Ben Bajarin – Page 43

Dell’s Thinking Outside the Tablet

What is a tablet? Sorry to get philosophical but I think this is an interesting question–especially of late. I sensed from the first early glimpses I got of Windows 8 that we would see hardware that would cause us to question whether it was a tablet or a notebook. I’m still not sure the hybrid or convertible devices on the market today have yet nailed a mass market success and I remain pessimistic that they ever will. Pure slate tablets are the hot ticket and I believe will continue to be for the foreseeable future. However, there is one category of Windows 8 devices that has had my interest peaked for a while. That is portable, large screen, touch based, all-in-one PCs.

Today Dell is releasing the XPS 18. An all-in-one computer. Typically when I refer to this category, I call it an all-in-one desktop computer. However, with the XPS 18, I can not use that term because this all-in-one is not confined to a desk but is rather a highly portable 5 lb computer with a tablet twist. The XPS 18 is not positioned as a tablet nor should it be, but still, many of the key value propositions of tablets are applicable. I guess perhaps with the exception of putting it in a bag and leaving the house for work, school, or Starbucks–or are they?

I first saw these larger screen portable all-in-ones late last year. The reinvention, or I should say redefining, of the desktop category was a trend I had been tracking for a while. Larger, portable, touch computing solutions were not something readily available for the mass market until now. I first saw a touch based table top PC when Microsoft first showed me their Surface Table. That product was too pricey but I felt had a great deal of potential. In my opinion, the XPS 18 is the first to deliver on this new vision of a larger screen touch computing solution.

What makes this product interesting to me is the communal nature of the device. I have been writing for a while now about my conviction for touch based computing products and how there will be some that are personal (meaning intimately tied to a single person) and there will be ones that are communal (meaning freely shared within a community). The communal nature of a computer has always been the case of a desktop PC. These devices, as they matured, were largely used in consumers homes as a shared device. That is what makes this new class of touch based portable all-in-ones so interesting to me.

Dell is positioning this correctly in my opinion because they are focusing it on family use cases. Families can gather around this and use the 10 pt multi-touch functions to play games, or draw together, etc. Yet on top of the many new uses cases that will emerge from this category, consumers still have the bare bones powerful PC they still need for every day computing tasks. But its large screen portability is what I think is interesting. By having an 18-inch portable display that is connected to the web, and runs Windows applications, it opens up some new possibilities. Using it as a portable TV or media hub for example. Or in the kitchen for recipes, or out in the garage for how-to videos and instructions, or even for backseat passengers in the car since it gets 5 hour battery life.

I know several of the use cases I pointed out can also be used for tablets like the iPad, however, what makes the XPS 18 interesting is that it can also be used a full desktop class PC. There is a role for both in my opinion. I firmly believe that the XPS 18 will challenge many peoples pre-conceptions of not just what an all-in-one computer is but also what a tablet is and means to them. At $899 it is actually a reasonable price for a device that may blur the lines for many use cases consumers are looking for.

My friends from Dell came to our offices last week and gave me the walkthrough of the product and let me have some time with it. They set it up with the Bluetooth Keyboard and mouse and I never touched them. I just picked it up, put it on my lap, and started playing with it. I plan on doing a full review / analysis of the XPS 18 but what I will say for now was that I was impressed and intrigued by this form factor. I applaud Dell’s thinking with this product as well as with many other nicely designed computers they have released of late.

Mostly individuals use computers, but there is a place for a family computing device. I believe companies that approach computing from a family standpoint will generate interest in the products they make even if they are simply stand alone solutions. I expect many more solutions like this to come but for now, the Dell XPS 18 may be the best family computer/(tablet?) I have seen to date.

Understanding Android Activations

There are some questions that are worth spending the time to understand. Part of this lure may be due to the elusive nature of how Google reports Android. They make it sound like the game is over, they have already won, they are the new Microsoft. Now there is nothing wrong with that even if it is true. There is no question Android is the current market share leader and there is nothing wrong with that. The problem that I have and the reason I scour for data on the subject is because by not operating within the mantra of full disclosure, I feel as though there is a level of disingenuousness when data is not accurately reported. This forces many to guess and often speculate and in often not so helpful ways. Especially when many in the mass media fail to ask critical questions about the data they are reporting.

There are two articles I highly recommend, especially if getting to the bottom of this puzzle is interesting to you.

Benedict Evans is on the same hunt and wrestles with the same questions as I do related to Android. His post here makes some relevant observations. Horace Deidu of Asymco also is on this quest and posted a great article today looking at the question of “Where are the Android users?”

Horace makes the following point:

My suspicion is that it has something to do with the fact that the US is one of the few (but largest) market where the iPhone is available as a “low end” offering. At a minimum price of $0 (with a contract) many consumers are finding the iPhone attractive relative to a $0 (with a contract) Android phone. This price parity (illusory as it may be) allows iPhone to grow even faster than Android in this particular market.

One wonders what would happen if such price parity were present globally.

As I pointed out last week with regards to the clear application usage and engagement times of Android vs. iOS users, Apple’s growth in the low end is what is interesting. I have a hunch similar to Horace’s that the US could be a sign post of what could happen world wide as Apple extends their aggressive offerings there as well.

The App Developer Dilemma

A lot of great data came out yesterday that I believe is worthy of a deeper look. In my opinion, this data begins to shed light on some of the key questions I have had around platform engagement.

Flurry released some very insightful data that dug into the vast platform fragmentation across platforms. This data helps us draw clean conclusions around why it is very difficult for small to mid-size developers to survive if their goal is to have an app on as many devices as possible. To highlight this, Flurry makes the following point:

(for a developer) to ensure that your app is optimized to function well on 80% of the individual connected devices currently in use. How many different device models (e.g., Kindle Fire HD 8.9″ Wi-Fi, Galaxy S III) do you think you need to support? (the answer is) 156.

A developer would need to index and code for the different variables for 156 different devices just to cover 80% of the current connected devices in use. That sounds like a lot of work.

The Flurry data goes on to focus on more reasonable device coverage and estimated that if a developer simply wants their app to run on 50% of connected devices in use, it means supporting 18 devices. If you know anything about how app development, testing, troubleshooting, etc., works then you know this is a problem.

From the get-go my analysis has highlighted that developers would continue to commit the bulk of their resources to support iOS due to the minimal screen size and OS generation discrepancy that exists in Apple’s model. From the many startup briefings I am having with software companies in Silicon Valley, the iOS first mantra still rings true.

The next bit of data worth highlighting is around application engagement in iOS and Android. Flurry’s data highlights that even though Android has a greater number of people using the platform, iOS has a significantly greater application engagement level. iOS users engage an application 14 times more frequently than a user on Android.

Flurry even analyzed the data further and decided to look at application engagement not just of Android but by specific device brands running Android. The bit that stood out to me was the data around Samsung devices running Android. Flurry’s data returned that iOS (iPhone and iPad) users engage applications 7.7 times more than users on all of Samsung’s Android installed base.

This one has always been a puzzler for many of us because we constantly see the data (from many sources both public and private) telling us that iOS users are far more engaged with software on their smart devices. So with all the data pointing in this direction, we are faced with the question of why? I attempted to shed light on this with my column on iOS and sophisticated simplicity. My core conclusion is that iOS makes it easier to engage more with the software, but this point is subjective so let’s look at more data.

The Flurry data should shed some critical light on the development challenges facing many developers. The bottom line is for developers this is an issue of massive strategic proportions. comScore also shared some of their data, also targeted at developers, with the goal of highlighting some core differences between Android and iOS customers.

The main point I found interesting in the comScore data was their findings that the extremely high satisfaction rate of the iPhone leads to much higher device loyalty. Something I believe many in the media who write their famed “I’m switching” articles fail to realize is that the mass market simply doesn’t change for change sake. If they are happy and satisfied, then churn is rare.

Another bit of interesting data is related to the average income of consumers of both platforms.

As you look at the chart above, you may be tempted to look at the lower part of the Android graph. That isn’t the one I want to focus on. I want to focus on the bottom part of the Apple graph. If you would have seen data going back a few years that looked at average income per platform, you would have seen that most Apple users skewed higher overall on the average income level. What we are now seeing is the iPhone growth, which led to 3.5% gains this last quarter, and caused Android to lose 1.3% market share, being a result of Apple growing their share of the lower end of the market. So what do you think will happen when a new iPhone comes out and the iPhone 5 becomes $99?

The Flurry article brings up an important point facing small to mid-size developers. Where should the focus their time and financial resources? This group is where true software innovation often comes from. Rather than spread themselves thin supporting a fragmented device universe, it seems wise that they focus on the customer base and platform which will reward them financially so they can keep innovating. This decision is of monumental strategic importance.

Speaking of Tablets

I spoke at the TabTimes conference in February, but I also spoke at one in November in New York. The February video will be up soon but in the meantime I wanted to share some highlights from the November conference. Also, we are exploring some things to do with video for our readers here at Tech.pinions. I happen to own fancy video equipment, so we are interested in ways we can use video to add some new dynamic elements for our readers. So please share any thoughts in the comments section.

Why Tablets are Reinventing the PC

Touch as the Foundation of this new Paradigm

It all Comes Down to the Ecosystem

Apple is the World’s Most Valuable Player

As you may recall, the late Steve Jobs was said to have a reality distortion field in the way he saw the world. It was articulated that Steve would create alternate realities which were actually distorted realities. Since his passing his reality distortion field still exists but it has moved from inside Apple to outside Apple. Mainly to the many on the street and the mainstream media (just looking for headlines) who have caught the reality distortion field syndrome and now live in a reality distortion field and believe in a reality that does not exist.

I wrote two articles that should help any smart person understand the landscape of the tech industry. The first one was titled What Tech Company is More Healthy Than Apple. The second I wrote yesterday called Google or Microsoft? That is the question. It is designed to give you the perspective of the landscape from an OEM (not named Apple) shoes and the immense challenges that lie in front of them. If you read them both in succession, I do not personally see how you walk away with any doom and gloom scenario for Apple.

However, even more data came out today proving that most outside observers and naysayers have caught the reality distortion field.

Fortune today released their list of Worlds Most Admired Companies. This is not a list of just tech companies but simply of enterprises on a global level from every field. This work and research is done in conjunction with the Hay Group and it surveys 15,000 business executives and directors to rate their peers in several different category. To use an analogy, this survey is like ones in sports where athletes vote for other athletes they think are the leaders in certain categories.

The result is in. The global industry professional audience has voted Apple the MVP of the business world. The Hay Group, in conjunction with Fortune, found that Apple is the world’s most admired company. Apple came out number one in the following four categories:

– The Worlds Most Admired Company
– The Worlds Most Admired Tech Company
– Most Admired in Innovation
– Number 1. in product quality

People say Apple is doomed, people say they have lost their “mojo” but those in the industry running actual fortune 500 companies disagree. They still say Apple is the gold standard on many levels. This is just more fuel for the fire that the reality distortion field has moved from Apple the company and out into the views of those who have lost the ability to think critically about Apple.

Fortune’s own description in the listing should be enough to burst the reality distortion field.

it (Apple) remains a financial juggernaut, posting $13 billion in net income last quarter, making it the most profitable company in the world during that period.

Apple is the most profitable, can’t make enough products to meet demand, is the most admired by its peers, yet it is doomed. Reality distortion field.

The facts don’t line up with the picture being presented by the street and the headline seeking mainstream media. And the most unfortunate thing about it is that it is affecting many who aren’t stuck in the reality distortion field. Apple’s shareholders.

There are many good people who understand that Apple is positioned for success and made wise long term decisions to have Apple stock as a part of their retirement funds and who either depend or will depend on that money some day. In my opinion, Apple’s shareholders are being punished for being wise. I do not own any Apple stock but if I did I would be livid at the fact that all the evidence in terms of health and signs of long term success favor Apple. Yet the Street continues to play the game and live in the reality distortion field. The media is to blame as well because as unfortunate as it is they can to a degree, alter public sentiment in incorrect ways simply because they have the desire to chase page views with a catchy headline full of half-truths.

We can only hope that wiser minds prevail but one thing is certain. Those who run and manage billion dollar companies find Apple the gold standard. We can only be glad that those living in the reality distortion field don’t run those billion dollar companies or our world would really be in trouble.

Google or Microsoft? That is the Question

If you are a technology company—not named Apple—then the answer to this question is vital to your future. The fact of the matter is that all technology companies, other than Apple, do not solely control their own future. Samsung, HP, Acer, Dell, Lenovo, LG, HTC, Nokia, etc., must rely on either Google or Microsoft for their operating system for the smartphones, tablets, and or PCs they choose to make. So the answer to the question, Google or Microsoft, is as strategic as it gets. Making a wrong decision could mean the end of your company.

Google

Right now Google’s platforms are the hot ticket item. But they come with a price, or a lack of a price for that matter. Google would prefer that all hardware that runs their software be virtually free. That may seem counter to the logic of them releasing a ChromeBook for $1200 but that is simply a strategy to take advantage of a particular market and get early adopters to pay them for their own market research. It is actually quite brilliant.

The long game, however, for Google is one where their services are running on every device and getting there requires the hardware be practically free. This is the world I firmly believe Google wants to see happen. So if I am one of the aforementioned brands trying to make money in the hardware game, I should be mindful of betting my future on a company who would rather me not make any money on my hardware. Also, Google gets almost all of the ad revenue that comes through Android devices. In Samsung’s case, they get 10% but the rest goes to Google. Who really makes money in this case? If you say Google, you are correct; this is part of their end game. How do others make money?

Microsoft

Microsoft on the other hand genuinely wants their hardware partners to make money. This is why they offer a healthy premium on the license of their software. The assumption is that Microsoft software adds value and is therefore valuable. That value should translate into a reasonable price willing to be paid by the mass market in order to capture that value. This was how it worked for nearly two decades in the peak of the PC era so is there reason to believe it will not work again with devices in the post-PC era?

The challenge with Microsoft is that their ecosystem, mainly in apps, is well behind that of Google. To put all your eggs, or even most your eggs, in Microsoft’s basket brings with it the assumption that they will yet again get it right someday, after many tries. Maybe they will.

The Universal Downside

There is a downside to licensing someone else’s software as the main software interface your customers will be using. Actually there are several. First the hardware manufacturer does not actually own the end consumer. This creates platform loyalty but not hardware loyalty. In this scenario, the next time a consumer needs to by a new PC, smartphone, or tablet, they may stay loyal to Microsoft or Google, but said hardware manufacturer must now compete for that customer each time they go back to buy new hardware.

Building out the downside of platform loyalty for the hardware manufacturer comes with it the other challenge of licensing someone else’s software. Your competitors may also license that software which makes standing out or differentiating much more difficult. It is this differentiation, which must go beyond hardware, that can begin to create customer loyalty. But when all your competitors, not named Apple, are running the same software as you, it makes it difficult to stand out in a crowd. I call this the sea of sameness and its getting bigger and deeper every year. Standing out in the sea of sameness is the biggest downside of licensing someone else’s software.

This is why there must be and there will be consolidation in the hardware side of this industry. The current players can not keep going the route they are going forever. Companies may make a go at building their own OS, but they risk losing time and resources to the dominant players. The platform providers like Microsoft and Google, may also start making more of their own hardware, which will complicate matters even further and cause consolidation to happen even faster.

These are certainly tricky waters to navigate and for those who have done this before they are in uncharted territory. The companies that survive the turbulent waters of the sea of sameness will either sail through or sink with the flag of Google or Microsoft mounted high on their mast.

The Invasion of Cheap Tablets

Given the massive market demand for tablets and the fundamental shift in consumer sentiment from PCs to tablets, it was only a matter of time before the tablet race to the bottom took place. I wrote about how this was happening in China at rates hard to fully comprehend. It looks like 2013 will be the year cheap tablets start showing up in numbers at retail in mature markets like the US and Europe.

The precedent for these products was already set by the Nexus 7, which has likely been the most successful Android tablet to date. The last data checks I saw at the end of 2012 suggested that the Nexus 7 was selling around 1 million units a month. That may have slowed as of late but I’m sure it is still selling well.

It seems that the sweet spot for Android tablets has been in the sub 8-inch screen size and I don’t see that changing in the short term. At MWC 2013, Samsung and HP have just added more flame to the fire of Android tablets. Samsung is coming out with an 8-inch version of their Note product line and HP is bringing their first Android tablet to market with a 7-inch device called the Slate 7. Pricing and availability is yet to be disclosed on the Samsung Galaxy Note 8.0 but I expect it to be in line and most likely slightly less than the iPad Mini. If it costs more, it’s DOA. HP on the other hand chose to be very aggressive with the pricing of the Slate 7 and will bring it to market at $169 and will be available in April. These are the first of many Android tablets I expect to see in 2013 with 8-inch or smaller screens and at lower cost price points.

The Role of Cheap Tablets

Believe it or not, I believe these products have an important role to play. They will help mature the market for tablets and they will bring low-cost entry points to the Internet into the home.

The market for tablets is still immature. Even though there are now well more than 150 million tablets (mostly iPads) out in the wild, there are still many consumers who have not owned a tablet nor have they deciphered what their needs, wants, and desires are with such products. This understanding is a critical part of the adoption cycle and it requires an understanding of what a product means to a consumer. This is also something that only comes with ownership. Having a plethora of choice around tablets, from small to large as well as varying price points, is a healthy part of product market maturity.

The other role I think these devices play is one of low-cost Internet access points. I’ve stated in previous columns my belief that some tablets in the home will not be personal but will be communal. They will be products anyone can pick up and use and will be likely not tied to one person but perhaps more tied to general entertainment, media, automation, or other general cloud services relevant to the household as a whole rather than one specific person.

Last Friday I pointed out how I am doing this now with more than a dozen tablets in my own home. Everyone has their personal one, which they have customized but since we don’t carry them around with us everywhere, we have communal tablets one can use for web browsing, streaming media, playing games, etc, lying around the house for free access. Low-cost tablets will make experiences like this more a reality.

Winners and Losers

The arrival of low-cost tablets from major brands (especially legacy PC ones) will certainly impact many players in the technology industry–some more than others. In the case of HP, I found this strategy interesting because one of the things a low-cost sub 8-inch tablet does is it continues to emphasize dependence on a traditional PC form factor. By keeping this particular tablet in the low-end both in terms of price and experience they are not in danger of cannibalizing their PC sales, even still, others may cannibalize it for them. Regardless, I actually think this is a smart move for HP in the short term. They need to figure out their software and services add value on top if they want to stay relevant in the long term.

Samsung will keep doing what Samsung does, which is offer a wide range of devices in all shapes and sizes and price points.

The real loser in an invasion of low-cost tablets, in my opinion, is Microsoft. They are just getting started and they have no intention of allowing their customers to compete in the lower end of the tablet spectrum (they don’t even have a 7” tablet offering near coming to market). I expect these low-cost tablets to hurt the adoption of Windows 8 tablets initially but not necessarily in the long run.

Of course that leaves Apple. I’m sure the Apple naysayers and critics will look at all the cheap tablet buzz and assume that this means danger for Apple. I certainly don’t believe that is the case. Apple has no intention on competing with the lowest end of the market. They chose to compete on experience and have proven they can do it extremely well. I also believe they don’t want to price themselves out of the market and will do anything necessary to keep their products affordable. There is a market for cheap but there is also a market for high-value products which are affordable. There is a big difference between cheap and affordable. This strategy alone for Apple can keep their profit share high even if they have smaller market share.

We will see how this all plays out. I’m not sure the degree the current tablet forecasts took into consideration the size and scale of the potential cheap tablet invasion. My gut tells me all the current tablet forecasts for 2013 are still much too conservative.

Live the Future Now

By nature of what I do for a living, I spend a lot of time thinking about the future. As a part of that exercise I like to employ a tactic I call live the future now. I’ll explain. Part of how I attempt to create a vision for the future and analyze opportunities and weaknesses of solutions is to try to use existing technology to do things I believe we will do in the future. This is why I am currently using tablets in and around my house in ways that seem unorthodox, or “crazy” as some have told me. I’m trying to get a sense of how these devices may evolve. For example I believe someday a tablet computer will exist in every room. They may also be communal and thus may be mounted on walls, refrigerators, in bathrooms, etc. This is why I literally have 15 tablets in some use around my house (or perhaps that is simply how I justify it).

In the early 2000’s, quite a bit of my research focus was the digital home. I spent a lot of time piecing together solutions in an attempt to stream HD videos wirelessly to all my displays in my house (which was 4 at the time) because I knew wireless whole home video would someday be a reality. I used any and all technologies I could get my hands on as I attempted to build the most connected and automated digital home possible. I basically used my own house as a lab. Interestingly, 10 years later and we still aren’t close to mass market commercialization of the digital home I envisioned and tried to create. It was a painful experience trying to create this digital home back then and many man hours were spent connecting DMAs (digital media adapters as they were called), home theatre PCs, 5ghz proprietary line of sight video points, beam antennas, and many more technologies.

This exercise was valuable and it was all based in an attempt to live the future now so I could learn and observe the potential of certain experiences. The point, however, was an attempt at technological ethnography of the mass market of tomorrow.

Understanding the Mass Market of Tomorrow

One of the most critical things any company can do is seek to understand the needs, wants, and desires of their customers of tomorrow. This is generally why RND labs exist. A key component of any RND lab are individuals with a vision of how the mass market may use their innovations based on tomorrow’s customers needs, wants, and desires. This is often done very poorly by many technology companies.

Understanding what the current mass market needs is important for the short term. Understanding the mass market of tomorrow is important for the long term. This practice is at the core of what we do at Creative Strategies, and it is why I engage in the practice of attempting to live our technological future in the present as much as possible.

Different Approaches

There are two approaches a company can take to understand the mass market of tomorrow. One is to do it solely inside the companies walls. Apple does this for example but so does Microsoft and many other technology companies. This model is traditional but as I pointed out above, requires incredible insight and understanding about the future market in order to know what to commercialize and what to scrap. Apple is perhaps one of the only companies who has continually done this well. Some companies may actually test their products with large groups of employees in order to broaden their sample size as well. Palm used to do this, and I am sure many others do this as well.

The other approach, and the one I think is extremely interesting, is Google’s approach. Google does their RND out in public. ChromeBooks and Google Glass are two prime examples of this. These products may have mass market potential, or they may not, but a great way to find out is to test it with people and observe their behaviors and translate that into learnings. Call it market research with the help of the broad public. Things the market likes, keep. Things the market doesn’t like, don’t keep. Testing future products on actual future consumers and learning from their observations is an extremely interesting way to do future use case research. I appreciate that Google does their RND in public. I also applaud their ability to get people to pay for the privilege of doing their homework for them.

Most consumers don’t know what they want until the see it or experience it. It’s extremely hard in internal RND labs to truly understand mass market sentiment. This is why I think Google’s approach is so interesting. Competitors can learn from this and adapt, which is a risk. But I like the direction they are taking. Regardless of your opinion of the products themselves or Google, I like the idea that Google is getting back to its roots.

Apple’s Penchant for Sophisticated Simplicity

I mentioned in an earlier column that I had finally figured out why iOS is the mobile operating system of choice for me. I take the time to objectively look at all the flagship devices on the market. I don’t just use these products for a day or two and then form an opinion but rather I use them as my primary phones, tablets, PCs, etc., for at least a few weeks and sometimes more. However, for me, all roads lead back to iOS. I always go back to my iPhone or iPad. None of the flagship devices I use can keep me from going back to the iPhone or iPad. I think I finally understand why.

Simplicity

Sophisticated simplicity is the term I think of when I think of iOS. This is true also of OS X in my opinion but for today I am focusing on iOS. This is perhaps why so many non-tech savvy consumers appreciate and choose the iPhone. Believe it or not there are billions of people on the planet who are not in search of the next big thing in technology. Rarely are the masses looking for the pinnacle of innovation in a product; more often they want things that just work and make their lives easier. To put it succinctly the mass market favors convenience over cool. If that product happens to be incredibly innovative then so be it. But it is not the fact of innovation by itself for which they buy it but rather the problem it solves for them. The mass market hires technology products for reasons that are largely based on convenience not specs. They will favor the technology that helps them get their tasks done in the most convenient, efficient, and simple way possible. Sometimes that task is entertainment, sometimes it is productivity, sometimes it is communication, but the point remains that for many, convenience is what is valuable.

The simplicity of iOS translates into convenience for me and my many mission critical tasks. Yet its simplicity provides a feeling of sophistication that allows me to get very complex things done in an efficient manner. Simple solutions require sophisticated technology. In my opinion, iOS is both.

Sophistication

I spend as much time away from a desk as I do at a desk. For me, it is critical that I stay as productive and efficient as possible while I am mobile. No platform that I have used in recent years has come close to iOS in this regard. It is important to point out that this was not always the case for iOS. In the early days of using the iPhone, I still carried a Windows Mobile device for my more work/productive tasks. Apple caught on and evolved iOS in a way that it is now invading the workforce at unprecedented rates. iOS is not just simple to use it is also extremely sophisticated.

Some thoughts from Steve Jobs at the launch of the iPhone bring clarity to the sophistication of iOS. When Steve Jobs announced the first iPhone, he explained how iOS was based on OS X and because of that it ran desktop class applications. This would explain why time and time again we hear from developers that they are overwhelmingly happy with the quality of applications they can write for iOS. More importantly these applications are extremely sophisticated. They are not simply dumbed down mobile versions of desktop software, but an entirely new class of software all together.

Because I am rarely at my desk doing real “work” it is essential for me that I am able to fulfill my job role any place, any time, and with any device I have with me. The bottom line is I don’t always have my notebook, and I don’t always have my iPad with me. However, I always have my smartphone with me. With every single device and mobile OS I have evaluated, I have never felt as productive or efficient on the go with regards to my specific job functions as I do with iOS. As much as I enjoy and appreciate evaluating other other platforms and as much as other platforms have some things that I truly like, at the end of they day I will choose the device that makes my life and my job easier. For the kind of work I do and the manner in which I get things done, other platforms I’ve tried require more work and more time than it takes to do the same thing on iOS. That alone makes the choice easy for me. I don’t want to work for my smart devices, I want them to work for me.

For Me and Maybe Not You

Now I’m sure at this point many passionate fans of other platforms want to point out all the reasons why their platform of choice is better than mine—but let’s remember one thing. Just because your favorite color is green doesn’t mean mine has to be also. Just because you like BMWs doesn’t mean I have to as well. Insert any analogy you like here. The best device is the one you chose for specific reasons unique to your wants. The best device for me is the one that meets my individual needs, wants, and desires. Yours may be different and that is ok. We don’t live in a black and white world and I hope we never do. I fully acknowledge and appreciate the benefits of other products. I also know no device is perfect. But for me, time after time, device after device in which I put through the the paces of my personal life and workflow, all roads lead back to iOS.

Putting Tablets to Work

Tablets are rapidly becoming an integral part of many work forces. Fortune 500 companies are deploying them in the tens of thousands and small business everywhere are integrating them into their workflow. The myth that you can’t be productive on a tablet or do “real work” has been de-bunked. In the early days of computing smart people got together and discussed how the desktop computer could be used in work environments to transform the work place and bring analog processes into the digital world. It is for that reason that I am pleased to be involved with the Tablet Strategy West conference happening San Francisco on Wednesday February 20th. Tablets have the potential to impact computing in ways the PC never could. It is for this reason conferences like this are important.

I will be speaking at this event and giving a state of the industry related to tablets. I’ll discuss trends, adoption cycles, key business use cases, and more. The conference organizers have been generous enough to offer an 80% discount to the first 20 or so Tech.pinions readers who register. So for those of you on the West coast, if learning and discussing the latest regarding tablets and their role in the market is of interest, then I invite you to come. And of course I’d love to meet and talk with any of our readers, so if you come, seek me out.

Here is the link and use the promo code TP to get an 80% discount.

They will post videos of my session after the event, so even if you can’t make it, I will link to the videos so you can watch my presentation. Hope to see you there.

Should Apple Make A Larger iPhone?

There has been chatter of late around Apple’s plans for the iPhone. Some suggest they need to make a more affordable version of the iPhone. Notice I didn’t say cheap. The logic for a more affordable iPhone is that it will open the door to new customers, especially in emerging markets, who can’t afford the high price of an unsubsidized iPhone. There is a lot of merit to this argument and if done right it can be a healthy addition to the iPhone product line.

The other speculation as of late is that Apple could make an even larger iPhone than the current 4” iPhone 5. This would fall into the larger phone category (some call it Phablets) and would give Apple a competitive iPhone for those who desire larger screens in the 4.7-5.5” range. Apple making a larger iPhone is a newer element to the discussion but one that is worth some thought for those of us who analyze competitive trends.

No matter how you slice it, I believe the time has come for Apple to expand the current iPhone line. This would mean releasing two or three current generation devices in the same year each targeted at different audiences. Apple does this now with the Mac line where they have 11”, 13”, and 15” products in their lineup. Arguably they also do this with the iPad line offering both the 4th generation larger screen iPad and the iPad Mini. I believe it is time this same thinking comes to the iPhone.

Although I think the idea of a more affordable iPhone is compelling, if I had to choose the strategy for either the more affordable iPhone or a larger screen size version for the first product to expand the lineup, I would choose the larger iPhone.

My reason for this logic is the ecosystem. As we have learned from Android phones, focusing on the low-end lowers engagement and ecosystem investment. Those who have cost constraints simply don’t spend as much in an ecosystem. A large question looms as to whether iOS would lead those in the cost conscious category to higher engagement or ecosystem investment. But the evidence we have so far is that the lower end of the market uses these devices very different than the tiers above them. And not in ways that lead to loyalty or deeper ecosystem investment.

Ecosystem investment is important to Apple. Horace Deidu and analyst at Asymco tweeted out the following data yesterday:

Speaking of new legs on the stool, in the last quarter iTunes and Accessories generated as much revenue as the Mac.

— Horace Dediu (@asymco) February 10, 2013

Also in a tweet earlier than that one Horace estimated that gross margin for iTunes is now 15%-17%. This is why for the current growth trend and competitive strategy for Apple, focusing the iPhone lines on segments who can and will invest in the ecosystem is important.

An expanded current generation iPhone line not only gives more customers a path to Apple’s door, it gives more customers an opportunity to invest in Apple’s ecosystem.

Now turning our attention to the topic of Apple making a larger iPhone. I wrote on Friday about my experience thus far with the Galaxy Note II. I made many conclusions in that article and the primary being that larger phones, those above 5” are actually more tablet like than phone like. Yet the value of a pocketable phone/tablet is apparent. The question that needs answering is whether or not the market for larger phones (Phablets) is big enough for a company looking for mass market products—like Apple— to care about. I believe the answer to that question is yes.

Is The Market Large Enough for Large Phones?

The Galaxy Note I sold about 10 million devices world wide in 2012. They will most likely sell at least 20 million this year and most well reasoned analysis I have seen project a steady growth trend for these larger size smart phones. The reasons are simple.

For many markets people can’t afford a smart phone and a tablet. For many markets, especially emerging ones, a product that can merge the benefits of a phone and a tablet is a compelling value proposition. We all know that the phone capabilities of any device is simply just an app, but the portability or pocket-ability is important for a device that is with us 24/7. This is what makes the larger phones a legitimate category. Just how big a percentage of the overall smartphone market large phones are, is a project I am still undergoing. I believe it is larger than 10% but how much larger I am not yet sure. Even if it is only 10% of the overall growing smartphone base of the next few years, it would be in the hundreds of millions.

For more analysis on the value this form factor brings to market read my column on the Galaxy Note II.

Room to Innovate For Larger Devices

Using the Note II, and for that matter the iPad Mini, has led me to think about those form factors as unique sizes to solve challenges for one-handed operation. 5-7” devices, whether phone or tablet, are still manageable to hold and do some operation with one hand. Samsung included some software around the keyboard and keypad to make one-handed operation easy but the device is still to large for full ease of one-handed operation. I genuinely believe this form factor presents some unique opportunities for innovation.

One way could be by using voice, and in Apple’s case Siri. Our research has continually returned many of the primary use cases for Siri not just being search but also automation. Set reminder, add a calendar event, post to Facebook, send a tweet, set an alarm, etc., are all examples of common automation tasks from heavy Siri users. One simple way to address some of the issues with one-handed operation on larger screen devices will be around voice.

Another is sensors. As sensor technology evolves we will be able to embed these sensors into the bezel of the larger devices. The Galaxy Note II was almost impossible for me to reach the back button with just one hand. The back button is a key function of Android and is needed throughout much of its UI. A sensor solution could allow me to have a back button function by simply taping the side of the device. Scrolling was feasible but not ideal on the Note II. This is also a use case I found was capable with the iPad Mini but not as much with the iPad. Sensors could be embed into the sides of the device and allow a slide of the finger down the side to act as the scroll function. There are many more opportunities for sensor control than I can get into here, but I believe this is an area for innovation and improvement. By Apple innovating to solve some one-handed operation problems for a larger iPhone, they can leverage those innovations for iPad as well.

In a market the size of smartphones, staying competitive will mean offering a range of devices. The smartphone market is mature enough that it has begun to segment. An iPhone designed to serve the market that wants a larger screen, which can add to more productive and more media rich experiences in a pocketable form factor, is a good move in my opinion. One that Apple could do right and again put them years ahead of the competition.

The Galaxy Note 2: One Giant Step for Android Phones

If you have read much of what I have written here or at TIME, then you may be surprised at some of the conclusions my analysis of the Samsung Galaxy Note 2 have yielded. I have not been shy about my affection for the iPhone. The iPhone is by far the most elegant, the most simple, and the most sophisticated mobile phone I have ever used. However, to keep a keen eye on the mobile landscape, I try and use all the flagship Android phones for a period of time as my primary smart phone. Up until the Note 2, I have never felt that Android, or larger phones for that matter, every really presented any significant value to me over the iPhone. That is until the Note 2.

I wrote a somewhat detailed analysis of Apple’s 4” iPhone vs. Android 4.7” phones last year. My conclusion from that analysis was that an Android phone in the 4.5-4.7” range did not present enough value for the tradeoff of one handed navigation. My conclusion is different since using the Note 2.

In that analysis I did with the 4” iPhone vs. a 4.7” Android phone I looked mostly at how information was presented. I looked at the web, email, twitter, FB, etc., and found that in most cases the amount of information displayed between the two OSes and screen sizes was roughly the same. The only major difference was that on the 4.7” screen the information was slightly larger. Again my takeaway was that although most information was larger, I didn’t see the value in the tradeoff of one handed navigation and or the robustness of iOS. It simply wasn’t a big enough difference in my opinion. That analysis led me to the conclusion that Android devices between the range of 4.5-4.7 inches were not worth the trade-off of one handed navigation.

Size Does Matter

This realization became clear to me in comparing the Samsung Galaxy GSIII to the iPhone. I used the GSIII for a few weeks but had the same feeling as I did when I compared the iPhone 5 to the Galaxy Nexus. Conclusion being the value of the larger 4.7″ screen was lost on me and it wasn’t worth the trade-offs. However, the Galaxy Note 2 is a different story.

After a few days of using the Note 2, I was struck by how good the experience of Android was on a phone over 5 inches. Oddly enough, it was a similar feeling to how I felt with the Nexus 7. Then these two experiences collided in my mind and I made a realization. I genuinely dislike Android on devices smaller than 5-inches and larger than 10-inches. Yet I like it a great deal on it on devices between 5-7 inches. It is an anomaly I know but that is exactly how I feel. It is almost if Android’s clearest differentiated value over the competition is in the 5-7 range. Both size ranges where iOS is not. Granted the iPad Mini comes close to the Nexus 7 in size, and the iPad Mini is significantly better than the Nexus 7 in my opinion, but I can see why people like and choose the Nexus 7. It is a good value and good experience for the price. Not the best, but for the price, good enough.

The Note 2 size range, however, feels to me like the area where Android really has a clear and distinct differentiated advantage. Again, part of this has to do with the fact that Apple does not offer an iOS device in this range so it is hard to compare. But its still a significant point from a competitive analysis standpoint.

The One Handed Mode Tradeoff

The strongest argument against these size phones is the one-handed operational trade-off and it is a very strong point. If one handed operation is important to you then stay away from devices 4.5-inches and above unless you have Lebron James size hands. But the key conclusion I made is that the trade-off of one-handed operation feels like less of a trade-off with the Note 2 than with any other 4.5-4.7” Android phone I have used. Any phone larger than 4.5” is going to require a trade-off of one-handed operation anyway so why not just go larger and get more value.

Interestingly, I had discussions with folks who owned the Note 2 and specifically many women. They told me that since they have smaller hands, most phones were already hard to use with one hand and therefore they simply wanted the biggest screen possible because they found that valuable. Many were overwhelmingly pleased with the Note 2. This makes my point that if one handed navigation is not that important to you then the value of the screen size experience of the Note 2 is significant.

Although much of my analysis of the 4.7” screen holds true with the Note 2 about information displayed, it is with the Note 2’s size range where bigger actually does feel better. Take Facebook for example. Comparing the Facebook app experience on the iPhone 5 vs. a 4.7” Android phone yields only slightly larger photos and media making the size difference moot in my opinion. However comparing the Facebook experience on the iPhone 5 vs. the Galaxy Note 2 yields much larger photos and media which resulted in quite a different experience. An experience that was definitely more tablet like than phone like.

Web browsing is another good example. I pointed out in my screen size analysis the web experience was nearly moot with the iPhone 5 and other Android 4.5-4.7” devices. However, with the Note 2 the difference in web browsing was significant. Not only were mobile sites larger and easier to read but so were full desktop sites. In fact with the Note 2, I set it to always bring up the desktop site. Never before have I done this on any non-iOS devices. Here is a side-by-side screen shot to scale of the Note 2 and the iPhone 5.

It was examples like these where the bigger screen truly brought value. What really struck me is that the experience with the Galaxy Note 2 is more tablet like than phone like. This is probably a key point in why I think this form factor is so interesting. It is also one that makes it very hard, for the first time, to actually compare an Android phone with the iPhone.

Samsung has also done some interesting things in software to enable more ease of one hand use which led me to the conclusion that larger phones present the most opportunity for new hardware and software innovation.

Conclusion

In all the cases where I found the value of the Note 2 clearly differentiated was with regards to media. Photos, videos, games, social media apps, and other places were media was a key part of the experience. This is a key point because the use cases I identified where value is clear in a giant phone are exactly the ones that matter the most to the mass market.

My personal conviction is that the value of the 5” plus phones are worth some of the trade-offs of one handed navigation where 4.5-4.7″ devices are not. The primary point being that for devices where one-hand navigation is already difficult like ones above 4.5”, consumers are better off going larger in my opinion.

5″ smart phones are an are where a lot of innovation in hardware and software exists. Perhaps more so than any other smart phone form factor. Particularly around voice automation, smart sensors, gestures, and software.

So am I leaving the iPhone? No, for reasons I finally believe I can articulate and will share in a column soon. However, after using the Note 2, I can honestly say it is the best Android phone I have ever used and the only one I could identify tangible differentiated value.

For some deeper audio context to this column, click the play button below to listen to my interview on the Galaxy Note 2 and whether Apple should make a larger phone.

I’ll Take My Hardware With a Side of Software

Despite some people loathing CES, I actually happened to enjoy the show this year. I go to CES mostly to meet with our clients, gather data and market intelligence, and search for trends. CES always includes hidden gems; you simply have to know where to look.

Two things stood out to me as major themes at CES this year.

The Internet of Things on Display

We have talked about the concept of the Internet of Things for several years now. The Internet of Things is the idea that the vast majority of our electronics will be connected to the Internet and/or other nearby devices.

A refrigerator, for example, may have a touch screen on the door and be connected to the Internet, allowing you to remotely access information — things like inventory, temperature, whether or not you have what you need to make a certain recipe. Another example is the Nest thermostat, which is a connected thermostat that allows you to remotely manage your thermostat from your smartphone, tablet or PC. The high-level view of the Internet of Things is a world where nearly every electronic device we own will be connected to something.

In years past, this idea was just an idea — something we said was coming. This year, however, was the first year when I could actually say the Internet of Things was on display. I saw examples of nearly every type of electronics device — from coffee makers, ovens, fridges, cars, clocks, stereos, exercise equipment, and my personal favorite: an LED lightbulb with a wireless speaker built in. All of these devices were connected to the Internet and allowed you to interact with them, store data, access data and more. This was the first year I could see the Internet of Things becoming reality, and it is very exciting for us industry observers.

I’m half-joking but I can’t wait for the year when we see a connected toilet and companion app.

Hardware with Software Accessories

The reality of the Internet of Things coming to fruition brings with it perhaps one of the most interesting developments: the role of software. What become increasingly evident with all the connected devices I saw and played with at CES was that nearly all of them were made significantly more usable and valuable through the use of companion apps for smartphones or tablets.

Some I have spoken with position devices such as connected watches or even the Nest thermostat as accessories to your smartphone. The logic is that because your smartphone is the terminal that all these devices leverage to really make them smart, then the phone must have the more important role. This is true to some degree, because there is no point of having all these connected devices if the experiences are limited to the hardware itself. However, I would still position the hardware as the stand-alone device adding value, while the app on your smartphone is actually the accessory.

At CES, this hardware-software model was on full display in the area of smart health and personal sensors. On the show floor, the pavilion for the smart/connected health area was the biggest I have ever seen it: Several dozen vendors were there showing off the latest in smart health. Every single smart health and body sensor product I got a demo of or gathered info on had a companion app that ran on a smartphone, making the hardware more than just hardware.

This is the world we are headed toward. Because of the unrivaled momentum and rapid worldwide adoption of devices like smartphones and tablets, we have smart devices with us at all times. They perfectly function as the platform to drive the interaction with the hardware around us.

All hardware will be made smarter through not just the use of connected chipsets and next-generation parts, but rather through the applications that add to their value.

What Tech Company is Healthier Than Apple?

When it comes to understanding the stock market, I acknowledge I am no expert. I am not a financial analyst and my research is not directed at those making stock bets. Yet if I was to put myself in the shoes of a financial analyst or someone looking to make long term bets on tech companies, I would have to wonder what company is a better long term bet than Apple? In my opinion there isn’t one.

I do industry analysis and not financial analysis, however, my work often results in very company specific analysis. I do quite a bit of scenario planning as it helps guide our trend and strategy reports. I can say with quite a bit of confidence that as I survey all the current players in the technology industry, Apple is the one I worry the least about. In fact my only concern for Apple is that they are having trouble keeping up with demand. Their earnings call revealed that Apple was supply constrained in almost every product category. Apple could not make enough products fast enough.

What other company has this problem? Apple has this problem in the tens of millions of devices per quarter range and in the foreseeable future hundreds of millions of devices per quarter. The level of scale for the precision engineering of Apple hardware is unprecedented in consumer electronics. I can’t think of a single more elegantly designed piece of hardware that was mass manufactured to the degree of the iPhone.

I remain confident, as I look at the strengths, weaknesses, executive management, competitive landscape, and the core strategies of all the companies in the technology landscape, that Apple is among the few I am certain will still be relevant and in the game 10 years from now and for much longer.

Others Going Vertical

A question I look at as I analyze specific companies is who is building a strategy to be a long term company. Many tech companies develop strategies and create corporate vision in the 3-5 year range. Many also don’t even go that far as they are only planning 1-2 years out. There are a rare few companies who strategize a bit longer and Apple is one of them.

Yet if you look at some of the core strategies of those who I think are thinking longer term, you will note that they are headed down a vertically oriented path—just as Apple is. Microsoft will inevitably get into more hardware business, Lenovo has their own smartphone OS in China, Samsung will invest in its own middleware solution and Google owns a smartphone and tablet hardware company.

Companies today are faced with the reality that a hardware only business model is not sustainable. That business model always results in a ruthless race to the bottom. Companies who can add unique value at the software and services level can protect their hardware efforts. In mature markets the vertical model is the most sustainable and defendable model there is. So it is easy to see why others are on the verge of going fully vertical the same way Apple has been for decades. Which brings up an interesting point and it gets to the question of my columns title.

Almost every major company who is thinking long term is headed in a vertical direction. This is a model that Apple has used since the beginning. To put it another way, Apple has decades of experience executing the very model that many companies are hanging their future on. This does not mean that others will be successful implementing a vertical model, only that they believe it is the way forward.

There is a massive land grab and Apple does not need to own as much land (market share) as others in order to have an incredibly large and profitable business. If Apple simply acquired and maintained 10% of the global smartphone market (when it is saturated) they would ship five times as many iPhones as they currently do. I believe Apple will get and maintain a larger piece of the global pie for smartphones and tablets but I use that number to make a point.

I recognize that investors have a distorted and mostly short term view of the world. So I can’t fault them for being short sighted. But I would encourage them to dig deep down and ask themselves what tech company is more heathy than Apple and better positioned for success in the long run? If Apple isn’t still on the forefront of innovation then who is?

At the launch of the first iPhone, Steve Jobs said this:

“Every once in a while a revolutionary product comes along that changes everything”

Stop expecting Apple to make every once in a while happen every year.

Apple’s Transparency

I don’t hear the topic of transparency brought up nearly enough. I asked the question in my column today of what company is more healthy than Apple and now I ask what company is more transparent than Apple? The cost of being transparent is that inevitably you will expose some dirt. Most companies want to sweep dirt under the rug. But as I read the latest supplier responsibility progress report from Apple, it hit me that Apple is not just interested in exposing the dirt but actively trying to clean it up.

Now I know many tech companies do this but I have to emphasize that it is a very difficult problem and its not one that a company who is in a commodity race to the bottom would have the time or money to truly invest in. However, this most recent report from Apple released today included something that I thought was extremely interesting.

Take a look at the following core violations Apple found and the action taken.

The part that stuck out to me was that Apple terminated business with the supplier. This is more than just a small detail. Apple chooses suppliers for very specific reasons largely unique to a product or process. Often times heavily customized processes are in place at these suppliers for Apple’s products thus making a relationship with that supplier more like an investment. For Apple to terminate business with a core supplier could have significant supply chain ramifications. Replacing that supplier is also not an overnight process but takes time and more equity to get a new supplier up to speed.

This is interesting to me because if all Apple was interested in was a pure profit motive, they would not have taken an action like this.

Here was another one I found interesting on the topic of bonded labor or human trafficking.

Apple actively investigated and worked to resolve accounts of forced (slave) labor in factories that make their products. Again what does this say about Apple and their philosophy as a company? Are these moves a profit at all costs kind of action?

These kinds of things impact change of a positive nature. I know from many sources I speak with in the supply chain that getting a deal with Apple can literally change the fortunes of many overnight. Actions like this will hopefully help those companies bidding for Apple’s business in future product follow ethical principles in their business practices if they want a chance at Apple’s lucrative business.

Fascinating stuff and very encouraging. Obviously global supply chains are hard to manage and often filled with dark secrets most care to keep in the closet. We can only hope that continued work like this and greater corporate transparency becomes common practice throughout the industry.

Why RIM Is Not Dead Yet

I wanted to share some of my thoughts regarding RIM prior to them having their press event next week. I know there are many who have the opinion that RIM has been circling the drain for some time now and have counted out any rebound chances the company has. While I agree that the hills they face are steep, I am not ready to write their obituary yet. These are my reasons why.

The Sheer Size of the Mobile Market

When I give our platforms and ecosystems presentations to industry executives, investors, and at other public forums, the most common question I get when I talk about other platforms than the current dominant ones, is how many platforms can the market sustain. This is an extremely valid question, but it is one that I believe is asked with a backward looking view and not a forward looking view.

If we are using the PC industry as our example, then this question makes the most sense. There was one dominant platform—Microsoft—who owned the vast majority of platform share. If we look at the size of the market as well as where it was during along both the consumer adoption path and market maturity cycle, then we can explain quite a bit about why Microsoft was dominant, but also why at a certain point in time the door was open to other players. But the most relevant point on this topic was that during Microsoft’s dominance the market was both maturing, using Windows and more relevantly the Internet as the standard, but also not that large on a global scale. The market for PCs is in the hundreds of millions (and potentially shrinking) where the market for smartphones is in the billions. With such a large market it is easy to believe that a number of platform players can and will thrive as they carve out specific segments of the market to focus on.

As we are constantly observing, the one size fits all model simply doesn’t stand up in such a large consumer market and personal preference will only become more personal and specific to the end consumer the further down the adoption and maturity process that both smartphones and tablets go.

You Never Forget Your First Love

Our mobile market intelligence data continually points out positive sentiment toward RIM and the BlackBerry devices in particular. For many mobile professionals today, and even more millennials than you would think, they cut their proverbial smartphone teeth on BlackBerry devices. I can’t tell you how many times during our smartphone interview sessions with consumers we hear the words “I sure loved my BlackBerry.” Granted much of this sentiment was founded in the love of the BB keyboard that so many used for heavy text input. I believe we are past the point of the physical keyboard being desirable for the bigger sections of the market and we are yet to see what RIM intends to do with their hardware in this area. That being said, the level of positive sentiment toward BlackBerry devices is one that I do not believe can be discounted as I have a feeling that at the very least it will lead these consumers who share this sentiment to strongly consider BlackBerry’s new devices.

A Focused Opportunity

The opportunity staring RIM in the face is not the general mass market consumer, rather it is the mobile professional. A number of my colleagues in the field of industry analysis disagree with me and think RIM should go after the low end but I disagree. I feel RIM’s potential is the higher end. Many millions of global industry professionals switched to the iPhone from RIMs devices but also many millions still use them today.

Whenever I talk with folks still using RIM devices today, they acknowledge the fact that they are not the most cutting edge devices, but also point out that they are embedded into their workflow. Something that by itself is a key understanding. Just like how many professionals and corporate workplaces have come to standardize, depend, and are extremely comfortable with Windows and Office in their productive workflow. So are many of these same professionals committed and comfortable to RIM. These devices have helped them be successful and many have not changed yet for that very reason. Even though the iPhone and iOS is penetrating the workforce in rapid numbers I still think there is an opportunity for a second platform player focusing on the mobile professional. Android has not caught on largely due to security and Windows Phone is practically non-existent from current CIO surveys I have seen.

If RIM can bring to market a more modern and competitive solution targeting these individuals, I believe they can have a successful business by focusing on value to the high end on the front of hardware, software and services. Keep in mind this market may not be massive like the mass consumer market but I do believe it is lucrative.

Competitive Hardware and Software

This is the big IF. As I stated above targeting the mobile professional is the key but this hardware has to also be appealing from a consumer standpoint because these mobile professionals are also consumers at heart. So the saying goes “if you want to compete in enterprise, you have to compete for the consumers.” Its the BYOD effect in full swing.

RIM must bring competitive hardware to market. This was the root of Palm’s downfall in my opinion. webOS was an extremely competitive platform from an OS standpoint but the hardware was years behind. If RIM makes this mistake they will certainly go the unfortunate way of Palm.

Secondly the software experience must also be competitive and I don’t just mean a plethora of apps. I am becoming increasingly convinced that a solid list of quality applications is more important than a massive quantity of applications. I find every single app store shopping experience today much too cluttered and difficult to make decisions on which app to install or buy. See my thoughts on the paradox of choice for a more clear idea of what happens when we are faced with too many choices.

I’d rather have a much more curated app experience around the core things I do or applications I care about. By focusing on the mobile professional, this becomes a bit easier. Even Apple has begun to do this and smart platforms will take notice. Apple has many app essentials or app starter kits broken out by genre. This can be games, photography, productivity, social networking, etc., but when you look at these genre specific hubs you don’t see hundreds of apps you see dozens. These are highly curated and that is the point.

I am not downplaying the value of long tail applications, but what I am pointing out is that most consumers at best use 10-12 key applications regularly. They may download way more than that but regular use is much lower. This is why I believe that other platforms can come in with a segmented play and get the couple thousand or so most popular apps but then also begin to curate quality genre specific ones to the market segment they are focused on.

Of course for RIM, or any new platform entrant, there is a chicken and the egg scenario. To attract those key applications and keep attracting quality top tier applications, you need to acquire a critical mass. There is no if you build it they will come motto here. There is only if you sell tens of millions they will come motto. This is where the channel comes in and we will certainly see how serious the network operators are about wanting more platform choice.

I look forward to RIM’s event next week and to see whether it will alter my opinion on their future.

For Now, Marketing is More Important Than Innovation

It seems as though the past year I’ve heard a lot of people with early adopter tendencies, especially the media, complain about the lack of innovation coming from the tech industry. It again up again at CES this year. Quite frequently I heard from people that there was nothing ground breaking or truly innovative at the show. Now we can define innovation in many different ways where even simple improvements can be innovative. But I think it is important to point out that true limit pushing, ground breaking innovation is cyclical not annual. We are coming off the re-invention of two primary technologies categories, the smartphone and the tablet. Furthermore we are in the midst of now re-defining what a personal computer is, does, and looks like. Of course I believe innovation is still around the corner but I think there are some important market truths that need to be pointed out.

Innovate Then Communicate

Innovations fail if they can not be marketed. Sometimes I think the importance of effective marketing is taken for granted. I think many industry observers simply assume that when something innovative is released that everyone will magically understand it at a glance. The truth is, even the simplest innovations need effective marketing if they are to be embraced by the mass market.

This is the cycle we currently find ourselves in. This is why it actually becomes much easier to discern the winners and losers by judging not just the product but also the marketing. Great products have the potential to fail to be considered by the mass market with poor marketing while at the same time bad products do not get embraced by the mass market even with great marketing. Great products require great marketing.

There is also the danger of over innovating during a market’s maturity process. When this happens a company tries to add too many bells and whistles and runs the risk of it being too much for the market to handle. Thus their market doesn’t grasp the value of all the new features, or perhaps it just isn’t ready.

Marketing Matters in Mature Markets

Perhaps the most fundamental point for the reason we are in the marketing driven cycle we are currently in is due to the market largely being a mature one. Mature markets function very different than when they are maturing. As a market is maturing it is receptive to more limit pushing innovations. As the market reaches maturity it is more receptive to the marketing of that mature product in order to drive its growth from the early adopters and into the mass market.

Early adopters are important segments for every company to understand because the things they value today will be the things the mass market of tomorrow values in the future. Early adopters rely heavily on new, cutting edge, and innovative features. They appreciate the wow factor, the things that no one else has and they can be the first to embrace. However the mass market is often more down to earth and doesn’t necessarily understand why the flashy, shiny new gadget adds value to their life and is truly useful. Luckily for companies the mass market is significantly larger than the early adopter market. The billions need marketing to help them understand why they need something, the millions need to be wowed by something. Moving from early adopters to the mass market is the fundamental key to a product’s success and that is where marketing comes in.

We also have to understand that the demand to innovate by companies also catches up with technological limits. Many of the things in labs that I have seen that I think can lead to the next round in innovation for smartphones and tablets, like flexible displays, new semiconductor process technology, battery science, etc., are still years away for being ready for mass commercialization. This is why we should simply expect more evolutionary hardware than revolutionary.

This happens all around us, especially in post mature markets. Look at the automobile industry for example. We don’t see revolutionary hardware on an annual basis. If fact we rarely see it at all.

The Myth of iPhone Fatique

I’m in no way saying innovation isn’t important. Just that it is cyclical and we need to understand where we are in the innovation cycle. Maturing product segments require time for original innovations to be adopted by the mass market. To make this point, I’d like to address something I think is interesting. From many early adopters I know, it seems as though they frequently complain that iOS feels dated. For the early adopter this is the challenge. They adopt technologies extremely early and then have to wait for the rest of the market to catch up. As per iPhone fatigue, for many (hundreds of millions of people) they will be experiencing the iPhone and iOS for the first time throughout the next few years. For them there is no such thing as iPhone fatigue. This is the point that many early adopters miss.

Believe it or not, marketing is more important than innovation in the cycle we are currently in. Value needs to be communicated to the mass market. People need to be shown the usefulness of a product or feature and fully grasp the why not the what. Too many companies market the what not the why. Anyone analyzing any company in today’s market needs to heavily evaluate said companies marketing plan as much as the product itself.

Innovation at its best solves problems. Great marketing communicates the value the innovation is bringing to solving a problem people either knew or didn’t know they had. In my opinion there is only one tech company who currently does this well.

Introducing the Chinese Grey Market Android Tablets

Buckle up because this is going to get interesting. What I am going to elaborate on is perhaps one of the most disturbing and potentially disruptive things that I picked up on at CES. As many of our readers know, I have been studying and compiling data for my Creative Strategies reports around the Chinese consumer technology market. I shared some high level thoughts around the market for Android smartphones in this column where I layout how Android in China is the wild wild west. Yet that market looks fairly organized compared to what is happening with low-end Android tablets in China.

What are Grey Market Tablets

You might be wondering what I mean when I say the grey market tablets. This means several things. First they are made up largely by white box tablets coming to market by a no name brand. A company or shelter company was started to simply take entry level ODM tablets and bring them to market. These devices come with stripped down versions of Android (AOSP). Meaning its basically stock with just a few simple apps pre-loaded and stripped of Google services because they are irrelevant in China. These devices don’t come with any services, including Google’s or from any other like Tencent, 360, Baidu, etc. Consumers who buy these tablets need to go download a local app store (or several) and customize them with the local services they choose. Lastly, the grey market also means how they are sold. Let me explain this last part.

When Tim and I were in Shenzen a few years ago by random accident we happened upon one of the more interesting things I have ever seen. We entered a building that looked like an indoor mall and what we saw was four levels of flea market style booths and tables all selling cell phones and smartphones. The place was bustling with people shopping for phones. As soon as we walked in I knew what we stumbled upon and tried to take my phone out and take a picture. To no surprise the second I tried a nearby guard said I couldn’t take any pictures.

What happens in these technology flea markets is buyers come in loaded with boxes of smartphones and tablets inventory and sell them for extremely low cost (often negotiated rather than fixed). Sometimes hard to find devices make it to they grey market here and go for prices well above retail. This activity is legal but unregulated. When vendors sell out their inventory they close up and come back the next day with more. Given the amount of commerce and the amount of people I observed, I would approximate that many tens of thousands of devices change hands in each of these locations every day and who knows how many of them their are all over China. The grey market sales channel also includes smaller local Chinese shops selling these devices as well. The key thing to understand it that the grey market is parallel to the traditional sales channel but less regulated. This is a simple picture of the grey market in China.

[UPDATE] Engadget’s Chinese Editor Richard Lai shared this link and photo where he was able to get a picture of one of these markets.

How Cheap and How Many?

While I was at CES, I talked to a vendor mass producing several versions of these low cost tablets at volume in China. This particular vendor had the lowest cost 7” Android tablet I could find and it was $47 dollars (292.51 CNY). Nearly every vendor I spoke with was around this range offering Android tablets starting at 7” and going to 10.1” for a range of $47-$60 for 7-inch all the way to $150 for 10-inch. There is unquestionably a massive and rapidly growing market for extremely cheap Android tablets in China. How big this grey market is hard to quantify and I know I am not the only analyst currently trying.

The challenge is that these are being built by many second or third tier manufacturers. Many of these are off the radar but are sourcing older generation materials from many of the usual component manufacturers. Although these second and third tier manufactures don’t have massive capacity, there are many of them popping up all over the place. They are sourcing later generation components like SoCs, memory, and displays, which have dropped in price, have higher yields but are also looking to be moved in volume by the source to clear inventory for newer products. Also, because these are moving in volume through non-traditional parallel channels, it makes it that much more difficult to track.

However, through some trusted sources in the supply chain who have common parts across these devices, I think I can approximate its size potential. Toward the later half of 2012 these tablets sold into China and grey market, super cheap, locally made Android tablets were creeping up on 20 million a quarter. This segment is gaining steam and I believe the market for tablets in China could be as high as 200 million units in 2013 largely driven by the grey market and super cheap Android tablets. I know this seems shockingly high and is much higher than other firms estimates. But it is these super low-cost Android tablets that could bump the number up and lead China to pass the US in tablet sales next year. If this scenario plays out as we believe it means that we could be looking at total worldwide tablet sales of over 400m in 2013. Meaning if we count these low end Android tablets we could sell more tablets than PCs in 2013. Also based on overall triple digit tablet growth in China, which is line with many supply chain forecasts I have seen, this number is plausible. There is of course the question of local manufacturing being able to meet demand but as I said sources are popping up all over the place as this is beginning to smell like a gold rush.

Significant Implications

This of course has significant implications on many levels. First of all legitimate brands are going to be challenged to compete with dozens upon dozens of upstarts looking to trade margins for volume just to make a quick buck. These off brand white box companies do not have sustainable businesses but it sure has the potential to make some people fairly rich overnight. Get in, ride the wave as long as possible, get out.

This growing movement has the potential to thwart the growth opportunity for many legitimate brands trying to build legitimate products and add value around hardware, software, and services specifically for the APAC region. Of course many legitimate brands will still do well in China because the market is so big, particularly in the tier one more developed regions of China. However, those buying these cheap tablets are likely not also buying ones from a major brand. So arguably, these low end devices are stealing customers from the legitimate brands.

Although all of this sounds crazy and like a hot mess (which it is), it is potentially a good thing for the China tablet market. These grey market tablets will help develop the market for tablets at large. As Chinese customers experience these products for the first time and potentially refresh them several times a year, these consumers will become accustomed to their needs, wants, and desires with regards to tablets and then begin to shop for products who are innovating and adding value. This is where the brand comes in, because as value is established in the mind of the consumer, they are willing to pay more for the function and convenience.

Many of us in the developed world are extremely accustomed to many technologies like smartphones, tablets, and PCs. We understand, for the most part, what we want and why we want it. Billions of consumers in China do not and that is the point. This market is extremely immature and undeveloped. There are huge problems to be solved in that region but those buying grey market products do not know that yet. The hope is that over time as they experience the pain points for themselves, that those who are investing in adding value and solving those pain points will begin to reap the rewards.

Conflicting Data

As an analyst I continually come across data. Much of it is often conflicting and discerning what is an accurate reflection of the market is not always easy. Such data has come out today that I think is fascinating due to its suggestions either way if true.

Venture Beat published an article referencing an Accenture study which stated that 66% of phone, tablet owners don’t really care if they run iOS, Android, or Windows. Venture Beat quoted Kumu Puri, a managing director at Accenture saying:

“Overall, our survey found there is not widespread loyalty among consumers about operating systems used on their smartphones, tablets and PCs,”

Really, they don’t care at all? I find it extremely hard to believe. That’s like saying the vast majority of consumers don’t care what care they drive, what clothes they wear, what brands they support, etc. If this is true then RIM, Windows Phone, and Tizen all have a viable shot in the market. As should have Palm with the Pre. The bottom line is personal preference matters and software is a part of that preference.

Yet we have Kantar releasing stats today that share AT&T (the original exclusive iPhone carrier with Apple) had half (51.7%) of their iPhone user base upgrading to a newer iPhone.

66% are saying they are not loyal yet 51.7 percent of AT&T’s iPhone subscribers updated to the newer iPhone. Personally I believe there is much more platform loyalty, particularly to iOS than the Accenture survey is showing. My experience from surveys is that you can get consumers to say whatever you want if you ask the question the right way. This is why we don’t do them anymore and instead focus on observational research crossed with real world market patterns.

The Accenture survey sounds like it was targeted at a much more mature and early adopter user base. Market behavior data we have of the early and late majority (a market that is massively larger than the early adopter market) validates our conviction that loyalty is there. Also it shows there is more loyalty to iOS than any other platform.

While I am on the subject I want to point something else interesting out about the Kantar data and it relates to Verizon. According to their data:

“First-time smartphone buyers upgrading to an iPhone led to iOS becoming Verizon’s top selling OS for the first time. Verizon, who has the largest featurephone user base, saw 44% of their featurephone user base upgrade to an iPhone, compared to 38% of AT&T’s featurephone user base.”

iOS is already among AT&T’s top selling smartphone platform, with over 50% staying loyal and they have had it for over five years. Verizon is going on its third year selling the iPhone and it is now their top selling smartphone. Could that with Verizon’s sizably larger feature phone base and the data point that most upgraders from feature phones to smartphones chose the iPhone highlights the headroom still available in the US for the iPhone. I also believe Verizon’s iPhone customers will show similar loyalty patters as AT&T’s. As iPhone subsidies get stronger in other parts of the world my gut is that similar patters will emerge.

All in all real world market habits don’t validate Accenture’s study in my opinion but that’s just my .2c.

Technology Predictions for 2013 – The Year of Going Vertical

The theme for my 2013 predictions is going vertical. The writing on the wall has been seen for some time now and I believe 2013 is the year we will see it officially come to fruition. There is absolutely no denying the success of Apple’s vertical model. In a mature consumer market, being vertical is simply the most sustainable model–if executed properly– by way of differentiation, competitive advantage, and a host of other long term strategic reasons. Many parallel industries and the vertical nature of the businesses in them point the way for this reality.

1. Samsung Invests in Its Own Future
Right now Samsung is the most dominant Android smartphone manufacturer. However, they do not fully control or dictate the directions of agenda of Google as it relates to Android. Because of this Samsung is dependent, to a degree, on Google for their future success. In a quickly verticalizing industry, this is a point of concern for Samsung. Samsung once invested in their BADA OS, but I believe they will further invest in owning their own software platform in order to fully unify their screen strategy. The most logical candidate is the Tizen OS they have been working on but are yet to release.

2. Microsoft Gets Into Smartphone Hardware
Microsoft signaled their intent to be a PC hardware company when they launched the Surface. By doing so they strained relationships with their partners and went down a path which is hard to turn back from at this point. The next logical step is for them to get into the smartphone hardware business, or acquire someone like Nokia or HTC, and begin controlling the hardware for Windows Phone. I believe Microsoft will officially get in the smartphone hardware game in 2013.

3. Apple Makes Large Investment in Its Supply Chain
Apple is more vertical than any company right now in the personal computing landscape. Other companies have some of the parts, but are yet to fully go vertical and show that they can execute as a vertical company. Apple has already proven it is a well oiled vertical machine and I believe they will further invest in that by using their massive stockpile of cash to invest in owning key parts of their supply chain. The key reason for this is to maintain their margins around hardware but also to relieve many of the supply chain bottlenecks that they deal with on a yearly basis. These investments could be in owning a key display manufacturer, hardware machining factories, and even investing or co-investing in a foundry to manufacture their own semiconductors for all their computers.

4. Google Goes Fully Vertical with Motorola
Because Samsung is Google’s largest partner, and in many of the same ways Samsung depends on Google, so does Google depend on Samsung. The reality is that Android would not have the market share it does today without Samsung. So by Samsung investing more in its own future with a software platform, Android will be weakened. The only logical response is for Google to also officially go vertical with Motorola and take their hardware future into their own hands. They can do this by focusing Motorola on the high end with a Nexus like strategy or they can focus on the lower end and go for more volume than margins. I can see either scenario playing out.

5. RIM is Acquired
To be entirely honest I have some hope for RIM. I do think they will make a modest rebound in 2013 with the release of BB10 devices. But to fully take a significant share of the handheld market they will need help from someone else. It makes the most sense in my mind for RIM to consolidate with someone who has the marketing and the hardware vision. Perhaps Samsung would acquire RIM and make BB10 its proprietary OS if Tizen doesn’t work out or any other number of the growing Asian OEMs who could use a better business platform and a better and unified localized OS for China.

Some Anti-Predictions

Here are a few things others believe may happen in 2013 that I don’t see happening, call them my anti-predictions.

1. Amazon Does Not Make a Phone
We have all heard the rumors and some tech blogs have even proclaimed an Amazon phone as a fact. I personally still find this move hard to swallow. The business around mobile phones is an entirely different beast and one that operates uniquely amidst other personal computing segments. Given Amazon’s business as a retailer, I have a hard time finding the value in extending that model to a segment where actually purchasing is still done at a minimum if at all by most of the mass market.

For me to believe Amazon has a shot with success in the very difficult economics of mobile phones, I would need to be convinced of the business value for them to do so. Something that I have not heard a sound argument for yet. At this point, however, I don’t see it happening.

2. Apple Does Not Release a TV Set
It seems as though the hottest rumor that keeps surfacing is Apple and the apparent holy grail of an Apple TV set. I’ve argued before that I don’t see Apple designing and shipping a large piece of glass as Apple TV. I remain convinced the set top box strategy is the most dynamic, sustainable, annually innovative, and logical approach. A set-top box can be refreshed in a more regular fashion and there is nothing you can’t do with a set-top box that you can do by integrating technology into the TV set. Given the way technology is advancing for next generation TV display technology, it is becoming to clear to many who know and understand the industry that glass is glass and it will contain some smarts but the best approach is to put innovation into the box that sits next to or is somehow connected to the TV. Apple will continue down their current path with Apple TV and will make strides toward moving it from a hobby to a business but it will not be by releasing a large piece of glass.

I have mapped out a number of scenarios for 2013. I’ve shared a few with you here but my full industry outlook includes many more including some related to the economy which I will turn into some columns here soon. 2012 has been an incredible year for Tech.pinions and its because of our amazing reader and commenter community that our site has become a recognized source of technology industry insight and perspective. We appreciate you all greatly and we will continue to serve you with many new features and exclusive content in 2013. Happy New Year to you all and may you have a prosperous 2013.

Reflecting On 2012

What a year 2012 has been. From some of the most exciting and historical product launches, wild and ill-concieved acquisitions, ugly court battles, and more, has made this year one worth reflecting upon. One thing is certain and agreed upon by the Tech.pinions columnists, that we are entering one of the most–if not the most–innovative time in human history. We are still only scratching the surface with personal computing. We expect the next decade plus to be both a land grab of opportunity for those ready to solve problems for the mass market of tomorrow, or a tragic wasteland of once industry titans who failed to understand and embrace disruption and re-invent themselves on a regular basis.

We the Tech.pinions columnists felt like this week was worth taking time to reflect on the last year and think about the new year and we encourage our readers to do the same. So we are all taking the week off from the daily column and will resume next week. Until then, we thought we would share some of the most read and most talked about columns from 2012. Enjoy and Happy Holidays!

The PC is the Titanic and the Tablet is the Iceberg. Any Questions?

Pinch-to-Zoom and Rounded Corners. What the Jury Didn’t Say

iPhone Naysayers

Chrome OS, not Android, is Google’s Future

Ten Things I Prefer to do on my Surface vs. My iPad

We Are Entering the True Era of Personal Computing

The iPad Put a Fork in the Tablet Controversy

How the iPad Mini (and other 7″ tablets) Could Impact Future PC Sales

Facebook is for Old People

Despite Competition, Apple’s US Market Share Gains

Happy Friday to anyone working today–or not working–and poking around the inter webs. Although it’s the Friday before the holiday break, some interesting data came out from the Kantar Worldpanel today that I thought I would highlight. Kantar’s latest smartphone sales data is showing that despite the increased competition, Apple has actually grown its smartphone platform market share in the United States.

Global Consumer Insight Director Dominic Sunnebo stated:

“Apple has reached a major milestone in the US by passing the 50% share mark for the first time, with further gains expected to be made during December.”

Other data from the report highlights platform share in other parts of the world and the various changes. However, despite all the questioning I continually see from the investor community of whether Apple can remain competitive despite increased competition, increase in latest Android smartphone subsidies from carriers, other platforms like Windows Phone 8 emerging, yet amidst those questions and what seems like steep odds, Apple is actually gaining market share.

Keep in mind this is all being done with a limited iPhone lineup. One current generation, and two legacy products still selling well in the marketplace. I’ve said for a while now that Apple is competing against an army of Android devices. The continual sales numbers and marketplace demand for the iPhone remains incredibly impressive despite the massive Android army they are competing with.

That alone is enough to show this market is not acting like many of the pundits and financial analysts assume. Many assume this market looks like the PC industry of old where the market is dominated by one single platform. Wrong on every level.

Take a deeper look at this chart (click on it to enlarge it) as it is very telling in a number of areas. First iOS grew from 35% to 53% in the US market, a change of 17.5% from the same period a year ago. Android went from 52.8% to 41.9% in the US market, a decline of 10.9%. The US market is arguably the most mature smartphone market on the planet. I wonder the degree other markets, as they mature, begin to look like the US, keeping in mind the carriers and how and what devices they subsidize over others. All things equal, however, may paint a similar picture. And don’t think for a second the US an insignificant market and/or litmus test for others. No sane executive at any OEMs believes that and in fact I continually hear from them how important the US market is.

This is a huge market and keep in mind the total addressable market for smartphones is not static but it is dynamic. It is growing by hundreds of millions of new customers every year and will do so for at least the next five years. So to say Apple has increased market share in the US, means that they are also attracting new customers and benefiting from the TAM expansion, arguably more than any current vendor.

I’m yet to write my predictions for 2013, and I will the week following the holiday break. But I believe the smartphone market will look very different this time next year and perhaps not in some of the ways assumed by the pundits.

Android, China, and the Wild Wild West

Last week, I talked about the importance for us industry observers, analysts, media, etc., to have a more informed discussion when it comes to Android. I think it is important when we analyze, from an industry and market viewpoint, that we do so with a holistic viewpoint.

My key point in last weeks column was to address the issue of Android platform forking. Android in its purist definition only refers to the AOSP or Android open source platform. Something anyone on the planet can take for their own and fork it, thus differentiating their Android platform and in many cases using the core Android source and making their own platform. Therefore, as it currently stands we have Google with a platform based on Android, we have Amazon with a platform based on Android and we have Barnes and Noble with a platform based on Android. Each of these platforms is their own unique ecosystem.

I make this point because when we say Android has X% market share we are talking about the total including all the forks. This is a key point, because when many make the claim that Android is winning the market share game, they often make the mistake of assuming that Android equals Google, therefore assuming that Google’s version of Android has the total Android market share. This is of course false, as Google’s version of Android, the one that benefits Google in a monetary or data gathering way (a.k.a a business model), has only a fraction of the overall Android market share numbers being referred to. Exactly how much we are not sure because even Google refers to Android falsely making it sound like the total installed base of Android devices on the market have some business benefit to Google and of course that is not true. My gut tells me that if Google did release the numbers of the global install base of Android devices tied to their services, thus qualifying as a Google Android device, the picture would not be as rosy as many make it out to be. No where is that more the case than in China.

The Wild Wild West

As I have been studying the Chinese Android market, the only way I can describe it is the wild wild West. Android is fragmented, un-unified, inconsistent, and otherwise fundamentally fractured in as many ways a platform can possibly be. In fact it is hard to even call Android a platform in China, and there is certainly no Android ecosystem there. There are dozens of app stores, tightly controlled ISP and heavily differentiated experiences and services bundled on the vast majority of Android devices, half a dozen different payment mechanisms, and a general lack of standardization.

The top app stores come from the likes of Tencent, 360, 91, UCWeb (which is a browser) app store and a number of other tier two heavily localized app stores. If I was an Android developer focused on China, I would have my work cut out for me making sure I was present in all the various app stores, or try to go direct to consumers (as many are trying to do), or working as close as possible with the ISP and carriers themselves. This model is somewhat feasible by the larger developers but very difficult for the upstarts and other smaller developers.

What is also very interesting about the Chinese market for Android devices is that the vast majority of the 38 million Android devices sold in China last quarter were extremely low-cost entry level devices. Now, in most cases, this is exactly the kind of scenario that Google would hope for. Google’s mobile business model depends on install base and the best way to do that is to have a plethora of cheap devices so hundreds of millions of people can jump on your platform and you can make some mobile search and ad revenue. The only problem is Google is not benefitting from Android’s success in China in even the slightest way.

The challenges of Google with China are well documented. Over the past few years Google has continually been closing offices in China and largely abandoning the region. Android has not helped relations or Google’s strategy–or lack of strategy–in that region and it doesn’t appear that it will anytime soon. The vast majority of Android devices sold in China have been stripped of all services tied to Google in any way. Here are some key points.

– Local browsers dominate the web browsing landscape
– Google search engine market share is less than 5%
– 90% of new Android devices sold in China do not have the Google Play store on them.
– Many developers are choosing local in app advertising solutions over Google’s

China, and in particular the low-end Android segment, is one of the fastest growing segments in mobile. Every day China is accounting for more and more of the Android activations. Android in China has simply become such a customized and regionalized OS that I’d argue the point that Android in China should be considered its own fork. And due to the extremely fragmented and lack of standards around app distribution, I’m not that confident that Android has a sustainable position in the region outside that the devices are cheap. The vast majority of low-end Android consumers in that region are not investing into any specific ecosystem other than the likes of someone like Baidu, for example, which offers their services on a range of platforms, Apple’s included.

Other than Android devices being extremely low-cost, I’m not convinced, based on the data I have on the region, that Chinese consumers are loyal to the regional Android fork. A point, that offers more hope for standardized and unified platforms from competitors like Apple and Microsoft or even some platform not yet released.

The bottom line is, for now, Android is alive and well in China. It represents one of the fastest and the largest growth sectors for not just Android but the mobile market at large growing at about 300% year-over-year. Android is being taken by the natives and customized / implemented to benefit themselves and their heavily regional services. The vast majority of these devices have little to no benefit to Google. Android is doing well in China, Google is not. Something I find fascinating.

I paint this broad picture of Android in China for the hopes that we can have a more informed discussion when we discuss Android. Too many people associate Android’s holistic global success with Google and that is a disingenuous analysis. I’d love to be able to break out the individual Android fork market share, including the regional forks like China, India, and now Africa, but when the handset OEMs–and Google–are not sharing specifics. A situation I find entirely suspect. Although, the more I learn the truths about Android holistically across the forks and the regions, I am getting a sense of why the details are not being shared with us.

The Opinion Cast: How Does Microsoft Move Forward?

In this Opinion Cast we focused mostly on Microsoft and what they need to do going forward to continue to compete. We also got to talking about what it means that Apple will start ramping up their efforts to assemble Macs in the USA.

As always, we would love any comments or feedback on our Opinion Cast. We want this podcast to be valuable to our readers so please let us know things you like and what we can do better. Also, if you get a chance please rate it in the iTunes store.

You can also subscribe to our opinion cast in iTunes here.

Toward a More Informed Discussion on Android

There are a lot of things that bother me about the discussion among the pundits related to Android. John Kirk has done a great job looking at the business issues around Android from a business perspective so I am not going to rehash those points. You can read them all eloquently stated by John in his series which you can find here. Rather, I would like a take a deeper look at the platform truths related to Android.

Who Cares About Market Share?

The first thing I want to talk about briefly is the pundits and the media’s obsession with market share. There was a time when market share mattered and it was during the maturity cycle of the PC industry. The reason we cared about market share, and in this case Microsoft’s, was because the market was maturing and thus needed a standard to center around, build hardware around, build software and accessories around, etc., in order to mature it. Now that the market is mature, market share is less important than people think to the overall industry. Primarily because there will no longer be on single OS dominating the landscape but rather there will be many which together equal the whole pie. Many ecosystems and platforms can and will continue to co-exist. How many? As many as developers will support and write software for.

As long as developers can make a healthy living supporting a specific platform, no matter how large—or small—its market share, that platform will exist.

From what I can gather there are two groups to whom any bit of market share discussion is relevant to, developers and those who wish the demise of competing platforms. It is unwise and uninformed to be in the latter.

What Do We Mean When We Say Android?

This is the core of the issue that I think gets overlooked. Android is in no way shape or form the same as OS X, Windows, iOS, Windows Phone, or RIM’s Blackberry OS. When we speak of those operating systems we are speaking of a unified platform controlled by one company whose platform share represents the total addressable market, via single SDK, for developers. Should a developer want to develop for any of those platforms, all they need do is get the SDK for that single platform. Android, however, is an entirely different beast.

Because Android is open source, all the term Android refers to is the AOSP, or Android Open Source Project. Anyone can take this core code and create their own custom operating system using Android as the core. Google created and manages the AOSP but also has their own version of Android. Amazon does this and has their own version of Android. Barnes and Noble does this and has their own version of Android. I would not be shocked if new entrants as well take the Android platform and make it their own for their own needs as well. Android is not actually a platform, it is an enabling technology that allows companies to create platforms. A commenter gave the smart analogy a few weeks ago that Android is more like a BIOS.

All of this is fine and good and to be honest I am glad Android exists for the reasons that great companies can take it and build exciting hardware. Whether or not this is why Google released Android into the world is an entirely different discussion. What’s more to the point is that when we talk or read about Android market share, we need to understand that number only applies to Android as it relates to an underlying open source framework.

The reality is Android’s market share is broken up into the many different versions that exist, all with separate developer SDKs. So If I was to actually break the market into the computing platforms which exist for developers the list would look like this:

Proprietary Platforms
– OS X
– iOS
– Windows
– Windows Phone
– Blackberry OS

AOSP Platforms
– Amazon Kindle Fire platform
– Barnes and Noble Nook HD platform
– Google Android Platform
– Other

All of those platforms I just mentioned (including other which I will address in a moment) have their own app stores and/or their own developer SDKs.

So what is other? Other represents the incredibly complex and nuanced regions like China, India, and other emerging markets. These regions have a rapidly increasing number of Android devices in them, yet they have no unified app stores and no benefit to any of the players mentioned above with AOSP versions of Android, including Google.

Now when it comes to smartphones, for now it’s Google’s version of Android vs. other, since neither Amazon or Barnes and Noble make a phone—yet. So to dive deeper into a recent market share estimation that Android has 75% of the smartphone market, means we need to understand what percent of that is Google Android vs. other. Which would be a whole lot easier if Google would tell us, which they won’t.

The fascinating part of this is related to China. Consider this a first in a two part series, where in the next one, which will come next week, I will take a deeper dive to the complex environment that is the China market for smartphones and specifically what is happening with Android in China. China is the wild wild West at the moment and a fascinating market to study. Until then, however, I leave you with a few articles.

The first is by Ben Evans and his recent Forbes column entitled:
Android, China and Addressable Markets

The second is an article in TechAsia entitled:
Chinese apps are bypassing Google’s Play Store, giving Android apps straight to Users

I highly recommend those articles as a primer for what I will dive into next week.