Google’s Android Bait and Switch

You may or may not have caught an interesting change Google has made with KitKat. Google is no longer including Chrome as a part of the Google services license. Meaning that the Chrome browser will not come pre-installed on Android devices running KitKat. OEMs in essence can now choose to license the Chrome browser as a part of this or not depending on if they want it pre-installed or not. Consumers can still go download it from the store after purchase. When you think about the bulk of Android’s install base being the low-end segment of the market you realize these users will generally just use whatever is installed.

This struck me as odd, given Google’s business model. One would think they want Chrome front and center on all devices in order to push search to all users. So giving Android OEMs a choice seems like an odd move. This is what got me thinking about the bait and switch strategy Google may be using with Android.

One thing to note though, is that Google is doing everything they can to rein in the low-end devices and try to get more control and more value from them. Google may ultimately be planning a bait and switch type maneuver where once they have the majority of devices they start forcing OEMs to license their search engine for example. Google services certification requires vendors to comply with Google’s rules in order to get access to the Play store, Maps, now Chrome and other key services. What is to stop them from adding to search to that list?  Which seems like a contrary move given their business model but the bottom line is there is no search engine better than theirs so if they did this many would not have a choice. But if you think about it, if Google can create a dependence on Android and their services by keeping them free or low-cost to gain market share, then start charging, it would be the ultimate bait and switch. Google doesn’t get much revenue from low-end devices on search so this would be a way to monetize these devices regardless.

While this is purely speculation, I am told there is a strategic agenda inside Google to figure out how to better monetize the low-end Android devices since that is the bulk of the Android install base. Which creates the challenge, since low-end Android OEMs make next to nothing on the device. But it is clear Google is not seeing much benefit, if any, to their ecosystem on these devices.

The Golden Goose and the Process of Innovation

Horace Dediu joined Benedict Evans and I on our weekly podcast. Horace wrote something that got me thinking in his post the innovators curse. In this article he used the analogy of the golden goose. As I read that I interpreted the golden eggs to represent innovation. While I pondered his insight, what it led me to think about is how this story may relate to Apple. What I concluded, was that those in Wall St. who chant the innovation mantra as the only way for Apple to succeed, survive, and grow, believe that Steve Jobs was the golden goose. And now that he is gone, the golden egg of innovation is gone from Apple forever. I fundamentally disagree and I believe that the golden goose of innovation is core to Apple’s culture not a single individual. What is unique is that this culture was created by a very unique individual but was designed to not be dependent ON any one individual. It requires the right group of people not the right single individual.

This is contrary to how many companies operate where there is one primary rock star and his team. For Apple the team, is the rock star not the individual.

During the discussion, we discussed Pixar and how Jobs saw a team for which this unique culture was possible and implemented it at Pixar. Who despite all odds, continues to be a blockbuster creation factory. The same proved true at Apple who continually creates hit products and it is directly because of both process and people. But both companies fall victim to their own succes in the innovators curse. With each hit, the external view is that the next one becomes statistically less probably and less believable that it will happen again.

Both Pixar and Apple are unique in this regard to their culture. One would think that with each consecutive hit, the market would recognize that a track record is established and repetition becomes more likely not less. However the opposite is true. This is the innovators curse.

It seems most recognize that Steve Jobs was unique and that his unique way of doing things was impactful in creating innovative products. What seems to be missed is that his uniqueness can extend to a culture, or perhaps a lasting legacy, unique to companies where his imprint remains. This was a great discussion and a difficult topic to address. If you like deep discussions on this stuff then I encourage you to listen.

Cubed Episode 10: The Process of Innovation

The State of Global Smartphones Q3’13

There are a number of things worth pointing out about the current state of smartphones. The first is that from a hardware standpoint vendors are staying relatively flat with a few seeing slight growth. Here is an updated chart showing IDC’s estimates for smartphone vendor share up to Q3’13.

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As you can see not a ton of change any which way. What stands out however, is the continued growth of Android. Here is Gartner’s estimate of Android’s global market share for smartphones.

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As you can see this is an important chart. However, without the lacking context it is very misleading. Do spend a minute looking at the rapid rise of Android in this chart because it is important to soak in for the next few data points I will show.

With this rapid and what seems like dominating market share rise of Android we would think that we would see some change in the web browsing statistics yet that is not the case. First let’s look at America. According to StatCounter Android’s market share is declining in the US with iPhone staying relatively steady.

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I’m anticipating iPhone to grow slightly in the US with regards to this statistic and even overall OS market share. I also expect Android’s continued decline as well in this statistic. I will update both toward the end of December and add more context.

Next let’s look at worldwide global browsing share. Keep in mind that the earlier Android chart plotting its market share growth is a result of emerging markets coming online and purchasing very low-cost smartphones. Devices that cost less that $150 USD. This is where Android’s growth is coming from and understanding that is key context. Here is a chart from NetMarketShare showing global mobile browser trends.

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What myself–and many others–are continually perplexed by is that Android’s quarter growth at at WW level does not seem to change its low browser share. So the question we have to ask is why? There are several possible explanations.

First, and quite simply, they are not being bought to browse the web. This does not mean they are not using the devices data connection but that they are not using it to browse the web. Any data being used by the device is coming from a download of an app, media, or other in app usage of data. No network provider would really consider this a heavy data usage point and I think it is clear that these devices are not heavy drivers of data services.

Second, and along those lines, many of these devices are consumers first experience with the internet. Perhaps a significant percent do not have consistent access to Wi-fi at home. We know that data plans vary greatly in these regions and some are very expensive and to a degree extremely slow, particularly in emerging markets. So between price barriers and experience barriers, perhaps the local regions where Android is growing simply do not lend themselves to drive much data. If you have to pay for the data you consume, rather than have an all you can eat data plan, perhaps you are more cautious about the data you use. This would mean that consumers are prioritizing their data usage. We know consumers in these regions likely have a data plan but not a text messaging plan which explains the rise in messaging apps like WeChat, WhatsApp, and Line. Consumers are prioritizing using the web for communication rather than browsing, or other rich web experiences.

Lastly, perhaps a large percentage of these devices are not being purchased with a data plan at all. Only 29% of global mobile subscribers have a data plan. I was told by a carrier in India that just over 50% of their Android device sales did not include data plans. Perhaps this is happening much more than we realize and in all emerging markets.

The key conclusion is that low-end Android phones are not proving to be effective network and business model drivers for the carriers and the carriers know it. This is what makes the speculation of the iPhone’s launch on China Mobile as a part of the launch of their 4G network so interesting. China Mobile, and other Chinese carriers, know that in order for them get a return on their network investments in future networks they need devices on that network that take advantage of those investments as a premium data driver. It seems as though many carriers across the globe know the iPhone will serve as a premium network driver. So as those regions develop and add new network infrastructure it is safe to assume those network carriers will be aggressive about getting devices that drive network value, by way of data, into the hands of consumers.

XBOX One: Congratulations Microsoft, You Own My Living Room

While the XBOX One is a great gaming console, it is the other features that have more of my interest. Of course these new consoles will play great games but it was the other parts of the story I was interested in. At the end of the day both the PS4 and the XBOX One have to earn a place in consumers living rooms. Both the PS3 and the XBOX 360 are great gaming devices so the story for the new consoles needs to be more than just gaming. Microsoft delivered on that challenge.

The XBOX One is far and away the best piece of living room technology I have ever owned and used. Which is saying something since I’ve been doing connected and digital home analysis for 13 years. I have used everything. Microsoft has done several things with the XBOX One that are very impressive that I want to highlight.

Kinect and Voice

The new Kinect has some sophisticated technology built in. As you set up your XBOX it will ask you if you want to log-in using facial recognition. If you choose to do that the XBOX will auto log you in using your facial and body profile and bring up your custom home screen. What is even more impressive is that the Kinect can log-in multiple people at the same time using facial and body recognition. I set up my account then set one up for my kids with different screen settings and home screen apps for them. When we all sit on the couch it logs us all in at the same time but only allows one person at a time to control the screen.

The voice recognition technology is another leap forward for a living room solution. XBOX is always listening and to turn it on you can say “XBOX turn on” and it will turn in and log-in anyone in the room. This was extremely useful when my friends came over to play who had their own XBOX live accounts. It would instantly log everyone in and allow us to quickly start playing together using our individual accounts. Simple things like that were an impressive part of the overall experience with the XBOX One.

Where Microsoft’s advancements in voice recognition really made an impact was in the TV experience with the XBOX One.

Liberation From My Cable Provider. Almost

The box provided to me by my cable provider is some of the worst technology I have ever used. The only reason I have it is because my service provider makes me use it. While the XBOX can’t replace my cable box yet it has come as close to it as possible. Any living room solution will have to deal with the broadcast TV element. While this is difficult, Microsoft has done the best job yet.

Microsoft has custom built a new guide called the XBOX One guide. This guide is designed to control your broadcast TV experience. If you choose to do so, and I did, you can plug your cable box into the XBOX One and let the XBOX one control it. Where this really becomes powerful is when you use this with Kinect’s built in voice technology.

To see the solution in action check out this video from the Verge.

I saw the same demo live and thought it would never work like this when I got it home and set up. Sure enough it did. Like magic I can say “XBOX watch ESPN” and it quickly tunes to ESPN. I can say “What is on Discovery Channel” and it instantly brings up the guide and shows me what is on Discover Channel. Using voice to navigate around the TV experience opened my eyes to the potential with this experience. Others boxes have tried this and failed. Microsoft’s solution is the first one I have used that works with all cable providers.

At a high level the XBOX One adds quite a bit of value on top of any existing TV provider by providing a better guide and adding the use of voice to change channels and navigate the guide. I was surprised how natural it was to instantly start controlling my TV experience through voice. And amazingly it consistently worked.

Content Matters, Not Its Location

The other element that I was impressed with was the seamless integration with streaming services and other media related apps. The XBOX One continually updates all your content sources so that very quickly and easily you can get to content. Again driven by voice this is quick and seamless.

By integrating search, through Bing, into the entire experience Microsoft made using voice search for content easy and seamless. For example, you can do a Bing search and and say “The Avengers” and it will bring up all content related to the Avengers which you can access. If you are a Netflix subscriber you can choose to watch it from Netflix. Same if your an Amazon video subscriber. If there is a TV show on Hulu about the Avengers you can watch it there. It will show all movies and TV shows related to the Avengers throughout any content services you have access to. It will also bring up and related content which you can rent or buy from the Microsoft media store. And amazingly, it actually works.

The tight integration with all your content sources with the XBOX One and the seamless way you can search, access, and decide what to watch all with voice was very impressive.

For the Gamer

While the games are important, they are a bit less of the overall story in my opinion. Graphics are better and unique titles will come out on both systems. However, Microsoft did do something that as a gamer I thought was useful.

Microsoft built quite a bit of custom hardware and chipsets for the XBOX One. One of them allows you to start and stop video games in mid-action by holding the games state in a virtual machine while you go access other apps. So for example, you are playing a game but wanted to go check the score of a sports team that was currently playing. You don’t have to pause the game you can just say “XBOX watch TV” and it will instantly jump your broadcast TV so you can check the score. Then to get back you simply say “XBOX play Forza” and you are right back where you left off. Instant and seamless transition between media types and content types all with your voice and all on one box.

Microsoft’s goal was to create the one box that works with all your other ‘boxes’ and streaming services. From my week with it, I’d say they delivered and I am impressed. Congratulations Microsoft you own my living room.

Observations about the Future

From a technology standpoint, the XBOX One is the most sophisticated piece of living room technology that I have ever used. It delivers on many promises of the digital living room and more importantly it actually works as advertised. ((I noticed some reviewers were frustrated with the voice elements but once you learn the syntax it works quite well. I’m confident this experience will improve.))

That being said there is still a long way to go when it comes to the full vision of the digital living room. For example, the XBOX, can’t yet allow me to use all the wonderful voice features with my DVR content. That is because that content is locked on my box by my service provider. Hopefully, as we advance the idea of the cloud DVR we may get closer to this future.

The other element is search. While the XBOX has robust search feature to search content from your streaming services, movie purchase and rental options, it does not extend to your TV guide. I understand this is difficult but it will need to be a key part of any box that wants to own the living room.

Skype integration through the Kinect camera was another interesting experience. The Skype experience was one of the best and the Kinect camera can move and zoom in on the person talking. More interestingly is how this experience may evolve to let friends watch sports together and be able to see each other at the same time.

It will be very interesting to see how Microsoft improves these experiences and more over time through software updates. If Microsoft wants to continue to compete to own the living room they can not stand still.

Ultimately the decision to buy an XBOX One comes down to timing. The lack of backward compatibility is less of an issue in my opinion than the lack of ability to play online against or with XBOX 360 owners. This means for me to have a meaningful online multi-player experience with my friends or clan we all need to have the XBOX One. Knowing this is not going to happen my XBOX 360 will have to stay in my living room until all my friends are on the XBOX One.

Console transitions take time. Generally speaking it takes 3-4 years for newest consoles to hit their strides. The media features alone that I outlined make the XBOX One a compelling piece of living room hardware but it also highlights how difficult and how far we still have to go to reach the full vision of the digital living room.

The Quantified Car

It is easy to make the assumption that most if not all electric products will have a companion app or be managed by a software platform in the future by a smart screen of some kind. Trying out these solutions as they stand today help to make sense of what they may look like or how they may be used tomorrow. Lately, I’ve been trying a product from a company called Automatic which links to a software app and begins tracking important data related to a car. I think of it like a health and fitness wearable for your car.

You plug Automatic’s hardware into your cars diagnostic port. It then connects to your smartphone with Bluetooth 4.0 and begins tracking things like time, distance, MPG, and how much money in gas you spent during each drive. At the end of the day or week you have a running tally of all those stats for the day or week.

As I started using this it felt like my first experience using a health and fitness wearable. Until such devices came along we had no real way to consistently measure things like steps, time spent sleeping, heart rate, and more throughout our days. Getting all this data was eye opening to me. Then the question becomes what do you do with it?

In the case of health and fitness wearables, tracking steps is useful if you have a goal of staying active or getting a certain amount of steps in each day. The data is useful in so much as you use it to modify your behavior in ways you see fit. And so the folks at Automatic added similar features into their solution. Namely, getting better gas mileage and decreasing wear and tear to your car.

This is accomplished by audible sounds, in this case a beep, when you go over 70 mph or when you accelerate too fast from a stop. Both driving over 70 mph for long periods of time and accelerating too fast are known to yield poor gas mileage. The other sound it makes is when you brake to hard. This increases wear to your car’s brakes and overall safety and is recommended to avoid. While I have no way to quantify the braking component in terms of tangible results, I did notice that my car’s average MPG went from 32.1 MPG to 37.7 (I have a Kia Optima Hybrid) just by abiding by Automatic’s audible noises which alert me when I went over 70 mph and decreased my speed to less than that. Another case of using data for quantified results which I would not have had without the help of connected hardware and companion software.

All of this brings up an important point. The key to quantified hardware is in its customization. Everyone’s goals and habits will be different. So the software needs to be dynamic enough to allow a full range of customizations for the person who is using it. These types of solutions, whether they be health and fitness wearables, connected car, connected home, connected watch, etc., all need to be highly customizable for the specialized interests of the buyer. This is why a one-size-fits all solution will not work in this space.

While Automatic’s solution is interesting, I assume that this type of technology will be built into all cars in the future. Your car will come with an app, your appliances will come with an app, even your toilet will come with an app that monitors their use in some way. Diverse connected hardware offerings combined with robust and dynamic software is what will turn these visions into reality and bring them from the early adopters to the mass market.

Google’s Strategy with the Moto G and KitKat

I’m observing several interesting things from Google’s moves as of late. The first has to do with the recently launched Motorola G, premium spec smartphone at low-end prices. The Moto G has a $179 price point. This price range is a significant part of global smartphone sales in developing markets. See the slide below which shows the most recent snapshot of the global smartphone vendor market share.

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Notice who is missing from this chart? Motorola. From meetings I have had with their teams it was made clear to me that Motorola wants to push to be a more global brand playing in more global regions than they are today. The release of the Moto G is a step in this direction. The handset fits the spec and price range that should make it attractive in the markets they choose to go after. Adding dual sim for India and Brazil makes them a potential competitor for Samsung, Nokia and other regional brands competing at the non-premium price points.

While I think the price is interesting, Motorola will be going up against local brands in markets like India and it will be interesting to see if they can compete with the more established local brands. Brazil, Russia, and other parts of Europe are likely targets as well.

The key for Motorola will be marketing. Right now their brand is not strong globally at a handset level and if they are serious about becoming a global player developing regionally relevant solutions, they need to build their brand in those areas.

KitKat

Several things have happened with KitKat that I have observed and found interesting. First, the UI seems to be a departure from the more geek centered focus and feel that prior stock versions of Android had. This happens to be one of the things I liked most about stock Android and Nexus devices. KitKat seems to be a OS transition from appealing to geeks to appealing to a more mainstream audience.

Second, it is much more deeply integrated with Google services. Each stock version of Android was always positioned as the best of Google but KitKat takes it to a new level. This is incredibly important. Google’s stock Android solutions get installed on the majority of mid-low range smartphones and tablets. Most vendors just take the generic AOSP, load it on their hardware and go to market. Only a few vendors actually change or ‘skin’ their Android devices with custom software work before they go to market. Samsung, HTC, and Xiaomi being the notable ones. For most other vendors stock Android is what gets shipped. This is why over the past 6 month’s Jelly Bean (version 4.1x-4.3) is now used on nearly half of all devices that have been shipped over the same time frame. Many new devices going to market run the latest OS. We don’t see this in the US but it is true in emerging markets.

For this reason, I feel Google is trying to get a handle on Android’s fragmentation as it specifically relates to their services. As I, and several other analysts have pointed out, Google’s services are practically nonexistent in many emerging markets where locals favor local services over Google’s. This is anything from email, social services, messaging apps, and more. My read with KitKat is that Google understands Android’s growth in the low-mid range is where the volume is and they have yet to capitalize on that market from a Google services standpoint. Android had for the most part been hi-jacked by the low-end and adding no value to their ecosystem. I believe KitKat is a step in the direction to address that.

How I use the iPad Air

I spend most of my working week being extremely mobile. I spend more time mobile during the work week than I do being stationary. This is why, for me, the iPad Air is the perfect mobile computing companion.

Now, I make the above statement recognizing that I still need a bigger screen, mouse, and keyboard computer in my life for my more in depth creation of content like presentations, reports, columns, etc. As a percentage of my weekly schedule those tasks are not 100% of the time. In fact they are less than 50% of the time. The rest of my working time requires me to take meetings, attend events and conferences, network with thought leaders, and more to keep close to the heartbeat of the technology industry.

Portable vs Mobile

I need a traditional PC in my life for a number of dedicated tasks where a workstation environment is necessary. For these tasks I have a MacBook Air and most of the week it stays docked and connected to my large screen monitor. What I have come to realize, as I think about the notebook form factor specifically, is that the notebook is simply a portable desktop. When you think about it this way then you ask the question who needs a portable desktop? There are many mobile workers who need a portable desktop / workstation for their jobs but I promise you it is a lower amount than people think.

This is what makes certain class of tablets ((not all tablets are created equal and not all tablets can replace a PC for the mass market.)) very interesting. They fill the role of the mobile computer for the worker who does not need a portable desktop to be a part of their mobile work flow. I realize that for a good portion of my weekly work time this profile is very much me. But prior to the iPad existing I did not know this about myself. The portable desktop was the only mobile computing solution I had so that is what I used. Now that there is an alternative, I’ve concluded there is a better mobile form factor for my mobile workflow.

Because I bounce all around the Silicon Valley taking meetings with all kinds of people and companies I generally only take the iPad Air with me when I know I will not be stationary for long periods of time. In this mode, the iPad Air is used to do things like take notes, keep up on email, twitter, and show presentations or data. But if a need comes up for me to edit a presentation, or work on a column, or edit a report I can do that as well.

Every now and then a day comes around where I will be stationary for the good part of the day either in a few long meetings or one all day meeting in the same location. When this comes around I bring my notebook instead of my iPad Air. The primary way I decide whether to tote my notebook around or carry my iPad Air around is whether I will be stationary or mobile a greater percentage of the day.

Computing Solutions Not Computing Islands

For my work flow, the iPad Air and a MacBook Air is kept in sync through iCloud and is the ideal multi-screen mobile computing solution for me. Originally, my belief was that the iPad Mini would be more of a second screen companion to a heavy notebook user like myself. But the larger screen of the iPad Air and now its new thin and light form factor, favor me using it as a replacement for my notebook when I am highly mobile. For me, this has become a real revelation.

With the new iPad Mini Retina being available, I know many are still wrestling with which iPad to get. My true sense is that for those computer users who are stationary for long periods of time and use a notebook or desktop in that context they will favor the iPad Mini as a companion to that computing context. But I share my experience for those who are more mobile than they are stationary and are looking for a device that lends itself to more heavy lifting while still being extremely mobile friendly. Which for me is the iPad Air.

Android as the Platform For Commodity Electronics

In the most recent episode of my podcast with Benedict Evans we discussed the post PC era and Android’s role in this post PC era. We touch on a number of points but during the course of the conversation an interesting thought hit me. While many look at what Android is doing in phones, what it is enabling in tablets, and even broader with the internet of things is perhaps the most interesting.

It led me to state on the podcast that Android’s real role is as the smart platform for commodity connected electronics. Over 80% (conservatively as it is likely higher) of Android’s market share is made up of mid-low range cost smartphones, tablets, and a host of other electronics. What is growing, however, is Android’s presence on appliances and other non-computing devices. In essence Android is shaping up to be more like a bios, or a debugged (often poorly debugged) platform.

When I talk to companies looking to make connected appliances it seems their options are either standard Linux or Android. The argument against standard Linux is that once they implement it they are often responsible to maintain or sometimes creating driver support. For example, a company that creates an appliance with bluetooth connectivity running embedded Linux will often be responsible for doing the updated software work and compliance when a new version of Bluetooth comes up. Embedded Linux simply requires more software development work on behalf of the OEM in most cases. Where with Android, Google does this for the industry.

This is why Android is making its way as the standard platform for commodity electronics. Things like point of retail screens, or running on coffee pots, refrigerators, commodity TVs, tablets that are only e-readers, or movie players, etc. OEMs can make devices running Android on low-cost hardware and not have to worry about managing the software.

A recent SoC company I spoke with at ARM Tech Con last week shared with me that they are shipping a Cortex A5 (a low-end smartphone chip) as a tablet reference design for white box OEMs in China who are taking this platform to market in about two weeks. Nearly all SoC vendors I speak with are recognizing Android as the default platform for electronics for the reasons I mentioned above and most of them are of the commodity nature.

This is actually a good thing. Something like this is needed to develop the future of our connected devices. A platform was needed and if not for Android/Google who would have owned it and enabled it. Google did this because if it wasn’t for them it would have likely been Microsoft with embedded CE. Only Microsoft charged 7-10 dollars for that which makes a huge difference in a commodity electronics market.

The real question is how–or even if–Google can tie any of this to value for Google. It is reasonable to believe that Android may run on tens of billions of connected electronics with only a fraction of those actually adding any value to Google’s ecosystem, business initiatives or revenue. And that may be Ok.

The China Smartphone Report

This is a high level overview of the Chinese market and some of the interesting trends we see in the region with smartphones.

Chinese consumers remain a mobile first set of consumers and in many cases mobile only. For the vast majority of Chinese consumers their only access to computing is coming from their smartphone. It is the only way for them to connect with each other and the broader world. It is how they are communicating, playing, learning, and more. For these consumers the smartphone IS their computer and may be their only computer.

Chinese consumers are being shaped by mobility and the rest of the world should take notice of how the region develops as a mobile first continent. We expect many similarities over the coming years with younger demographics in many other regions as well.

Table of Contents:
– Mobile Domination
– Smartphone Pricing
– Retail Channel
– Apps and Media
– Highlight: Xiaomi
– Concluding Observations and Takeaways

report-icon

Download the Report as a PDF. Right Click and save as to download or click to view in browser.

Only Apple, Only Google, and Only Amazon

Every company, in order to compete, must have a secret recipe. Something that helps their offering in the market standout from a sea of competitors. Those companies best poised to succeed in the future and adapt as necessary in a fast paced industry such as technology are the ones who know exactly what their recipe is and why it is successful. This is something I believe only a few companies have a strong grasp of.

Sports provides a context that I feel helps to best understand the idea of the secret recipe. All good sports franchises understand this concept. The secret recipe runs deep into a team’s philosophy, playbook, recruiting, culture, etc. While preparing to compete a team must understand what its strengths are and what its weaknesses are. This is the best way to create a plan that not only caters to your team’s strengths but also exploits your opponents’ weaknesses. The best teams in sports build around what makes them unique and creates a path forward based on that recipe.

Three companies in tech–I believe–do this well.

Only Apple
Tim Cook has said a phrase several times over the last few earnings calls that consistently struck a chord with me. Several times  Tim Cook ended with “only Apple can deliver.” Tim Cook understands the secret recipe at Apple, perhaps better than any current CEO of any company.

Apple’s vertical approach, specifically its deep desire as a part of the recipe to own hardware and software, was the single biggest roadblock to  success in the early days of computing. In that time, Apple was an incompatible player in a market that grew based on compatibility. However, where Apple’s recipe was a barrier then, it is an enabler now. Apple has spent the last 37 years perfecting the recipe. Everything from philosophy, playbook, recruiting, culture, etc., has been focused on being the best at this recipe. This recipe, and this recipe alone, yields genuine differentiation. Genuine differentiation is the only way to fight the battle against commoditization.

Apple’s recipe is obvious, it is clear for all to see. Yet extremely difficult to duplicate.

Only Google
Google also has a secret recipe. Google is the largest machine learning project in the history of computing and it is evolving before our very eyes. Only Google can provide the kind of superior search experiences it delivers. Google’s recipe is based fundamentally on cream-of the-crop engineering related to web search, web services, machine learning algorithms, and more.

In fact, I could create an argument that only Google could have done with Android what they did. Android’s role is often overlooked. When Google bought Android with the intention of releasing a free OS for smartphone makers, I do not believe it was targeting it to be an Apple competitor. Android was developed and driven by Google to go specifically where Apple had no intention–the low-end. This is where 85% of Android’s growth comes from. Android was released as a defensive play for Google to go after the market where Apple’s recipe simply doesn’t enable them to go. Android was deeply strategic to keep Microsoft from going after the part of the market Apple never would and it did its job well. ((Google did buy Android prior to the iPhone be released. Regardless of what then CEO Eric Schmidt may have known about the iPhone prior to its launch, I still believe he targeted Android at the low-end and specifically to disrupt and keep Microsoft from dominating mobile devices.))

Google has done as good of a job as any as building its playbook based on its recipe. This again is everything from philosophy, playbook, recruiting, and culture.

Google’s recipe is obvious, it is clear for all to see. Yet extremely difficult to duplicate.

Only Amazon
Amazon is another company with a unique recipe whose success is tied fundamentally to this recipe. Amazon is a retailer, fueled by the best e-commerce experience on the Internet. It has built arguably the best logistics, inventory management, and supply chain infrastructure outside of Wal-Mart. Every business Amazon invests in becomes profitable. Once it does, those profits are re-invested in new businesses that eventually become profitable.

Like Apple and Google, Amazon has a clear philosophy and playbook and its recruiting and culture support the unique recipe.

Amazon’s recipe is obvious, it is clear for all to see. Yet extremely difficult to duplicate.

Concluding Observations: ((Each of the three companies outlined above make up the majority of conversations I have with Wall Street analysts. Fascinatingly Google and Amazon’s secret recipes are viewed as valid long-term barriers for competition yet Apple’s is not. Something I strongly disagree with on yet I’m not surprised by. Until Wall Street can evaluate Apple with a fresh set of eyes, the company will continue to defy their logic and outdated templates. ))
What is interesting is who is left out of this conversation. For example, Microsoft. When I think about this, what strikes me as intriguing is what is Microsoft’s recipe? For a company that did so well for decades it is intriguing to me that it is having so much trouble adapting to current market conditions. Its recipe was built with business customer in mind and that recipe is being challenged. Intel is another whose recipe may need adaptation. What about the PC OEMs, smartphone OEMs, wearable technology companies, Facebook, etc. There are many companies for whom this analysis can be done.

What are the secret recipes of these companies that are not only defensible but difficult to duplicate? Every company has to wrestle with what they are uniquely positioned to deliver and recognize it as a key to strategy planning.

Facebook’s Conundrum

I used to be very bearish on Facebook. I’d say I’m more skeptically neutral now. Each quarter Facebook has posted significant growth in terms of monthly active users. Yet when we talk to consumers, particularly younger ones primarily in the US, we kept hearing of declining usage. Patrick wrote a great article earlier this year called Facebook is for old people based off things he was hearing from his kids and their friends.

For some time we had been hearing the same with the younger demographic. We did find some interesting related data that even many consumers of all ages who had been on Facebook more than three years noted a decline in their daily usage. So Facebook’s own admission that teen usage on their service is declining came of no surprise.

Before I dive into what I think the conundrum is let’s take a look at their growth as a user base at large then also the growth of mobile users on Facebook.

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The key to this chart is the growth of mobile active users which is now nearly every active user on Facebook. My hypothesis all along for the steady growth of Facebook’s quarterly increase of monthly active users was that emerging markets were coming online and joining the Facebook revolution. We know that many emerging regions have helped spike the adoption of smartphones very sharply over the past 12-18 months. In these regions many of these consumers do not own PCs so their smartphone was their sole portal to the Internet. In fact it is possible that Facebook itself was one of the primary driving factors for many consumers in these regions to get smartphones in the first place, buy a data plan, and connect with the broader world.

Benedict Evans eloquently stated this in a recent tweet:

iPhone is a tool to sell data plans in the USA. Facebook and Whatsapp are tools to sell data plans in emerging markets

This statement hits the nail on the head as to the growth and sustained active users for Facebook. Interestingly the same is true of Whatsapp which is adding about 50m new registered users per quarter. Another is LINE which has added 100 million active users since January of 2013 and is now currently at 280m users. As the world comes online via their mobile devices they are looking to discover and connect. But what happens three years from now when they are mature users. My suspicion is that these types services which acquire users quickly can also lose them just as quickly.

All of these companies are mobile first companies. Facebook used to be a PC social network and now they are a mobile company first and foremost. This is evidenced by their continual growth of mobile ad revenue. It is truly a mobile world.

Facebook’s Conundrum

Plain and simple, Facebook’s challenge is engagement. Early Facebook users find the joy of discovery and connecting with friends, family, those they lost touch with, etc., as a very sticky experience. Facebook’s on-boarding(initial sign-up and discovery of the service) experience is quite quick and clean because fairly quickly you can start connecting with schools, alumni, friends, family, etc. Within a few hours there is a wealth of active social data available to you.

But overtime, that discovery fades and Facebook becomes more about maintaining than connecting. Checking in and the occasional sharing rather than discovery. The challenge for Facebook is to continue to evolve the service to encourage and maintain engagement even after it moves from the discovery phase. [pullquote]Facebook would be a great service if you un-friended 90% of your friends[/pullquote]

One theory I have is that so many of us grew our friends list so big that the amount of noise vs. genuinely interesting things becomes so overwhelming that stop engaging heavily due to that noise. Someone once told me that Facebook would be a great service if you un-friended 90% of your friends. This is a fantastic point but also one that would come with a cost. The value of having a large network is that the timeline is fresh. The problem with that, to my earlier point, is that most of that is noise..but it is fresh noise! If we were to unfriend most our friends except the ones we are truly close to, the content would most likely be more relevant but it would also not be as frequent. So by nature Facebook would be better, but it may not make it that much more engaging.

Contrast this with Twitter. Twitter is my favorite and easily my most time consumer app of my day. I may actually be on Twitter more than any app including email. Twitter has the opposite problem of Facebook in that the on-boarding is an issue. You sign up for Twitter and it takes a significantly longer amount of time to find relevant folks to follow. And Twitter, unlike Facebook, gets better the more content sources you follow. Once you have curated your own network of hand selected interesting content sources, you find your timeline stays fresh and stays relevant. This is why I spend so much time on Twitter. I have hand selected content sources that I find relevant and interesting. I follow 793 sources and the quality of my timeline is so relevant that I do what I can to not miss any tweets by playing catchup throughout the day. With Twitter taking the time to invest in volume sources makes it better. With Facebook taking the time with volume sources arguably makes it worse.

Twitter may or may not reach mass market status. For me and what I do it is an invaluable resource, network, and communication tool. Facebook is clearly a mass market product but they have a challenge. They may or may not figure this engagement problem out. Perhaps they don’t need to. So long as they continue to find relevant ways to deliver engaging advertising on mobile devices and continue to run a healthy business they should be fine. But they are now a public company and investors are relentless about growth. Engagement is one of the keys to Facebooks growth metrics that investors care about. That is why I remain skeptical.

The iPad and PCs

A few years ago I started making the point that our behavioral research findings kept indicating that once consumers started using iPads that their PC usage declined. My overall point was not that the iPad was being purchased to replace a PC but that it was being purchased because they could do more with it than their PC. It covers the basic needs of web browsing, social apps, word processing and more, but also into the areas of e-reader, portable dvd players, art canvas and more. When you see how versatile the app ecosystem has turned the iPad into, it is no wonder it is selling in droves and effecting PC sales.

When I wrote about my experience with the iPad, I took the angle that for most it will become their primary computer. I took a lot less flak this time around than when I made the same claim when the iPad first came out. But there is still the debate. To this discussion of iPad vs. PC i’ll add a little more context.

First, there is a gigantic segment of the PC market who we classify as lite computing users. A few years ago when processor specs got to a point where each increase was hardly noticed many in our industry started saying PC performance is good enough. While I don’t entirely agree, the point was that for most consumers they did have enough performance simply because they weren’t doing a whole of performance intensive tasks with their PC. I blame this on software/apps actually particularly in the Windows ecosystem. This is one of the fundamental reasons why Netbooks took off the way they did. Most consumers realized they didn’t need all the power being pumped into PCs at their high price points and they reasoned a Netbook was all they needed. This didn’t last long and I blame the form factor and the apps.

Enter the tablet. All the same fundamental observations remain yet this form factor is more inviting than a PC and the touch interface makes it a delight to use. The app ecosystem grows and depth and breadth turn it into something much more than a PC while all the basic PC tasks remain intact. This realization by most consumers that their usage with the iPad remained high and PC usage declined was a key point.

This is why for many consumers the iPad is easily the mass market PC for the masses. In fact, with the iPad in the lead, tablets are becoming and will increasingly become the most important software development platform for the advancement of personal computing.

Based on how I look at things, I decided to start tracking the iPad as a segment with the overall PC segment. Based on my estimates of the mix of full size iPad’s in the market over the past few quarters, I estimate that the full size iPad to account for 8% of the PC sales over the past few quarters. And with PCs declining and my optimism that the iPad Air will move in significant volumes, I expect Apple’s iPad share of computing to increase.

Screen Shot 2013-10-31 at 2.19.23 PM

Apple’s Tablet Market Share

As I pointed out last week, we have to be very careful with statistics that generalize data. Like the one making headlines the past few days stating that Apple’s tablet market share has dipped below 30%.

As I pointed out last week, when general statistics that are not contextualized get thrown around it can mislead readers. So let’s look at the updated data doing what I propose, which is to separate legitimate tablets–devices being used for some form of computing function–from the tablets which are largely dedicated devices competing more with portable DVD players, e-readers, etc.

Screen Shot 2013-10-31 at 6.20.06 AM

As you can see, if we just break out the branded OEM segment, Apple’s tablet market share is 46%. An important point, however, is that Samsung has been steadily gaining tablet market share. Our estimates are that Samsung’s lower-cost tablets like the 7″ Galaxy Tab are still a healthy majority of that mix. The Galaxy Tab 7″ is now lower than $200 in the US and in many other markets as well. In fact, ‘other’ as a category slightly declined last quarter going from 38% of shipments to 35% of shipments. Samsung went from 18% to 20% sequentially and it helped the branded OEMs gain against the non-branded white-box tablets.

Tablet’s are slowing, this is true. However, as we and others have routinely pointed out, tablets are becoming extremely cyclical. At least the branded OEM tablets are. Companies like Samsung, Amazon, Apple, etc., continue to experience that cyclicality in the market.

Those who raise concerns that developers may flee to Android in tablets simply because of market share are fooling themselves. The dedicated tablet apps on Android are few and far between and I see no evidence that is changing. We must remember this about Google when we think about Android as computing platform competition. Google makes most of its money off search. Anytime a consumer is spending time in an app, they are not searching the web. Apps are quite contrary to Google’s business model. Even if you take the angle that they are learning about you as you use certain apps, that is only true of certain apps. Most time spent on Android devices is playing games. Most revenue from Play stores come from games and in app purchases.

The tablet becoming a computing platform is one of the most important market developments in the advancement of personal computing. This is why I hope Microsoft makes headwinds here. We need actual computing platforms to advance computing. Android on tablets is not that.

The iPad Air –A Truly Mass Market Personal Computer

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With the iPad Air, Apple has created the world’s thinest and lightest full size tablet. And by adding their 64-bit A7 processor they have made it extremely powerful as well. After using the iPad Air for the past week I’m convinced that it is the perfect personal computer for the masses.

Thinnest and Lightest
I use more tablets of different sizes and operating systems than I care to admit. At last count I now have in my possession 12 working tablets of different varieties. When I compare the iPad Air with all of these and others on the market it is clear that Apple’s claim’s that the iPad Air is the thinnest and lightest full size tablet on the market is accurate. The new iPad Air is so light you have to feel it to believe it.

The iPad Mini weighs .69 pounds and the iPad Air weighs 1 pound. But when you hold them at the same time the weight difference feels negligible. The iPad Air distributes its weight in a way that holding it and using it feels about as light as the iPad Mini.

The iPad Air is easily the best designed iPad yet.

Notebook or iPad?
Every year, I field many questions from friends and family on whether I can recommend that they buy an iPad rather than a new notebook. Of course, this question has to be followed with another question related to how they primarily use their notebook. If you sit at a desk all day, use a keyboard and mouse to input, and run software that requires a hard-core Intel or AMD processor then you probably need a notebook or desktop. However, for most consumers when they are at home or even if they don’t have a desk job, the iPad is the ideal personal computer.

The iPad has become as versatile as any personal computer on the market. In fact, any time I need to be reminded of the role of the iPad, I remember a quote from Steve Jobs when it was launched:

“The iPad is more intimate than a notebook and more capable than a smartphone.” — Steve Jobs

The iPad, iOS and the entire ecosystem of over 470,000 iPad apps all built with a touch interface are simply easier to use, less intimidating, and often more empowering than many apps that exist only on notebooks and desktops. My kids use the iPad to play games, read, create movies, make music, paint and draw, and a host of other things they would never be able to do on a PC with its mouse and keyboard input. The iPad is not computing dumbed down; it is powerful computing simplified. And simple solutions require sophisticated technology. That is exactly what the iPad and the new iPad Air is–powerful computing. And for many consumers the iPad Air will be the most empowering personal computer they have ever owned.

I am a heavy PC user. So I tried an experiment. Over the past week, I used the iPad Air to do many things that I normally only do on my MacBook Air. I used the iPad Air to make movies using iMovie. I used it to record some music in GarageBand. I used it to respond to emails, some very long. I used it to create and edit documents for our clients. I used it to write articles for our site here. In all of these use cases and more the iPad exceeded my expectations as a creation tool.

Apple has strengthened the value proposition of the iPad and the new iPad Air as a mobile personal computer by offering iWork and iLife apps for free. Now the iPad can be used  out of the box to create movies, make music, create documents and presentations, and a lot more, at no extra cost. Unless you are a Microsoft Office power user, iWork will more than meet your needs. ((iWork can open Microsoft Office documents and export them in Office formats as well. photo )) iLife opens the door to a creative world unparalleled on any other tablet platform. Where iWork may have a competitor on other platforms, iLife does not. When it comes to the creative arts, the iPad is unparalleled from a software standpoint.

The iPad has proven to be more than just a simple consumption device. A lot of that has to do with the breadth and depth of apps particularly in the creative arts for the iPad. While it is true that existing iPad owners benefit from all the software advancements I mention above, the new design of the iPad Air and the power of the A7 make it more usable than ever. And for most, this may be the only personal computer they really need.

The A7 and Future Proofing
When recommending products to consumers I always encourage them to look at it as an investment. Whether someone is buying a PC, TV, smartphone, or tablet, it is best to get one that is worthy of your money and will last. What makes the iPad Air interesting–from the view of personal computing–is the A7 processor.

Much has been written about the power of the A7. Creativity apps like iMovie and GarageBand run extremely smoothly and fast on the A7. I made a 4-minute high definition movie on the iPad Air and it exported in just under one minute. When I attempted the same on the iPad 4 it took just over three minutes. When it comes to exporting movies or even compressing video or a photo to upload to the web, send in an email, or even using AirDrop the A7 does it all faster.

The A7 being a 64-bit processor has laid a new foundation in mobile computing and it is one will help the iPad Air stand the test of time. There was a time not too long ago when PC purchasing advisors recommended to consumers to buy as much processor as they could afford. These were the days when megahertz were going to gigahertz. While I don’t recommend consumers buy products solely based on specs, I think the same advice applies to the iPad Air. The A7 helps future proof the iPad Air helping to extend its life and the performance of the tablet well into the future.

For many who do not depend daily on a desktop workstation or portable desktop (notebook) the iPad Air will more than suffice as their everyday personal computer. Thanks to the holdable form form factor the iPad is much more mobile than a notebook as well. The iPad Air starts at $499. Here is a link to compare prices and specs across the iPad lineup.

Apple Upbeat About The Holiday Quarter

There were a number of key takeaways from Apple’s Q4’13 earnings call. iPhones continue to beat estimates and grow. We expect this trend to continue into the holiday quarter. Even though many are pessimistic about the iPhone 5c (some un-intelligibly calling it a dud) we anticipate the 5c to continue to do well as a mid-tier offering. Tim Cook was clear on the phone call that the 4S is the entry level iPhone, the 5C is the mid-tier offering, and the iPhone 5S is for those who want the latest and greatest. He even pointed out that we should expect demand to be high for the 5S due to the predictability of the early adopter market. We expect the 5C to gain steam once the early adopter phase passes.

The iPad sales were lower than most expected but easily explainable by the increased seasonality of the iPad for the mass market. One has to assume that the bulk of the sales last quarter came from markets like education, business, and other verticals. I also expect the iPad 2 to have made up a healthy mix of iPad sales. Mainstream consumers likely held off in anticipation of new devices for the holidays. Given no new iPads in all of Cy’13 14.1 million iPads is impressive. We anticipate significant pent up demand for iPads going into the holiday quarter and expect Apple to yet again set all time record sales for iPads.

The one growth story we are still anticipating is with regard to the Mac. It is significant that Apple spent as much time as they did at their fall unveiling on the Mac. It is also significant that the theme of last weeks event was personal computing and that Apple included the iPad in that event. Although Windows PC sales are down, the Mac has largely outgrown the segment for over two years. We believe that there is still a growth story for the Mac to continue to grow its share in the PC segment and take share from Windows. Annually we still sell upwards of 300m PCs every year and Apple has approx 6-8% of the WW PC market (higher in the US) but is poised to grow that share over the next few years.

Apple has strengthened the value proposition for Macs by making all future versions of OS X, iWork, and iLife free for customers. They have also been aggressively lowering the price of their Macs annually. I believe Apple smells and opportunity to gain share of the WW PC sales against Windows OEMs and will begin being very aggressive to capitalize on this opportunity.

Those are the three categories we expect holiday season upside with. Tim Cook said it is likely to be an iPad Christmas but is more likely to be an Apple Christmas like so many Christmases before.

When Genuine Data Leads to Disingenuous Conclusions

I genuinely love the industry analyst business. I love the role we analysts, our data, and our commentary play in helping companies make strategic decisions. However, I’ve noticed a disturbing trend. ((It’s a “Jump to Conclusions” mat! You see, you have this mat, with different CONCLUSIONS written on it that you could JUMP TO! — Tom Smykowski from the movie Office Space))

The challenge with data is that the truth lies in the interpretation. Without context genuine data can lead to disingenuous conclusions. This is why data cannot be put out in the public without context. Yet this is exactly what happens. It creates a scenario where a media industry who thrives on negativity can take genuine data, miss the context, and create stories around a false narrative. It is not their fault entirely. It is the fault of the data firms who release data to the public, without proper interpretation or context, and allow the media industry to draw their own conclusion, and often a false one.

Genuine data should point out market truths. However, when presented in the wrong way, it has the potential to do just the opposite.

Why We Count Things

The bottom line is data matters. If you are a company that makes touch-based displays or sensors you need a fairly accurate view of shipment growth related to the areas you care about so you can plan your long term product cycle. If you are a company that makes screens you don’t necessarily care what the operating system market share is of specific platforms. All you care about is how many screens will be sold over the next few years, and what the likely segment mix of screen size will be. For you, the data matters because you need to know how many to make. This is why forecasts and segment tracking statistics are relevant.

Data, forecasts, and other statistics, should help reveal an opportunity to the interested party. It should also help point out where there are not opportunities.

Not all data that gets put out in the public leads to disingenuous conclusions. However, it is the market share statistics that do so more often than any other. To make my point, and highlight how this happens, I will use the tablet market share narrative as an example.

The iPad Has Lost to Android

When you track the global sales of tablets, it is easy to look at the market share statistics and say that it is game over for the iPad. You can stare at the chart and conclude that the iPad can no longer grow as the world and the growth shifts to Android. There is some truth to the global statistics of Android’s tablet market share. At face value we create charts that look like this:

Screen Shot 2013-10-25 at 7.10.08 AM

That is genuine data. Android is being shipped on more tablets than iPads. Therefore, the narrative that Android tablets outsell iPads is accurate at a bullet point level. However, the graph does not tell the whole story and yet so many are left to conclude it does.

If you are a software developer ((Software developers are ones for whom a market share discussion does matter. Perhaps the investment community does also but at large it is irrelevant for most.)) you will look at that chart and say “I should be writing tablet apps for Android.” The problem is… that is an incorrect conclusion when you have the context of the market share data points.

The picture starts to get more clear when we look at the market share of each vendor as a makeup of total sales. Here is that chart. ((Graph viewed with a stack chart. Screen Shot 2013-10-25 at 11.43.31 AM ))

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When we look at that chart we realize that the name brands shipping Android tablets are not shipping nearly as many as the iPad. We will also notice that the largest segment of Android tablets being sold come from this category labeled ‘other.’ Upon learning that ‘other’ makes up a significant portion of the number of Android tablets being sold; we must seek to understand what ‘other’ is and ask if it represents the same opportunity as the vendors who are shipping Android as a tablet platform tied to services and app stores.

Understanding Other

The category ‘other’ represents the no-name brand white-box tablets being sold at razor thin margins mostly in China and other emerging markets. Here are some visuals to help with some context.

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I wrote about this point in particular where I dug into the gray market for tablets in China. It is a big market.

As I have been digging into the white box segment–which makes up the bulk of Android tablet shipments–I have been trying to understand what consumers are doing with these extremely low-cost devices. As we know, Android tablets globally make up a minuscule share of global web traffic. The latest estimates I saw peg Android tablets at less than .08% of global traffic while iPad is at 4% of global internet traffic. This has always been the stat that has caused us researchers to raise an eyebrow. Android has more volume but significantly less internet traffic. So what is happening?

Nearly all evidence and data we find comes back to a few fundamental things. First, most of these low cost tablets in the category of ‘other’ are being used purely as portable DVD players, or e-readers. Some are being used for games, but rarely are they connecting to web services, app stores, or other key services. I have asked local analysts, local online services companies, app tracking firms, and many many more regional experts, and the answer keeps coming back the same. They affirm that we see the data showing all these Android tablet sales. But they aren’t actually showing up on anyone’s radar when it comes to apps and services in a meaningful way.

Understanding the context, it is hard to genuinely conclude that ‘other’ represents an opportunity for anyone but the white box hardware companies making less than a dollar of profit and component vendors who can supply the parts to make such low-cost tablets. It is certainly not a genuine revenue opportunity for app developers, services companies, or other constituents in the food chain. And other makes up almost 40% of the Android tablets shipped world wide.

So let’s look at the chart without ‘other.’

Screen Shot 2013-10-23 at 5.30.05 PM

Now we get a slightly clearer picture. If we eliminate ‘other’ Apple’s tablet share goes to over 50% WW with the closest competitor being Samsung at 18%.

Yet we are still left with a legitimate question which is relative to vendor growth. ‘Other’ is causing a downward trend for the competition. We know that ‘other’ was growing but ‘other’ is not an area any branded hardware OEM wants to go near. So, can vendors grow their share in a growing market against other? That is the key question. To shed insight into that question a little more context is necessary.

Our research, and many others, suggests that over half of first-time purchasers of low-cost tablets had buyers remorse and intend to spend up on their next one. This is why with many of the latest branded crop of OEM tablets, prices went up in order to invest in better components to better the experience.

Our research also suggests that those in the market for a tablet–who plan to use it to do meaningful things for the value chain–prioritize the experience over price. The tablet market as a whole is growing and I tend to view that growth separately from the ‘white box’ category. ((There is likely some percent of ‘other’ that does represent an opportunity, however, we have no idea how much. My suspicion is it is very small so I lean toward leaving it out entirely.)) Doing so brings much more clarity to what is happening in the market for the stakeholders.

We are still waiting for updated figures on these but I wanted to add the needed context about what is happening in the tablet market so that accurate opinions, and more importantly accurate business decisions, can be made with regard to this category.

A similar analysis can be done on the market for smartphones, but I will leave that project for another time. Data is good. But it is dangerous when it is released into the public without context. Data should inform not confuse. Yet, more often than not, data that gets thrown around in the public sphere clouds the truth rather than brings clarity to it.

Can Windows Phone Compete in the Low-End?

At Nokia World earlier this week Nokia launched what I feel is an interesting product. I am an optimist so I have not given up on Microsoft or Nokia when it comes to mobile computing. The most interesting product to me is the Lumia 1320.

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I got to spend some time with the new Lumia large screen phones and the latest update to Windows Phone 8 shows well on larger screen smartphones. But what makes the 1320 interesting is not the size but the price. The Lumia 1320 is estimated at $339 USD and will launch first in China and Vietnam in early 2014, followed by other Asian markets, India and European markets. For context on that price point, in China the $339 priced smartphones or 2000 Yuan price range occupied 8% of Q2’13 sales.

Here is a chart using IDC’s numbers on where the global platform share sits currently.

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I ask the question whether Windows Phone can compete in the low-end because that is where I feel its best chance at market share gains will come from. Our research suggests that Apple is an immoveable force in the high end or top 10% of the global market and with the addition of the 5c it is possible they will dominate the top 20% by the end of the year. Where Android succeeds is the area where Windows Phone has a chance – at the low-end. If I am Microsoft and Nokia I focus on the blue line in the graph not the green one…at least for now.

I truly believe that Android needs low-end competition. I say this because Android in the low-end is not advancing personal computing. From what I have seen and used with the Windows Phone, I feel it is a much better platform than Android at those price points to empower consumers with computing. The problem is that Android has an army of OEMs shipping phones at low-price points. Windows Phone will never make a dent in Android unless they get the same.

To date Nokia’s best selling Lumia is the 520 which is among the most affordable of the group. It will be interesting to see how the 1320 does but I will remain optimistic until proven otherwise.

Apple’s Software as a Service Strategy

We have had one focus since the beginning. To build the best personal computers in the world that people love to use. –Tim Cook

It is easy to look at Tuesday’s event from a hardware only viewpoint and miss the significance. However, if you view Tuesday’s event through the lens of personal computing more clarity emerges. Hardware is the beautifully designed tangible object. But it is the software that turns that beautifully designed tangible object into an empowering tool called a personal computer.

Apple is a hardware company that is true. They are also a software company. However, they don’t want to just sell you hardware or software. They want to sell you an experience. That experience is fueled by their ecosystem.

There were a number of things hardware-wise to be excited about. The new Mac Pro and all its innovations are best in class. The new iPad Air is the thinnest and lightest full size tablet on the market. The iPad Mini now with Retina display and A7 processor is a ton of amazing tablet for only $399. As important as the hardware is the software is the compelling part of the narrative and Apple’s vision for advancing personal computing.

Consistency and Ecosystems

When we look at Apple’s hardware across different segments we notice very distinct design themes. The iPad Air and iPad Mini follow the same design language. The MacBook Air lineup follows the same design language. The MacBook Pro lineup follows the same design language. What I saw today with iLife and iWork is that now apps across iOS and OS X follow the same design language.

Many of the new iLife and iWork apps look like desktop class applications. GarageBand for iOS supports up to 32 tracks of audio. iMovie can create and implement many more desktop class transitions and effects as well as run picture-in-picture video during editing. The new iLife and iWork apps for iOS take creativity and productivity on tablets to new levels. They are not only powerful but also similar in look and feel to their OS X counterparts. This makes for a seamless jump over to OS X should consumers use multiple devices in their digital life. This also strengthens the case for a potential new Mac owner should this consumer also be in the market for a new PC.

The story to me was a consistent experience around personal computing. Apple is bringing a consistent software experience across the screens in their hardware portfolio. In the post-PC era consistency matters. Consistency will be valued.

Software as a Service For Personal Computing

Apple has put pressure on Microsoft by bringing iWork to consumers for free. For most mainstream consumers iWork is more than sufficient. iLife has always come pre-installed on Macs but is now free as well and nothing like the iLife suite exists in the Windows ecosystem at any price point. However, Apple has raised the bar by making OS X free. That one will be tough to compete with.

What is amazing is that a company who is strengthening the power of their ecosystem through software is able to do so by offering this software experience for free. Apple’s hardware may cost more but you are also getting more from a software standpoint. Consistency in OS updates, app updates, and more is now free. Not to mention best in class customer support. This can not be overlooked or underestimated. This is the vertical advantage.

Consumers now know that an investment in Apple’s hardware is an investment in future software upgrades at no additional cost. The value of the software is now built into the value of the hardware. Apple is telling customers that they are committed to bringing them quality software as a service to their quality hardware. This is Apple’s vision for personal computing.

Why Does the iPad 2 Still Exist?

There seemed to be some general surprise from many as to why the iPad is going to stay in market. Particularly since it still has the 30-pin connector. Many assumed Apple wants to be aggressive in moving their hardware base to the new Lightening connector and were thrown for a loop with this news.

This actually makes a lot of sense when you understand a few things. First, my friend Stephen Baker at NPD pointed out in a blog post today that the iPad 2 has remained a strong seller for Apple and has outsold the iPad 4 in the US (NPD only tracks US data). Interestingly, they point out that the non-retina Mini may also follow this trend and perhaps outsell the iPad Mini with Retina as well. Either way, we know for sure that Apple sells more Mini’s than full size iPads.

One other way to look at the iPad 2 and why it is still in market is for vertical markets. There are many point-of-service use cases the iPad is used for. The healthcare industry has practically standardized on the iPad. Mobile workers and field agents. Construction markets. Retail. And many more use the iPad and have developed custom software for their mobile workers. In many of these vertical use cases the person using the iPad does not necessarily need the latest and greatest. For these markets the iPad 2 makes a lot of sense.

Now, do I feel the iPad Air will be impacted this way the same way the iPad 4 was impacted by the iPad 2 staying in market? I don’t. I feel the A7 and the software that will come out showcasing its prowess may draw more people to spend up for the “future proofing” that the A7 will allow. This may be especially true in the US. There was a time where it was common knowledge that when buying a PC you should buy as much MHZ or GHZ as you could afford. Now, while I don’t believe consumers will go shopping based on these specs. There will be something psychological to the A7 and the experience it yields that I feel carry over from the old days of PC buying.

I track all these devices so we will keep our insiders informed in real-time as we know.

Apple’s Software Pricing and the Impact on the Competition

When I saw Apple’s theme around free with their software strategy I instantly started thinking about how this could impact the competitive landscape. And while doing so I remembered a strategy from the art of war. Force your competition to compete on a battle field where they have no chance of winning. This is exactly what Apple has done by creating what I can only now call a software-as-a-service model.

Microsoft is a software company and much of their value is wrapped up in businesses like Windows and Office. Like OS X, Windows costs nothing to the person buying a new PC. The cost of the operating system is included in the cost of the hardware. But unlike Windows, a consumer who buys a Mac now knows that all future versions–that come out annually–will cost them nothing. Basically, a Mac customer will always get the latest and greatest software all simply with the initial purchase of the hardware.

When you understand that when the majority of consumers buy a PC and view it as an investment, you see how this strategy can pay off. Microsoft can not make this promise to their customers. Microsoft can and will release rapid Windows software developments but there can be no guarantee to the consumers that future OS versions will be offered to them for free. This is what Apple referred to as “the new era of OS pricing” and it is one I can’t see Microsoft competing with.

Microsoft will also see the value of Office challenged by the mass market. If you are an enterprise customer whose business has spent a great deal of money and time building templates around Office programs, then you will remain committed to Office. However, there are many hundreds of millions of consumers who have no such Office dependency. For these customers the iWork will fully meet their needs and will be offered at a price that Microsoft simply can not offer Office at–free.

Lastly, iLife is a vastly underrated suite of applications. When you survey consumers and ask them the more compute intensive things they do with their PCs it almost always comes back to creativity. They edit and manage photos, they create videos, etc. When you buy a Windows PC there is no built in software suite to serve the basic creativity needs that consumers value more than productivity, in most cases. The fact that Microsoft ignored this has baffled me for years and is further evidence that Microsoft understands business customers needs but not consumers needs.

Throughout the years we have done PC buying intender research. Now while price remains a key driver, and always led us to predict the volume mix between Macs and PCs, the consumers who were considering Macs continually brought up iLife as a reason. The other main driver of interest in Macs was built in customer support. These value proposition remain and are enhanced now by offering OS X (and all future versions) as well as iWork for free.

This is what I mean that Apple has made clear a software-as-a-service model as their strategy. A consumer knows that an investment in Apple’s hardware is also an investment in future software innovations. This can not be underestimated by the competition.

The State of Tablets

On the eve of Apple’s event–where we expect new iPad’s to be unveiled–I thought I would provide a high level view of the current state of the tablet market. While it may not be terribly obvious to many, the holiday quarter for tablets will easily be the most competitive yet. Amazon’s Kindle Fire HDX tablets have hit their stride and are viable choices. Samsung has been steadily gaining in market share with their onslaught of screen size choices and aggressive pricing. And even though many discount Microsoft’s Surface and the other similar 2-1 PC form factors from vendors like Dell, HP, Lenovo and others, they still represent a force in the market place that some consumers will need to evaluate. While we can debate the legitimacy of all these choices, the fact remains, there will be a plethora of choice in the tablet category this holiday season.

Defining a Tablet

This is easily the most controversial element of this discussion. When those of us who count and segment these categories discuss this point I often feel like it is the ultimate philosophical and post-modern question: what is a tablet?

Early on in the tablet lifecycle many were keen to keep a clean line between tablets and traditional PCs like desktops and notebooks. However, now more than three years later we know the line is blurred.

We have overwhelming data that now suggests that consumers themselves view tablets as PCs. For the mass market consumer there is no division. Many things they used to do on the traditional PC they owned or had access to they can now do on a more friendly form factor with a natural touch interface.

Tablets are the new PC and there is just no way around this. Notebooks and desktops will go through a role shift and have limited appeal and annual growth. When it comes to computing devices, which tablets are, they are the one growth spot. Although, the tablet may come in many different form factors and appeal to different segments accordingly, it is the device for which the PC industry needs to focus on.

Forecasting Growth

We have to take forecasts with a grain of salt in their accuracy. Things change and forecasts need to be considered more liquid than firm. But they do provide a framework to show what segments are growing and which are not. Therefore, looking at what seems realistic in current forecasts is helpful frame the discussion and the category. For my firms estimates I took a number of forecast data we had and used them to create what I feel fits in line with the regional trends we see. Screen Shot 2013-10-21 at 8.42.17 AM

At one time trend data suggested more aggressive growth. It seems as though the trend data in key regions suggests more modest growth to be expected. Perhaps larger screen phones have played a role in slowing tablet growth. One can only speculate but as I point out we must consider forecasts to be fluid. Regardless of conservative or aggressive estimates tablets are a growth segment.

Few Vendors Finding Success

The other key observation when looking at tablet market share breakdown by vendor is that only a few are finding success. Apple, Samsung, and Amazon are the big brands that have the most market share with tablets. And interestingly all of them are coming from a mobile posture not a desktop or notebook posture. Here are the estimates I feel are most accurate of tablet sell through by vendor contrasted with PC sales. ((This chart is using Apple’s quarterly timeline where Q1 is the holiday quarter and Q4 for most others.))

Screen Shot 2013-10-21 at 9.06.38 AM

As we can see, Apple is still the dominant tablet vendor by volume. Samsung is growing and Amazon is managing consistency.

Tablet OS Browser Share

Understanding how consumers use tablets is important. We know that iPad leads in browser usage share, which suggests at the very least that the iPad is an internet traffic machine. Browsing the web isn’t the only usage metric that matters but it is the best one we have. Web browsing share is a demonstration of overall device usage. If a tablet is just used for movies is it a tablet or a portable DVD player? If a tablet is just used for games is it a tablet or a portable gaming device? Tablets are best of breed mobile computers capable of web browsing, games, video, productivity and more. A true tablet platform should be about possibilities not limitations. Right now, in all the metrics we can count, it seems the iPad is the best example of a true tablet. ((By stats I mean commerce driven (iPad averages just over $130 per quarter by US consumers), app breadth and depth, developer monetization, etc.))

Here is a chart to grasp web browsing share of major platforms in several key regions.

Tablets-OS-share

As we track this information in real time it will be interesting to note any key changes. Right now the iPad dominates every category checked that matters from a market, business, and economics standpoint. The gap between an Android tablet–for someone who wants to use it as a tablet not something else–is minimal from a price standpoint for the value gained. If Apple closes that price gap with iPad pricing options then it is logical that Apple will gain ground in many of the key categories.

Microsoft and their ecosystem partners are the ones to watch to see if ground is gained in any significant areas for tablet intenders. The competition for first time tablet buyers will be fierce. Understanding what consumers want, expect, and desire to do with tablets will be the key in defining who wins and loses in this segment.

Microsoft’s Uncharted Territory

As I study the industry, the market trends, and the solutions trying to flow with the trends, I’m fascinated by what Microsoft is doing strategically. From a historical standpoint, we have to conclude that the Microsoft of old is drastically different from the Microsoft of new. The recipe that got Microsoft to where their once dominant stance in the market has been is not the recipe that will again make them relevant. ((Note I didn’t say dominant, as I have a hard time making the case that any company will truly dominate the market the way Microsoft once did.))

We are seeing this shift in action as Microsoft gets more active in the hardware space with products like Surface and their acquisition of Nokia. We are watching Microsoft abandon nearly all the strategies that made them successful and embracing new ones in the hope of a future. A quick survey of the hardware landscape brings this to light.

Hardware Walled Gardens

What we are seeing is the emergence of hardware walled gardens. Take Surface for example. The Surface–and even more so with Surface 2– was designed with an experience that is based on proprietary hardware accessories. Many of the new accessories and keyboards work only with the proprietary port designed into the Surface’s hardware.

What is interesting about this is that it is somewhat counter to how the industry rallied around Windows to begin with. Microsoft’s success up to this point was built up around the idea of compatible hardware and accessories around the Microsoft ecosystem. A customer knew that if they purchased a desktop or notebook from a Windows vendor that many, if not all of their ports, were compatible with third party accessories. We may be moving away from this model. The only exception was in docking stations. Third party vendors often made their connectors to the laptop proprietary but all other ports were based on industry standards.

A quick glance at nearly every other hardware partner of Microsoft’s and we see the same picture emerging. Nearly all of them are building hardware specifically tied to proprietary ports using proprietary accessories for a specific value proposition. So what has changed that is causing this shift? The answer is differentiation.

During the era of compatible hardware there was nowhere near the need to differentiate as there is today in the broad consumer landscape. When most PC users were being supplied with computers from their employer, it was their employer who made the buying decision and did so in bulk largely based on price. Once a pure consumer market emerged–somewhere in the mid 2000s–we saw a more clear demand from consumers to differentiate and hardware companies were forced to think of new differentiation strategies in order to compete.

This is in essence the challenge of a hardware company who ships the same software as their competitors. Hardware becomes the only real differentiation point and maintaining more loyal hardware customers becomes even more challenging. ??So enters the era of hardware walled gardens. Companies like Microsoft, Dell, Acer, Lenovo, Samsung, Sony, HP, etc., hope to generate more hardware loyal customers by locking them into a proprietary hardware ecosystem. This is out of necessity because they simply can’t do so with a proprietary software ecosystem like Apple can.

Glimmers of Hope

I don’t necessarily think this is a bad thing. I simply believe that it is different from what we have seen historically from Microsoft and its partners.

This trend certainly lines up with the BYOD stance of many corporations today. Consumers may choose the best hardware ecosystem to meet their needs at both home and work. But based on the understanding of differentiation I outlined above, it is fascinating to think that PC companies may be evolving into accessory companies. What I mean by that is that their “box” strategy is really more a means of an end to their accessory strategy where the real money may be.

Now, if we use this line of thinking then the Surface makes perfect sense. While Microsoft has never had a true PC hardware business they have had an accessories business for quite some time. So perhaps the Surface is more an accessories strategy than a box strategy. Whether it is or not, Microsoft’s partners will follow suit. ((Of course, it will be also interesting to see how Microsoft navigates the hardware waters at large. I’ve been of the idea they should license technology like Surface’s connectors, etc., to partners. However, Microsoft seems committed to some degree of hardware.))

We are at the very beginning of this shift. I’ve continued to think that hardware companies will be continually challenged if all they are is hardware companies using off the shelf operating systems. However, by adding a proprietary hardware walled garden angle into the mix things can get even more interesting and actually be a profitable part of their business. Perhaps hardware companies who think about their hardware walled garden may not only continue to differentiate but also may be able to layer web or tie software services onto that differentiation.

We are very early in this hardware walled garden trend and the next 12 months will be very interesting to watch how this new approach to differentiation of Microsoft and their partner ecosystems develop.

Bringing Technology to the Masses

Whenever I speak or give a presentation for the first time to a new audience, I start off with a slide where I explain where we are in the transition from the analog world to the digital world.

This transition is a journey and we are roughly halfway through it. The first 25 years of this transition were about bringing digital technologies to the business customer. The next 25 years and beyond will be about bringing those digital technologies to the masses.

Adoption Cycles vs. Innovation Cycles

Often it seems like pundits misunderstand where we are when it comes to industry cycles. Any direct call or critique of a company that they are not innovating enough, or that the products they released aren’t innovative enough to get attention from the market, simply has no fundamental understanding of adoption cycles.

To fully understand adoption cycles, I find Everett Rogers Diffusion of Innovations philosophy to be apt.

chasm-1

Classifying the buying mentality of consumers is key to the diffusion of innovations. Geoffrey Moore extended Rogers’ explanation of how innovations get adopted and famously explained that there is a large chasm and most products rarely cross the chasm from enthusiasts to mainstream consumers. [pullquote]Early adopters want cool the mass market wants useful.[/pullquote]

The fundamental understanding is to recognize what is required of a product in order to get it to cross the chasm and move through the adoption curve. When you understand what the latter parts of the market require to adopt, you realize that it is not innovation but evolution. The initial innovation either creates or re-creates the category. The early adopters bend toward innovation, the later and substantially larger parts of the market exhibit patience. Companies work out all the technology kinks with the early adopters and then the mass market accepts them as they are refined and perfected through more evolutionary innovations. Early adopters want cool the mass market wants useful.

Smartphones and Tablets

To put this into perspective for smartphones, for example, Horace Dediu has put the current US smartphone adoption into the diffusion of innovation curve to see where we are.

Screen-Shot-2013-10-07-at-10-7-6.20.24-PM-620x531@2x

What is fascinating about this is that smartphones started gaining steam in 2009 and we are not even halfway into its global adoption cycle. It is estimated that smartphones have yet to penetrate past 30% of the global population. And if history is our guide, what got the smartphone this far is not what will drive it to global saturation.

Tablets are also rapidly climbing the curve and are now bleeding into the mass market. There are many opinions to the size of the total addressable markets for tablets but one thing is becoming clear — it is big.

The smartphone had nearly a four year lead but the tablet is growing fast and has already become the fastest CE device of all time to reach 100 units and is on pace to sell 500 million annually by 2015. The tablet is on pace to become the fastest technology to reach 10% penetration as it is estimated to be around 6-7% today. However, the tablet reached this level of penetration two years faster than the smartphone.

Smartphones and tablets have jumped the chasm and are well on their way through the adoption curve. Evolutionary innovations will be key to drive these products to saturation of their respective addressable markets.

Smart Watches and Wearables

Using the foundation I outlined above, I am personally yet to see a smart watch that has any hope of crossing the chasm. They will have appeal to the predictable enthusiast segment but have a long way to go if they have any shot of appealing to mass market consumers.

I’m more optimistic on health and fitness wearables for the foreseeable future. Health and fitness wearables have a much more clear and simple value proposition. This is why we already see many consumers in the adoption curve using these products already. What is fascinating about this point is that health and fitness wearables are not viewed by the mass market as ‘technology’ even though they are. Rather, they are viewed as a solution or more importantly as an experience. For technology to cross the chasm it must get out of the way and let the experience take center stage.

The Next 25 Years

I have no idea how many new technology categories will be created over the next 25 years. Yet more categories have been created in the past 10 years then in the first 30 of the PC/CE industries life. Because of that I can say with confidence that the next 25 years are going to be some of the most exciting technologically we have ever witnessed.

Why Apple is Growing Its Bank Account

During my conversation with Benedict Evans as we recorded the 4th episode of our podcast, we got to discussing some competitive players in the mobile market. During this conversation Benedict brought up how aggressive Samsung is with a portion of their marketing budget which goes to commissions to sales reps who sell their devices. Now while Samsung does make a good sum of money and has had record quarters over the past few years, their marketing budget is astronomically high. The reason for this, as I point out in the podcast, is that Samsung has a nearly limitless bank account. Samsung, like LG, is backed by their nation state of South Korea. After I made this point, Benedict added that so is Huawei, and of course several other Chinese ODMs, who are also backed by their nation state. When there is a guarantee of a cash trove behind you, it is possible to make business decisions that perhaps other companies without such a wealthy backer would make. In essence the rules for spending may simply be different for a company like Samsung and other Asian OEMs / ODMs who have nation state backing. ((The backing of nation states to certain companies is worth a much deeper analysis as it relates to the competitive landscape.))

With this backdrop in mind I propose a theory. ((Feel free to offer alternate theories as well, I’m just lobbing this one out there)) Perhaps Apple is building its bank account, which is now estimated at about $150 billion with this competitive point in mind. Apple has no guarantee from their nation state who will keep them in business if all goes down the tubes where a number of their competitors do have this guarantee. ((Chart of Apple’s projected cash reserves. Although $200 billion is unlikely for this year, it seams reasonable for 2014))

So perhaps, Apple growing its bank account is less about what companies they can buy but more about the nature of their competitors who have what is in essence very large bank accounts as well. If we understand the competitive nature of this point, then it makes it easier to grasp and support the idea that Apple should not only hold onto its cash but should also keep building it. Perhaps Apple is building for itself the same sort of financial backing that is guarantee to a number of its prime competitors by their nation states.

Now, while I don’t offer this up as a point that they should just sit on all this cash for this reason. Of course, using it for dividends, or investments in long term strategic RND and CapEx, etc, are all important. But I do think we should think about this competitive point as to why the cash matters and should not dramatically be made smaller.

Perhaps by building this bank account it allows Apple to play along the same rules as their competitors who have nation state financial backing. One other very important point that can not be missed is that this bank account they are building allows them to be patient and more deliberate with their market moves. Which, in my opinion, can not be underestimated.

It’s Tough Competing With the iPhone

Understanding what is happening in smartphones is all a matter of perspective. It is easy to get caught up in the OS market share statistics and lose sight of the big picture.

comScore has recently updated their MobiLens and Mobile Metrix, data for US smartphone subscribers in August 2013. Many in the media picked up the point that iOS gained on Android during the month. While this is true, it has actually been going on for almost a year now. In November, 2012, Android peaked in the US at just over 53% share. Since then it has slowly declined. During that same time iOS has been slowly growing.

Screen Shot 2013-10-08 at 12.18.03 PM

That is, of course, all very interesting and important to know as we try to get a picture of what is happening with smartphones in the US. When we look at browser share between iOS and Android in the US we see a very different picture.

Screen Shot 2013-10-08 at 12.21.10 PM

–US Mobile browser share by type from NetMarketShare

In this picture, the iPhone leads all other platforms in web usage. Android is steadily gaining and that is an important takeaway. But as much as we like to generally compare iOS to Android, the uninformed mistakingly compare apples to oranges in doing so. The iPhone, at this point of time, is not competing against the entirety of the Android offerings in the US. The iPhone does not compete with the low-end, extremely low-cost, Android devices offered free by carriers or on pre-pay plans from retailers, which is why comparing the iPhone to the entirety of Android is a mistake. Rather, to get a holistic picture of what is happening, we must compare the iPhone to similarly priced products. More specifically we must compare the iPhone’s market share to that of other vendors’ products at the same price points. When we do that, we get a clearer picture.

Below is the iPhone’s share against other devices costing greater than $400 wholesale (or offered at $99-$199 subsidized). This chart is based on sell through estimates that I am extremely confident about.

Screen Shot 2013-10-08 at 12.29.16 PM

As you can see, the iPhone dominates the premium segment of the market. These estimates are prior to the launch of the iPhone 5c and iPhone 5s. For that reason, I specifically included devices as low as $400, even though the wholesale cost of the iPhone 5c is an estimated $549. I added that price point because I’m convinced that the iPhone 5c will continue to take share from devices — even those devices in the $400 wholesale range — which are generally priced at free by the carriers. I’m also convinced that this will happen in regions beyond the US, as well.

If I were to include only devices which cost more than $500 wholesale or priced at $99 to $199 on contract, the iPhone’s share would jump to well over 70%. As you can see, the iPhone outsells Samsung’s devices at nearly a 3-1 ratio and other devices at a ratio of 5-1 or higher.

Based on all the data I am seeing from demand and sales trends, it is hard not to conclude that iOS will overtake Android in the US in the near future – possibly as soon as the end of the calendar year. But perhaps the most important thing about the iPhone’s share in the premium devices sector is that other competitors have only been able to made weak inroads against it. Samsung, for example, has been spending hundreds of millions of dollars in US-based marketing, yet their share of the premium market has peaked and been trending downward on weaker-than-expected sales in 2013.

All of this is specific to the US. The US market is key for many reasons, not least of which because its one of the most profitable. I am, however, keeping a keen eye on Europe and Asia as well.

The key question in my mind for the US, or other regions for that matter, is whether anyone can legitimately compete with Apple in premium. I think we will observe that Apple can legitimately compete with others in the middle of the market. But whether anyone can challenge Apple’s dominance in the high end is yet to be seen.