[Report] HTML5 and what it means for the mobile industry

[HTML5 has been tipped to be a game-changer, with some predictiving it will take over most mobile platforms. But what is its real impact to the mobile industry? VisionMobile Research Director Andreas Constantinou evaluates HTML5 vs apps and what it means for the mobile industry as part of our newly released report – free copy here]

VisionMobile- HTML5 and what it means for the mobile industry

Background: Web vs. apps

In today’s world of apps, the web seems to have taken a seat in the back row. But many industry observers are predicting a comeback with HTML5 advancements, the proliferation of smartphones and ubiquitous backing by both telcos and Internet players. Is the web as we know it about to change?

First things first: what is the web?

Firstly, the web is a language for creating interactive, navigable content, which consists of three main parts: HTML (the language used to define the static text and images), CSS (the language defining styling and presentational elements) and JavaScript (the language describing the interactions and animations).

Secondly, the web is a paradigm for open, unfettered access to content that is not controlled by any single entity. In the era where apps distribution is controlled by single vendors like Apple and Google, the web seems to challenge the status quo.

There are many ways in which web pages differ from mobile apps today, as shown in the next table.

Differences between apps and web

From web 1.0 to the mobile web

The web has gone through two major phases: Web 1.0 and Web 2.0.

Web 1.0 was the era of the dumb terminals and static web pages. The first generation of the web assumed all intelligence was in the network; the device had to issue a simple request to fetch a page and then present it on the screen.

Web 2.0 was is the era of smarter terminals and interactive pages. This second generation was designed around the ‘read-write web’ where the user is not just a consumer but also an editor, curator and producer of content. Web 2.0 helped create today’s phenomena of Wikipedia, Facebook, Twitter, blogs and nano-publishing.

Despite starting off as an outsider to the web, the mobile industry has been rapidly catching up since the early WAP days. WebKit, the Apple-born browser engine is now the common ‘circuitry’ behind more than 500 million devices shipped to Q1 2011, by all major smartphone vendors. Opera, the mobile browser vendor, counts over 100 million monthly active users on its Mobile and Mini browsers.

In the manufacturer camp, smartphones are expected to reach well into sub-$100 retail price points in 2011. In the operator camp, content delivery optimization solutions from the likes of ByteMobile, Openwave, and Ortiva Wireless are being deployed across tier-1 operators, facilitating efficient use of the network while browsing the web.

Mobile industry initiatives such as the Wholesale Applications Community (WAC) are pushing the envelope for web applications (also known as widgets) while EU-funded initiatives like webinos aim to use the web as a medium for deploying applications across mobile, PC, TV and automotive screens.

HTML5 as a technology change

The hype surrounding HTML5 has peaked in 2011. HTML5 promises to push the capabilities of web applications to the point of making web apps as engaging as Flash applications and as integrated with the device as mobile applications. HTML5 introduces several technology improvements in these domains by adding off-line storage, 2D graphics capabilities, video/audio streaming, geo-location, access to the phone’s camera and sensors, as well as user interface tools.

This next generation of web languages in the form of HTML5 is being standardized by the W3C and the WHAT working group who are driving forward web apps as equal citizens to mobile applications. The W3C consists of 51 member organizations, over 440 participants with strong backing from Google, Apple, Opera, IBM, Microsoft, and Mozilla. In parallel the WHAT working group is working closely with Mozilla, Opera and WebKit who are implementing and testing the latest browser features.

Yet HTML5 is still work in progress and even standards bodies show fragmented approaches to HTML5 completion. The W3C expects official completion of the HTML5 set of standards in 2014. In parallel, WHAT has taken a different approach to completion and is now working on ‘HTML’ as a continually evolving set of specifications.

Despite the adoption of the WebKit engine as a de-facto standard, HTML5 implementation on mobile devices is both fragmented and incomplete.

Independent studies by quirksmode.org and NetBiscuits have shown that every mobile WebKit implementation is slightly different. In addition, the leading smartphone platforms show inadequate HTML5 support; iOS, BlackBerry OS and Android devices show partial HTML5 support (at best 2 our of 3 HTML5 features supported), while Symbian and Windows Phone devices are lagging further behind.

Much like history has shown with the PC browser wars of the 1990’s and the Java ME fragmentation of the 2000’s, mobile browser fragmentation in 2010’s will be driven by the need to differentiate (’embrace and extend’), and the varying speeds among vendors in implementing the latest WebKit engine.

What about HTML5 app stores? Already a number of start-ups such as OpenAppMkt, Openspace and Zeewe have proposed app stores focused on web apps. The key advantages of HTML5 app stores are cross-device portability and a buy-once-use- everywhere application model.

Unfortunately, supply does not always imply demand; HTML5 app stores can’t deliver a business model change if demand is not there, for three reasons. Firstly, users care about availability of popular content (see Angry Birds, Skype and Facebook) most of which are not available as web apps often due to HTML technology limitations. Secondly, users care about choosing among hundreds of thousands of apps, which is currently a 2-horse race (Apple and Google) with the web lagging far behind in terms of number of apps. Thirdly, users are becoming loyal to their smartphone platform (Android, iOS or BlackBerry) where the native app store dominates.

How to compete in a software world

HTML5 introduces several technology innovations. However HTML5 remains a technology change that is not designed to solve discovery, distribution or monetisation problems – in other words it is not designed to change the business model.

What *will* be changing the business model of the web are the innovations introduced in the apps economy – where content is created with semantic tagging (description, category, user ratings, etc), discovered via web stores (much like app stores), distributed within walled gardens (much like Facebook), and monetised through micro-payments (much like apps). We call this web 3.0 – and we expand on its implications in the full research paper.

The question is: how can the mobile industry leverage on the web, and the native platforms that dominate the apps world?  The trick here is not to compete, but to leverage on the network effects of the Apple, Google and Microsoft platforms where handset OEMs or network operators can position themselves as a new generation of over-the-top players.

For example, operators can act as the matchmakers between developers and end-users by helping developers get the right apps in front of the right users through techniques such as featured placements, social- graph-based recommendations and segment targeting. Similarly, handset OEMs can act as on-device retailers, connecting the developers to the right audience, in the right region, through white space across the handset real-estate.

This is also where we believe WAC has the best chances of success but helping operators reposition as over-the-top players on top of the Android and Apple app stores – that is by helping developers reach out to users with ubiquitous billing, quality assurance, content curation, local content deals, privacy and security assurance, and help extend app stores away from the virtual and into the physical retail space.

In parallel, network operators and handset OEMs can help push the web into a viable alternative for native platforms in many ways. They can push the development of WebKit towards better bandwidth management, and closer integration with hardware multimedia acceleration. Moreover, the mobile industry can sponsor the development of better cross-platform developer tools that allow HTML and JavaScript developers to target multiple native platforms and mass-market browsers.

No matter how telecoms players decide to compete in the software world, they need to adopt ‘agile’ development methods and move at software speeds to catch-up the platform players in controlling the last mile to the consumer.

One thing is certain; the future of connected web and devices is going to surprise us – much like how applications turned telecoms economics upside down. Like Bill Gates once famously said “we always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten”.

Web is going to be a game changer, but not in the way we expect it.

Read our full report for more.

– Andreas
you should follow me on Twitter: @andreascon

An X-ray of Mobile Software: The 11 vital organs of mobile

[Sales of mobile phones remain healthy, but can the same be said of the software designed for them? Guest author Morten Grauballe offers a biological metaphor to check the pulse and visualise the evolution of the mobile software business.]

The app store “Long Tail” has recently dominated strategy discussions in the mobile industry. The Long Tail is a captivating and inspiring notion that challenges companies to think beyond mass production and mass retailing. The mobile software market is, however, far from mass production and mass retailing. Tight coupling of software and hardware, combined with platform fragmentation, have created a mass market for mobile phones, but not for mobile software. Hence, the tail is wagging the dog (and its organs) in the mobile software strategy discussion.

I ‘d like to use a biological metaphor – the notion of the 11-Organ System – to represent the core value-adding elements in mobile software and discuss how Apple, China Mobile, DoCoMo, Google, Nokia and RIM have utilised these core organs to their benefit. The 11 Organs interact to create the mobile software.

The Long Tail App Store
The Long Tail concept was coined in a 2004 article by Wired Magazine editor Chris Anderson to describe the notion that a large share of consumer needs rest within the tail of a statistical normal distribution. From a marketer’s perspective, this means you need to sell large quantities of unique items – each in small quantities – often combined with large quantities of a few very popular items.

The idea was coined to describe phenomena in online retailing where companies such as Amazon for books and eBay for auctions were able to cater – profitably – to very small, unique segments of the market. The digital economy allows these retailers to decouple stock from purchase. Later, the notion was proven to apply to some of the most successful business models today, namely Apple’s iTunes music store and Google’s search advertising model.

Lately, the Long Tail has been used to describe and propagate one of the biggest hype waves in the mobile market, namely the app store. Apple recently passed 200,000 applications in its store; fanning the enthusiasm for all major players to develop their own app store strategy.

Whereas books, auctions, music, and to some extent search are well-understood businesses with relatively straight-forward Long Tail effects, the essence of the mobile software business is generally not well understood and analyzed. So, before we pin the app store Long Tail on Eeyore, it is worth taking off the blindfold in an attempt to understand the essence of mobile software.

The Organ Systems of Mobile Software
Like biological systems, the software on mobile phones has value-creating subsystems. The Long Tail app store is like the tail on mammals. It does not have a function without being attached to a healthy body full of strong and interconnected value-creating systems. Apple knows this. Google knows this. Nokia knows this. DoCoMo knows this. They all have strategies in place for these value-creating systems.

Mammals generally have 11 organ systems (see note at the end of the article for a biology refresh). To stay true to my metaphor, I break down the most advanced smartphones into 11 organ systems – five core infrastructure systems and six application level systems. There are of course many more ways these systems can be broken down (see VisionMobile’s Industry Atlas for examples).

The five infrastructure core systems are:

  • Operating system: On a high level, the key value of an operating system is to be found in the abstraction of the hardware into a set of APIs against which applications can be written. More fundamentally, this process of abstraction has a significant impact on the characteristics of the system, including usability, battery life and privacy. There is a long discussion taking place within the industry as to whether the OS is a commodity or not – I believe not, but I ‘ll leave that debate is for future article. Let’s instead list the current choices available in the mobile market: Android, Bada, Blackberry OS, Brew Mobile Platform (BMP), iPhone OS, LiMo, Maemo, MediaTek OS, Nucleus, Series 40, STE OS, Symbian, Web OS and Windows Phone OS.
  • Application Execution Environments (AEEs): Most phones have one or more AEEs that attract developers and hence enhance the ability to “wag the tail”. The list of AEEs is long, but should include Java, Flash, widget and and web runtimes. AEEs and operating systems are generally complementary, but as the recent spat between Adobe and Apple has shown, these value-creating systems do not always coexist peacefully.
  • Software Management System: From a strategy analysis perspective, this is probably one of the fastest developing value-creating subsystems. Software management addresses two ‘bodily functions’:
    • The in-the-hands user experience. Apple has made 22 versions available for its phones since June 29, 2007. That is one release every 6 weeks. Most of the features released have addressed the user experience by enhancing features or the usage of features. In the end, this generates revenue and builds an ongoing relationship with the user.
    • Repair and correction. The ability to protect the phone depends on the strength of the security system (see below), but also on the system’s ability to respond to issues in the system, whether malware or not. Software Management allows us to respond with new pieces of software when needed.
  • Security System: The security system is very similar to the integumentary and lymphatic systems in humans. It protects the system from external threats. Parts of the security system should be built into the operating system, but other parts are application-level components, such as lock and wipe of the device.
  • Business Intelligence System: Similar to the nervous system, the business intelligence system allows you to understand what is going on in the entire organism. This ranges from understanding usability issues over performance problems to actual defects in the system. You want to know what works and what does not work for the particular user, which apps are used the most, which services work and which not, how does service usage vary across devices, etc.

The six core application systems are:

  • Peer-to-Peer Communication: Voice communication is often overlooked in strategy discussions of mobile software, but it is one of the most used applications on any mobile phone. It might be a baseline feature, but it needs to be done well. Integration with other value-adding subsystems is quite important too.
  • Peer-to-Peer Messaging: This includes everything from SMS over instant messaging to push e-mail applications. Similar to peer-to-peer communication, it is generally not considered sexy at this stage of the market. It is however the second largest revenue generator after voice communication and thus should not be disregarded.
  • Search: Most phones already have Web search functions. However, the future of search is in the location-based services (LBS) area, where digital search is combined with the physical presence of the user. Advertising is a part of this subsystem as it connects sellers with buyers of products and services.
  • Content Creation: The biggest craze in the market is social networking. Every new phone has social networking capabilities galore closely integrated into the contact manager. Content creation, however, also includes pictures, video and other types of media produced by the consumer. Most of the data produced by the consumer needs to be shared somehow. That is where the key value creation of the mobile phone comes in.. sharing!
  • Content Consumption: Compared to creation, content consumption is so yesterday. The consumer expects easy access to a catalogue of games, music, video, etc.
  • Browsing: This is such a crucial application that I have classified it as a system of its own. The browser is used as the basis of many of the other systems. Actually, most of the other applications can run via the browser and hence it is even possible to classify the browsing subsystem as an infrastructure subsystem.

Choose your Organs before Pinning on the Long Tail
There is no need to have the perfect business model for each of the mobile software organ systems above, but you need to have considered all of them and, if possible, have three or four strong organs to support an independent software strategy that can then carry a Long Tail app store. Let’s consider a few examples:

  • Apple has been the most aggressive on the OS side, publishing native APIs to developers and building a large developer community. Apple’s software management strategy is well-synced with its OS development and is a real strength. With iTunes Apple also is very well placed in media consumption. Apple’s weaknesses are in the areas of AEEs and search.
  • China Mobile has recently put its weight behind the OPhone, which is running a completely customized branch of Android. The OPhone version of Android is managed by a company called Borqs. At launch, handsets were available from Dell, HTC and Lenovo with plans for further handset models from Samsung, ZTE, Phillips, Motorola and LG. By having Borqs in between Google and themselves, CMCC achieves greater ownership of the operating system and its APIs. This is, of course, expensive as Borqs need to track new versions of Android and migrate China Mobile-specific changes across to the new versions of the OPhone OS.
  • DoCoMo has traditionally been focused on content-consumption and browsing with its i-mode services. i-mode nicely mixes Java, Browsing, Flash and e-mail into a very strong application suite. Customers know what they are getting. These services are built on top of two different operating systems, namely Linux and Symbian. So far, DoCoMo has not exposed native APIs to developers, but has focused on Java. The content market is therefore very strong in Japan, but the software application market is not well developed. Recently, DoCoMo has released its first Android handset, the Sony Ericsson Xperia X10, which gives it access to the Android market. This is the company’s first experience with an application market.
  • Google has combined the introduction of the Android operating with a strong suite of applications (Gmail, Google Maps, GTalk and Android market). While on the surface Android is an open source project, you only get access to the application suite if you agree to Google’s commercial terms.  There is no surprise that Google’s strengths come from its applications – it has less control of the core infrastructure components.
  • RIM has full control of its OS and has used Java as the AEE to create a third-party community of developers. The real strength in the RIM offering, however, is peer-to-peer messaging and this is the subsystem that ties RIM to its users. Over the last three years, RIM has made improvements to the subsystems that are more focused on mass-market consumers, such as content consumption/creation, but it is not considered to be its strength.
  • Nokia is active in all the subsystems above. Focus is probably one of the weaknesses of the Nokia offering. Traditionally, Nokia has been focused on peer-to-peer messaging and communication, but recently it has moved aggressively into search and content consumption, which are emerging as their new areas of strength.

Taking inspiration from Blue Ocean Strategy, it is possible to create an Organ Map. I have included an example below. (Each area included in this map warrants its own discussion, so please take it as an educated view rather than a universal statement of truth).

Getting started on your own Organ Map
Any serious player looking at the app store Long Tail needs to look at the organ system above and decide how to build a serious software strategy first. Some companies, like HP with their Palm acquisition, are at a cross-road and should make tough choices up-front. Others are in the middle of executing on their software strategy and need to evaluate progress. In both cases, key questions to answer are:

–        Which organ systems are the focus of my strategy?

–        What is the right mix of core organs to application organs?

–        What level of control do you want to exert over each organ system?

–        How will the chosen organ system allow me to build a relationship with my customer?

–        How do the organ systems interact to realize value for the customer?

–        How are my organ systems mapping against the competition?

Through the discussion around these questions, you should document the criteria by which you and your organizations determine the scoring of each organ system. That will answer questions like, what is a high-end offering in the browser space and who is offering this in the market.

To have a truly independent strategy, the choice of organ systems need to include at least one core organ system over which you can exert a high-degree of control. This does not have to be complete ownership of the organ system, but you should be able to determine the roadmap and direction of the organ system.

The Long Tail as a Greenhouse for New Organ Systems
Once you have a nice set of organ systems up and running, the real point of the Long Tail app store is to act as a greenhouse for new organ systems. By monitoring the sales statistics and trends on your app store, you get a very good view (from your business intelligence system) as to what the next organ system might be.

It is no coincidence Apple just added iAd to iPhone OS v4. They are on top of their business intelligence game and have been tracking advertising in their app store for a while. As apps or features develop into viable businesses, they get promoted from the tail to the body. They become new organ systems for the value-creation machine called Apple.

What are your own thoughts on strategy as a biology metaphor? What other examples of use of software-based organ systems have you come across? What Organ Systems does HP currently have that would render Palm as successful business? Which new ones should they build?

– Morten

[Morten Grauballe is EVP Marketing at Red Bend and ex VP Product Management at Symbian, and has been in the mobile industry long enough to boast both scars and medals]

Note 1: The 11 major organ systems of the body are:

(1) The integumentary system is the organ system that protects the body from damage – it includes nails, skin, hair, fat, etc. This is the largest system making up ~16% of the human body.

(2) The skeletal system is the structural support system with bones, cartilage, ligaments and tendons.

(3) The muscular system is the anatomical system of a species that allows it to move.

(4) The nervous system is an organ system containing a network of specialized cells called neurons that coordinate the actions of an animal and transmit signals between different parts of its body

(5) The endocrine system is a system of glands, each of which secretes a type of hormone to regulate the body. The endocrine system is an information signal system much like the nervous system. Hormones regulate many functions of an organism, including mood, growth and development, tissue function, and metabolism.

(6) The circulatory system is an organ system that passes nutrients (such as amino acids and electrolytes), gases, hormones, blood cells, etc. to and from cells in the body

(7) The lymphatic system in vertebrates is a network of conduits that carry a clear fluid called lymph. It is used to fight diseases and transport fluids from the cells.

(8) The respiratory system’s function is to allow oxygen exchange through all parts of the body.

(9) The digestive system is the organ system responsible for the mechanical and chemical breaking down of food into smaller components that can be absorbed into the blood stream.

(10) The urinary system is the organ system that produces, stores, and eliminates urine.

(11) The reproductive system is a system of organs within an organism that work together for the purpose of reproduction.