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

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

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

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

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

The very first new post-Steve Jobs product, Apple Watch, is stunningly pretty, is functional — and is utterly unnecessary. #AppleLive

— Brian S Hall (@brianshall) September 9, 2014

A lot of kitchen-sinking in the Apple watch. Much like the iPad launch. It's a piece of glass that be be anything, but what in particular?

— Benedict Evans (@BenedictEvans) September 9, 2014

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

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

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

WatchKit

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

HealthKit

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

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

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

Identity

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

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

Users first

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

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

Who will be the iOS and Android of IoT?

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

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

The major players have put their stake in the ground:

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

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

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

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

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

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

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

Who will be the kings of IoT?

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

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

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

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

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

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

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

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

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

The wheels are in motion

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

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

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

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

How Samsung enlists developers to make sense of health data

Samsung unveiled its vision on mobile health. The company wants to provide the “voice of your body” with two new intiatives: a sensor-packed Simband device for protoyping next-gen wearables, and the SAMI cloud platform that enables developers to generate insights from health data. The vision is spot-on when it comes to making software entrepreneurs the new heroes of health. Analyst Stijn Schuermans asks the question: what’s next for mHealth?

It used to be that the coach on the field or in the gym had all the wisdom to make you fitter and healthier. Ever since Moneyball, coaches have had a serious competitor: data. This trend has started to snowball in recent years with the advent of smartphones, wearable fitness trackers and connected devices (from scales and heart rate monitors to blood glucose meters).

Health IoT has moved from being a blue ocean market to red ocean status as competition increases. Fitness trackers, connected weight scales, sensorized running shoes… Already we see dozens of similar devices on the market. For example, Amazon.com shows 1,000+ results in the pedometer category; it lists products from Fitbit, Jawbone, Nike, Basis, Omron, iHeart, Striiv, Misfit and about 50 other known and less known brands. Even if many of these are not yet connected, they will be soon.

[tweetable]The current wave of health and fitness related IoT devices is just the beginning.[/tweetable] Once these devices become commonplace, what’s next?

From coder to coach: the role of software entrepreneurs in mHealth

It is well understood that the trend to approach fitness with devices and data will have far-reaching consequences for sports coaches, dietologists and medical professionals alike. If those professions want to remain the heroes of health in the future, they’ll need to partner up with new players in the game: software developers and data scientists.

[tweetable]The wheels are already in motion when it comes to making sense of health data.[/tweetable] There are already over 50K health apps on iOS and Android that help people to get fitter, increase their wellness or manage their disease. Insurance players like Aetna are working actively to get a full health picture. Their Carepass initiative helps their customers to get a full picture of all their app and device data in one place, and to set and track health goals. Propeller Health is combining IoT with environmental data to help patients to better manage asthma.

What’s being done for the developers who make all those apps? Programmable Web lists 100+ health APIs. Most of them are between 1 and 3 years old and will have matured quite a bit already. Companies like Human API and Validic provide middleware for health data, making it easier for software entrepreneurs to build interesting applications. Another company that has clearly understood the message is Samsung. Their “voice of the body” concept is spot on. With today’s announcement of the SAMI platform they’ve taken a big step in enabling developers to make sense of data. SAMI, an unwieldy acronym that stands for Samsung Architecture Multimodal Interactions, is described as an open cloud-based sensor data platform that helps developers to go “from big data to contextual insight”.

[tweetable]IoT and wearable will win by communities of software entrepreneurs that will make sense of all the data they generate[/tweetable] and help you improve your health, no matter what your current level of fitness is. The smartest of these entrepreneurs will combine data from many sources to arrive at the best possible recommendation or diagnosis. Platforms like Human API or Samsung’s SAMI will make that possible.

Incidentally, Samsung has signaled clearly today that developers and entrepreneurs are crucial to the future of mHealth. Developers being involved long before a consumer-ready device is available – the same developer-first strategy that Google followed with Android or, say, Google Glass. The Korean electronics giant is also putting its money where its mouth is: it will invest a handsome $50M in a Digital Health Challenge to stimulate innovation within the global developer ecosystem.

Next stop: users

Samsung’s Voice Of The Body announcements illustrate the evolution in IoT maturity nicely. First come sensors and devices, represented today by the Simband “investigational device”. (Simband is a wristband packed with novel sensors to measure your body. It’s more of a reference design rather than a commercial product.) Then, empower hardware makers, developers and entrepreneurs to experiment with the new technology (via Simband) and with the data it generates (via SAMI). Samsung obviously hopes that this will result in more component sales. But before that will happen, a final piece in the puzzle needs to fall into place.

Simband and SAMI, despite all the talk about developer-entrepreneurs, are still very much focused on solving technology challenges. The aim is to reduce the cost and complexity of building valuable applications. What’s missing is a vision on how to connect these developers and their apps to the users who needs them. Where will the demand for wearable health sensors and health apps come from?

We can draw an analogy with smartphone platforms. The Android ecosystem consist of a software platform (the Android Open Source Project, or AOSP), plus the Google Play app marketplace and a set of critical apps and APIs (more in our Naked Android article). AOSP is open, the Play store and Services are tightly controlled by Google, as they represent the connection with users. Demand for Android phones is driven by Android apps, which are built with Play APIs and available on the Play store. [tweetable]The SAMI platform represents the AOSP of wearables.[/tweetable] The equivalent of the Play services is nowhere to be seen (yet).

The crucial question for Samsung and other players in the space is this. Will they stop at technology? Or will they continue to evolve into a full-fledged computing platform and ecosystem that connects users with a community of software and hardware entrepreneurs?

Interestingly, more so than almost any of its competitors, Samsung has a large amount of existing users that could be connected to valuable health solutions. If Samsung pulls this off, they have an opportunity to start the network effects that will eventually lead to a winner-takes-all outcome. [tweetable]Will Samsung seize the day in IoT and create the next dominant computing platform?[/tweetable]

What do you think?

Apple & Samsung's "Profit Share" Trap

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

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

The Xiaomi Tribe: New hope for handset makers?

[Chinese handset maker entrant Xiaomi is putting itself in the spotlight with impressive first year sales and innovation across hardware, services, brand and business model. Is this a promising attempt to create a new profitable handset business, following the Apple & Samsung profit recipe? VisionMobile analyst Stijn Schuermans investigates in this retelling of our relevant report.]

Xiaomi (pronounced “chow me”), the upstart Chinese handset maker, has put itself in the spotlight with impressive early sales figures in its first year of existence.

This article is based on an issue of Mobile Insider, a monthly publication by VisionMobile. that examines under-the-radar and forward-looking trends in mobile. Each issue focuses on a specific topic distilling the insights in an easy-to-digest 5-page format. Mobile Insider is part of Telco Economics, a range of strategy reports and workshops that deliver a 360° view on the new economics of the mobile industry and changing role of telcos in the era of digital ecosystems. Continue reading The Xiaomi Tribe: New hope for handset makers?

The Apple and Samsung Profit Recipe

[Apple and Samsung are sucking the oxygen out of the room. What’s the recipe of their profits and why are all the other OEMs struggling? In this reiteration of April 2012’s Mobile Insider, VisionMobile analyst Stijn Schuermans gives insight into sustainability and profits in the handset market.]

The mobile handset market is in turmoil. Since Apple launched the iPhone in 2007, OEMs have been rushing to jump on the smartphone bandwagon. Five years later, few have managed to do so profitably. Even if more companies are gaining a significant market share, only two seem to be making a profit out of it: Apple – the creator of the market in the first place – and Samsung, a fast follower. Attractive profit margins are elusive for most of their competitors. Some are toppling from their former glory (Nokia, RIM), while some newcomers seem to be gaining speed (ZTE, Huawei). But will they manage to become profitable? This article is based on an issue of Mobile Insider, a monthly publication by VisionMobile. that examines under-the-radar and forward-looking trends in mobile. Each issue focuses on a specific topic distilling the insights in an easy-to-digest 5-page format. Mobile Insider is part of Telco Economics, a range of strategy research and workshops that deliver a 360° view on the new economics of the mobile industry and changing role of telcos in the era of digital ecosystems. Continue reading The Apple and Samsung Profit Recipe

The elusive long-tail of mobile shipments

[The era of smartphones is upon us, as penetration increases from 11% in 2008 to over 25% in 2011. But what of the remaining three quarters of the market? Marketing Manager Matos Kapetanakis talks smartphone numbers and takes a look at the elusive long-tail of feature phone shipments]

Dawn of the smartphone era

Smartphone penetration continues to accelerate, growing from a paltry 11% in 2008 to 20% in 2010 and climbing to 27% in H1 2011. Feature phones continue to make up the bulk of mobile shipments globally, but the revenue potential of each segment is a different matter altogether. As an example, the average selling price for Nokia’s feature phones was 39 Euros versus 144.5 Euros for their converged devices.

Another parameter, namely profitability is much in favour of smartphone vendors. HTC has comparable revenues to Nokia’s successful feature phone segment, with two times the profits and profit margin, despite having six times fewer shipments. The gap is even larger in the case of Apple, whose profits are nearly 20 times those of Nokia’s feature phone segment, despite having less than a third of Nokia’s shipments.

Smartphone platforms: Google vs. Apple

First, let’s take a look at the two leading players, Android and iOS. The vacuum left behind by Symbian’s timely demise has been filled primarily by Android and, to a lesser extend, Apple’s iOS. In H1 2011, Android gobbled up nearly 45% of the smartphone pie, leaving approximately 20% for Apple’s iOS and 12% for RIM’s BlackBerry OS.

Apple has enjoyed a healthy increase of iPhone shipments in 2011, already reaching past the 50M full-year figure for 2010 in the first three quarters of 2011. Despite the initial disappointment of not being a brand-new iPhone, the iPhone 4S managed to get 4 million sales in just one weekend – that’s more than Windows Phone manages in an entire quarter. However, in an increasingly price sensitive smartphone market, there is a limit to how many iPhones can be sold.

Despite being the number one smartphone platform, Android is not guaranteed a smooth sailing. Apple’s lawsuit barrage on Samsung, the biggest Android vendor in terms of sales, has exposed the platform’s Achilles’ heel, namely patents. The large arena of this high-stake drama will not be set in Germany or Australia, but the large smartphone markets, like the U.S. Google’s acquisition of Motorola (don’t miss our full analysis) has indeed armed Google with fresh patent ammunition, but might alienate the big Android vendors.

Smartphone platforms: The best of the rest

But what of the other platforms? Windows Phone continues to fail to impress users, with sales being disappointing, as Ballmer himself recently admitted. Nearly eight months after the much-vaunted Microsoft-Nokia deal, Windows Phone is faced with lukewarm results, being outsold even by Samsung’s bada platform. In H1 2011, Windows Phone barely reached 4M shipments, while bada shipments climbed to nearly 8M. WP7’s growth, after it replaces the zombified Symbian as Nokia’s main smartphone platform, is still uncertain, but the longer it takes for Nokia WP devices to hit the shelves, the more market share will Nokia lose. In H1, even if Nokia were to magically replace all Symbian handsets with Windows Phone handsets, Microsoft’s platform would still be far behind Android, with just half of Android’s shipments.

Windows Phone, however, should not be summarily disregarded, as Microsoft has managed to create a substantial ecosystem around the platform, which is the main ingredient to the success of Apple and Google. Windows Marketplace reached the 30 thousand apps milestone in just 10 months, while the platform has received positive reviews by developers. The platform is widely acknowledged as having the best developer tools in terms of features, based on our Developer Economics 2011 report (www.DeveloperEconomics.com).

Even though Stephen Elop described the smartphone market as a three-horse race, there is another important player to be considered, namely RIM. During the past year, RIM has suffered a number of blows, from declining market share and repeated drops in their share price to a total service blackout that lasted four days. RIM is starting to lag behind its competitors and their leaking market share is up for grabs. Despite a vibrant developer community, problems such as fragmentation issues and an aging platform have cost RIM the creation of a healthy ecosystem. A telling sign is how BlackBerry App World is lagging behind not only Apple and Google’s app stores in terms of available apps and downloads, but also Nokia’s Ovi Store. Now, the BlackBerry blackout fiasco has cost RIM the confidence of 70M subscribers. RIM is on the verge of relinquishing their last remaining competitive advantage, namely reliability. Even though RIM is trying to turn the situation around, with the introduction of the BBX platform, plus the carrot of Android apps compatibility in the second version of Playbook, it’s the RIM brand that has taken a beating, more than the BlackBerry brand. It remains to be seen whether users will flock to the notoriously unsafe Android platform or will opt to follow the safer, iPhone route. The iPhone route seems more suitable to RIM’s enterprise segment, as the segment’s disposable income is enough to carry the weight of expensive iPhones.

Smartphone vendor arena

In H1 2011, Apple and Samsung toppled Nokia as the undisputed king of smartphones. The top-5 smartphone vendor rankings also include RIM and HTC. It’s no surprise that 3 out of the top 5 players are purely smartphone vendors; but the old guard is catching up.

Although lagging behind, LG is finally on board the smartphone express, while Sony Ericsson has disowned their feature phone heritage and plan to become a smartphone-only vendor in 2012. As smartphone prices are dropping, ZTE and Huawei are also firmly in the game, extending well past their native home market.

It’s interesting to note that in a market of 208 million smartphones in H1 2011, there are very few dark horses. The top 10 players accounted for nearly all smartphone shipments in the first half of 2011, leaving just 3% of shipments in the â€˜other’ category.

The elusive long-tail of mobile shipments

While Nokia has lost the pole position in the smartphone market, it continues to firmly hold the feature phone market in its grasp. Nokia accounted for over 27% of total feature phone shipments in H1 2011, followed by Samsung with 20% and LG with 7%.

However, the feature phone market is extremely fragmented, with the top 7 players accounting for just 64% of shipments. The remaining x% belongs to the generic â€˜other’ category. But what is this dark, elusive gap in the market? The answer lies in the plethora of primarily Asian phone manufacturers out there (see a slightly out-of-date list here), taking off-the-shelf MediaTek hardware designs to create Shanzai handsets for the Chinese market or brand name handsets for India.

The long tail of feature phone manufacturers largely caters to local markets, in partnerships with local telcos. India and China are the obvious examples of low-volume feature phone manufacturers, with each country playing host to over 15 such companies. With tens of companies shipping low-end devices to local markets, it’s small wonder that the biggest bulk of feature phone shipments comes from the long-tail of handset OEMs.

The end of feature phones

While smartphone penetration continues to increase, just over 1 in 4 mobile phones are smartphones. The tipping point will come when handset OEMs manage to release low-cost smartphones into the market, in high volumes. Google is already attempting to sell cheap smartphones in the range of $100 unsubsidized, pre-tax. The rate of acceleration will increase even further if there is any truth to the rumors of cheaper iPhones, as consumers are still hesitant of the prices that Apple demands for its products.

Furthermore, most major handset OEMs are keen to lower the volume of feature phone offers in favor of smartphones, as the latter have a much higher profit margin and the market is slowly getting accustomed to the use of touch screens.

Questions or comments? Drop us a line on Twitter.

Download the full 100 Million Club watchlist.

– Matos

From MeeGo to Tizen: the making of another software bubble

[Just a short 1.5 years from MeeGo’s birth, Intel dumps it to shift focus to a new platform, Tizen, in partnership with Samsung. Guest author Dave Neary discusses the underpinnings of Tizen and why both MeeGo and Tizen are software bubbles].

Eight months after Nokia embarrassed Intel by withdrawing support for the MeeGo project, Intel has followed suit. On 27th September, Intel and Samsung announced the birth of a new mobile platform called Tizen. After only 19 months, MeeGo has been left parentless, and appears to be on life support. Tizen is, in fact, a successor of the Samsung Linux Platform, a reference platform of the LiMo operator consortium, with some components taken from the MeeGo stack.

Given that LiMo and MeeGo have both failed to set the mobile computing world alight, and Android has a four year head start, can we expect better things from their offspring? What has changed with this announcement? Is this Intel’s last chance to have a stake in a credible smartphone platform? And what should Samsung, Intel and the Linux Foundation do to give their new platform a fighting chance at success?

The Birth of Tizen

Last year, when reviewing the progress which MeeGo had made in its first few months, we reserved judgement on the project, on the grounds that it was “too early to be able to tell how the final product will compare to iOS or Android”, but we noted that there had been some growing pains between Nokia and Intel.

Those growing pains stretched to breaking point earlier this year, when Nokia finally gave up on MeeGo and turned to Windows Phone to revitalise its smartphone products. Intel was left looking for a heavyweight consumer device partner to come in and lend credibility to their claim that MeeGo was no longer a one-man show. Rumours that LG would be joining the project failed to materialise. Finally, Intel ran out of patience, and partnered with Samsung on a new platform, Tizen, to be based on SLP (Samsung Linux Platform), a platform which Samsung have previously provided to the LiMo Foundation to be used as a reference plaform for its members.

While the move has obviously been in the planning for months, Samsung were perhaps encouraged to partner with Intel on the back of the news that Google has acquired Motorola Mobility in August – a view supported by their recent settlement of an Android-related patent dispute with Microsoft. In addition, as LiMo members, most notably Vodafone also ran out of patience, SLP was left as a platform without a home.

MeeGo on Life Support

How does MeeGo fit into the big picture now? High profile participants like GENIVI, China Mobile, Asus and Acer have committed to shipping MeeGo devices. Will they be based on the unreleased MeeGo 1.3, or the previous 1.2 release? Or will these companies move en mass to Tizen?

Given the lack of reaction from partners like GENIVI, we suspect that the Tizen announcement caught these vendors unawares. Jerermiah Foster, a community manager working for one GENIVI member, informed me that his company would reuse MeeGo 1.2 in the short term, and while Tizen looked interesting, there were no current plans to move development to the platform. He also confirmed that he found out about Tizen through the project announcement, and not before.

In spite of vendors withdrawing their support, part of the community is banding together to salvage their work. After Nokia pulled out of MeeGo, community developers working on the MeeGo Handset UX banded together to continue work (with several Nokia engineers) in the MeeGo Handset Community Edition, aiming to provide MeeGo support for the Nokia N900, N950 and N9 devices. In spite of the Intel announcement of Tizen, these developers have vowed to continue the development of MeeGo on ARM, and released the MeeGo Handset Community Edition 1.3 at the end of September. The current plan proposed by these developers is to create a lightweight core distribution based on Qt, under the brandname “Mer” (“MeeGo Rebooted”), on which vendors can build custom user interfaces. The MeeGo Handset Community Edition will be the first consumer of Mer’s core operating system.

The MeeGo community mailing lists are full of developers wondering where they stand now. The announcement suggests that no software will be released from the Tizen project for another 6 months. According to Joel Clark, MeeGo IVI Program Manager, the MeeGo 1.3 release has been shelved, and only incremental updates to the previous 1.2 release can be expected until then. While the MeeGo community certainly has some enthusiastic community supporters, it is unlikely that any major vendors will adopt the community-supported Mer.

Ironically, the move away from MeeGo comes at a time of potential wins for the project. Nokia’s MeeGo-based N9 is finally shipping, and getting rave reviews. And continued demand for netbooks has fueled the launch of several MeeGo based netbook and tablet products, including the Asus EeePC X101, the Acer Iconia M500 and other devices from Samsung, Lenovo and Fujitsu.

Perhaps Intel ran out of patience just as the project was about to take off.

Tizen = SLP, with a pinch of MeeGo

Technically, Tizen is a successor of the Samsung Linux Platform, a reference platform of the LiMo operator consortium, with some components taken from the MeeGo stack. The project governance and infrastructure, however, will look a lot like MeeGo. According to Imad Sousou, the director of Intel’s Open Source Technology Center, and head of the MeeGo project: “in the new project, a lot of things will be the same as they were in the MeeGo project”.

We also know is that the primary APIs for 3rd party developers are targeting HTML5 and WAC environments. WAC stands for Wholesale Applications Community, a set of APIs for building and delivering rich HTML5 applications, based on APIs from JIL (Joint Innovation Labs) and BONDI (a platform specified by the now-defunct Open Mobile Terminal Platform, OMTP). The Enlightenment Foundation Libraries (EFL), are also set to be a key part of the platform. We can infer two things from this: Qt will be taking a back seat in Tizen, if it is part of the platform at all, and it appears that SLP will be the basis of the Tizen platform.

One thing which has not changed from MeeGo is the wide range of participants being targeted by the project. At the moment, the target audience can best be summarised as “everyone”. Tizen is aimed at platform developers, integrators, vendors, application developers, and mobile enthusiasts. That’s a very wide range of target audiences, each with different needs and expectations. Not knowing your target customer is a surefire way to throw money down the drain.

Challenges, challenges, challenges

Tizen’s main difficulties at this point can be broken into three groups.

First, there will inevitably be teething problems between the project founders. The fact that Samsung have not yet mentioned Tizen in any press releases or announcements, and the lack of new information coming from Intel representatives since the launch announcement, suggests that there may be some communication issues to be worked out in the relationship. In fact, at this point it looks like the active partners have not yet agreed on what will and will not go into the platform. Intel and Samsung will have to work hard to overcome the cultural dissonance which is inevitable given the very different corporate DNA.

On top of this, unless something changes soon, there could be a major mismatch between the reality of working with Tizen and the public positioning of the project. The project isn’t yet open for business, and when it is, it will only be useful for a small subset of its target market. If it were a new project, they might get away with it. But with the legacy of MeeGo, Moblin and Maemo, disappointing early adopters could be a very dangerous thing to do for Intel and Samsung. Getting the project governance and community dynamics right from the start is vital to learning from the mistakes of MeeGo and Moblin.

Beyond the community, there are question-marks over Tizen’s potential to make an impact in the industry. Google’s purchase of Motorola Mobility, not just a patent portfolio play, has created a disturbance in the force around the Android universe. Samsung does not want to find itself competing with Google at the same as they are dependent on them for their smartphone platform. This creates an opportunity for Tizen which it is too immature to exploit. For third party developers, concentrating on HTML5 is great. But will there be a demand for a native API also? And if so, will Tizen be capable of providing the kind of unified developer experience you get on iOS or Android?

It will be interesting to see if Intel and Samsung manage to get substantial support from other ARM vendors. As long as Intel are seen as the main custodians of the project, that seems unlikely. It will also be interesting to see the effect which Nokia’s first Windows Phone based devices, due to be announced at the end of October, will have on the project.

The main challenge for the Tizen partners will be getting devices to market. The key constituency for the change, vendors who were committed to MeeGo before, appear to have been neglected during the announcement. Intel and Samsung need vendors to adapt the platform to sell more chips, to give breadth to the ecosystem around the project, and to give credibility in the industry that this is not a party of two.

The Long Road Ahead

To succeed and make a space for itself in the mobile ecosystem, execution will need to be flawless on Tizen. If the internal bickering which dogged MeeGo rears its head again, if the initial release of the platform does not meet vendor and community expectations in terms of functionality and quality, or if there is an 18 month wait for well integrated finished products running Tizen, then the project may not have a second chance to make good.

Tizen seems set to be another victim of misaligned incentives across several industry partners. Samsung is bringing SLP to the “standards” table simply to find a new home for it, now that LiMo is winding down. Intel is seeking another marriage of convenience, trying to tempt a major OEM to ship significant x86 chip volumes.

– Dave

[Dave Neary is a regular columnist at VisionMobile writing on how companies can work more effectively with open source community projects. Dave is the founder of Neary Consulting and has also been an active member of the GIMP, GNOME, OpenWengo, Maemo and MeeGo communities, with over 10 years of experience in open source community issues. He can be contacted at dave (at) neary-consulting (dot) com]

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.]

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 â€˜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 â€˜native’ services of the platforms.

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

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 â€˜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 â€˜native’ services leverage Microsoft’s Bing, Live, Zune and Xbox assets having millions of active users.

These â€˜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 speech made back in 2007, by then Nokia CEO,Olli –Pekka Kallasvuo. 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]

The Android Monopoly and how to harness it

[Behind Android’s stellar success is a love and hate relationship with handset vendors. Android is a critical launchpad for PC-borne OEMs like Dell and Acer, but a short-term life support for mobile vendor incumbents like Sony Ericsson and Motorola. Research Director Andreas Constantinou looks at how OEMs can leverage on virtualisation to get the best of both worlds with Android; the burgeoning app ecosystem, but without Google’s lock down of experience differentiation]

From an underdog to ubiquitous manufacturer support, the Android platform has come a long way since its introduction in 2008. Almost every single device vendor (except for Apple and Nokia) has launched Android devices, while Sony Ericsson and Motorola are betting their margins and future on it. The phenomenal rally behind Android is – in a nutshell – due to 4 factors: the operator demand for a cheaper iPhone, the burgeoning Android developer community, Android’s market readiness (3 months to launch a new handset) and the ability to differentiate on top of the platform.

A monopolist on the rise?
Year after year, Android keeps on surprising industry pundits. Google’s software platform saw 100% quarter-on-quarter increase in the first 3 quarters of 2010. The last quarter of 2010 saw Android go chest-to-chest with Nokia in terms of smartphone shipments, in what CEO Stephen Elop called â€˜unbelievable’. With such meteoric rise, analysts are beginning to talk about a potential Android monopoly in the future market of smartphones, contested only by the Nokia-backed Windows Phone.

The Google commoditization endgame
Is Google the biggest benefactor the industry has seen? Not by a long way.

Google runs a hugely successful advertising business and needs to bring as many eyeballs as it can onto its ad network. To this end, Google’s agenda is to commoditise handsets by forcing smartphone prices down (see our analysis on the $100 Android phone) and having its ad network deployed on the broadest possible number of smartphones (via closed apps like GMaps and Gmail).
Moreover, Google’s agenda is to commoditise mobile networks by flattening the mobile termination barriers and removing volume-based price plans that telcos have traditionally built.
At a 10,000 ft level, Google’s strategy is based on deceptively simple microeconomics principle; to drive up the value of its core business (ad network) it needs to commoditise the complements (devices, networks and browsers).

Naturally Google is hermetically closed in all aspects of its core business. The Android Market, GMaps, Gmail, GTalk are â€˜closed source’ and the Android trademark is commercially licensed. This means that while Android is open source, Google uses the Android Market and trademark to enforce strict compliance of Android handsets to Google’s CDD and CTS specifications. See our earlier analysis on Android’s hidden control points for how Google runs the show.

So Google is by no means a benevolent benefactor. Like any other company out there, it’s in it for the money; a rationally-driven business of the platform era, out to commoditise the mobile handset business with a free-for-all carrot.

Winners and losers of the Android game
For handset manufacturers, Android is both a blessing and a curse. A blessing because it offers OEMs a low-cost-base, rapid time-to-market platform from which to build differentiated designs. This is manna from heaven for PC-borne assemblers who use Android as the pier from where they can gain firstly a foothold in mobile and secondly global reach.

At the same time it’s a curse; Google’s control of Android compliance means that it deprives OEMs of all points of differentiation: user interface, hardware features and industrial design – except for (you guessed it!) price. Which means that with Google defining the Android experience, there’s little differentiating a Sony Ericsson handset from an Acer handset. With Acer happily operating at 3% profit margins, Android is to Motorola and Sony Ericsson just a short-term life support.

Nokia too evaluated Android before hoping on an strategic partnership with Microsoft on Windows Phone 7. As Stephen Elop said during the press conference with Steve Ballmer, “we assessed Android […] but the commoditisation risk is very high”. In sight a potential Android monopoly threat operators, too and getting wary of over-supporting Android.

Best of both worlds
Confronted with Android’s two-faced agenda, major handset vendors have been apparently plotting how can they get the best of both worlds; the burgeoning apps ecosystem but without the Google’s control of the user experience. Three approaches have emerged.

1. The Do-it-yourself approach: By virtue of the open source (APL2) license, any handset vendor can take the public Android codebase, branch it, tweak it and deploy it on handsets. China Mobile has commissioned Borqs to develop the oPhone spin-off while Sharp has released handsets based on the Tapas spin-off also for the Chinese market. However, branching Android means that you miss out on the 130,000+ Android apps as Google won’t give you access to their app distribution system – which is ok if you â€˜re targeting China, but unacceptable if you â€˜re targeting any other region. Moreover, the Google Android codebase moves faster than any other platform (5 new versions within the space of 12 months) meaning that it’s near impossible to maintain feature parity in Android spin-offs – the same reason why Nokia publically regretted forking WebKit in the past. Lack of feature parity means that an Android spin-off would breaks the developer story and stays behind the competition of Android Experience and Partner phones.

2. The virtual machine approach: Myriad announced Alien Dalvik , a solution it claims can run Android apps on non-Android handsets, including on Maemo. Alien Dalvik is a Java SE virtual machine designed in Zurich and China by the same ex-Esmertec guys who started off the OHA consortium. Myriad has released a demo of Alien which however hides the real issues behind a pure virtual machine approach: the lack of 100% API compatibility and most importantly access to the distribution of 130,000 apps available through Google’s Android Market.

3. The Virtualisation approach: the third and most promising approach is to run a complete replica of the Android platform within an isolated, â€˜virtual’ container using mobile virtualisation technology (from Red Bend, OK Labs or VMWare – see our earlier analysis of virtualisation technologies). The virtualisation approach offers a sandboxed, complete version of Android (including the apps ecosystem) which co-habits the same handset as the OEM-specific core UI and applications. Virtualisation technology is mainstream in cloud and enterprise, but applied only in a limited context in mobile to reduce hardware costs or run enterprise micro-environments (the type Barack Obama enjoys in his virtualized BlackBerry cellphone).

The real opportunity with virtualisation is to deliver the best of both worlds for handset OEMs who want to leverage the 130,000+ apps ecosystem, but maintain their own apps experience and signature user interface. A virtualized Android co-inhabiting with the native app experience (think S40, Symbian, QNX, BlackBerry OS 6, Web OS, or Bada) would allow OEMs to resist commoditization while having ample degrees of freedom to differentiate.

The question is: will Google allow OEMs access to the Android Market and the Android trademark when the platform is run within a virtualized shell?

Such an approach would allow Sony Ericsson, Motorola, RIM, HP and the others not to compete against Android and neither to surrender to Android – but to leverage Google’s network effects and harness the Android innovation wave.

Comments welcome as always,

– Andreas
you should follow me on Twitter: @andreascon