Unity leads the way in developer satisfaction

As software continues to eat the world (to paraphrase Marc Andreessen), software developers fulfill an ever more critical role in the progress of technology and, by extension, society. Supporting developer productivity is good for business. Those developers then become innovators – co-creators – that give a boost to your core business.

It’s also challenging. Developer programs consist of a myriad of activities, ranging from simple providing sample code and developer education, to tooling, to in-person events and online communication. It’s hard to be great at everything, and it’s hard to allocate effort and money effectively for maximum impact.

Every six months we benchmark top developer programs against each other. First, by measuring what developers value in those resources and activities, in all its diversity across several segments of the developer population. Second, by highlighting the best practice leaders: those vendors that are doing an excellent job in specific aspects of developer programs, to whom you can look for inspiration and insights on how to improve. There is no single leader across all of the 20 activities we measure – everyone can improve somewhere.

unity leads developer satisfaction

The top spot in terms of developer satisfaction is taken by Unity, with an overall developer satisfaction score of 75 out of 100. Unity shows exceptional performance on several attributes: tutorials, how-to videos & webinars, and official forums. This may be skewed by the fact that their products cater to a specific subset of developers (game developers) who might score attributes differently than others.

Google, Microsoft, and Mozilla are not only among the largest developer programs; they lead the pack in terms of developer satisfaction and engagement. Other major developer companies like Amazon, Facebook, Oracle, and Apple follow at some distance.

This doesn’t imply, however, that only the companies with the most traction and the biggest budgets can create excellent developer support programs. The living proof of that are Unity and Tencent. As we said, Unity has the highest developer satisfaction of all programs in our list. Tencent, the producer of WeChat who mostly addresses a geographical developer segment in China, has a developer satisfaction on par with Facebook and well beyond Twitter’s, and one of the highest levels of engagement in our survey. Other companies like Intel and Cisco may have moderate overall performances, but lead the way in important attributes such as training, technical support, or access to devices.

The study above shows data from the 12th edition SlashData Developer Economics survey. Over 21,200 respondents were asked which developer programs they used and how satisfied they are with them. These respondents came from 162 countries around the world and span mobile, desktop, IoT, cloud, AR/VR and machine learning developers and data scientists. The results were collected by SlashData over a period of six weeks between November and December 2016.

To access the full study drop us a note at sales@slashdata.co or download the brochure

The 3 key Apple Watch features that nobody talks about. Yet.

[If Apple wants to create a new, large product category out of smart watches, they need to create mass-market demand for their new product. What are the 3 most important features that will define the future of the Apple Watch? The ones that enable developers to innovate on top of these devices and create demand for smart watches.]

apple-watch-09

“We believe this product will redefine what people expect from its category. … It is the next chapter in Apple’s story.” With these words, Tim Cook made it very clear that the Apple Watch is more than just an excellent product. As with the iPod, the iPhone and the iPad before it, the Apple Watch aims to shape the future of wearables and create a whole new market reality.

As it stands, the Apple Watch v1 is a nicely designed timepiece, an engineering wonder, but competition will be fierce. Since fashion is about self-expression, by definition, there will be no single winner.

If Apple wants to create something bigger than fashion accessories, the Watch needs to be a functional tool. If it’s a tool, [tweetable]Apple must answer a fundamental question: what is a smart watch for?[/tweetable]

Will notifications become the killer app for smart watches? Unlikely. Not only is it unclear that we really want more interruptions, but it’s a bit of a dead-end for innovation. There can only be so many improvements in notifications, and only so many companies making those improvements.

If Apple wants to create a new, large product category out of smart watches, they need to become something much more that a timepiece with notifications and sensors. Something that allows people to do things that were not possible before. How Apple can do this? By following the same path that worked so well for iPhone and iPad: Tap into the limitless innovation power of co-creators to discover new use cases and possibilities we cannot imagine today.

The most important features of the Apple Watch going forward are the ones that enable developers to innovate on top of these devices and create demand for Apple’s smart watches. What are these features?

WatchKit

WatchKit

The straightforward way to expand the functionality of the watch is the WatchKit SDK, which allows developers to create “watch apps”. Other smart watch players like Android Wear, Pebble and Razer have made similar capabilities for developers. Developers are already showing strong interest in smartwatches. For example, the developer program of Pebble boasts 20,000+ developers and thousands of apps,.

HealthKit

The Apple Watch has a strong emphasis on embedded sensors for fitness and wellness. On the launch event, the company dedicated an entire section on it. Tim Cook: “This is a very important area for me and a very important area for Apple.”

But a few sensors and apps do not make a platform. The real potential lies in the HealthKit SDK that Apple launched at its WWDC event earlier this year. While its not technically a feature of the watch itself, it is this SDK that can take the device’s functionality and expand it in a whole new way to monitor activity and other wellness data . Could it be that the category that Apple wants to redefine is not the watch, but wellness and healthcare (in the broadest sense of the word)?

Certainly several other companies seem to go after that opportunity. Among them Google (Google Fit), Validic, Samsung (SAMI), Human API and most recently Jawbone (Jawbone UP API).

Identity

Like the Nymi wristband, the Apple Watch has all the technology in it to identify you personally. Apple has already demonstrated how digital identity combined with the Apple Watch can be used to make payments or even open hotel doors. (The clever integration with the new Apple Pay can drive adoption for both.) However, the possibilities are much broader. Biometric identification can be the end of not only passwords, but other kinds of ID as well. Another product category for Apple to redefine and absorb into its iOS universe?

Digital identity is a key control point for many digital leaders, including the likes of Google, Facebook, Twitter, LinkedIn and Salesforce. They are all actively working to hold your identity information and build your online persona on their platform. For Apple, the importance of identity is also evident in their deepening integration between devices and in their introduction of fingerprint sensors in all new phones.

Users first

What is a smart watch useful for? Beyond fashion and self-expression, a new kind of health monitoring and identity are prime candidates for the title of killer use case. Apple is going at it with their proven recipe for launching digital ecosystems: users-first. Apple starts by releasing a well-designed device for hardcore fans with a lot of value built in by default. Once there is a critical mass of users, Apple connects them with developers, who create real mass-market demand for the product.

It will take the ingenuity of a community of developers to explore all the possibilities and create a category killer, and Apple knows it very well.

The trillion dollar choice for car makers: control or cooperate?

[Will the car become little more than a smartphone accessory on wheels? This question is highly relevant after the recent CarPlay and Android Auto announcements. Car makers face a choice that could well determine their success for many years to come: keep tight control over the in-car experience, or cooperate with Apple and Google and benefit from the immense value that they have created. But do car makers have a choice at all?]

_The-trillion-dollar-choice-for-car-makers

“Will there be head units in the future, or just mirrored phones and devices?” Annie Reddaway kicked off the Q&A section of a webinar about the app mania in cars with this simple enough question from the audience to expert speakers from Ford and INRIX (at the 38 minute mark). She might as well have asked: will the car become little more than a smartphone accessory on wheels?

A long, tense silence followed. This question – highly relevant after the recent announcements of CarPlay (at the Geneva Motor Show last March) and Android Auto (at Google I/O in June) – clearly touches a nerve with even the most forward-looking car makers like Ford.

After a pause, John Ellis, self-proclaimed “software guy” at Ford, answered that the concept of what is a head unit will evolve, moving somewhere along a continuum from dumb screen to fully integrated app system. (Note the resemblance with the much-feared “dumb bit pipe” scenario for mobile telcos. Not a coincidence.) Let’s see if we can pinpoint where we might land along this spectrum.

The trillion dollar dilemma

Car makers face a critical dilemma. You can either have full control over the car’s functionality (i.e. in-vehicle apps), or you can embrace Apple and Google in the car, benefitting from the immense value that they create in smartphones and from their automotive initiatives. But you cannot have both.

What do we mean by control? In answering the head unit question, John Ellis paints a picture of what’s at stake: “You have to remember that we’re building an object that’s going to be used by people who, at the tender age of 16, get taught what a stop sign looks like. (They don’t get taught how to drive a car!) And then they buy these very high-end, safety-equipped vehicles and then take them out at speed.” Or, as another automotive insider put it: “We make one of the few products that literally kills people.” ‘Control over apps’ means accepting the liability of what happens when a user crashes the car while using an app, which will inevitably happen. With that liability comes a great responsibility to curate and shape what goes into the car, certainly when it is made by third parties.

So far, car makers have opted to retain tight control to avoid liability. However, this has slowed them down in creating value for users and in competing with over-the-top solutions, like just using your smartphone while driving. Once more John Ellis: “We [the users] are demanding personalization at a rate that is far in excess of what [car] OEMs can handle.” Automotive has become a market where choice and innovation-by-open-experimentation, not engineering, are the basis of competition. Car makers are far out of their comfort zone, as we’ve explored in-depth in our March report on connected car apps.

The alternative to fighting this losing battle is to delegate (and therefore give up) control over in-car apps to over-the-top players. Companies like Apple and Google can solve fragmentation and are experts in developer-centric innovation, i.e. in building vibrant communities of software entrepreneurs. They’ve proven in the mobile space that they know how to create massive value for users and developers alike. Car makers can leverage the expertise of ecosystem specialists, and then use it to their own gain. More and more of them are willing to consider, as the graph below shows.

Isn’t this a utopia? Won’t car makers be blown away if they embrace Apple and Google into their products? I don’t think so. In mobile, companies like Facebook, Amazon and WeChat have proven that the model when these companies leverage rather than compete with ecosystems can work very well too.

Carplay Android Auto adoption v2

Mobile precedent: why an OTT future might be inevitable

If the mobile industry’s history is any indication, car makers might be taken in speed. There are several strong arguments why an over-the-top future for in-vehicle infotainment will be inevitable, despite the best efforts of car makers to stay in control. (After all, telcos and handset makers had the exact same intention in the pre-iPhone era).

  1. The basis of competition in automotive has changed. We know that the basis on which people make car buying decisions has irreversibly changed, with in-car technology taking a more prominent role. Smartphones are driving people’s expectations of what car infotainment should offer. People don’t want to be connected with their car, they want to be connected with their life while in the car, and smartphone ecosystems are best positioned to offer that. A 2013 Accenture study found that 61% of people find it essential or important to have the same operating system on the dashboard and on their devices. (see Q10)
  2. It’s a predictable new market disruption. If you’re familiar with Clayton Christensen’s Innovator’s Solution, in-car technology might seem like a deja-vu of his transistor radio example. While transistor technology was not a good solution for table-top radios in the 1950s, it resonated with youngsters who wanted music on the go (even at worse quality). The millennial generation today doesn’t care too much for the car as a status symbol or for driving experience. They care about digital lifestyle and about a personal transportation solution that might be multi-modal, doesn’t necessarily involve car ownership, and is above all convenient to get from A to B. Is it any wonder that they’ll turn to the familiar mobile players first? Watch this video if you want to see this generational difference play out before your eyes. Car makers will have to get creative with their products and their business models and optimize them for new customers who may not be interested in buying a car as it exists today.
  3. The differences in development lifecycle favor an over-the-top solution. People replace their smartphones on average every 2 years. Cars last a multiple of that; many manufacturers offer 5+ years of warranty, so a 10-year lifetime wouldn’t be surprising. Cars also take much longer to design. The result is that at any time, the technology in your car is likely to look inferior to that in your phone, if not outright obsolete. On which of the two platforms would you prefer to build your functionality? Silicon Valley investor Marc Andreessen (here and here) knows what he would choose. He concludes that cars will become accessories to the phone, not the other way around. Car screens should (and will) be 100% tethered and controlled by the up-to-date device in your pocket. In a poll at the Consumer Telematics Show (Jan 2014), 54% of experts agree that “standardized integration of mobile devices” will be the best way to align with the speed of development in consumer electronics devices. My colleague Mark Wilcox offered the only alternative: “If car makers don’t want the in-car computer to be dumb glass with a better GPS antenna and speakers then they need to make cheaply replaceable head units and swap them out at every service.”
  4. Company inertia too favors the challengers. The capabilities, resources, processes and business models needed to successfully innovate with car apps are nicely aligned with those needed to innovate with mobile apps. Developer-centric innovation is in the DNA of Google and Apple, while it is a very different mode of operation than that of a traditional car business. As many of you will know, it’s very difficult to get anything at all done in a large organisation, let alone change its core. Based on this, over-the-top players will have an easier time implementing the new regime, which gives them a substantial head start over car makers.

Taking the lesson from the smartphone revolution, we even have a pretty clear picture of how exactly control over in-vehicle software will move from car makers to over-the-top platforms; a scenario that today might be unthinkable for many in the industry.

How the mobile industry was overturned in 5 easy steps:

  1. The proprietary portal Telcos attempt to build their own tightly controlled service “portals” (incl 3rd party apps). This fails, as it is too restrictive for both users and developers.
  2. Tactical gain for early adopters Several over-the-top players come in and are adopted by small subset of incumbent telcos and handset makers who seek short-term tactical gain. They might be able to sell an extra high-value connectivity service or become more attractive to the large/affluent OTT player’s customer base.
  3. New basis of competition The over-the-top players redefine what is important when buying a phone. Smartphones who have integrated the OTT solution take off in popularity. Consumers show a disregard for traditional metrics of performance in favor of the new platform.
  4. Must-have status The popularity of over-the-top solutions quickly makes them a must-have for all handset makers. All other OEMs are forced to adopt, or see their market share and/or profitability eroded. (see image below)
  5. Shift of control With wide-spread adoption, control over the app ecosystem moves inevitably to the over-the-top platform players. Telcos and handset makers become “decision takers”, not “decision makers”, as they no longer have the market power to enforce own rules.

image01

Can we replace telcos and handset makers with car manufacturers in the story above?

The first three steps are already clearly in motion in the connected car market. (See our report for a full discussion). Car makers are making their own app stores, with almost no apps or user traction. The table illustration above shows how some car makers will certainly adopt CarPlay and Android Auto (due to their large traction in smartphones) and possibly others like MirrorLink. The Accenture study mentioned above already clearly shows the shift in customer criteria when buying new cars.

When looking at the list of car makers who promise to adopt CarPlay and Android Auto, we might even argue that stage 4 is underway as we speak. Already we can see that OEM-specific head unit software will not remain a differentiator. It might be a lowest common denominator, i.e. having the top internet radios on the car, like now an AM/FM radio is included.

If the scenario plays out, then Apple and Google will soon become the guardians of driver safety – they will be the ones applying driver distraction rules and curating apps. It will cement their position as ecosystem owners.

Be prepared

The odds are stacked against car makers as the controllers of apps and guardians of driver safety. It looks like they have already stepped on the slippery slope that will eventually shift control to over-the-top car app platforms. The pattern is remarkably similar to the events that occurred in the mobile industry, with the same key players and just a few short years ago.

Car makers would do well to prepare to embrace the alternative choice: welcoming over-the-top platforms and leveraging them to sell more cars and boost profits.

If not, they risk losing the control anyway, without the leverage to boost their core business. One only needs to look at the shifts in the handset industry to appreciate how serious a scenario that is. Many of the ‘kings of mobile phones’ from 2006 are now out of business, have been acquired, or are in deep trouble. Handset profits have shifted to just two companies who understood what was going on and acted correctly.Telcos from their side have seen their VAS business replaced by apps, and are now seeing their core business of messaging and voice being pressured by non-telco apps with superior value propositions.

On the other hand, car makers that succeed in leveraging CarPlay, Android Auto and other platforms await a bright future. Also for this scenario, many examples can be found in the mobile industry. Smartphone maker Xiaomi, a 4 year old startup the leverages Android and builds it own differentiated services on top, sold 26 million devices in H1 2014. That’s already more than in all of 2013 and puts the company in the global top 10 of smartphone makers. In its home market China, Xiaomi outsells Apple and has already outsold market leader Samsung on two occasions. OTT² platforms like Line see revenues in the hundreds of millions of dollars, built on a commodity messaging base.

So what will the choice be? Over the coming years and decades, trillions of dollars in car revenues ride on this question.

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.

2

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.

wwdc-illustration

[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.

To understand Beats you need to understand Lady Gaga

The news are finally out — Apple is buying Beats for 3 Billion Dollars.

shutterstock_93393982

Headphone sales? Music streaming service? Wearables? Music label deals? None of the current Beats products look as a credible reason for a deal of that size. Something much bigger is going on. It is not about what Beats is today, but about what Beats can become in the future.

To understand what Beats can become we need to understand Lady Gaga first. Lady-Gaga-the-business-model.

Lady Gaga broke in with her August 2008 debut album, “The Fame”, and became an international megastar in a few short years. Gaga won Billboard magazine’s Artists of the Year title 2010, is ranked fourth in VH1’s list of 100 Greatest Women in Music, is the fourth best selling digital singles artist in US according to RIAA, is on Forbes magazine The World’s 100 Most Powerful Women list from 2010 to 2013, and was named one of the most influential people in the world by Time magazine.

Lady Gaga was the subject of numerous business case studies, including one by Harvard Business Review (Anita Elberse, Michael Christensen) and Business Strategy Review (Jamie Anderson, Jörg Reckhenrich and Martin Kupp). What makes Lady Gaga special is her pioneering use of social media to build a loyal community of fans to “sell the artist” in what the music industry calls a “360 deal”. The “360 deal” is reminiscent of a VC investment model, where a label invests more money up front in exchange for a piece of merchandise sales, touring revenue and other earnings that artists had long kept for themselves.

The HBR Lady Gaga (B) case study notes that as early as 2009 and 2010 Lady Gaga already had multiple consumer brand partnerships, including:

  • Beats by Dr. Dre selling branded Heart Beats model of the $100 in-ear headphones as “undeniably unique” and likely to “attract fashionistas far and wide.” (The story is much bigger here than this specific deal.)
  • Virgin Mobile sponsoring the U.S. tour dates of the Monster Ball tour.
  • Polaroid, which appointed Lady Gaga as creative director for a special line of products that would be released in the coming years.
  • MAC Cosmetics for which Lady Gaga joined 1980s pop legend Cyndi Lauper as the latest celebrities to feature in MAC Cosmetics’ Viva Glam advertising campaign.

In 2011, Amazon launched a promotional campaign selling at a loss Lady Gaga’s album “Born This Way”, essentially subsidizing distribution of the new album.

In an interview with The Wall Street Journal, Gaga was asked whether she believed that “Born This Way” was worth more than 99 cents. The answer is very telling:

“No. I absolutely do not, especially for MP3s and digital music. It’s invisible. It’s in space. If anything, I applaud a company like Amazon for equating the value of digital versus the physical copy, and giving the opportunity to everyone to buy music,” she said. “It also wasn’t really 99 cents, because Amazon paid the difference on all of those purchases as part of their promotional campaign for one of their new services. I think it’s amazing and it was a really nice surprise and I felt honored that they chose my record to be part of it.”

Troy Carter, who discovered Gaga and was her manager till November 2013 being widely credited for much of her business strategy sums it up nicely in his interview to FastCompany:

It was more about building a platform on top of music—because music, we realized, sells everything but music.

Gaga-the-business-model is a poster child of the new economics of digital era. Mike Masnik of TechDirt calls it the economics of abundance brilliantly explaining it in just minute and a half video here: http://www.techdirt.com/articles/20091020/1519476609.shtml.

(Note that Mike accurately predicted the rise of the new business models in music well before Gaga’s business success became known.)

Digital music is abundant (“It’s invisible. It’s in space” as Gaga puts it) and music industry whose business models were rooted in scarcity of vinyl records and later CDs were turned upside down by the need to deal with abundance of digital music. The good news, Mike says, is that for every abundance new scarcity is created. Gaga-the-business-model is an excellent example of how to benefit from these new scarcities created by the transition to digital.

The business people behind Gaga also saw the missing link in the digital music value chain. This missing link is also a huge opportunity to fill the void going much further that “selling the artist” to the loyal fan base.

In February 2013 Jimmy Iovine, Chairman of Interscope Records (Lady Gaga’s record company) and at the same time co-founder and CEO of Beats, gave very revealing interview to D:Dive Into Media. The most interesting bit comes in the Q&A section where Jimmy divulges his vision for BeatsMusic.com 35 min 15 sec in the interview (and it’s not about curation):

“But there something else going on our service that doesn’t go on anywhere. We have to make it user-friendly to the artist. They have to be able to build businesses on it. They have to be able to have the information who is using their music, where they are… That has to become a business for the artist as much as communicating with their fans. Right now, they (music services) have all the information and the artist have no information. No one knows… I don’t know. I own a record company. I would die to know who bought my records on iTunes or bought my tickets on TicketMaster.”

Jimmy Iovine sees the opportunity in changing the game and “building a communication between a fan and an artist.” In other words Beats Music is not yet another streaming service designed to sell music, but a platform for artists to build businesses and “sell everything but music” as Troy Carter says.

That brings us all the way from Gaga to Uber, where Troy is an investor. Steve Schlafman from RRE ventures says in “Uberification of the US Service Economy”:

“On-Demand Mobile Services (like Uber) deliver a “closed loop” experience by collapsing the value chain including discovery, order, payment, fulfillment (offline but within owned network) and confirmation.”

In essence, Beats aims to become Uber of music by aggregating demand, connecting listeners to artists and empowering the artists to build thriving business on top of the platform. Much like Uber, which promises to end the era of poorly paid cab drivers. Or like Apple App Store, which connects users with app developers allowing them to build business on top of the platform.

Pandora, Spotify, Play Music and Amazon that are all designed to sell music, will have very hard time to compete against a platform for building businesses on top of music. As Marshall Van Alstyne said in slightly underestimated way (pun intended):

“There is a strong argument that platforms beat products every time.”

The acquisition makes very good sense for both Apple and Beats. Beats gets the opportunity to kickstart network effects of the platform by bringing huge base of Apple users together with their credit cards to artists. Apple at the same time will benefit by bundling the music platform with its idevices, where the company makes most of its profits and badly needs to rejuvenate growth.

(I don’t think Apple will prevent BeatsMusic service from being available on Android devices. Having best experience with most fresh music reserved for Apple users will do just fine. “Apple-first” strategy works very well for both most mobile app developers and Apple.)

Interesting times ahead — As Troy Carter says in his interview to Guardian:

“Hollywood, record labels and tech giants such as Apple, Google and Samsung face immense risks and opportunities. Everybody should be afraid right now. We saw what happened to Nokia and BlackBerry and Motorola. Nobody saw Android coming. Nobody saw the iPhone coming. Nobody saw Samsung coming. No one is safe right now. Everything is moving so quickly.”

The music industry needs to brace for a deep and painful disruption, much like legacy taxi cartels and unions across the globe. Samsung needs to find a new source of differentiation after acknowledging defeat with its home-grown music service. Will health and wearables fill this void? Google will probably scramble to build a competitor to Apple/Beats refocusing YouTube Music from labels to artists. Amazon will need to find a solution if the company wants to stay relevant in the music distribution on which it relies for promotion.

Of course we haven’t heard much of it from Apple or Beats, but Jimmy Iovine said to Re/Code following the announcement of the acquisition:

“Obviously, we can’t talk about that, as you know. See, in the record business, you can show someone your song, and they don’t copy it. In the tech business, you show somebody your idea, and they steal it.”

The strategy lesson from Apple and Beats is this: Look for opportunities to build platforms connecting consumers with value-adding complementors. (Think a “connect-ing business”, and not a “connected business”.) Capture value through bundling with the platform that will buy you hyper-growth driven by network effects and insurmountable competitive advantage. (And of course don’t tell anybody what’s you are up to before it’s ready.)

From 4 to 4000 apps: disruption deja-vu in the car industry?

[What if cars were like mobile phones? There are some eerie similarities between the approaches of car makers in 2014, and operators and handset makers in 2008. Will car makers be disrupted in the same way that the mobile industry was? Senior analyst Stijn Schuermans shares his feeling of deja-vu.]

Automotive-report_illustration_web

“Cars are the biggest and oldest mobile devices. We are the face of mobility. We’ve been around for over a century. But we welcome the competition from newcomers like Apple and Samsung.”
— paraphrasing John Ellis (Head of Ford’s developer program) at CES 2013

Let’s entertain that thought for a moment. What if cars were like mobile phones?

At the moment, they would be like the feature phones of yesteryear. Today’s mainstream cars have 4 “apps”: driving from A to B (obviously), climate control, music (AM/FM radio, CDs, and more recently internet radio) and GPS navigation.

Feature phones in 2008 Cars in 2014
Telephony Driving
Texting Climate control
Contacts GPS navigation
Camera Music

In fact, this is not the only parallel we can draw between these two industries, as car makers are betting heavily on the concept of apps in the car. There are some eerie similarities between the approaches of car makers in 2014, and operators and handset makers in 2008. We’ve listed some in our latest report: “Apps for connected cars? Your mileage may vary”.

QNX is the new Symbian. Genivi is the new LiMo. Windows Embedded Automotive is the new Windows Mobile. Just like mobile operators in 2008, car makers are very hopeful that apps under their control will bring significant new revenue streams from value-added services. Developers are named “partners”, but it is clear that car makers (as were telcos) are mostly see them as suppliers of content and treat them accordingly. (For the full list, take a look inside the report.)

How mobile was disrupted

Can we use this insight – car apps are just like mobile, shifted in time – to predict the future of the car app market? In our report “The Telco Innovation Toolbox” (2 years old, but still highly relevant), we showed what has happened in the mobile industry.

From the 4 “most wanted” apps of the feature phone days (according to market research acquired at great expense, no doubt), we went to smartphones with now over a million apps, encompassing every imaginable user need. Service distribution and industry power shifted from telcos to mobile platforms: Android and iOS.

Fundamentally, the basis of competition in the mobile industry shifted from reliability and scale (which network has the most bars) to choice and flexibility (which handset has the most apps). This wealth of applications unlocked a user demand that far exceeds that of a selection of “best” or “most important” features in a product designed by a single organisation.

The same shift in cars?

Can the same shift happen for car apps? Will the basis of competition for car makers change from reliability and scale in the production of cars and infotainment systems, to choice and flexibility of in-vehicle and out-of-vehicle services that will unlock new user demand? We believe it can, and it will.

Already car makers like Ford and General Motors and over-the-dashboard players like Mirrorlink, Apple, Google and most recently, Microsoft are working towards app platforms for cars. The introduction of Apple’s CarPlay, Google’s Open Automotive Alliance and Microsoft’s Windows in the Car seems to herald a tipping point in the industry. Here are players that have a deep expertise in fostering vibrant ecosystems, in building developer communities and in enabling developers to add value. There is now a realistic and acute possibility that these new entrants will sweep away the existing car app platforms with a dominant, over-the-top solution, just as they did in the smartphone world.

In short, car makers should take the following statement as a heads-up:

Now you know what’s at stake. Find out how the car industry is changing and what to do about it. Our full report on automotive developer programs is available as a free download.

The evolution of handset business models: From source of profits to distribution channel

The evolution of the PC and mobile handset industry have been mirror images of each other, as both saw two distinct disruptions: a new market disruption, followed by a low-end disruption. Sameer Singh and Michael Vakulenko, VisionMobile Strategy Director explain how the shift from integrated companies to modular competitors will pressure hardware profit margins across the industry, leading to the emergence of a new business model, i.e. hardware-as-distribution

VMevolution

The mobile handset industry has already seen two waves of disruption: A “new market disruption”, led by Apple, and a “low-cost disruption”, driven by Google and its Android platform. Each wave created distinctly different business models that completely realigned competitive dynamics in the industry. Where do we go from here? Continue reading The evolution of handset business models: From source of profits to distribution channel

Profits are Life Blood

[Is profit share overrated as a measure of company viability? Guest author Jay Goldberg takes a contrasting viewpoint to our recent “Profit share trap” article, arguing that profitability has been the key to predicting Apple’s past – and future success.]

VisionMobile - Profits are life blood

I like to think I sparked a meme. In 2009, I wrote a analysis comparing the market share of the various handset makers and their respective share of industry profits. At the time, Apple’s had 1% or 2% share of the global handset market, and everyone was writing off the iPhone as an unimportant niche. And by everyone, I mean not just analysts but major companies like Nokia and Motorola. The mobile phone industry had a case of willful ignorance back then, but by looking at profit share versus market share it was pretty clear that something important going on here. Continue reading Profits are Life Blood

Apple & Samsung's "Profit Share" Trap

[Are the smartphone wars about profit share or market share? Guest author Sameer Singh argues that the case for profit is fundamentally misunderstood.]

VMTrap_v2

Over the past few days, there has been a lot of noise in the tech media about the supremacy of “profit share” over “market share”, specifically related to Apple’s performance in the smartphone market (but it can be extended to Samsung as well). Most proponents of this argument seem to fundamentally misunderstand the long-term relevance of the “profit share” metric. Let’s make a more educated comparison between the two metrics to understand how each can be used to analyze the smartphone industry.
Continue reading Apple & Samsung's "Profit Share" Trap