on twitter: @andreascon

Smart < feature phones = the unbalanced equation (100 Million Club series)

[Smartphones get all the media attention, but it’s feature phones that are still driving the mobile industry. Marketing Manager Matos Kapetanakis examines this unbalanced equation and makes sense of the numbers published in the latest 100 Million Club]

100 Million Club - Smart < feature phones: the unbalanced equation

Welcome back to the 100 Million Club. This 6th edition of our watchlist tracking successful mobile software companies debunks the smartphone myth and paints a detailed picture behind the 34 software products – from BREW to Webkit  – which have shipped in more than 100 million handsets as of the end of H1 2010. Click here to download the watchlist.

Key insights
– Despite the hype, smartphone platforms account for less than 20 percent of the 620+ million handsets shipped globally in Q1 and Q2 of 2010. More than 80 percent of total shipments are driven by feature phones, the majority of which use proprietary software platforms.

– BlackBerry is now the second smartphone platform, after Symbian, to break the 100M handset barrier. As of the end of June 2010, RIM has sold more than 100 million BlackBerry devices.

– A total of 350M handsets have shipped with a WebKit-powered mobile browser up to the end of 2Q10. The biggest contributors to shipments of the open source browser engine are the Series 40 and Symbian OSs, while the steep rise of Android will play a bigger role in WebKit going forward.

– Only a handful of mobile software products were shipped in more than 100 million devices during the first half of 2010. Among them are the T9/XT9 text input engines by Nuance, the vRapid Mobile software update engine by Red Bend and the Nucleus real-time OS by Mentor Graphics.

– Symbian alone has more shipments in H1 2010 than iOS and Android combined. Moreover, when combined, the Google and Apple mobile operating systems make up less than 20% of Series 40 shipments in Q1 and Q2 2010.

What’s new in the Club?
In this 6th edition of the 100 Million Club we ‘ve introduced a dedicated watchlist tracking mobile platform shipments.

The watchlist comprises of 10 application environment software products, OSs and RTOSs with more than 100 million installations. Our latest members in these categories are the BlackBerry OS by Research in Motion and ThreadX by Express Logic. We have also added media favourites Android, iOS and Windows Phone 7, for comparative purposes, since they are well below the 100 million mark.

The Embedded Software Shipments watchlist features 24 products that have been pre-installed in more than 100 million handsets. This latestedition of the club sees the addition of the Media EXP, an audio/video codec and frameworks suite by Aricent and MSIP, a mobile analytics software agent, by Carrier IQ.

100 Million Club - 1H10 - Mobile Platform Shipments
Click on the image to download the full pdf

The smart vs. ‘dumb’ phone equation
The impact of smartphones to the industry is way overrated. It’s a little-told secret that smartphones account for only 20% of worldwide handset shipments, a fact we tend to forget in the face of the one-sided media storm that surrounds smartphones. A key observation from the 100 Million Club is that the ‘proprietary’ Nokia’s Series 40 and Qualcomm BREW are shipped in many times more handsets than Android, iOS, BlackBerry even the older Windows Mobile and Symbian OSs. In fact, with 638 million cumulative shipments by the end of Q2 2010, BREW is the most widely deployed licensable mobile operating system. If one considers real-time OSes for application and baseband processors, then the shipments scale to the billions of phones.

OS, RTOS shipments H1 2010
Click on the image to download the full watchlist

So, is Nokia’s Series 40 the most successful OS ever? Not exactly; the handset market is very much dependent on internal OEM platforms, which power more than 45% of total handset shipments for H1 2010. Samsung and LG, ranking 2nd and 3rd in the top-five handset OEM leaderboard, are largely responsible for proprietary platform shipments. Samsung has heavily ramped up smartphone shipments starting in Q2 2010 (which should become visible in H2 results) and is investing in its home-grown Bada platform, a C++ layer on top of its proprietary SHP operating system. LG also hopes to get a larger piece of the smartphone pie, by releasing 20 new smartphone models in 2H10.

The 20% share of smartphone shipments is set to grow rapidly driven by two phenomena; firstly the growth of Internet-borne platforms, namely iOS and Android. Secondly, the carrier drive to commission and subsidise smartphone handsets as a differentiating strategy, which is driving the carrier-happy tier-1 OEMs (Motorola, Sony Ericsson, Samsung and LG) to bend over backwards and ramp-up smartphone production. This is unprecedented growth in share of smartphone sales, which was neighbouring at 10 percent back in 2007.

The shift of attention of traditional handset OEMs towards smartphones, coupled with the rise of smartphone-only vendors, seems to indicate a balance shift in the smartphone vs. feature phone balance. It might seem a foregone conclusion that that pretty soon we’ll have a majority of smartphones flooding the global market. However, that is not going to happen overnight, i.e. not in the next 3-4 years. Smartphone shipments of traditional OEMs are but a fraction of their overall shipments, while Apple, RIM, HTC and ZTE cannot yet hope to meet the demand of huge, feature phone-dependant, price-sensitive markets, like India and China.

Clash of the platform titans
In the clash between the more familiar platforms, Symbian and BlackBerry rule over newcomers Android and iPhone’s iOS, in terms of cumulative shipments. But the picture is quite different in terms of growth, where Android has been the clear winner, growing by leaps and bounds (from 100K activations a day in May 2010, to 160K a month later and 200K in August – activations are not the same as sales, but the growth is still impressive). RIM and Apple have seen a healthy increase in their handset sales, while Symbian has suffered a small (~3-4%) decrease in market share between H2 2009 and H1 2010, despite Nokia’s growth in the handset market. However, Symbian’s market share is bound to drop even more, considering the recent decision by Samsung and Sony Ericsson to drop Symbian altogether, as well as Nokia’s choice of MeeGo over Symbian^3 for their latest N-series. Symbian is fast becoming a Nokia-only OS so we should expect the end of the line for the Symbian Foundation within the next few months as well.

Where are MeeGo, Chrome OS and webOS in this picture? The short answer is that they are nowhere to be found in mobile devices in the first half of 2010. MeeGo is rumoured to be appearing in Q2 2010 in the market, with Nokia targeting to make first impressions last while facing delays in Qt integration and the departure of key personnel. Chrome OS will most likely be shipped solely in tablets and netbooks, while HP aims at delivering new webOS devices in early 2011.

Last but certainly not least, we should not ignore Microsoft’s latest bid for dominance in the mobile industry: Windows Phone 7. The newly released OS has been completely redesigned to offer iPhone-style margins with an Android-style business model, while targeting untapped pockets of Xbox and PC developers instead of making up with Windows Mobile developers who were left with a bitter aftertaste (see our Developer Economics research). Windows Phone 7 already seems to be building momentum, with 9 new models coming to the market in Q4, $500 million in marketing budgets and a tightly integrated hardware and software platform (see our earlier article on Windows Phone for a detailed strategic analysis).

Not museum material…yet
In summary, smartphones captivate our minds, but it’s still ‘dumb’ phones that we carry around with us. Someday in the foreseeable future, non-touch screen phones will take their place in a telecoms museum (right next to the old, ‘brick’ mobile phones), but that day is not as close as mainstream media have us think.

– Matos

The Snowball Effect of Mobile Application Analytics

[It takes time for your eyes to adjust when you’ve been blind-sighted for so long. Especially if you are an entire industry. Research Director Andreas Constantinou dissects the market of Application Analytics and discusses why it’s the most underhyped market sector in mobile]

VisionMobile - The Snowball effect of Mobile App Analytics

Application analytics has been one the surprises in the mobile industry radar. It’s a market sector that emerged almost out of the blue in 2009 and became mainstream in just a year, fuelled by the mobile app phenomenon.

Why are analytics important? from a developer perspective analytics serve a very simple, practical purpose; that of an optimisation tool that helps increase app downloads and sales. From an OEM and carrier perspective, analytics are a double-edged sword; they offer unprecedented insights into consumer app usage, but they can also leak critical insights to third parties (see the Apple-Flurry dispute). Strategically, application analytics present one of the biggest disruptions on the mobile industry radar; the potential to extract more consumer insights and metrics than can be gleaned through TV, credit cards, loyalty cards and any other medium that has come before.

But let’s take things one at a time.

The spectrum of mobile analytics
Application analytics is only one of the three sectors of mobile analytics. Each sector comes with a different set of participating vendors:

– Application Analytics: usage and marketing analytics tools aimed at application developers (e.g. Flurry, Localytics, Motally)

– Campaign analytics: usage and marketing analytics tools for mobile web or WAP sites plus campaign optimization tools aimed at media companies (e.g. Amethon, Coremetrics, Omniture, Bango)

– Service analytics: platforms for mining network or device data to extract service intelligence aimed at network carriers (e.g. CarrierIQ, Neuralitic, Zokem).

The three sectors of mobile analytics differ in terms of probing points, deployment route, sales route, applications and revenue models to name just a few. All in all, mobile analytics is a sector which we expect to see develop over the next 5 years; moreover, it’s probably the most underhyped sector in mobile, as no one can foresee how big analytics is going to get (but certainly many times bigger than TV, billing or other consumer analytics).

Back to application analytics now. When researching the landscape of application analytics vendors we came up with an interesting analysis framework; vendors are positioned differently across the user journey, based on their probing points, therefore the metrics that they can gather, and the types of solutions (or ‘intelligence’) that the can deliver, as shown in the next chart.

Billing/e-commerce analytics intercept the user journey at the discovery and purchasing touch-points (e.g. Bango, AT Internet). App Store analytics extract data directly from the App Stores (e.g. Distimo). Finally in-app analytics extract data during installation and the application runtime (e.g. Flurry, Localytics, Mobixy).

App Analytics landscape

We surveyed the landscape of application analytics vendors in July and August, speaking to Bango, Distimo, Flurry, Localytics, Mobixy and Ubikod. We ‘ve summarised the positioning of these vendors in the matrix below, providing the history, ownership/funding, positioning, products, revenue models and installed base for each vendor. Naturally, there’s lots of vendors that we didn’t have time to cover, namely Motally (now Nokia), Appclix (ex.Mobilytics), Apprupt, webtrends, Adfonic, Google, Medialets, Mobclix, Tapmetrics, Millennial Media, LoopAnalytics, ApSalar, Ivdopia, Mixpanel, appFigures and Eqatec.

The comparative table below offers quite a bit of insight into how analytics products from these vendors differ in their background, positioning and revenue models.

App Analytics Vendors

[click on image for full table]

It’s only the beginning
Despite the hockey-stick growth, the sector of application analytics is still in its infancy. Some key observations are worth highlighting here.

Supply polarisation. There is a very polarized distribution in the installed base with Flurry grabbing more than 95% penetration into iOS and Android apps. At the same time we have negligible penetration for the mass-market of mobile platforms (incl. RIM, Java ME and Symbian).

Solution packaging. App analytics solutions are packaged in two very different forms; firstly pure-play vendors offering analytics as a core product (e.g. Localytics, AT Internet, Motally), where first-party hosting, data ownership and tailored metrics are key issues for customers. Secondly, vendors offering analytics as part of an app recommendations, ad or campaign management solution (e.g. Flurry, Mobclix, Medialets), where targeting efficiency is the key issue for customers.

 

Convergence with web analytics: Mobile analytics are converging with their web counterpart. This is happening on the supply side (web analytics firms coming to mobile), the buy side (brands deploying both web and mobile properties) and the user side (as the web and the mobile user journey have many intersecting points)

 

Customer experience analytics is an untapped vertical for app analytics. Purchase decisions, app usage and device monitoring can be leveraged to add unprecedented, granular insight into traditional solutions.

Disrupting consumer analytics. The app analytics value will explode as mobile apps penetrate more engagement channels. Set-top-boxes, media boxes, augmented reality apps and online payments will more and more leverage the phone as a remote control or as an experience delivery medium. App analytics will catalyse engagement monitoring in all these channels and in the process disrupting Nielsen’s TV audience measurement business.

 

Snowball effect. App analytics is the “snowball” that will pave the way for all other analytics; for many years companies have seen the benefits of deep behavioural analytics, but never before has the route to market been so straight forward. By piggy backing on app analytics, OEMs and carriers can gain access to the richest customer metrics with the shortest distance to customer purchase decisions and the sales funnel. The “Nielsen” of mobile will be a company with application analytics at the core of its business.

In this rapidly evolving market, it is verticals know-how, community-building skills (especially developer communities) and relationships that will determine the real winners and losers. One thing is for certain though; application analytics will bring much-needed transparency and visibility in an industry that has so far been blind-sighted.

– Andreas
you should follow me on twitter: @andreascon

30 Tablets in Q4 2010: packed train arriving at empty station

[There are 30 tablets coming by Q4 2010, but who is going to buy them? Guest author Jonathan Goldberg, Research Analyst at Deutsche Bank breaks down the supply and demand equation behind the emerging tablet market, and discusses why the impending tablet wave might be a full train arriving at an empty station]
This article is also available in Chinese
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30 Tablets in Q4 2010

The key issues

The tablet market is opening up, with at least 30 tablets coming by Q4. Here are a few key issues:

  • There are indications of at least 30 tablets coming to market by Q4. And there are reports of at least 80 to be launched in the next six months.
  • There is no hard data available about consumer usage of tablets. This might mean that most of the tablets will be undifferentiated and it is unclear who, if anyone, will buy them.
  • The leading brands in the space this Q4 are Apple, Dell and Samsung. Other major brands are expected to enter the market in 1Q11, including HP Palm, Motorola and RIM
  • Most of the tablets are using Android, but we hear that Google has been trying to discourage many of these projects. They do not support Android for use in tablets with the current Froyo V2.2 of the OS. This means some of the tablets coming this year may lack access to the Android marketplace, Google maps, etc.
  • All of the tablets we have seen run on ARM-based processors. Major suppliers will be Qualcomm for the 3G baseband and integrated applications processors. We have seen tablets using applications processors from Marvell, Nvidia, Samsung and Texas Instruments. There are also a number of designs using silicon from Atheros, Broadcom, Skyworks and Triquint. In theory, this could be good for these vendors, but the looming glut of product may dampen enthusiasm for the category.
  • Pricing will be a key determinant. Most reports peg low-end models at $300 or less. However, there are reports of prices ranging as high as $900. I believe there will be few takers for tablets priced above the iPad.

Overall, everyone likes the idea of a tablet, but I think it will take a year or two before the market shapes up. There are just too many devices coming online amid very initial interest from consumers. Eventually, the tablet may become a preferred media consumption device for consumers, filling the gap left by underpowered netbooks. There is likely room for both netbooks and tablets in the market, but it is too early to gauge the size of the tablet market.

What’s a tablet?

Any discussion on tablets needs to start with a definition. For our purposes, we will define them broadly to include anything that is not a smartphone or a laptop. These devices have no hinge as laptops do, but cannot easily fit in a pocket. This covers considerable ground from e-readers to true tablet computers.

Most of the tablets coming to the market today are less mobile than smartphones, but have essentially the same computing power. The iPad is the best example of this. The electronics of an iPad are identical to an iPhone – same processor, same memory. It does have longer battery life, but no one would argue that it is less portable than a phone, since it does not fit in a pocket.

These facts seem somewhat incongruous, leading to several interpretations. The first is that with time tablets will see an increase in computing power. In fact, there might be a few of these more powerful tablets in the works for next year. Another interpretation is that Apple has just confused the market, which they can get away with because of the power of their brand. They positioned the iPad to fit into their own product line-up, not to meet industry expectations. It will be interesting to see if any of the tablets coming out later this year have noticeable performance deficiencies, in the form of hang time and slow app loading. A more gloomy interpretation is that this is a dead-end form factor. While I’m more optimistic than that, I believe the OEMs should seriously question what ‘need’ a tablet addresses for consumers.

 

What is the Tablet Market?

To better assess the potential for the market, we need to deconstruct it a little. First, it is worth considering who has bought a tablet so far. Then we should consider what they are doing with those devices, and finally compare that to what the devices are capable of. As with all such new products, there is very little hard data available, but here’s what we know so far.

Who is buying tablets? So far, there are really two products that fit into this category – the Kindle and the iPad. Amazon has not released any data on Kindle sales, but they continue to roll out new models, so it must be doing well by some internal metric, and most reports indicate Kindle is helping to expand overall book sales by Amazon. Apple has sold over 3 million iPads since its launch last quarter, and Deutsche Bank estimates are at 12 million unit sales for this year. That’s an impressive number for a new product, but a small number relative to everyone else’s expectations for the category. It is still unclear who is buying these. By some estimates, a very large percentage of iPad buyers are already iPhone owners. There is a lot of synergy between the two with easy syncing of content and Apps via iTunes.

There is also a lot of anecdotal evidence to suggest that the iPad has broadened the demographic group of iPhone buyers. For instance, some people have bought the device for parents and grandparents, reaching a group who is uninterested in the Apple brand but like the ease of use of the device.

What are people doing with tablets?

While waiting for further hard data on iPad usage, we can look at iPad developer activity and app downloads as a decent proxy.

Developers, for their part, seem very interested in the iPad. In the graph below you can see iPad apps versus iPhone apps, in terms of available apps in iTunes plotted against days since the release of each of the two products. iPad apps have outpaced iPhone apps in growth, although we should take into account that writing an iPad app today is much easier than writing an iPhone app when iOS first got a start, three years ago.

According to Distimo, developers for the iPad also seem to be taking advantage of a wider variety of iOS features such as in-app purchases. The Distimo data also shows that as a percentage of apps, games are more prevalent on the iPad than the iPhone. Prices for iPad apps also tend to be higher than comparable (sometimes identical) iPhone apps. From this, we infer that developers see this as a worthwhile market, and possibly one with a superior demographic for paying for software.

iPod&iPad apps vs days after launch

What it all boils down to is a lack of actual data. While there have been some consumer surveys done on the space by tablet vendors, this is really a virgin market. No one knows what consumers want from a tablet or whether they even want one at all.

I am actually somewhat optimistic about the tablet as a concept, but I think the excitement will outpace demand in the near term. There is also a gap between laptops and smartphones, that gap will find interest from some consumers, as was the case with initial excitement for netbooks. Consumers want low-priced computing devices that have larger screens than a phone. This market was artificially capped by Intel and Microsoft who sought to stave off cannibalization of their laptop business. The end result was that consumers lost interest in underpowered netbooks, which struggled to multi-task or play high quality video.

The first devices available run iOS and Android, but they will by no means be the only offerings. Google is likely to enter the fray soon with Chrome, an OS originally built for netbooks, but equally applicable for tablets. Google has even made comments that Chrome is the preferred OS for tablets. Beyond this, however, there will be other options. HP will likely have a Palm webOS tablet out soon. Blackberry has announced a new OS for their PlayBook device available early next year. And even MeeGo has to be considered a potential entrant. Although I’m skeptical about this OS’s prospects, many reports indicate that MeeGo is actually very well suited for a larger form factor like a netbook or tablet. Perhaps the only entrant I would not add to the list is Windows 7 (Big windows not Windows Phone), since conventional widom is that this OS is just not suitable to the touch-screen form factors that are quickly becoming standard for this class of device. There is a video making the rounds on the blogosphere that shows how clunky the Windows 7 interface is with touch-screen input.

In this year’s race to launch tablets, it seems like few companies have given much thought to the software experience. Most of the companies launching tablets appear to be using Android. This is despite that company’s weak support for Android on this form factor. It appears that many of the Android tablets launching this year will NOT have links to the Android marketplace as the FroYo (2.2) release is not really designed for tablets starting from the screen resolution. I believe Google is encouraging hardware makers to hold of on Android tablets until the Honeycomb release due out next year. This implies that many of the Android-based tablets coming out this year will have very few apps and limited ability to download them. Effectively, these tablets will be large, expensive browsers.

Competition

The tablet field is expected to be very crowded, from as early as 4Q10. Below is a table compiled from a range of sources, including news reports and blogs. There might be some discrepancies, especially on pricing, but many of these devices have been officially announced.

List of tablets planned for 4Q10

And this list is by no means complete. There is also this user-generated list of Android tablets coming for Christmas. At the time of writing there were 22 models listed. As if that were not enough, here is another list of all 73 tablets rumored or announced so far.

In terms of official developments, Samsung has officially launched its Galaxy Tab, RIM has announced its tablet and, most recently, reports emerged on the web that Amazon was preparing its own Android tablet and Android marketplace.

A key question will be pricing. There is no seen official word on this, but some press reports indicate the Galaxy Tab device will cost $900+ without a carrier subsidy. As PC World points out many of the tablets coming to the market are charging a premium to the iPad. Maybe Samsung can pull that off, but few other tablets will be able to command a premium to an Apple product.

Conclusion: Who benefits from tablets?

The answer to that is that there are too many tablets coming to market too soon. With no hard data about consumer usage, it’s likely that most of the products will have a hard time differentiating themselves. This will probably lead to a glut that will mean pricing pressure for most of these vendors.

From the component level, the biggest beneficiaries are the screen vendors. Capacitive touch screens are not cheap, and are probably the most expensive component in the bill of materials. So far we have seen few tear-downs of any of these tablets. The iPad BOM is very similar to the iPhone and iPod touch, running an Infineon 3G baseband, Skyworks and Triquint’s front-end modules, and the internally developed Apple A4 processor. It is likely many of the Android tablets are using Qualcomm’s Snapdragon or other MSMs for 3G connectivity. Also, there are reports that tablets makers are trying out Nvidia’s Tegra, TI’s OMAP and Marvell’s Armada for applications processors.

Finally, investors will have a hard time tapping into this. On the one hand, price competition from a multitude of Android tablets would imply lots of volume. On the other hand, design wins are not free; they cost upfront engineering resources. A glut of product could lead to inventory back-ups and order declines in Q1. For the time being, my view is that tablet volumes (other than the iPad) are likely to remain small relative to PCs and handsets. Nonetheless, we should expect a shake-up next year as suppliers pick their battles carefully.

– Jonathan

[Jonathan has been a Research Analyst at Deutsche Bank for 8 years and focuses on wireless technologies and the Mobile Internet. He can be contacted at “jonathan.goldberg (at) db (dot) com”]