A game of ecosystems: Crashing the Android party

[In a game of ecosystems, it it possible to bend the rules? Research Director Andreas Constantinou examines the few technologies that can bring the Android ecosystem on non-Android devices – compatibility layers, virtualisation or emulators – and their impact in a post-‘Googlerola’ world]

A game of ecosystems: Crashing the Android party

A game of ecosystems

The mobile industry in 2011 is an industry ruled by ecosystems. The Android and iOS platforms are jostling for the top spot in terms of number of applications and developer mindshare. Earlier this year, Nokia had to jump from a burning platform (its in-house Symbian OS) into an ocean of uncertainty (Microsoft’s Windows Phone).  MeeGo has to find foster parents, as both Nokia and Intel (its founders) seemed unable to gather enough momentum. Nokia is re-launching its effort at building the Qt ecosystem through a more ‘open’ platform governance model. Qualcomm is trying to rebuild loyalty in BREW MP by investing in online marketing. The platforms today are fighting for who can build the biggest, most active and most sustainable developer ecosystem.

VisionMobile - App Store figures 2Q11

What determines the success of a platform? We know it’s the wealth of its ecosystem (lets call it developer ‘mindshare‘) as well as its consumer reach (the ‘market share’). It’s also patents, as these legal instruments can create not just barriers to entry (see how Apple barred Samsung tablet), but also market costs (see how HTC, Acer and Viewsonic are paying patent royalties to Microsoft).

Therefore, ecosystem wars are fought on three fronts: mindshare, market share and patents.

Let’s focus on developer mindshare. Developers are extremely critical as ‘platform consumers’. Anyone who has tried to recruit developers through traditional outbound marketing has failed. Developer marketing is about evangelising developers to a higher cause, more like crafting a software-centric religion – what can be called “religion engineering” (see evidence here on Apple as a religion). More importantly, building developer mindshare is extremely costly and tricky – you need software marketing know-how to execute successfully. Which is why many ecosystem-building efforts, including Java ME, Symbian, MeeGo and Palm OS 5, have failed.

Crashing the party 

Developer marketing needs a very different toolbox and billions of investment; unless you can crash the party.

Two types of solutions exist that allow OEMs to piggy-back the Android ecosystem on non-Android devices: compatibility layers from Myriad, OpenMobile and virtualisation technologies from OK Labs, Red Bend, and VMWare. RIM has also been using an emulator approach to bring Android apps on QNX.

Myriad (www.myriadgroup.com) (SIX Symbol: MYRN). is a mobile technology company that offers browsers through to messaging infrastructure, with mobile software deployed in more than 2.2 billion mobile handsets. Based on the earlier acquisition of Esmertec (the early Google partner on the Java virtual machine) Myriad offers an Android emulator it calls Alien Dalvik. Launched in February 2011, the emulator allows “thousands of Android apps” to run on non-Android platforms like MeeGo. Myriad claims that once the APK files are repackaged for Alien Dalvik, applications can run unmodified and with no loss of performance. The company is focused on making its emulator compatible with popular apps like Dropbox, IMDB and Evernote, presumably focused at OEMs that want to bring the out of box apps experience on proprietary platforms.

OpenMobile (www.openmobileww.com) is a Massachusets-based company founded in 2010. The company is privately funded and led by Nachi Junankar, a serial entrepreneur, and Bob Angelo, a software veteran who, as COO of Phoenix Technologies, led the team that opened up the clone business and later created the PC BIOS. OpenMobile has developed an Application Compatibility Layer (ACL) that claims to bring all 250,000 Android apps to non-Android device. The ACL is available for MeeGo (webOS and Windows support are in the pipeline), and claims 100% compatibility as “all Android Apps run exactly as they do on an Android device”. Moreover, OpenMobile says that app developers don’t have to modify, recompile or repackage their Android apps to run under ACL.  OpenMobile doesn’t use virtualisation or emulation, but integrates the Android application runtime into the native OS and supports Android API Level 4 or higher, as well as NDK 6 or higher.

The alternative approach to bringing Android apps on non-Android devices is to use a virtualisation technology from Red Bend, OK Labs or VMWare (see our earlier analysis of virtualisation technologies). Virtualisation allows the Android OS (including the apps ecosystem) to run in sandbox, completely isolated and independent of any other platform (including OEM proprietary OS). Like on desktop virtualisation, the apps from both platforms can surface on the same menu, so that virtualisation remains transparent to the user.

Challenges and the new shape of Googlerola

Can an OEM crash the Android party? Yes, but only with a bodyguard. We suspect that the above vendors will be facing two primary challenges that they‘ll need to muscle their way through.

Firstly, keeping in sync with the Android upstream changes is no small task, as new Android (including NDK) APIs have to be integrated into the target platforms and Google introduces API changes every two months on average.

Secondly, OEMs who use an Android compatibility layer will also be exposed to potential patent lawsuits. Now getting access to an Android Insurance Policy (see our Googlerola article) from Google will also mean complying with Google’s tight software/hardware specs. The one region which seems opportune for Android-compatible technologies is China, where telcos and OEMs have long been trying to develop their own OS flavour, but have been stuck with antiquated OS versions as they haven’t been able to keep up with Android upstream.

So can an OEM crash the Android party? Yes, but you‘ll need some pretty good bodyguards to escort you in.

– Andreas
you should follow me on Twitter

The mobile services landscape: Can OEMs compete with platform vendors?

[Growing competition and price pressures push handset makers to seek new ways to differentiate. This increasingly means services. VisionMobile Research Partner Michael Vakulenko compares service offerings of leading handset makers, explaining why OEMs will struggle to create meaningful differentiation through services.]

VisionMobile - The mobile services landscape

Remember the Motorola RAZR or the Nokia N95? Long gone are the days when handset hardware was fertile ground for innovation and differentiation. Convergence of device form-factors and equal access to advanced chipset technology pushes the handset market to the brink of deep commoditization.

Focus on smartphones can only provide short-term life support for deteriorating margins. Android opened the floodgates to low-cost assemblers to compete in the smartphone market. Aggressive new-comers, like ZTE, Huawei, Acer and Dell, along with a growing list of previously unknown handset manufacturers, push incumbents deeper and deeper into the commoditisation corner. Differentiation based on services increasingly looks like an attractive solution for many handset OEMs.

Services, services, services
Let’s look at how service offerings of leading handset OEMs stack up against each other. Nokia, Samsung, Apple, RIM, HTC, Motorola and Sony Ericsson (in no particular order) all have service ambitions and will be the subjects of the comparison.

State-of-the-art service offerings go far beyond much-hyped application stores. We ‘ll dig into the following service categories:

– Content retailing services: App stores, music, premium video and billing.
– Cloud services: Cloud-based contact book, cloud synchronization/backup, and device management (i.e. location tracking and remote lock).
– Communication services: Email services (e.g. gmail.com, me.com or nokia.com), instant messaging and video conferencing services
– Location-based services: Maps and navigation
– Advertising: Ownership of an ad network, display ads, multimedia ads and location-based ads.

Since many of the OEMs use Google Android and Windows Phone 7 platforms, we ‘ll also compare OEM service offerings with the ‘native’ services of the platforms.

The table below compares service offerings of different OEMs, as well as smartphone platforms across the above service categories.

VisionMobile - handset manufacturer services

The Leader: Apple
Apple, as usual, is in a league of its own. Apple has an extensive set of services anchored in the well-oiled iTunes content machine and MobileMe cloud services. One glaring omission is location-based services. For now, Apple has to rely on an uncomfortable partnership with Google Maps. There are persistent rumors that Apple develops its own location and mapping services (here and here). We can expect that sooner or later Apple will find its way out of its dependency on Google Maps, launching its own location-based services.

Challengers: Nokia, RIM
The next group of companies are the challengers – Nokia and RIM. Both use integrated models similar to Apple’s, combining proprietary software platforms with proprietary hardware (for now I will ignore the big unknowns of the partnership between Nokia and Microsoft).

Nokia has a comprehensive service portfolio, even compared to Apple. It ranges from the quintessential app store and music service all the way to location-based services and its own ad network. However, Nokia’s execution was weak and the future of Nokia’s services is up in the air following announced the partnership with Microsoft.

In contrast, RIM has a sketchy service portfolio, focused on its best-in-class messaging services. These include push-email, the BlackBerry Enterprise Server (BES) and the BlackBerry Messenger (BBM), in addition to the mandatory app store. It looks like RIM continues to focus on hardware and its new QNX operating system. For now, service-based innovation outside messaging takes a back seat for the BlackBerry platform.

Wannabes: Samsung, HTC, Sony-Ericsson and Motorola
Finally, Samsung, HTC, Sony-Ericsson and Motorola are OEMs building smartphones based on the Android and, in some cases, Windows Phone software platforms (Samsung also owns the bada software platform).

While Motorola is strong in cloud services with its MOTOBLUR service, Samsung leads the way in content. The Samsung offer includes music downloads and movie services, bundled with the popular line of Galaxy smartphones and tablets. Due to the licensing terms of content owners, content services have a limited geographical footprint, being available only in North America and Europe.

Overall, the services offering is very mixed for these vendors with piecemeal solutions mostly focused on content and cloud sync services.

Platforms: Android and Windows Phone
Unsurprisingly, Android and Windows Phone offer a comprehensive set of ‘native’ services across all service categories. Google Android is weak in content services compared to Apple and even Windows Phone, but compensates with leading-edge location-based services and a comprehensive ad offering. Windows Phone ‘native’ services leverage Microsoft’s Bing, Live, Zune and Xbox assets having millions of active users.

These ‘native’ services form the basis for platform differentiation and user value proposition for both platforms.

OEMs will struggle to make impact with services
Out of these handset OEMs, only Apple and Nokia come close to the breadth and scale of service offerings provided by platform vendors. It’s really difficult to see how Samsung, HTC, Sony Ericsson and Motorola can create highly differentiating services on the Android or Windows Phone platforms. For them, services will not become a solution for the upcoming wave of commoditization.

Dependency on 3rd party software platforms, lack of scale for making meaningful content deals, conflict of interests with operators and incompatible company DNA will make it extremely difficult for handset OEMs to make an impact with services.

In the words of Nokia’s CEO “Devices are not enough anymore”. No, this quote was not one of Stephen Elop’s, taken from the recent “burning platform” memo – it comes from a speechmadebackin 2007, by then NokiaCEO,OlliPekkaKallasvuo. Nokia realized early that services will play a critical role in handset value proposition. The Finnish OEM has tried hard to reinvent itself and become a hardware+services company.

The rest is history. Nokia found it nearly impossible to reconcile the DNA of a hardware company, which “lives” by device release cycles, with the DNA of a service company that “lives” by developing long term relationships with users, developers and partner ecosystems. If Nokia failed to do so with their vast resources and enviable volume leadership, what are the chances that Samsung, HTC, Sony Ericsson or Motorola will manage it?

– Michael

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[Michael Vakulenko is a Research Partner at VisionMobile. He has been working in the mobile industry for over 16 years, starting his career in wireless in Qualcomm. Michael has a broad experience across many aspects of the mobile industry, including smartphone ecosystems, mobile services, handset software, wireless chipsets and network infrastructure. He can be reached at michael [/at/] visionmobile.com]

RIM: a leap ahead in user experience, but can it execute?

[RIM’s acquisition of UI firm TAT marked the largest mobile software M&A of 2010. Research Director Andreas Constantinou explains why the acquisition places RIM a leap ahead of the top-10 OEMs in terms of UI capabilities and asks – can RIM execute on the promise?]

RIM: a leap ahead in user experience, but can it execute?

In December, RIM surprised industry observers by buying TAT (The Astonishing Tribe), a 200-strong UI technology and design firm based out of Malmö, Sweden. At nearly $130 million, RIM’s move marked the largest mobile software M&A transaction of 2010 globally and an impressive 5.5x multiplier over TAT’s 2009 revenues of 170 million SEK. It follows a string of RIM acquisitions since 2009, namely QNX (operating system), Cellmania (content billing and distribution), Dash (two-way navigation), DataViz (document viewer), Torch Mobile (WebKit experts) and Viigo (software house).

More importantly, TAT’s acquisition places RIM a leap ahead in the league of top-10 handset manufacturers in terms of own UI capabilities. Here’s why.

A leap ahead of the competition
TAT was founded in 2002 by 6 games engineers and designers out of university (here’s their story) but has come a very long way. TAT is not just another technology company. It has seen its Kastor 2D/3D graphics framework deployed in over 500 million phones across 5 out of the top-7 OEMs. More important to the RIM story is TAT’s Cascades product, a UI framework that allows OEMs to design their phones not in terms of applications, but in terms of screens, allowing what can be termed ‘rapid variant management’ (more about that later).

TAT has also been clearly ahead of the UI technology vendor pack – vendors like Ikivo, Digital Aria, Acrodea, Bluestreak, YouILabs and Scalado – thanks to its design skills. When other vendors have banked on technology marketing, standards implementation or operator deals, TAT has used its design skills to get into the door of both OEMs and operators/carriers (check out this video on the ‘future of screens’). The marriage of design skills and technology licensing allowed TAT to build momentum and cash-flow when OEMs were cutting budgets post-2005. These same skills were what got TAT the deal to design Google’s Android 1.0 UI. TAT’s strength lies in the combination of UI framework technology and the first-class design skills – both of which are now with RIM.

So what does RIM get?

TAT’s acquisition is far more encompassing than many would have thought – it puts RIM a leap ahead of the pack in the league of top-10 handset manufacturers in six ways:

1. Match the iPhone
With the Cascades technology, RIM can now match and even exceed the sophistication of the iPhone UI (see this and this video demos). Long term this means RIM has a chance to contain the exodues of enterprise customers opting for replacing their RIM with iPhones due to the outdated UI and usability on the Blackberry OS 6. Heck, it would be even easy for RIM to offer ‘deep skins’ for BlackBerry handsets where the navigation and core apps closely resemble the iPhone apps.

 

2. Rapid variant management
TAT’s Cascades is a departure from how OEMs build handsets today, by allowing the UI to be designed in terms of screens and not applications.

The downside is that Cascades-enabling an existing software stack means that legacy ‘spaghetti’ applications have to be ported one by one on top of TAT’s framework, which takes 9-12 months for the complete UI (it’s 10s of millions of lines of code that have to be ported). This is what has historically limited Cascades to only tactical wins for specific applications on Motorola, Samsung and Asus handsets.

The upside is that with Cascades RIM gets rapid variant management; creating 100+ operator variants from a single vanilla UI is just a button (and an XML file) away. Designing in screens rather than apps means that RIM can keep its investment into messaging, graphics and enterprise middleware but radically change the UI look and feel. This allows RIM’s carrier customers more differentiation and exclusivity opportunities, all without delaying the time to market – and therefore securing the carrier multi-million subsidy and marketing carrier budgets.

Rapid variant management is today one of the few domains where Android suffers and Nokia’s Symbian still excels, so a very important differentiator for RIM once the integration work is out of the way.

3. Consumer and enterprise personas
We covered earlier how RIM needs to escape its dual personality disorder by designing separate consumer and enterprise product lines. However, designing a different set of apps for enterprise and consumers is complex – not to mention managing many more device models and variants in the field.  With TAT, RIM buys the ability to have enterprise AND consumer UI personas ship in the same phone – not only that, but in a way that can be easily switched by the user at the flick of a button. Switching between enterprise and consumer personas is also much cheaper to do at the UI level rather than the bare metal level with what’s called ‘mobile virtualization‘.

This implies that with TAT’s technology, RIM can allow users to switch between consumer and enterprise UI personas; a consumer UI when you want to browse on Facebook and check out Flickr and an enterprise UI when you want to check the email attachment for your next meeting. Note that Nokia and HTC Sense have also implemented basic switching between work and personal skins.

4. Enterprise UI customization
Besides the runtime technology, TAT develops Motion Lab, a tool that a designer can use to define UI screens and UI flows through a drag-n-drop environment. For RIM, this means that enterprises can customize the phone’s navigation to focus on the few key applications that are used most of the time. It also offers RIM a level of enterprise customization beyond what other OEMs can achieve out of the box.

5. UI personalities
With the erosion of the market of downloadable ringtones and wallpapers, the industry has turned to apps as the next premium content market. Yet, there are still new revenue opportunities in downloadable content. In Japan, DoCoMo has led the market of downloadable UIs in the form of “standby screens” (programmable home screens), and which Acrodea has extended to the dialer and menu apps.  This has created a small market of downloadable UIs for both DoCoMo and KDDI.

With TAT, RIM can extend that market to the world, and across more embedded applications – creating what can be called the market of downloadable UI personalities. Whether RIM can turn this capability into a new ‘market’ is questionable, but it certainly presents a unique point of differentiation and an opportunity for a new revenue stream for RIM.

6. Connected experiences
With the acquisition of Dash, a 2-way car navigation company, RIM has its sights set beyond phones and tablets into the automotive segment. To deliver a consistent UI across these varied form factors a new OS (QNX) is far from adequate. It needs a portable UI technology that allows RIM to reuse its UI assets with minimum maintenance overhead across different form factors, from phones to cars. TAT’s Cascades is exactly this technology and as TAT has shown, it can be extended to connected screens in the living room, in the street, in the car, and in the hands.

Filling in the gaps that TAT left
With TAT out of the picture, how can other OEMs catch up to the level of UI technology sophistication and design skills? There’s a variety of UI technology vendors out there (see below for an extract from our Mobile Industry Atlas), but none really combine the UI ‘screens’ framework or the design skills of TAT.

Many companies claim to have “UI frameworks”, but they all invariably mean a combination of SVG engines, 2D and 3D graphics toolkits or compositing engines – which address UI development as an application, not a screen paradigm. Historically there have only been three companies who have developed screen-based UI frameworks; TAT, Digital Airways and Next Device. Digital Airways was behind the UI of the Vodafone Simply series of five handsets launched between 2005 and 2007 and the Porsche P9522 handset introduced by Sagem in late 2008; the company has since transitioned into UI services in mobile, embedded, automotive and aerospace – however the company ceased trading sometime in 2010. Next Device was acquired by Mentor Graphics (makers of the Nucleus RTOS), who didn’t manage to leverage the technology asset as the licensing model was markedly different to Nucleus’ site-licensing. The gap that TAT left creates an opportunity for other UI middleware vendors (e.g. Ikivo, Acrodea, Digital Aria, Sasken,) to maneuver into this technology space.

Another way to deliver ‘screen-based’ phone design and variant management is via development tools; much like how OpenPlug (now Alcatel Lucent) uses the Adobe Flash IDE to create mobile apps. However this is still virgin territory and we ‘re not aware of any sufficiently advanced UI tools vendors in the mobile domain.

Can RIM execute?
All in all, TAT can deliver Apple-class user experience that offers RIM a strategic advantage compared to OEMs leveraging 3rd party Windows Phone and Android platforms.  This all sounds great on paper of course, but it’s all a question of execution.

Can RIM’s corporate monoculture adapt to the creative minds of TAT? Will the TATers get the mandate and budgets to innovate deep into RIM’s product lines? How long will RIM take to integrate the TAT technology on top of the QNX platform and where will the competition be at that point?

Ladies and gentlemen, place your bets.

– Andreas
you should following me on Twitter: @andreascon

[Andreas Constantinou is Research Director at VisionMobile, and oversees the research, strategy and industry mapping projects at VisionMobile. Andreas also served on TAT’s advisory board during 2008-9]

BlackBerry: A Dual Personality Disorder?

[RIM is torn between two very different market segments: Enterprise mobile messaging and text-addicted consumers. Amidst troubling signs for RIM’s future, the company needs to reconcile its dual personality. VisionMobile Research Partner Michael Vakulenko explains why RIM needs to create separate product experiences for business users and consumers and analyses the possibilities.]

BlackBerry: A dual personality disorder?

It’s hardly news today that RIM is at the verge of losing its smartphone leadership. Analysts dog-pile on the company downgrading the stock amidst declining smartphone market shareincreasing subscriber acquisition costs, increasing competition from Apple and a slew of Android handsets from tens of OEMs.

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A lot has changed since RIM earned its success on providing mobile push-email to enterprises. Today RIM serves two distinct market segments: enterprise users and text-addicted consumers.

Contrary to common perception, enterprise market is no longer RIM’s largest market. Back in June 2009 the company reported in that 80% of the growth came from consumers. Today in fact more than half of BlackBerry active users are consumers. Who are these people?

BlackBerry was conceived as a messaging device with optimized user interface and physical keyboard being its primary advantages. These advantages found warm reception in the hands of text-addicted youth, who according to Nielsen are sending on average 3,339 texts (SMS) a month in the US.

SMS is not the only way to socialize using BlackBerry. BlackBerry Messenger (BBM) is a proprietary instant messaging application running on BlackBerry smartphones. BBM uses BlackBerry PIN programed in the device to identify BBM users. The application supports avatars, groups, photo sharing, voice notes and reading the PIN using bar code. Because of the device-specific BlackBerry PIN, BBM has strong viral effect. A person must have a BlackBerry device to participate in the social network formed around BBM. As of May 2010, BBM had about 22.5 million users, representing close to 50% penetration across a total subscription base of 46 million subscribers.

In countries like Saudi Arabia and the United Arab Emirates, about 90% of BlackBerry owners use the BBM service – a figure which concerned government authorities, which weren’t able to intercept BBM communications. In the UK and France BBM is one of the main drivers for BlackBerry device sales. In Netherlands, Venezuela, Indonesia and Thailand users put the bar code of their BlackBerry PIN on their business cards, t-shirts or even swimwear.

A Personality Dilemma
Consumer success is great news for RIM. It is however increasingly difficult for RIM to maneuver between its established high-margin enterprise market, and the less familiar lower-margin consumer market. RIM will risk loosing both markets to competition, if it continues to serve them with the same brand and product portfolio. Enterprise users have very different and often conflicting expectations compared to the enthusiasts of message-based socializing:

– Cost is important factor for many text-addicts. Many of them are young or live in developing counties. A BlackBerry price tag in the pre-paid range has significant allure for this segment. For example, Carphone Warehouse sells BlackBerry Curve 8520 for £129.95 (more than $200) with a Pay-as-You-Go plan. On the enterprise side, the last thing that a high-flying executive wants is to use a smartphone associated with a cheapy, “smartphone-for-the-rest-of-us” brand (for example see this T-Mobile commercial)

– Many text-addicts buy BlackBerry because they don’t like touch screen. If they would, many of them would be buying iPhone or Android phones. Instead they prefer a device with physical keyboard and optimized for one-handed operation. On the enterprise side, touch screen is important to compete against high-end iPhone, iPad and Android devices.

– Text-addicts need texting, instant messaging and integration with popular social networks.  Enterprise users need emphasis on email, PDA functions, synchronization, MS Office compatibility and device management.

– Security is a big issue in the enterprise, while many consumers don’t know how to spell it – as demonstrated by the wide adoption of Facebook, despite privacy issues.

Is RIM putting its R&D cycles and money in the right places? No – RIM seems to be gravitating towards the convenient and familiar enterprise segment playing catchup with Apple. RIM acquired DataWiz, maker of MS Office compatibility software, in September 2010; Introduced high-end touch screen model, BlackBerry Torch, in August 2010; and recently announced PlayBook tablet squarely aimed at the enterprise market.
There is very little in the recent RIM product announcements to bolster confidence in the company’s historical smartphone leadership. New developments are mostly about catching up with Apple, without introducing anything significantly new and relevant for RIM’s devoted user base.

A Gordian Solution
Instead of chasing Apple, RIM shall build on its advantages and focus on unique needs of its devoted user base. The first step would be separating its product portfolio into enterprise and consumer product lines. This will free consumer products of unnecessary burden and complexity, while keeping enterprise products focused on productivity and security.

The second step would be enhancing the BlackBerry Product Experience (PX) by building up the social features of BBM on the consumer side and beefing up on the proven push-infrastructure, security and team collaboration features on the enterprise side.
Today, competition in the mobile industry shapes around Experience Ecosystems comprising of connected devices, applications, services and communities. New Product Experiences based on connected services should be the focus for RIM’s innovation. Here’s how RIM could create service-based product differentiation for future versions of BlackBerry devices.

Location-based games have proved to be very popular, especially with RIM’s consumer demographics. Foursquare, a company developing a smartphone check-in service, reached a valuation of $125M having just 1.8 Million users and 27 Employees.

Compare this with RIM who has over 20 Million users in their BBM network. Why can’t RIM build its own checkin service on top of BBM, exclusive to BlackBerry devices? Adding location context to BBM messaging will greatly enhance social interaction of the platform’s users. Moreover, check-in apps show strong advertising potential. With 20 Million BBM users RIM could create new revenue streams for itself and mobile operators.

Even compulsive texters use the phone once in a while, but for them voice call is often a part of a longer conversation taking place using multiple means of communication. RIM could integrate voice calling with BBM making voice part of a wider social context. Users would enjoy better communication experience, while operators would be happy to see users consuming more voice minutes.

Business users use their devices in rather different context from consumers. Many of them are mobile and depend on collaborating with their colleagues remotely. BlackBerry-based team collaboration could become a killer app and differentiator for such users. Real-time activity updates, multiparty discussions, wikis, collaborative task lists have all enjoyed success on the Internet as shown by Teambox, Yammer, 37 signals and long list of other Internet collaboration startups. Why not integrate information sharing tools and video calling into the operating system making BlackBerry indispensable not only for email, but for team collaboration?

The Clock is Ticking
In order to keep its position in the smartphone market RIM needs to create separate Product Experiences for consumer and business users, and focus on innovation in connected services.

RIM doesn’t have much time for experiments with the PlayBook tablet, or on internal debates about replacing the vintage BlackBerry OS with the more capable QNX OS. The mobile market continues to evolve rapidly: Apple is making steady progress in improving enterprise readiness of its products, prompting mass defections of enterprise users to more appealing iPhone and iPad devices. At the same time, Android is spreading into low-cost smartphones threatening to displace BBM with Internet-based alternatives.

What do you think RIM should do to keep its smartphone leadership position?

– Michael

[Michael Vakulenko is a Research Partner at VisionMobile. He has been working in the mobile industry for over 16 years starting his career in wireless in Qualcomm. Michael has experience across many aspects of mobile technologies including handset software, mobile services, network infrastructure and wireless system engineering. He can be reached at michael [/at/] visionmobile.com]

Windows Phone 7: Tipping the Scales of the Smartphone Market

[Windows Phone 7 has the potential to redraw the smartphone competitive landscape and accelerate the evolution of the mobile value-chain. With the arrival of WP7 just around the corner, VisionMobile Research Partner Michael Vakulenko explains what success of the platform can potentially mean for the industry and why Microsoft’s mobile comeback should be closely watched.]
This article is also available in Chinese

Windows Phone 7: Tipping the scales of the smartphone market

Just over a year ago I had written how Apple’s iPhone and Google Android will capture leadership positions in the smartphone race, leaving behind all the legacy smartphone operating systems. Indeed, one year later iPhone and Android are confidently cruising ahead on the tailwinds of consumer, operator and developer ecosystem support.

Symbian continues to submerge into irrelevance distracted by its venture into open-source waters. The only two handset makers who are members of Symbian Foundation board recently jumped the ship. Both Samsung and Sony Ericsson lately said that they do not plan any new Symbian handsets. Worst yet, major chipset makers are scaling down their efforts to support Symbian. The direction is clear: Symbian is soon to become Nokia-only internal OS hidden behind Qt application framework.

RIM is steadily drifting towards mid-, low-end of the smartphone market. Contrary to common perception, enterprise users are no longer the platform’s most important audience. Over half of the subscriber base and 80% of Blackberry growth comes from the consumer space. The reason is the viral effect of Blackberry Messenger application popular with teenage kids and college students.

Contrary to Nokia and RIM, Microsoft took proactive approach. Instead of patching the leaking boat of Windows Mobile, the Redmond giant build ground-up a new smartphone platform carefully designed to address challenges presented by iOS and Android.

Make no mistake, Microsoft’s primary motivation for Windows Phone aren’t its software licensing fees. The real motivation is the need to protect Microsoft core businesses of Windows and Office product lines. Mobile and smartphones became pervasive. Microsoft must have a convincing mobile story to prevent increasing numbers of users churning to Apple and Google product ecosystems.

There are reports claiming that Apple sells just as many computers as Dell to college students. Naturally, a decision to buy a Mac is much more easier for a person already owning an iPhone. A person regularly using GMail or Google Apps on a PC and Android phone is much more prone to dropping Outloook, Word, Excel and PowerPoint in favor of cloud-based alternatives from Google.

With absolute majority of Microsoft operating profits coming from licensing of Windows OS and Office applications, the software giant cannot afford losing users to Apple or Google. Both Windows and Office must be augmented by the ‘mobile screen’ to remain competitive.

A comeback in the making?
Based on pre-release information, Windows Phone 7 has all the necessary ingredients to become a powerful contender in the smartphone race.
First, there is clear differentiation thanks to fresh user interface and deep integration with Microsoft on-line services and products.

The UI and the interaction model are based on well-received Zune HD Player (funnily enough there is Zune Home app on Android Market, which replicates Zune HD look & feel on Android). Finally we see refreshing departure from icon-based navigation that became de-facto standard following iPhone introduction.

The user experience is closely integrated with Windows Live, Xbox Live, Bing Maps cloud services, Zune content platform, together with pervasive Office and Exchange. Microsoft has impressive number of users registered for its on-line services – 360M Hotmail accounts, 299M Messenger accounts, 23M Xbox Live subscriptions. This will certainly help driving Windows Phone adoption.

Second, when it comes to developers Microsoft is playing on its home ground leveraging established developer ecosystem and excellent development tools. Windows Phone 7 application development is based on Silverlight UI framework and XNA game runtime. Both are well-known to large number of PC and Xbox developers eager to apply their skills in mobile environment. Consider that Windows Phone 7 Beta SDK was downloaded 200,000 time in just 2 days since its general availability. Instead of wresting developers from iOS and Android platforms,  Microsoft can tap into large pool of loyal .NET and XNA programmers, converting them into an army of mobile developers.

Developer monetization is high on Microsoft’s agenda. Windows Phone Marketplace avoids the pitfalls of the competing platforms promising predictable and transparent approval process, lack of handset fragmentation, localization, try-before-buy model, app beta testing program, and tools for active promotion of the content in the Windows Marketplace.

Third, operator billing supported by Windows Phone Marketplace will be instrumental in winning operator subsidy and marketing budgets from iPhone and Android. These budgets are critically important for the platform success. Windows Marketplace already supports operator billing for older Windows Mobile platform. This experience will help Microsoft quickly introduce operator billing for growing number of operators. Sure enough, Microsoft can be flexible on splitting 30% of app sales revenue share with operators. Not surprisingly, all five major UK operators will be selling Windows Phone 7 handsets at launch.

All these combined with familiar consumer brand and a huge $500M marketing budget (more than 5 times bigger than any previous Windows Mobile launch) makes Windows Phone 7 a convincing entry to the smartphone game. This entry is already supported by a lineup of handset makers from experienced mobile players like Samsung, HTC and LG, to PC specialists like Dell and Asus.

So what’s the catch? Windows Phone success will ultimately depend on Microsoft’s ability to execute on the promise. Microsoft will need to deliver solid product experience, prove monetization potential for operators and developers, and keep the momentum by following up with subsequent platform versions. Without these, Windows Phone 7 will only remain a great promise.

What will Windows Phone’s success mean for the mobile industry?
The mobile industry has radically changed in the recent years. In an industry where the only constant is change, what impact will the success of Windows Phone have on the mobile industry?

The hardware specs of leaked Windows Phone handsets from HTC, Samsung, LG, Dell, Asus and Toshiba reveal striking similarity between the models. All are based on QUALCOMM’s Snapdragon chipset. The variations are limited to industrial design, amount of memory, optional physical keyboard and FM radio. Are we entering PC-like era in smartphones, where industry will converge on a small number of hardware configurations? Will we see emergence of ‘Wincomm’ alliance in mobile similar to ‘Wintel’ in PC? Value-chain evolution theory says this is not question of ‘if’, but the question of ‘when’. Windows Phone 7 looks like a natural catalyst for this to happen much sooner than some companies would hope for.

This will be great news for low-cost ‘assemblers’ like Dell, Acer and Asus, who lack significant software capabilities and experience. With Windows Phone software and QUALCOMM’s support these companies can readily replicate their PC business models, brands and experience, while thriving on single digit operating margins. To do so, they only need to focus on building hardware platforms for Microsoft software, while leveraging pre-integration with QUALCOMM chips for fast time to market. Microsoft definitely learned from mistakes made with Windows Mobile. This time the approach is closer to the PC model: ODMs are given exact specification of how the hardware platform should look like. From the screen size, to amount of memory, to number of navigation buttons on the device.

For low-cost ‘assemblers’ Android proved to be too difficult to productize. Dell Aero is one example, which is four Android versions behind now. Using Windows Phone software will significantly lower barrier to entry on the software side. Paying software licensing fees to Microsoft may prove a better way forward than a crappy product that doesn’t sell.

On the other side, these will be very bad news for high-margin branded OEMs like Motorola and Sony Ericsson. Such OEMs will have little chance to protect their business from increasing competition from low-margin assemblers. Adopting Windows Phone won’t help: Microsoft is determined to maintain tight control over the platform and limit OEM differentiation opportunities.

Increasing smartphone commoditization accelerated by the entry of low-cost ‘assemblers’ will certainly put strain on today’s leaders, Apple and Google. Apple seems to be well-positioned to keep its positions in the mid-term. But will we see its vertical integration becoming a liability in the next phases of value-chain evolution? The phases where flexibility and customization of commodity products will favour modular solutions.

For Google things can quickly get challenging. Android is yet to grow into a recognizable consumer brand being concealed by operator and handset maker brands (e.g. Droid and Sense). What if Android will get squeezed between style-conscious consumers opting for iPhone and masses of mainstream users opting for the comfort of familiar Windows brand? Will we see Android slowing down and struggle outside the group of tech-savvy users?

What about mobile operators? Windows Phone success will increase the dominance of non-mobile players in the mobile ecosystem and their control over user experience. The distance between user and operator will inevitably increase, and we will see more and more mobile operators settling on the role of a ‘pipe’ satisfied by getting a share of app and content sale revenues.

Tipping the scales of the smarpthone market
If successful, Windows Phone 7 will catalyze further shifts in the mobile industry bringing PC-style commoditization and increasing distance between operators and their subscribers.

Microsoft and low-cost, PC style ‘assemblers’ will be the main winners driving smartphone price declines. High-margin branded OEMs will have no choice but to look for new ways to create value to operators. This is to snatch critically important subsidy and marketing budgets from Apple and RIM.

Apple and Google won’t wait long to make Microsoft’s life harder. Google can be exposed on multiple fronts and finally will have to pay closer attention to operator and developer interests.

Things will continue to be interesting in mobile in the foreseeable future.

How do you think things will shape up with Windows Phone? Who will be a winner and who will be a loser?

– Michael

[Michael Vakulenko is a Research Partner at VisionMobile. He has been working in the mobile industry for over 16 years starting his career in wireless in Qualcomm. Michael has experience across many aspects of mobile technologies including handset software, mobile services, network infrastructure and wireless system engineering. He can be reached at michael [/at/] visionmobile.com]

Remapping the handset OEM landscape: squeezed in between a rock and a hard place

[In a race for profits, the mobile industry finds itself squeezed between vertically integrated players like Apple and horizontal players like Google. What is the fate of handset manufacturers? Guest author Vinay Kapoor takes a peek into the future landscape of the mobile industry]

The top 5 mobile OEM list was recently shaken and stirred by the entry of RIM into the list of top 5 OEMs and the subsequent exit of Motorola. Previously, the top-5 OEM leaderboard had been stable for half a decade and so the most excitement you could get would be a change in the relative position of the incumbents.

Looking today at the comparative handset sales of RIM, Apple and Motorola, it is clear that the exit of Motorola from this list of top 5 OEMs has been a long time coming. While Motorola’s decline in sales may be reversed, it is unclear if Android can help propel Motorola back into the top-5 list.

So what does the future hold? If we look at the top 5 OEMs, Nokia, Samsung and LG are fairly spaced out to not expect a major change in their relative positions, assuming an absence of disruptive events. Yet, Apple and Sony Ericsson are much closer, just 1.5 million units apart.

Sony Ericsson’s President, Bert Nordberg recently stated that Sony Ericsson is seeking to not be a volume player, but rather a value player and as such will focus on smart phones. Such high value products and the higher profit that they bring would clearly take preference over market share. This is not a bad thing at all; for example Apple and RIM command a meagre 3% of the mobile device volumes, but 55% of the profits according to a Deutsche Bank analysis. Left unchecked, an un-necessary race for volumes and growth can have disastrous consequences.

Quality and profits are certainly more important than a blind race for meaningless volumes. This is a reason why the top 5 OEM list, is only part of the big picture. The strategic positioning of the manufacturers on and off that list is equally important and can often signal a rapid change in fortunes.

What’ clear is that in early 2011 we should see Apple displace Sony Ericsson from 5th position, making the top-5 list the territory of a Finnish mass-producer, two South Korean workhorses and two North America challengers.

Learning from the industry’s mistakes

Taking inspiration from a certain eruption from a volcano in Iceland (whose name I cannot pronounce!), the industry is undergoing a change in landscape. Much like the results of a volcanic eruption, this landscape and the map we draw-off of it, will change for the foreseeable future. The two “eruptions” in our case have been the surge in emergence of new, vertically integrated product experiences, as a result of Apple and RIM’s success, and the open source phenomena, triggered by Google’s Android platform.


The Evolution

From the perspective of mobile software, we are in a new phase of evolution of this landscape.

Up until the beginning of the century, OEMs built devices around vertically integrated systems. This included in-house ownership of the complete solution from hardware all the way up to the applications. The applications themselves were little more than enablers of the underlying technology; in other words software-enabled hardware.

During 2002-2008, there was an emergence of several “horizontal” value players. A lot of the underlying technology was sourced from organizations who specialized in componentised software layers, selling middleware, browsers, application frameworks and operating systems. This has been especially prevalent in smartphones powered by the likes of windows mobile and Symbian.

Since around 2009, OEMs have been building systems around open source software and open interfaces. This is not only true for software (Android, Symbian, LiMo, MeeGo), but also the hardware pieces are becoming more off–the-shelf and commoditized

The success of Apple and RIM, both of which have vertically integrated offerings (to varying degrees) has polarized the industry; manufacturers are now stuck between a rock (vertically integrated offerings from Apple and RIM) and a hard place (open source software platforms).

So, on one end are the players who are embracing and driving open source and commoditizing suppliers (Nokia, Motorola, LG) while on the other end are the players who believe in control and in-house vertical integration (Apple, RIM). Samsung, with its Bada programming layer is clearly looking to replicate Apple and RIM’s vertically integrated model. Sony Ericsson is leaning to the Open end with Android and Symbian (5 of 8 products in the core portfolio)

So is the Apple and RIM vertical model a one-way street for everyone to embrace? Apple and RIM are essentially able to afford the luxury of a complete in-house solution because of the relative lack of variation required in their software, due to fairly narrow deviations in their products (it’s not just a case of affording.. they are also buying companies to effect this – e.g. chipset, ad networks in case of Apple, QNX and Dash in case of RIM).

This is obvious for the iPhone where Apple is essentially upgrading a single product year after year. Even in the case of RIM, with seemingly several different variations on the Blackberry hardware, they deal with one main Blackberry vanilla design. Note that in that sense both Apple and RIM are both playing a fairly risky game, akin to putting your eggs in one basket. This risk is manageable as both Apple and RIM still sport unique selling points; best-in-class product design, services and user interface in case of Apple and proprietary messaging solution in case of RIM.

In case of Apple, the iPhone’s hardware and software is designed to wow the user. A combination of Apple’s brand value, shrewd marketing and design-centred approach has resulted in a desirable product that goes to the extent to sacrificing seemingly important features to keep things simple for the user. However, the iPhone would not be this ‘desirable’ were it not for the massive amount of applications, both good and bad, available to the user. That much content means that users tend to not get bored with the limitations of the few built in applications on the device.

Blackberry on the other hand has taken the approach of creating a messaging solution that is extremely simple to use and needs no complicated “setup”. The device is of course valuable to enterprises with it’s built in security mechanisms and fully integrated enterprise solutions. Once again, superior consumer experience and focus on the core group (enterprise users) has been achieved through vertical integration of the complete value chain.

For the incumbent handset OEMs who need to reduce the total cost of ownership for software, going back to the days of 100% in-house software, does not sound appealing at all. The sheer amount of work required to adapt software to 10s of hardware SKUs is not very appetizing. For these OEMs open source is a real blessing that helps tap into innovation while at the same time cutting costs on the core software R&D. This is one reason, why Samsung’s Bada move is very bold indeed. It will be interesting to see how Samsung manages to competitively maintain Bada, without the R&D cost of managing that platform having an impact on the Korean manufacturer’s bottomline.

So, it seems that a polarized universe is the only way forward with some players betting on open source and commoditized hardware, and others on vertical systems.

The struggle for differentiation

Once Sony Ericsson and Samsung have finally placed their bets with Bada and Android the ecosystem will settle down into this polarized state.

The vertically integrated players will have the privilege of keeping a high barrier to entry for any new entrant. This assumed new entrant will have to replicate what Apple did with the iPhone, which is not something you see very often.

The players in the open ecosystem will, however, have to guard against the king of cost Shanzai (fake phone) brands that have the possibility to challenge established OEMs. The assumption here is that a drive to open systems will lower the barrier to entry. When any tom-dick-and-harry can slap one of several open source software stacks on top of one of several chipsets readily support such software stacks, the need to differentiate will extend beyond hardware and software design. It is too risky to assume that the consumer will remain committed to a brand solely on the basis of these easy-to-replicate characteristics.

So what is it that the OEMs can use to differentiate their offerings? One must remember that a consumers experience of product and a brand is an amalgamation of several points of contact with the brand and the product. The look and feel of the hardware, and the usability of the device are just two such contact points. A consumer interacts with both the device and the brand in many other ways, like using a cloud service provided with the device, or calling a call-centre for support. A differentiated offering will evolve, based on not just user interface but complete user experience (hardware, software, UI, cloud services, customer service). These will be necessary defences and barriers, which the incumbents will need, in order to protect against being reduced to commodities fighting on price. We may see OEMs positioning their products based on this complete package rather than simply advertising stunning hardware and user interface design.

Those that build a robust defence (the Gorillas) will command the landscape through their sheer size and position. The super efficient king-of-cost players will present a challenge with their sheer agility and cunning (the foxes). Rest assured, anyone stuck in the middle (the jungle) will be stuck in a constant struggle for survival. What a great ending to the fairy tale!

– Vinay

[Vinay Kapoor is a Business development director at Tieto where he helps build new revenue streams and helps shape Tieto’s mobile devices strategy. Vinay has been a mobile industry insider for over a decade and has an avid interest in the events that shape this ever changing industry. You can follow him on Twitter (www.twitter.com/vinaykap) or on his blog (http://wirelessmantra.blogspot.com)]

Developer Economics 2010: The Role of Networks in a Developer World

[In the final part of our series on our latest research – Mobile Developer Economics 2010 and Beyond – Telefonica’s James Parton discusses the challenges facing mobile network operators in their quest to stay relevant to mobile application developers. Full research report available for free download or see part 1, part 2 and part 3 of the blog series on mobile developer economics]
The article is also available in Chinese.

"The Role of Network Operators in a Developer World"

Historically, operators have been one of the few options available to developers when bringing new applications and services to market. Typically this has been in the form of placing applications in the operator mobile web portal or via a handset preload agreement within the operator variant software build.

However operator go-to-market channels have suffered from a lack of transparency, lengthy bureaucratic processes and the inevitable arrogance of a dominant gatekeeper.  The rapid rise of app stores has completely rewritten the rule book, and now provides independent developers with a more open and democratic way to get their product in front of potential consumers.

The Developer Economics 2010 report graphically highlights this trend, with less than 5% of the 400 developer respondents persevering with the operator channel. Clearly app stores have delivered real economic benefits to developers, with time to shelf being reduced by two thirds, and time to payment being reduced by 22 days (see part 2 of our blog series) when compared to the Operator channel.

There are some notable exceptions to the trend. Andrew Fisher, CEO of Shazam, frequently highlights the Operator channel as one of the reasons for Shazam’s wide spread success, and recommends companies to invest in developing operator partnerships. Christopher Kassulke, CEO at HandyGames confirms that major games developers also prefer to invest in selling games via operators, due to the higher per-download price points and the sustainable, predictable revenues that the operator channel offers.

Opportunity lost?
A key question for operators is “Has the app distribution opportunity been irreversibly lost?” An interesting insight from the Developer Economics report is that the app store phenomenon is perhaps not as widespread as portrayed. Beyond the iPhone and Android ecosystems dominated by native app stores, there is a significant gap in the market for operators to assist in the distribution of apps and services. This is especially significant in the growing mobile web app sector.

Of course it goes without saying; unless operators fix the legacy issues with their lengthy bureaucratic processes and ‘ivory tower’ attitude then the distribution opportunity will remain untapped. One of the interesting friction points will be the open market model vs. selective editorial cherry picking of apps favoured by many Operators.

Open market vs Cherry picking
In an open market model, there is no editorial body deciding the catalogue of applications presented to consumers. A complaint often heard from developers is “Who do they think they are, deciding if my app is good enough?” The customer is presented with unfiltered choice made available by any and all developers. The downside of this approach is the “lost in the noise” issue increasingly voiced by developers, the reduction in quality or increase in copyright-infringing apps and the over reliance on your app appearing in the “recommended” or top 10 listing of the relevant content categories to drive downloads.

Operators favouring the editorial selection model (‘cherry picking’) will argue less is more. Based on an understanding of their user base, operator content managers will work with developers to select the most appealing and appropriate apps. This directly addresses the “lost in the noise” issue as the catalogue will be much smaller vs. an open model app store. This approach should also deliver higher conversion rates if the apps are effectively matched to the needs of the audience. Cynics will argue that the operator content managers are not qualified to make the right selections, and this method heavily favours established brands like Facebook which are “safe” vs. lesser known independent developer offerings, thus stifling innovation.

Now developers need to figure out how to make their apps stand out from the crowd. Giving your app away for free just won’t cut it in the long run, as there is no emotional or financial bond between your app and the user. Pinch Media research shows that the average shelf life of a free iPhone app is less than 30 days, with only 20% of users returning to the app after the first day of installation. You don’t want to be the app equivalent of the shortlived May Fly ?

Key to ensuring your app will appeal to consumers is working directly with your intended audience at an early stage. Why waste time and effort if you don’t have an understanding of the following critical questions:

  • Which features will make a difference to people?
  • What is your addressable market?
  • How much are people prepared to pay you for your trouble, if anything?

This marketing insight gap was highlighted in “Developer Economics 2010”, showing that perhaps the app sector is not as mature as previously presumed. Worryingly the vast majority of developers do not invest in any formal market research or even user testing, outside of friends and colleagues.

Recognising that many development companies may not have specialised marketing people or the resources to conduct formal research, the operator can help fill this gap by opening up access to their customer base to encourage co-creation and testing with real end users, free of charge.

This model of match making developers with end users was championed in the UK in early 2009 when we launched O2 Litmus. This fresh approach quickly gained recognition for its innovative model. To date over 7,600 O2 UK customers have volunteered to participate in the development and testing of applications with developers. Typically engagement levels run at around 10% of the tester base actively working with developers at any one time. Approaching 100 individual apps have benefitted from customer co-creation in O2 Litmus, generating over 2,500 test installations to date.

Programming the network
I have previously written about the potential for Operator delivered network enablers (API’s). Developer Economics 2010 highlights the challenge that faces the operator community in effectively evangelising this message. Only 5% of respondents felt that it was the role of the Operator to expose network API’s.

The pace of technological innovation is not being matched by business model innovation. Increasingly developers feel constrained by the business models on offer. Pay per download dominates (two thirds of respondents), with subscription and advertising following.

This signals another significant opportunity for Operators, and an important angle to the exposure of operator network enablers. It is easy to limit the conversation around enablers to the technical feature set of each enabler. The untapped opportunity for both developers and operators alike is wrapping the exposure of enablers with new innovative business models, such as revenue share on the transactional traffic generated

If developers can plug in additional revenue streams from the usage of operator enablers, this will address both the lack of commercial monetisation options available to developers, whilst introducing richer functionality to their app experience.  If executed correctly I believe this can effectively address the developer perception issues highlighted in the report.

I will close the post with a developer quote from Developer Economics 2010 that perfectly sums up both the opportunity and challenge facing mobile Operators today:

“The first mobile company to TRULY reach out to web developers will have an edge over the competition, but right now I don’t see any candidates, except for Google. If Google became an operator our problems would be solved”

– James
Head of Telefonica Developer Communities
You should follow James on twitter at @jamesparton

[James is a Chartered Marketer specialised in Mobile. With an award winning track record of product delivery including twenty five major launches, featuring twenty first to market achievements, including MMS, mobile video, mobile music downloads, the UK DVB-H Broadcast TV trial in 2005, and the ticketing and interactive services supporting The O2 Arena in London. Recognised by Revolution Magazine as one of the “Future 50”, James is a regular industry speaker, panellist, judge, blogger, and has lectured in Marketing and New Product Development at The University of Oxford Faculty of Continuing Education and Reading University.]

Full report is available for free download, thanks to the kind sponsorship of Telefonica Developer Communities. You can follow Telefonica Developer Communities through their blog.

Are you a mobile app developer? Want to be part of VisionMobile’s next developer research and voice your own opinions? Take a moment to fill out the registration form.

Mobile Developer Economics: The Building Blocks of Mobile Applications

[In part 3 of the 4-part series on our latest research РMobile Developer Economics 2010 and Beyond Рguest author Tor Bj̦rn Minde takes a critical look at the developer sentiments on code development, debugging and support. Full research report available for free download or see part 1 and part 2 of the blog series on mobile developer economics].
The article is also available in Chinese.

Do iOS and Android enjoy a large market penetration? VisionMobile’s research suggests that developers think so even if it is not case for iOS and Android per se; iOS and Android are available in a fraction of devices compared to Symbian and Java ME. Most probably, developers view addressable market in terms of ability to reach a large audience of ‘application consumers’ rather than just a large installed base of handsets.

Developers also consider “quick to code and prototype” as a favourite platform aspect, second only in importance to making money on the platform. This reveals that the ‘fun’ aspect of mobile development co-exists with the realism of money-making in developers’ minds.

The new report Mobile Developer Economics 2010 and Beyond, contains many new insights into mobile development. In this article, I ‘ll  comment on and highlight key take-aways from chapter 3 of the report titled “the building blocks of mobile applications”.

Perceived market penetration should be interpreted as real app usage penetration
There seems to be a contradiction in terms regarding the platform aspect considered ‘best’ by developers. Developers flock onto iOS and Android due to a “perceived” large market share but still there’s a discrepancy between the installed base of the platforms and the number of available apps for each platform. The platforms that have greatest installed base (j2ME, Symbian) have the fewest applications and vice versa.

So, is there (only) a perceived market penetration by the different platforms or are there facts that support the choice?

Looking at some related data points from an Ovum report,  iPhone has 69% of all downloads while Symbian has 9% of all downloads. The report further says that 57% of all downloads in 2009 originated from North America, indicating a high usage pattern among  iOS/Android device users. Users of iPhones and Android devices are more likely to download applications.

Piecing together some more data points on  iOS and Android, specifically app stores’ ease of use, application discovery and the multi-touch experience, reveals an important point; for application developers the addressable market that matters is not just the installed base. While iOS and Android have limited deployments compared to the incumbent platforms, they are indeed ahead of the curve in terms of download share, usage share and ease of use – which explains the developer perception of large market share for iOS and Android. Hence, perceived market penetration should be interpreted as app usage and download share penetration.

It is still fun to code, but money-making rules
Looking at technical reasons that mobile developers consider important when selecting a platform, what sticks out as the favourite reason is “quick to code and prototype”. Moreover, Android, Mobile Web and Flash Lite seem to have the shortest learning curve while Android enjoys the shortest development time.

Developers still consider fun and coding speed as important even if developer mindshare is turning towards the appeal of monetization and reaching a large audience. The technical reasons for selecting a platform seem to be gradually becoming a less important selection criterion. However, developer responses are blurred by ‘soft values’ which affect the answers to the question “What is important”.

A study we did at Ericsson Labs argues that developers, these pioneers of mobile application development, can roughly be grouped into four categories. The answers to the question “What is most important” will be very different between these groups. One developer group has very strong opinions about open-source, another group are mainly focused on a good return on investment, a third group are attracted by the lowest possible barriers to entry and the last group try to keep one hand in every cookie jar.

Future building blocks of mobile applications
In general, mobile web development within an HTML5 browser or web runtime is promising when it comes to market penetration, ease-of-use and cross platform support. At the same time, the VisionMobile study shows several pain-points with mobile web technologies compared to native applications, namely issues with development environments, device API support and UI creation.

We will probably see both environments (native and web) used by developers in the future, both served by app stores and other discovery mechanisms. One could assume that the web runtime will fare better than previous cross-platform initiatives (J2ME, Flash Lite) since there is a large community developing to the web runtime (as opposed to single companies).

Untapped opportunities in developer support
VisionMobile’s study hints at the market gaps in developer support offerings. Developers are most willing to pay for access to hidden APIs – clearly a monetisation opportunity for platform vendors. Premium access to APIs can be delivered by device vendors as a point of differentiation, but it will run counter to cross-device application support of the platform. To achieve both depth of API reach and breadth of cross-device support, we need standards – which interestingly enough are not so important for developers, as VisionMobile’s study reveals.

Finally, VisionMobile suggests that developers use non-vendor sites and developer communities most often for tech support – examples being  Slashdot, Stackoverflow, Daniweb, anddev.org and the Chinese dev site csdn.net. At the same time, our study at Ericsson Labs also found that the main tool developers use for tech support is still regular search engines across tech support or developer communities.

Concluding remarks
All in all, the new VisionMobile report analyses most areas of interest for those who need to understand the developer experience. The knowledge of the developer experience using these ‘first wave’ platforms (what the report refers to as “the Renaissance period”) for mobile application development and marketing is crucial in order to guide the development of future platforms.

–  Tor Björn
follow me at @ericssonlabs.

Full report is available for free download, thanks to the kind sponsorship of Telefonica Developer Communities. You can follow Telefonica Developer Communities through their blog.

Are you a mobile app developer? Want to participate in the next mobile developer research and voice your own opinions on mobile development? Fill out the registration form & we’ll be in touch.

[Tor Björn is head of Ericsson Labs with 25 years experience in mobile multimedia & applications]

Mobile Developer Economics: Taking Applications to Market

[In part 2 of the 4-part series on our latest research – Mobile Developer Economics 2010 and Beyond – Andreas Constantinou looks at how effectively have app stores have reduced the time-to-market for applications and the five key challenges for mobile developers today in taking apps to market. Full research report available for free download or see part 1 of the blog series on the migration of developer mindshare].
The article is also available in Chinese.


If there’s a single reason for the mass-entrance of developers into the mobile market, it is app stores. We view app stores as direct developer-to-consumer channels, i.e. commercial conduits that streamline the submission, pricing, distribution and retailing of applications to consumers. For a breakdown of key ingredients in the app store recipe, see our Mobile Megatrends 2010 report. App stores have streamlined the route to market for mobile applications, a route that was previously laden with obstacles, such as lack of information, complex submission and certification processes, low revenue shares and regional fragmentation.

Despite the hype, there is sporadic use of app stores outside the Apple and Android platforms. Our survey of 400+ mobile developers found that only four percent of Java respondents used App Stores as their primary channel to market. Windows Phone and mobile web developers find app stores little more relevant, with fewer than 10 percent of such respondents using one as a primary channel for taking applications to market.

This contrasts completely with platforms that have ‘native’ app stores. Over 95 percent of iPhone respondents use the Apple App Store as their primary channel, while the percentage of Android respondents using Android Market is just below 90.

In terms of the incumbent mobile platforms, around 75 percent of Symbian respondents that use app stores, use the Nokia Ovi Store. The significant number (20-25 percent) of Symbian developers who also use iPhone and Android app stores reveals the brain-drain that is taking place towards these newer platforms. This is a particularly critical migration of developer mindshare, considering that the Symbian platform is the hardest to master. Thus, the size of developer investments on Symbian being written off is substantial.

Besides the growth of apps, app stores are the cornerstone of another major transformation that has taken place in the mobile industry: the mass-market use of mobile as the next marketing channel beyond the Internet. We would argue that it was app stores that triggered the influx of apps – not the open source nature of Android, or the consumer sex appeal of the iPhone.

App stores triggered the sheer growth in app numbers and diversity that led to the cliché, “there’s an app for that”. Another cliché, “the screen is the app,” tells the other half of the story. Combined, the app store and touchscreen were the two essential ingredients behind mobile apps as the next mass-market channel beyond the Internet. These two ingredients inspired just about every media and service company to commission companion or revenue-driven apps as extensions to their traditional online channels. In effect, this phenomenon fueled the app economy, even beyond what app store numbers alone suggest.

Speeding up time to market
App stores have revolutionised time to market for applications. To research exactly how radically the time to market for applications has changed since the introduction of app stores, we analysed two parameters:
– the time to shelf, i.e. how long it takes from submitting an application to that application being available for purchase
– the time to payment, i.e. the length of time between an application being sold and the proceeds reaching the developer’s bank account

Our findings show that app stores have reduced the average time-to-shelf by two thirds: from 68 days across traditional channels, to 22 days via an app store. These traditional channels have been suffering from long, proprietary and fragmented processes of application certification, approval, targeting and pricing, all of which need to be established via one-to-one commercial agreements. Moreover, app stores have reduced the time-to-payment by more than half; from 82 days on average in the case of traditional channels, to 36 days on average with app stores.

The bigger picture that emerges is that the developer’s choice of platform impacts the time-to-market for applications, i.e. the length of time from completing an application to getting the first revenues in. The iOS platform is fastest to go to market with, particularly thanks to Apple’s streamlined App Store process, while Java ME and Symbian are the slowest, due to the sluggishness of the traditional routes to market used by these developers (in particular via commissioned apps and own- website downloads).

Challenges with taking applications to market
Application distribution may be going through a renaissance period that began in 2008, with the direct-to-consumer model pioneered by Apple’s App Store. However, taking applications to market is still plagued with numerous teething problems, as is typical with nascent technology. There are four recurring issues reported by developers: app exposure, app submission (and certification), low revenue share and the challenges with app localisation. A fifth challenge (and untapped opportunity) is the efficient, crowd-sourced testing of mobile apps by real users.

Challenge 1. Application exposure
Our survey found the number one issue for mobile developers to be the lack of effective marketing channels to increase application exposure, discovery and therefore customer acquisition. This was an issue mostly for Flash and iPhone developers, followed by Symbian, Android and Java ME developers. Developers reported persistent challenges with getting traffic, customer visibility or in short “being seen”. One developer put it succinctly: “It’s like going to a record store with 200,000 CDs. You’ll only look at the top-10.”

The exposure bottleneck is new in mobile, but an age-old problem in fast moving consumer goods (FMCG). With such large volumes of applications in stock, app stores are taking on the role of huge supermarkets or record stores. As in any FMCG market, app developers have to invest in promoting their products above the noise, because supermarkets won’t.

Our research shows that in 2010, developers are relatively unsophisticated in marketing their applications. More than half of developers surveyed use free demos and a variety of social media, i.e. the ‘de facto’ techniques for application promotion. Other techniques cited were magazines and influencing analysts or journalists, while promotion through tradeshows was also deemed popular among a fifth of respondents. Less than 30 percent of respondents invest in traditional marketing media such as online advertising or professional PR services.

When asked about what type of marketing support they would be willing to pay for, our survey found half of respondents willing to pay for premium app store placement. This willingness varies greatly by platform, however; developers whose platform features a ‘native’ app store (iPhone, Android and to a lesser extent Symbian) are almost twice as likely to pay for premium app store placement, compared with developers whose platforms do not (Java and mobile web) as well as Windows Phone. This finding indicates that direct-to- consumer distribution channels are necessarily crowded and therefore developers will be willing to pay a premium to be able to stand out from the crowd – much like how FMCG brands pay for premium shelf space in supermarkets.

Yet with free applications being the norm, developers have to become more creative with promotion and advertising; free applications make up more than half of the Android Market catalogue and 25 percent of the Apple App Store catalogue, according to different reports by Distimo and AndroLib.

There are two types of solutions emerging to cover the market gap of application promotional services. Firstly, there are app discovery and recommendation startups (e.g. Apppopular, Appolicious, Appsfire, Apprupt, Chorus, Mplayit and Yappler), which help users discover applications based on their past preferences or on explicit recommendations from the user’s social circle. Secondly, there are white label app store providers like Ericsson that are moving to app mall (shop-in-shop) infrastructure. App malls will allow the creation of 1,000s of application mini-stores, each targeted to niche sub-segments, much like Amazon mini-stores.

However, the gap in application marketing services is widening in 2010 due to the rapid growth in application volume, which is outpacing the appearance of app discovery and recommendation solutions. We believe that application marketing and retailing services remain the biggest opportunity in mobile applications today.

Challenge 2. Application submission and certification.
Application submission and certification are two of the top four challenges for mobile developers, according to our survey. Overall, the most important issue related to certification that was raised by nearly 40 percent of respondents is its cost. In some cases, developers report that the certification cost rises to a few hundred dollars per app certification (not per app). Such economics do not work for low-cost apps, but only for mega-application productions. Java developers, for example, report that Java Signed is impractical; developers have to purchase separate certificates based on the certificate authority installed on the handset – and certificates are expensive.

Challenge 3. Dubious long-tail economics
The mobile app economy is nothing short of hyped from the successes that have come into the limelight – the $1m per month brought in by the Tap Tap Revenge social app, or the $125K in monthly ad revenues reported by BackFlip Studios on their Paper Toss app. Yet the economics for long-tail developers – i.e. the per-capita profit for the average developer – remain dubious at best.

At least 25 percent of Symbian, Flash, Windows Phone and Java ME respondents reported low revenue share as one of the key go-to-market challenges. Most app stores are still playing catch-up to Apple in terms of the revenue share they are paying out to the developer. As one developer put it, “There has been a bastardisation of the 70/30 rule which has been mis-marketed by app stores; for example with Ovi Store, where operators often get 50 percent of the retail price, so developers gets 70 percent [of the remainder]”. Unsurprisingly, the revenue share was not a major challenge for iPhone or BlackBerry respondents.

Moreover, less than 25 percent of respondents stated that revenue potential was one of the best factors of their platform; on average revenue potential ranked last among “best aspects” of each platform, showing how mobile software development is still plagued by poor monetisation in 2010.

The dubious long-tail economics are reinforced by our findings on developer revenue expectations. Only five percent of the respondents reported very good revenues, above their expectations, while 24 percent said their revenues were poor. Note that we didn’t poll for absolute revenues, because of the discrepancies across regions, different revenue models and distance of developers from revenue reporting. At the same time, there is a general consensus of optimism; 27 percent of respondents said that their revenues were as projected, while another 36 percent said they should be reaching their revenue targets.

There are two effects at play that make for poor long-tail economics. Firstly, the number of ‘garage developers’ who are creating apps for fun or peer recognition but not money; and secondly, the noise created by the ‘app crowd’ which prompts developers to drop prices in order to rise to the top of their pack.

There are also platform-specific effects: the unpredictability of revenues, in the case of the Apple’s pick-and-choose culture for featured apps; and, the limitations of paid app support for Android, where paid applications are only available to users in 13 countries out of 46 countries where Android Market is available, as of June 2010. Android has also been jokingly called a “download, buy, and return business”, referring to how you can get a refund for any paid Android application without stating a reason within 24 hours of purchase – a policy that allows many users to exploit the system. In addition, the applications that are published on Android market are not curated by Google, resulting in 100s of applications that are low quality or are infringing copyright, thereby making it harder for quality, paid apps to make money. Even in economically healthier ecosystems like Apple’s App Store, a standalone developer can hope to sell in total an average of 1,000-2,000 copies of an application at an average price of $1.99, which is barely justifying the many man- months of effort that it takes to develop a mobile application by today’s standards.

We maintain that the monetisation potential for the long tail of apps won’t be realised until effective policies are put in place to curtail the adoption of free apps – for example by enforcing a minimum $0.01 app price. Psychology experiments have proven time and time again how our perception of value is distorted when the price drops to zero. It is time for app store owners to borrow from cognitive psychology to help boost the long-tail developer economy, rather than compete on number of downloads.

Challenge 4. Localisation.
Another issue highlighted was the lack of localised apps. One developer said characteristically, “There is a big problem for developers in markets with low penetration of English as a second language. Since the platforms are poorly adjusted to localisation, the costs of development grow and thus profitability and attractiveness [drop]. It would be great to see platforms that take action towards easing the challenge of localisation.” The lack of localised apps for non-English markets is exacerbated for Android. A search on AndroLib reveals that out of the approximately 60,000 apps on Android Market, there are only about 1,400 apps localised in Spanish and only 1,800 localised in French, as of early June 2010.

The lack of localised apps on Android presents the number one opportunity for alternative app stores like SlideMe, AndAppStore and Mobihand, i.e. to attract communities of regional app developers, or to facilitate localisation of apps to different languages – in other words, to reach where Android Market doesn’t reach.

Challenge 5: Application planning and testing
Application planning and testing is a core part of taking an application to market. Our research confirms that planning techniques are near-ubiquitous for application developers. Yet, small development firms have limited means today to beta test and peer review their applications with a cross- section of representative users. Given the hundreds of thousands of mobile apps, we believe that efficient (crowd-sourced) testing of apps in a global market of users is considerably under-utilized. This presents an opportunity for the few solution providers in this segment – Mob4Hire and uTest.com, for example – but also for network operators, who can generate a channel for testing applications with end users, and provide an open feedback support system back to developers. Overall though, the need of mobile developers to have their apps tested cost-effectively by real users around the world is very much under-served.

Looking forward to your comments. Later this week, we’ll look at the next chapter in our research on the building blocks of mobile applications. Stay tuned or, better yet, subscribe to the blog.

Full report is available for free download, thanks to the kind sponsorship of Telefonica Developer Communities. You can follow Telefonica Developer Communities through their blog.

Are you a mobile app developer? Want to participate in the next mobile developer research and voice your own opinions on mobile development? Fill out the registration form & we’ll be in touch.

– Andreas
you should follow me on twitter: @andreascon

Mobile Developer Economics 2010: The migration of developer mindshare

[In part 1 of the 4-part series on our latest research – Mobile Developer Economics 2010 and Beyond – Andreas Constantinou looks at the migration of developer mindshare that is taking place in mobile software and the drivers behind that. Full research report available for free download]
The article is also available in Chinese.


Software has played a critical role in transforming the mobile industry since the beginning of the century. Since 2008, mobile software and applications have moved from the sphere of cryptic engineering lingo to part of the essential marketing playbook for mobile industry vendors.

In stock market terms, developer mindshare is one of the hottest “commodities” in the mobile business, one whose “stock price” has ballooned in the last two years. Platform vendors, handset OEMs, network operators, hardware vendors, and infrastructure providers all want to contribute to mobile apps innovation. Mobile players, from hardware vendors and handset OEMs to networks, are now vying to win software developer mindshare, in order to add value on top of their devices and networks. But how is the landscape of mobile developer mindshare looking today?

Our new report Mobile Developer Economics 2010 and Beyond, offers many new insights into mobile developer mindshare, and analysis into every touch point of the developer journey, from platform selection to monetisation. The research is based on a set of benchmarks and a survey across 400+ developers globally, segmented into 8 major platforms: iOS (iPhone), Android, Symbian, BlackBerry, Java ME, Windows Phone, Flash Lite, and mobile web.

In terms of developer mindshare, our research shows that Symbian and Java ME, which dominated the developer mindshare pool until 2008, have been superceded by the Android and iPhone platforms. Despite Symbian remaining in the pole position in terms of smartphone market penetration, ‘out-shipping’ iPhone 4 to 1 and Android many-times to 1, the signs of dissatisfaction with the way the Symbian platform has evolved have long been evident.

Indeed Android stands out as the top platform according to developer experience, with close to 60 percent of developers having recently developed on Android, assuming an equal number of developers with experience on each of eight major platforms. iOS (iPhone) follows closely as the next most popular platform, outranking both Symbian and Java ME, which until 2008 were in pole position.

In the last two years, a mindshare migration has taken place for mobile developers away from the incumbent platforms Symbian, Java ME and Windows Phone, while a substantial number of PC software developers have flocked to iPhone and Android. The large minority (20-25 percent) of Symbian respondents who sell their apps via iPhone and Android app stores reveals the brain-drain that is taking place towards these newer platforms. The vast majority of Java ME respondents have lost faith in the write-once-run-anywhere vision. Moreover, anecdotal developer testimonials suggest that half of Windows Phone MVP developers (valued for their commitment to the platform) carry an iPhone and would think twice before re-investing in Windows Phone. We should also point out the exodus of some influential developers from the Symbian camp, as is the case with the closing of Symbian-Guru.com, one of the leading community sites related to the platform, whose founder moved to adopt Android.

The disparity between devices and applications

One of the most telling clues about the speed of evolution of the new vs old platforms is the great disparity between the device installed base and the number of available apps for each platform. While Windows Phone, Symbian, Java and Flash have many times the market penetration of Android, iPhone and BlackBerry, the number of apps available tells a very different story.

The two platforms that best illustrate the above point are Java ME and iOS (iPhone). Java ME boasts an installed base of a staggering 3 billion, while the actual number of apps is very low by comparison. The iOS platform on the other hand is available in just over 60 million devices (not including iPods/iPads) but its app store contains more than 250K apps at this time, a number that will climb even higher in the foreseeable future.

The disparity is also pronounced in cross-platform runtimes i.e. Java ME and Flash Lite. This flies in the face the traditional common sense, i.e. that cross-platform runtimes are the way forward, when the number of apps available for those platforms are tiny in comparison. The recent Apple vs Adobe rift and the subsequent banning of Flash from all iProducts has only weakened Adobe’s position. In parallel Sun has launched half-hearted attempts at reducing fragmentation, the number one Java ME pain point, while the Oracle take over is only worsening the problem.

Choosing a mobile platform – facts and perceptions

Most developers work on multiple platforms, on average 2.8 platforms per developer, based on our sample of 400 respondents (although note that 60% of respondents had more than 3 years of experience). Moreover, one in five iPhone and Android respondents release apps in both the Apple App Store and Android Market.

The question is: in a market crowded with software platforms, how do developers choose between iOS, Android, Symbian, Java ME, BlackBerry, Flash, Windows Phone, mobile web, WebOS or Samsung Bada? For today’s mobile developer, market penetration and revenue potential are hands down the two most important reasons for selecting a platform.

Large market penetration was chosen by 75 percent of respondents across each of the eight major platforms we surveyed. Revenue potential was the second most important reason, chosen by over half of respondents. In fact, market penetration and revenue potential were more important than any single technical reason for selecting a platform, revealing how mobile developers today are savvy about the economic implications of mobile development.

The preference of marketing over technical reasons signifies a turn in the developer mindset. Developers no longer see programming fun as a sufficient reward in itself, but consider monetisation opportunities as a primary priority. It seems that, mobile developers now have a sense of commercial pragmatism. As commented by one of our developer respondents, “Technical considerations are irrelevant. The choice of platform is always marketing-driven”.

Looking forward to your comments. Next week, we’ll look at the next chapter in our research on taking apps to market. Stay tuned or ,better yet, subscribe to the blog.

Full report is available for free download, thanks to the kind sponsorship of Telefonica Developer Communities. You can follow Telefonica Developer Communities through their blog.

Are you a mobile app developer? Want to participate in the next mobile developer research and voice your own opinions on mobile development? Fill out the registration form & we’ll be in touch.

– Andreas
you should follow me on twitter: @andreascon