Who will be the iOS and Android of IoT?

[Put together, the announcements at Google I/O and from Apple, Samsung, Nest, Quirky and others in the past weeks paint a crystal clear picture of where the future of the Internet of Things is heading. Our latest report on the topic gives you the right tools to separate winners from losers in the IoT race. In this post, we line up the candidates in smart homes, smart cars and health.]

IoT-Developers_FINAL

The blast of IoT-related announcements in the past days and weeks, including at Apple WWDC and Google I/O, are more than an indication that the Internet of Things is picking up pace. Put together, they also offer a crystal clear picture of where the Internet of Things is heading.

The major players have put their stake in the ground:

  • A lot of attention at Google’s I/O conference went to the Google Wear and Google Fit announcements. At the same time, Google-owned home automation company Nest – known from its thermostat, smoke detector and now security camera (Nest acquired Dropcam) – has opened up its API to developers.
  • With the “Works with Nest” program, the company is positioning itself as the central hub for connected devices in the home; and it is not alone. Crowdsourcing product development site Quirky announced Wink, a hub + app + cloud platform that together with Nest is going to provide some strong competition for that other hub-in-the-home startup: SmartThings. Quirky is an interesting player as its backed by GE, with whom they have been partnering on a range of smart home solutions.
  • Apple announced HomeKit and HealthKit at its WWDC developer conference, adding to its push into the car earlier this year with CarPlay.
  • Samsung, finally, announced its own health platform SAMI and sensor designs Simband last month.

The common theme is that [tweetable]all these recent IoT announcements focus on developers more than products. Why is that?[/tweetable]

All these companies have understood a fundamental truth about the Internet of Things. IoT is not about technology or features or devices or connectivity. We explain this idea in depth, and with many more examples, in our new report – IoT: Breaking Free of Internet and Things.

[tweetable]The biggest opportunity in IoT is in thousands of niches and use cases, just waiting to be discovered[/tweetable] by tweaking and experimenting with new ideas.

How do you deal as a company with such diversity and unpredictability? How do you design products for future unknown needs? Luckily we have some recent examples of companies that solved this conundrum. In the past 6 years, Apple and Google propelled themselves to top positions in mobile by fostering vibrant communities of innovators (app developers) that together unlocked countless new use cases and needs, from silly (Flappy Bird) to life saving (PocketCPR).

We’ll leave the full discussion of the exact mechanics for another time, but with the smartphone model in hand, it becomes clear what the companies above are trying to do. They want to achieve the same kind of dominant position as Apple and Google in mobile, using the same recipe. And some of them inevitably will.

The stakes are high. Successful community owners will gain immense competitive advantages, typically leading to winner-takes-all markets. The game is on: [tweetable]who will be the equivalents of iOS and Android in the Internet of Things?[/tweetable]

Who will be the kings of IoT?

Three areas in particular seem on the brink of seeing Android/iOS-like ecosystems of entrepreneurs gaining momentum: home, health and cars.

In the home, there are at least 4 serious ecosystem contenders.

  1. Apple signalled its intentions by releasing HomeKit, the developer API that enables discovery and control of third party connected devices. Some clever people (e.g. at Forbes and Macworld) have pointed out that the Apple TV might be the perfect substrate for a HomeKit-driven hub.
  2. Google has made a clear investment in the home with its $3.2B acquisition of Nest, as well as other initiatives like Android TV and ChromeCast.
  3. GE has been building momentum with its Quirky partnership and now the Wink platform.
  4. Meanwhile in startup land, SmartThings has been pursuing this ecosystem vision for almost 2 years since its headline-making Kickstarter campaign.

In health and wellness, things are heating up too. Fitness wearables like Pebble, Razer, Nike+ and Fitbit have successful SDKs with tens of thousands of registered developers. However, in our new report we explain that the bigger opportunity is in combining and mashing up data from different sources. That is the core functionality of the following candidates:

  1. Apple puts its stake in the ground with HealthKit.
  2. Samsung did the same with the SAMI platform. Samsung is in a unique position to bundle an IoT platform with hardware (components, not devices), for example the set of reference sensors (Simband) that they announced at the same time. This strategy is also the basis for the company’s success in smartphones. Samsung can also bring a large amount of Samsung device users into play; a strong carrot for ambitious IoT entrepreneurs.
  3. Google has been playing with wearables for a while (Android Wear, Google Glass). At Google I/O, the company announced Google Fit, a set of APIs that will “blend data from multiple apps and devices”.
  4. Again there are several startups on the scene – Human API and Validic come to mind.

In cars too, we find a mix of internet giants, car maker incumbents and startups that are building developer platforms. We discussed them in depth in our March report “Apps for Connected Cars? Your Mileage May Vary”.

  1. Apple took the lead earlier this year by announcing CarPlay.
  2. Google is following suit with Android Auto, backed by the Open Automotive Alliance with all the major car makers. The announcement mentioned that “Android developers will soon be able to create entirely new experiences for the car” – a clear hint at Google’s intentions to empower a community of entrepreneurs to discover unexpected user needs.
  3. Microsoft has Windows in the Car.
  4. The leading platform-oriented car makers are Ford with AppLink and GM.
  5. Interesting startups with an “over the dashboard” play include Dash and Carvoyant.

What about the sectors that have historically been the focus of the Internet of Things industry, like utilities (smart metering), industrial applications or smart cities? While they represent attractive business opportunities, these arenas focus mostly on solving well-understood needs for known customers. As such, they are not likely to sprout ecosystems that can spectacularly break open the IoT market.

On the other hand, we might see some unexpected platform players coming on the scene. One set of strong candidates focuses on a different part of the IoT challenge: selling and distributing the physical products. Amazon has made its opening in the Internet of Things with a dedicated online storefront and with back-end services (Kinetics), a simple expansion for its AWS infrastructure. We’ve written earlier this year about the plans of Chinese e-commerce company JD.com (together with Baidu) to set up a service line for IoT entrepreneurs.

The wheels are in motion

Time will tell who will take the top position, but the wheels are clearly in motion.

As time goes by, hardware becomes less and less a barrier to entry. Just look at Cruise, an 8-person startup that built a self-driving car in record time with low-cost sensors and components. Dedicated Internet of Things platforms are booming (we count 50+ so far). The cost of connectivity is dropping. This allows entrepreneurs to focus on making sense of data and drive meaningful action, more than on solving underlying technology problems.

As this trend continues, VisionMobile forecasts a fast growth of the IoT developer base in the next years, reaching well over 4 million innovators and entrepreneurs by the end of the decade. With every new use for Internet of Things technology that they discover, demand will grow and this market will become more attractive still. Exciting times!

How can you separate winners from losers in the Internet of Things? Whether you’re a developer, investor or platform company, our IoT report will allow you to make the right bets. Download your copy now.

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UK App Economy report

We’re happy to unveil our latest research report – the UK App Economy 2014 charts the mobile app economy in the region, investigating revenues, jobs, the profile of the British app developer, and how the UK can provide better opportunities for developers. Get a free copy of the report here: www.vmob.me/UKAE14WN

This report will give you a snapshot of the mobile app industry in the UK, presenting an overview of the market in terms of size and revenues, as well as insights into the average size and geo distribution of developers in the UK. The UK App Economy also sketches the profile of mobile app developers in the country, presenting demographics, but also average revenues, app categories and attitudes. Finally, this report shows how app developers rate funding, training and policy in the country, and where they see room for improvement.

IoT industry report

We’ve just launched a new report, disseminating the IoT industry – you can download it for free here: www.vmob.me/IOT14WN

The key lesson from the smartphone revolution is that Apple and Google won not by product features, but by creating networks of entrepreneurs. These networks of entrepreneurs unlocked new demand by creating countless of apps and devices that no single company could ever imagine, let alone create on its own. This entrepreneur-driven demand has created a smartphone market that is several times bigger than the pre-iPhone one could ever become. The same will happen in the Internet of Things.

Our new report tells the story of how developer-entrepreneurs can push the IoT market to unpredicted heights, and how smart IoT ecosystem winners will reap enormous gains by leveraging developer innovations to boost their core business.

The UK App Economy 2014

The UK has been quick in adopting smartphones, tablets and apps with smartphone penetration expected to reach 74% by the end of 2014. But beyond the benefits that one can derive from using apps, there are potentially much bigger benefits in creating apps, or creating an app industry for that matter.

We’re happy to present our new research report, charting the mobile app economy in the region, investigating revenues, jobs, the profile of the British app developer, and how the UK can provide better opportunities for developers (you can download the full report here).

06 UK App Economy

VisionMobile set out to assess the state of the UK app industry in 2014 and find out whether the UK is on the right track to becoming a vibrant and global hub for the app economy. Our findings are based on our Developer Economics survey series (our 7th edition reaching over 10,000 app developers) and a UK App Developer Census survey of over 300 developers across the country.

We estimate the UK app industry will exceed £4 billion in revenues in 2014 and will be growing at a CAGR of 38% between 2013 and 2015 and 22% between 2013 and 2025. The UK has approximately 8,000 companies that are directly involved in app development and approximately 380,000 jobs centred around the app economy. We expect that approximately 30,000 new jobs will be created in the in the next 12 months.

UK-mobile-app-jobs

Most of the UK app industry is concentrated around Greater London, which is home to 31% of UK app companies while the South East hosts another 24% of app companies. There are several app startup hubs located in Brighton, Cambridge, Birmingham, Bristol and Edinburgh, however these are much smaller in scale than London.

App-companies-in-UK
The UK is certainly among the top global tech hubs with several metrics indicating that it is in fact the biggest tech hub in Europe and most likely the second most important tech hub after the US. In 2013 the UK accounted for over a third of the total app revenues generated in EU28 and slightly less than a fifth of all app developers in the EU28.

The UK app economy attracts developers & designers across all ages, from teenagers to 65+ year olds, with 4% being 17 years old or younger. Female app developers or designers account for just 8% of the developer/designer population.

UK-mobile-developer-demographics
44% of app developers and designers in the UK generate most of their income from apps, while 22% generate no income from apps. These are most likely Hobbyists and Explorers for who app revenues is not the primary goal, or early stage startups that have yet to monetise their products. The average salary of developers and designers that generate all their income through apps is £47,000, which is well above UK average salaries.

83% of app developers and designers are self-taught and only 7% have attended a Bootcamp or other taught course. This indicates a gap in the market for affordable training for app developers.

Overall, app developers and designers are pleased with career prospects, flexibility, income and work life balance. But they are quite critical of the UK as a technology hub and the support it provides, highlighting gaps in training and mentoring, funding, industry presence and support, particularly outside of London.

The UK has gathered a lot of momentum in the past two years and the government has been visibly supportive of the startup economy, introducing several incentives and investment in infrastructure. However, there are several areas where more work needs to be done in order to sustain this momentum: continuing tax incentives, providing affordable training, even at an early age, cutting the red tape for fledging startups, educating entrepreneurs about funding resources and support schemes. Industry must also strengthen its support in these areas and confirm this support through developer events across the UK.

Looking for more insights? Download the full report for free!

iOS 8 – Apple’s Hidden Agenda

It’s abundantly clear from WWDC announcements that Apple is working hard to lock users into the system by combining devices into one seamless experience (PC, mobile, tablet, home, wearables). What many people might not realise is that Apple is fighting just as hard to lock in developers.

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[tweetable]iOS is now fully in the third stage of the ecosystem lifecycle.[/tweetable]

You see, platform strategies differ throughout the life of a developer-centric ecosystem. To get started, ecosystems must solve the proverbial chicken-n-egg problem by establishing a beachhead market. Once network effects are in place, ecosystems must expand fast to stay ahead of competing ecosystems, hopefully to arrive at a winner-takes-all outcome. We’ve written extensively on this blog how mobile ecosystems have done that by subsidizing some participants (developers) and by commoditizing others (e.g. handset makers in the case of Android). In the case of Android and iOS, that battle has been won. (More about that in Mobile Megatrends 2014 – just out!)

As the ecosystem matures, new platform features become less about acquiring new users to further fuel network effects. Apple is now defending its iOS ecosystem. Its focus has shifted to capturing and keeping the most valuable users. Tim Cook spent several minutes on stage to highlight that Apple is capturing users away from Android in China. The best users, obviously, not those buying $50 Android devices. Here’s how Ben Thompson over at Stratechery puts it: “[Apple’s Jony Ive implicitly acknowledged] that smartphones have reached the saturation point, especially in the premium segment that Apple has chosen to focus on. However, this is problematic because Apple needs to grow. There are two ways to do so: steal share from competitors and sell more to existing users. While the sheer number of announcements at Monday’s WWDC keynote was almost overwhelming, much of what was announced slotted neatly into one of these two strategies.”

But as we know, iOS is a two-sided platform. [tweetable]To keep the most valuable users, Apple needs to keep the best and brightest developers and entrepreneurs engaged[/tweetable], too. This is a top priority for Apple.

Ecosystem lifecycle

Locking in developers

If developers create apps first (or even only) for iOS, then Apple is sure of a steady stream of high-value, exclusive apps that make iOS devices more attractive to users. The goal of keeping valuable users is tightly intertwined with Apple’s ability to keep developers on the platform. It does so by making it more difficult and costly for developers to switch away from iOS development.

A first set of initiatives intended to lock in developers are SDKs like Touch ID and Metal that only make sense when there’s little fragmentation (Apple’s natural advantage over Android). Creating a login mechanism based on a fingerprint sensor only makes sense if a lot of devices have such sensors. We can reasonably assume that future Apple devices (all high-end) will, while the same cannot be said for mainstream Android handsets.

Nat Brown astutely explains how the same principle works for Metal, a low level graphics SDK: “Of the class of very advanced programmers who will jump on Metal are… the teams that maintain the game engines, frameworks, and toolchains used by 95% (perhaps 99%) of the games for mobile. Unity3D, Unreal Engine, and a few others simply dominate mobile gaming on both iOS and Android. […] Due to this I find it unlikely that the API itself will act to lock anybody into iOS from a classic API perspective – everybody is using an engine or framework and indeed tools much higher up the value chain. But… Metal could very well offer an iOS performance lock-in on mobile.The most realistic rendering games will look great on iOS until Google does deeper/better driver work on Android. As it turns out, that is crazy hard due to the diversity and fragmentation of Android hardware. In this respect, if Metal is indeed a 10x speed improvement or a 10x detail improvement, it may very well be a masterful move – non-iOS games from the same engines will just look lousy on Android. Wow.”

Then there are SDKs that are basically platforms inside the platform, like HealthKit and HomeKit. While there are alternatives out there (e.g. SmartThings and OpenHab in home automation, Human API and Validic in health), Apple might be the path of least resistance and easiest experimentation for developers who are just starting to discover IoT. Furthermore, Apple has a key advantage over its competitors. It can dangle the carrot of hundreds of millions of users in front of developers. As a developer, once you build on Apple, you can’t go back, except at a very high switching cost.

Apple also creates lock-in by embracing the cloud, as Ben Evans pointed out. In the Naked Android post, we wrote about how Google gains more control over developers by developing all the most valuable functionality into proprietary cloud services, not in the open Android OS. To some extent, Apple is doing the same. With the newly announced Apple-only BaaS CloudKit in particular, Apple is aggressively subsidizing developers. The free storage and usage levels for CloudKit are orders of magnitude beyond other BaaS providers and would cost tens of thousands of dollars on competing platforms if used all. Some services might not be economically viable without it. The more developers adopt Apple’s cloud services (including CloudKit), the more difficult it will be for them to abandon Apple or go cross-platform.

Two platforms, two identities

iOS and Android are naturally (and intentionally) developing distinct identities. As Evans mentioned: “It might get harder to make essentially the same app on both platforms. If a core, valuable thing you can do on one platform has no analogue at all on the other, what do you do?” As a result, developers who are serious about iOS will stick with iOS.

SDKs playing to Apple’s fragmentation advantage, new platform attempts (uncharacteristically focused on developers first before polished consumer products have appeared) and building out cloud tools for developers all serve to make it more difficult for developers to port iOS apps. This will help to ensure a profitable future for Apple for years to come.