Waterproof, not Cellular, Might be the Killer Feature for Wearables

I just came back from a holiday in Cancun where, as you can imagine, most of my activities were in the water or close to it. While a non-waterproof Apple Watch is an annoyance as I do occasionally swim, during my holiday I really came to dislike it was not waterproof. For most of my week, I missed my calories and stand up goals despite being active more than I usually am when working. If your main reason for buying a wearable is to track your fitness (our data points on this remain the key purchase driver), you would certainly start to feel your investment was not worthwhile.

Earlier this month, GWI published a study on fitness fanatics – people who like to exercise more than 4 times a week and have a strong interest in health and fitness. Across the 34 markets they cover, this group represented 14% of their panel of internet users. Among these fitness fanatics, 28% are in the Apple Watch’s sweet spot of 25-34 years old. By country, the numbers become even more interesting as that 14% goes up and down quite significantly: US 17%, India 29%, China and UK 10%, Australia 13%. Outside of exercise, the top sport practiced by this group is swimming with 33% of the fitness fanatics mentioning it as something they do regularly. Cycling came second at 32%.

GWI found fitness fanatics tend to be active and adventurous, with a strong interest in travel and exploring new places. 77% are interested in other cultures and countries, while a similar figure say they like to explore the world around them. It comes as no surprise this group likes to travel: 56% have a vacation at home bi-annually, while 4 in 10 travel abroad at least once a year (putting them 20% ahead of the average).

This group has already invested in wearables with an above average attach rate: 16% own a smartwatch and another 16% own a fitness band. Fitness fanatics also show higher than average engagement in social media and, as to be expected, in fitness and health apps.

All these data points show a segment ready for wearables who will be highly engaged and likely to want to keep up with technology advancements by refreshing what they own fairly regularly.

The combination of the high interest in swimming and the higher propensity to travel along with the likely interest in keeping up with activity targets make waterproof and general robustness of wearables key attributes for these users. Capturing 14% of the market would start to make all players, from vendors to developers, more positive about the long-term potential of the segment.

Fitness fanatics aside, though, I argue my personal experience shows that, even for mainstream users who just want to keep an eye on their activity level when on holiday, these features matter. You might think that a week or two of holiday a year is not a big deal but I have one concern — abandonment rate. Considering most consumers are finding these devices a “nice to have” object, not wearing their smartwatch for a week or two in a row would certainly increase abandonment rates — a risk vendors cannot afford.

Unpacked for Friday, July 22nd, 2016

Don’t Freak Out About Latest IDC Smartwatch Numbers, Readjust Your Expectations – by Carolina Milanesi

This week, IDC reported its smartwatch sales figures and the news was that the segment has already registered a decline in sales. You can find the full release here.

The commentary I have seen around these numbers centered on the fact that the segment is clearly doomed because it is showing a year over year decline so early in the cycle. Such an analysis, however, fails to consider a few key points:

1) This is a very different market from smartphones. As I’ve said time and time again, smartwatches remain a “nice to have, not a must have” item. Because of this, we are still in an early adopter phase of the market which, by and large, has bought into it. While we wait for the mainstream consumer to come on board, sales will dip as the current installed base is waiting to replace and no significant amount of new buyers are added.

2) While the smartphone market saw a lot of development in the early stages, both of operating systems and apps, smartwatches have been moving slowly. While we have seen some OS improvements, mainly on watchOS, hardware has not changed much from where it kicked off and useful and dedicated apps have been hard to come by. This last point adds to smartwatches not being seen as a must have, as their role is mainly seen as a duplication of what one can do with a phone.

3) With Apple representing the vast majority of the installed base and so much expected to come out in the fall with the new version of watchOS and new hardware, it is natural people are waiting. The comparison with the iPhone would be a wrong one to make, as the Watch is not necessary and has no subsidy so people can and will wait for longer.

If you consider all of the above, the decline could have been expected. Long term, I still believe in this segment especially considering how much improvement will come with the next watchOS update. I also do not see any vendor threatening Apple’s lead in the market at least over the next year.

Entering the “Meh” Earnings Season – by Ben Bajarin
I find it apt to remember that stocks trade with a strong investor sentiment of future earnings. If a stock is down or investors are bearish, it means consensus is there is not a lot of future earnings potential in their view. This mindset tells us quite a bit. Look no further than Nintendo. Their stock is up thanks to Pokemon Go, even though revenues from this will be relatively limited given the revenue share agreements in place. However, investors are looking at the long-term potential for Nintendo to have an “a ha” moment and start moving from the Gameboy/Nintendo hardware generation to the mobile era. The stock is being traded on the future potential of earnings on IP like Mario Brothers, Donkey Kong, Legend of Zelda, etc., and Nintendo bringing those games in some new and unique ways to iOS and Android. One has to believe the time is close for Nintendo so it makes sense and could reap serious revenue for them.

Similarly, we see investor sentiment with Intel. Intel reported a beat yet their stock was down afterward. The Street does not feel there is much earnings potential ahead and thus the stock is viewed as a moderate to flat growth opportunity. Qualcomm on the other hand, despite their challenges, posted a beat and was trading up. As they solve their problems with IP licenses in China, they are still poised to see revenue gains from licensing even if the chipset business stays relatively flat. Investors clearly believe they will resolve the IP license issue and gain more revenue from their patents. Investors feel there is profit still to be had for the company.

Overall, this is a tough quarter, as summer is usually not the best time to be analyzing stock earnings. Summer is a bit of a lull from both an IT and consumer spending standpoint. But looking ahead, the fall will be quite interesting as it will help answer many questions in the world of the consumers.

Will Apple stay on track for negative or flat growth as many predict? If so, it implies a much slower upgrade cycle in their base overall which is going to be viewed as negative by investors. AT&T’s earnings seemed to hint in this direction — upgrade cycles are lengthening and this will have impact on many.

Will retail sales be down again this year as they were last year? US holiday retail sales were off more than a billion dollars YoY. Without any hot category to help drive sales, it may be more of the same this year.

Will tablet or PC sales rebound? Both of these categories remain in systemic decline as consumers remain content with the technology they have. I’m learning to accept this reality of the mainstream whenever we ask consumers if they plan to buy a PC, smartphone, or tablet in the next twelve months. The second most popular answer after “No” is “It depends”. If consumers are not inspired to get a new tablet or PC or their device lasts and is not broken, they largely choose to not upgrade. This is the hard and shocking reality of the mainstream most companies struggle to address.

From a hardware standpoint, I’m not sure I see anything on the horizon for 2016 that changes things and causes a big stir in the market. Which means companies like Facebook, Amazon, and others in the software and services side will continue to be the bright spots from a stock/future-looking perspective.

We never fully know until we see the hardware for the fall, but my analysis of many consumer tech hardware players is closely aligned with our studies who respond with “it depends” on what is released in the fall.

Unpacked for Friday, July 15th, 2016

Apple’s iPhone users are not defecting to Samsung – by Carolina Milanesi

On Wednesday Kantar Wolrdpanel (KWP) ComTech published its Quarterly Smartphone OB Barometer for the three months ending in May 2016, confirming what we have been saying for a while: Samsung’s current success has nothing to do with stealing users from Apple. As a matter of fact, Apple’s sales are more impacted by users that churn from Samsung to the iPhone than vice versa.

“Starting with the US, in the three months ending May 2016, Samsung accounted for 37% of smartphone sales and Apple 29%. However, sales of their respective flagship models reveal a much closer competition, with the Galaxy S7/S7 Edge accounting for 16% of sales and the iPhone 6s/6s Plus at 14.6%. What’s more, when we look at where these purchases are coming from, just 5% of Samsung purchases came from those switching away from Apple, while 14% of Apple purchasers came from those switching away from Samsung.”

As both Ben and I have been saying, Samsung is benefitting from the large base that decided to sit out the Galaxy S6 update. Despite a considerable improvement in the look and feel, the Galaxy S6 did not bring enough new features to justify an upgrade for many users. For others, the lack of removable storage and the relatively poor battery performance were a showstopper. The Galaxy S7, built on the look and feel of its predecessor, addressed those primary complaints. However, as the majority of sales are coming from upgrades, it would be wrong to assume the current success could be sustained with the next flagship as the upgrade pool will be smaller and Samsung is not capturing from Apple. Considering that KWP ComTech’s data shows 88% of current Apple users and 86% of current Samsung users intend to stay loyal, there is little reason to believe the situation will change.

KWP ComTech also said in the three months ending in May in the US, the Galaxy S7 outsold the iPhone 6s. This point got some Samsung’s fans very excited but we should remember when the two devices were launched: March 2016 vs September 2015. Aside from the new vs old argument, we are also a couple of months away from the launch of the next iPhone, which has traditionally been in September. This is certainly delaying some purchases especially of the current flagship — users know it will likely be discounted as soon as the new model is announced.

Outside the US, Samsung has been feeling the pressure. Huawei and local smaller players in Europe, China and India are impacting volumes – still accounting for the majority of sales – that come from the non-Galaxy S products. This, coupled with the smaller upgrade pull will make for a challenging 2017 when Samsung will certainly try and take advantage of its early move into VR.

Facebook and Twitter live video strategies go in opposite directions – Jan Dawson

The last couple of weeks have highlighted major differences in the strategies and uses of Twitter and Facebook’s live video platforms. Facebook Live Video has demonstrated its usefulness and reach as a platform for sharing raw footage in the moment by ordinary users in recent days as not one but several shootings were captured using the technology. That’s ironic because it was Twitter that first launched a live video platform for its users through its Periscope acquisition. Meanwhile, Twitter is focusing on doing deals for professionally produced TV-style content, having apparently de-emphasized Periscope.

Facebook has seen a variety of unconventional videos bring attention to its platform over recent months, from Buzzfeed’s watermelon experiment to “Chewbacca Mom” to the recent shootings. Some of that attention has been positive, while the shootings have been more problematic and it seems Facebook has been of two minds about hosting some of this content, though it has eventually come down on the side of openness. This role in sharing videos is a double-edged sword – on the one hand, it’s a fantastic advertisement for the platform and Facebook’s massive audience is the perfect tool for making the content go viral. On the other, such dramatic videos could give the impression Facebook’s Live Video isn’t designed for the simpler, more humdrum moments ordinary users might otherwise share. Facebook has to walk a careful line and must also be careful not to be seen trying to benefit from tragic events.

In doing all this, Facebook appears to have usurped Twitter’s original plan for live video and Periscope but Twitter has moved on. With its recent deals to broadcast Wimbledon, live stream content from the political conventions, and its Bloomberg deal, Twitter has clearly pivoted its live video strategy in a significant way. This is a fairly low-risk strategy for Twitter, as the content it’s secured is all non-exclusive and therefore comes cheap. Any ads Twitter is able to sell will provide some upside but I suspect the strategy is more about driving usage than it is about direct monetization. The big question is whether it will drive user growth or merely increase engagement of existing users (or neither). But given the low risk, it’s likely worth the gamble. What is clear is Twitter’s interface for live video requires work – the tweets that appeared under the Wimbledon video were a mess and significantly more curation is required to make that a better experience. Twitter has a few months to tweak the interface before its big NFL debut later this year.

Apple’s Content Strategy – Ben Bajarin
Whenever Apple execs talk publicly, I like to try and read between the lines. That is why, when the Hollywood Reporter ran this interview with Eddie Cue, a few things about Apple’s strategy stood out.

Just how deep Apple wants to own content has been a key discussion. Beats was an interesting deal and a bit out of character for Apple. So the question has been if that is a template to watch or just a one off activity. From this interview with Cue, I get the sense it was a one off.

Apple seems content to continue to play the platform game. Make their hardware and software platforms the best place for services companies to meet the needs of their customers. Telling was Cue’s response the question of if Apple is building their own TV subscription service (AKA “skinny bundle”). Here is his answer:

Whether we’re providing it or somebody else is, it really doesn’t matter to us. What we’re trying to do is build the platform that allows anybody to get content to consumers. If a Time Warner [Cable] or a DirecTV wants to offer a bundle themselves, they should do it through Apple TV and iPad and iPhone. As a matter of fact, I’m not a big fan of the skinny bundle.

Now, this answer doesn’t entirely leave out the idea Apple would still create this service but it does enforce the platform concept Apple seems content to pursue. Let others create value on top of what they have built in all vectors of software and services.

Cue addressed what they do with first party experiences vs. letting others create value by what fits with Apple’s core values. This is why they are so focused on first party music services since they feel it is ingrained into the Apple experience and culture. Perhaps the same is not as true of movies and TV. Cue basically said they don’t intend to compete with Netflix.

I think this is the right move for Apple to focus on the platform and not go vertical in media services or services in general. The challenge, however, is this tactic allows others to creep into the core engagement with Apple’s customers. For example, if I fully bought into a third party services world from Spotify, Google Drive/cloud, Netflix, Comcast’s bundle, etc., then all I need Apple for is hardware. That, again, is not the worst thing in the world but my concern is it could be limiting.

What Apple risks in the platform-only approach is other companies grabbing the bulk of engagement and developing deeper relationships with their customers. Theoretically, in a cloud-based world, hardware could become commoditized and less valuable. I don’t fully think it plays out this way but it is something to keep in mind.

US PC Market Shows Improvement – by Bob O’Donnell

After years of bad news and sales declines, PC shipment growth in the US finally turned positive in second calendar quarter, as both Gartner and IDC reported modest increases in US PC shipments. Worldwide shipments were still down for the quarter in the 4.5% range, primarily because of ongoing challenges in many emerging markets, but the return to positive growth in the US is highly welcome news for the often maligned PC business. Credit has been given to strong Chromebook shipments to the US education markets as a key factor, but I believe we’re also starting to see the impact of Windows 10-driven PC upgrades for commercial PC customers. Many organizations (and consumers) chose to do in-place, software only upgrades to Windows 10—a phenomena that never really happened with previous Windows releases—and that muted the originally higher expectations for the new OS. However, Microsoft’s free upgrade policy for Win10, combined with essentially no new hardware requirements from either Windows 7 or Windows 8-based PCs, made it much easier to do than before. Nevertheless, many commercial organizations who want to take advantage of Windows Hello’s biometric authentication support, as well as other traditional speeds-and-feeds hardware improvements, are now starting to make the kinds of large-scale fleet upgrades that many in the industry had expected (or at least hoped) would happen earlier.

The good news is, this provides credibility to the thought that PCs would bottom out and then turn around, unlike their tablet brethren, which continue to decline. Worldwide sales improvement is still elusive, primarily due to the economic challenges that many nations are still facing, but at least there now seems to be both hope and light at the end of the PC sales tunnel.

Unpacked: The Harsh Cloud Reality

We have been doing a significant amount of research on the consumer cloud as of late and a harsh reality has become clear. Consumers need the cloud — pure and simple. There are known pain points to consumers that cloud solves, yet they are unwilling to pay for it and utilize it to solve some of their technological problems.

As we look across a number of different demographics, we see clear value in the cloud from everything like automatic backing up, picture syncing, file management from many different devices, etc., yet 76% of consumers don’t pay for a cloud service. Most use whatever is free and many seem to navigate with ease a number of free services to keep from paying for it. What baffles me is how the pain point is fully understood.

For example, 20% of consumers in one of our recent studies indicated they manage (delete) photos on a weekly basis to free up more storage to take new photos. 14% engage in this task monthly to make sure they have enough free space for more photos and 5% indicated they have to do this daily. Nearly 40% of smartphone owners manage/delete photos at least once a month to free up more storage so they can take more photos. Similarly, 56% of millennials indicated they have lost an important file due to a computer/OS crash or some other kind of event.

Now, I understand millennials, especially college students, likely don’t have the monthly income to pay for storage. But the point remains, the cloud would solve what is absolutely a known pain point.

When we dig into the specifics of why people are not utilizing cloud services it is a close race between trusting that their data is kept secure and private (44%) and simply not wanting to pay for it (42%).

The cloud would make so many consumers’ lives better when it comes to their devices. One of my theories going forward is companies will start to bundle this cloud service with others like music, TV, or some other kind of cloud subscription which consumers are more likely to pay for and find greater value in. Perhaps what we have concluded is that the cloud, from a storage stand point, is simply a commodity and should be treated and understood as such.

When we dug into this exact idea, we found consumers were quite a bit more likely to pay for a cloud service which delivered entertainment than a cloud service which delivered storage/synchronization. Validating our thought that storage is a commodity and content is king.

Unpacked for Friday, July 8th, 2016

Light’s L16 is an Intriguing Camera Concept that Addresses a Shrinking Market – by Carolina Milanesi

This week, Silicon Valley-based startup Light made news as it raised $30m from Alphabet’s venture capital arm. Light claims the L16 will be able to replace professional DSLRs by delivering a lightweight camera unit that contains 16 separate cameras. Software is at the essence of the solution that uses “computational imaging” to combine several pictures into a high-def one. The cost? $1700.

Looking at the number of pictures people are taking and sharing on social media through their smartphones, one would be forgiven to think there is a strong appetite to get better quality images. However, quality is not as key as you would think.

Most pictures are disposable; they live in the social media moment. Just look at the protest by many about Snapchat adding the new feature called Memories. In the recent study we conducted on cloud, and specifically, photo storage, it is clear people just do not do anything with their pictures. The vast majority of the consumers who do store their pictures in the cloud do so because their phone is set to do it automatically. You can find the key dataset here.

Of course, there is still a market for high-end cameras but for those consumers and professional users, the design of the camera, the look and feel as well as the lenses, are very important. While it might be important to have something compact, the quality can never be compromised.

In between these two groups are people who rely on phones for everyday photography but then carry their DSLR with them on holiday or special events. For those people, current smartphones with some of the many lens accessories you can find are more than enough.

I think the money raised by Light says more about how eager investors are to find hardware winners at a time when the underlying tech commentary is on the death of hardware and the rise of services.

While smartphones will always be somewhat limited by their compact form-factor, there are modular options that will come to market soon that will turn them into more powerful cameras at a fraction of the price that Light is marketing the L16. Overall, even without these add-ons, smartphone technology is catching up fast and the focus is also quickly shifting to 360-degree cameras and how those play into the whole VR experience. Consumers will be more excited to spend money there simply because it is new and social media is embracing it.

Snapchat and the Battle For the Camera Roll – by Ben Bajarin
Yesterday, Snapchat released a new feature called Memories. Up to this point, Snapchat had made a name for itself by having users share videos that disappear after a set period of time. They had built in a habit of their users to constantly open the app and see what their friends are posting to make sure they didn’t miss something. You can imagine the embarrassment in a teenager’s life when their friend says, “Did you see what Aleah posted on Snapchat yesterday?” and that person hadn’t opened the app and seen it? The ephemeral nature of snaps are a part of the lure. However, Snapchat knows they need to expand the services features and it is no secret kids screenshot their friends and often save their own snaps to their camera roll. To address this, Snapchat released Memories which now gives Snapchat more direct access to your camera roll and allow you to create stories and save memories in new ways. This is a natural extension to Snapchat, who I also think will add more machine visual processing to their service, as they look to broaden their appeal beyond people under the age of 30.

What this showcases to me is a few things. First, we are moving ever closer to a cloud-based photo world. In a recent post at our Creative Strategies blog, Carolina Milanesi shared some of our cloud data around photos. There appears to be some value in the auto-backup features and people like having their photos everywhere. Snapchat making a play for the camera roll is them making a play to own the camera app and camera roll. This could have some interesting implications as this crucial millennial demographic gives more of their photo life to Snapchat and companies like Apple and Google potentially miss out.

Samsung’s Blip – by Ben Bajarin
Analysts are calling Samsung’s recent pre-earnings announcement that operating margin is the highest in two years as the return to dominance for the company. Actually, it is anything but. Samsung is enjoying a major part of their base upgrading and it is as simple as that. What Samsung is experiencing is, in a much smaller way, similar to what Apple saw in 2014/2015 as a big portion of their base upgraded to the iPhone 6 and 6 Plus. We track smartphone models by owners, so we knew a large percentage of Samsung’s base was still on older models. We should understand premium smartphone market refresh cycles as a pendulum swing. There will be down years and there will be up years and it will swing back and forth.

In no way is this a return to growth or a new chapter for Samsung smartphones. This industry is mature and it is and will continue to deeply impact refresh cycles. Apple will have a similar pendulum, now sometimes referred to as a “super cycle,” as a huge portion of their base upgrades. The problem is, this is unpredictable. Samsung will be the first to tell you they thought this was the year their base would upgrade. Samsung had two years of drought trying to get their base to move onto new devices. Apple has one year of drought and we will see if they hit a super cycle in 2017, or if they have to wait until their fiscal 2018 (starting fall of 2017).

BlackBerry kills off the Classic, its last QWERTY BB10 device – by Jan Dawson

This week, BlackBerry announced it was killing off its Classic device, the only current representative in the company’s lineup of what was once its mainstay: a QWERTY device running a BlackBerry operating system. The blog post announcing the end of life for the Classic left the door open to replacing the device, but the move is probably best seen in the context of broader trends facing BlackBerry.

The reality is it’s very likely BlackBerry will kill off its devices business entirely over the next couple of years. It’s down to under half a million shipments a quarter at this point and it’s extremely difficult to run a profitable phone business at that scale. The company has now built up its software business both organically and through acquisitions to the point where it can start to build its future around bits rather than atoms. It seems largely a matter of time until it completes that transition.

BlackBerry’s challenge for now is that, small as the device business is, it still provides useful revenue for the company and there are still some loose ties to its service and software businesses. Killing it off prematurely would sacrifice those revenues and potentially damage the rest of the business. But almost as damaging would be signaling the end of either BlackBerry 10 as an operating system or the devices business as a whole before BlackBerry is ready to pull the trigger, because then it will be left with lots of unsold inventory.

The challenging line the company has to walk the next year or two is to convince the market it isn’t giving up right until the moment it actually does so. That means refuting reports like the one last week that it was ceasing work on BlackBerry 10, even as it also sends subtle signals its investment in the platform going forward will likely be scaled back. One thing is for certain: BlackBerry’s future is very much about software, not hardware, so it’s simply a question of timing and percentages at this point.

Unpacked for Friday, June 30th, 2016

Amazon Trying a New Approach to Mobile that makes Sense – by Carolina Milanesi

This week, Amazon started offering Prime members a $50 discount on two smartphones models, the Moto G and the Blu R1 HD, as long as they agree to view lock screen ads similar to what the Fire tablets and the Kindle e-readers offer. With the discount, the Blue phone will cost $49.00 and the Moto G will cost $124.00. Amazon will not strip these devices of the standard Google apps as it did with the Fire phone but it will add its own shopping, video viewing, and playing music apps.

When the Fire phone was launched, it was a very confused proposition — high-end hardware with a price-point to match aimed at customers who were not already married to an ecosystem. That was not an easy match as most users who had not yet committed to iOS or Android by the time the Fire Phone launched in 2014 were more price sensitive and technology laggards who would not see the price of the Fire phone as appealing nor would they understand new features such as Dynamic Perspective and Firefly. Needless to say, the Fire Phone was a flop for Amazon.

This week’s proposition seems much more likely to give some good ROI to Amazon:

  1. The target is Prime members, a captivated audience who will be more interested than average in Amazon’s services like music and video
  2. The devices are a lower cost so they are more likely than not to attract users who are not already heavily engaged in an ecosystem although this might not be their first smartphones
  3. Leaving Google services such as the Chrome browser and the app store on the devices while adding Amazon’s apps for shopping and content is a win-win solution. Users will not feel they are compromising on their experience compared with getting the same phones or similar without the deal while Amazon still gets users engaged in what matters to their business: shopping and content consumption
  4. Although the fact these users are interested in the deal might point to a more price sensitive type, Amazon will know a lot about them as Prime Members which will help advertisers target their ads to get the highest return despite the price sensitivity
  5. Finally, there are consumers out there who are not prepared to pay a lot for a smartphone but that does not necessarily mean they do not have money to spend on anything else. Amazon and advertisers should know that

Amazon needs to widen its reach for its ecosystem but, most importantly for Alexa, this is a good step in the right direction.

Facebook tweaks News Feed to prioritize friends and family – by Jan Dawson

On Wednesday, Facebook announced it was tweaking its News Feed algorithms, with a couple of important implications. First of all, it would prioritize “friends and family” and secondly, it reiterated its commitment to treating news content in an unbiased way, while ensuring that content that purported to be news was, in fact, genuine.

The media has predictably responded to the news with more handwringing about Facebook’s role as both a major source of referral traffic and a major gatekeeper for content of all kinds. Though many news publications have gotten on board with Facebook’s Instant Articles program, almost all worry, to some extent, about Facebook’s power to dramatically reduce the amount of traffic they receive through the service. The latest changes only fuel those fears.

However, what’s likely motivating Facebook is a reported reduction in what it calls “organic sharing”, or the more personal posts member create organically, as opposed to third party URLs, videos, and other content members might share on the site. At least some members appear to feel that this content is less worth sharing because their friends and family are less likely to see it. Facebook clearly wants to assuage those fears by prioritizing this content in the News Feed, in an attempt to get this kind of sharing growing again. Interestingly, the news site, The Information, reported this week that average sharing per user is also down on Instagram recently, although it’s not clear this is as problematic as it seems.

For users, these changes should be subtle and many likely won’t even notice. By definition, Facebook’s algorithms only show us some of what our friends share, so it’s very hard to know what we’re missing and how well the stuff we do see reflects the broad range of content our connections are posting to the site. That also makes it tough to know when changes are made. However, Facebook absolutely needs to ensure people still have a sense of true connection to friends and family on the site or it simply becomes another repository of content, much easier to compete with than a true social network. The social element may have become less important to some users and to Facebook’s ability to monetize usage over recent years, but it can’t be ignored entirely.

From a media perspective, this is just another reminder of the immense power Facebook now has – something Ben wrote about earlier this week on the site. Facebook is both a massive source of traffic and an unpredictable (and therefore unreliable) partner as news sites try to grow traffic and monetize. Facebook readily admits that at least some Pages (and therefore some sites) will see reduced traffic as a result of the changes but it remains to be seen how hard it will hit various publications.

Windows 10 Anniversary Edition – by Bob O’Donnell

Microsoft announced the official launch date and availability of its next version of Windows 10 this week. On August 2, the company will release the Anniversary Update, a free update to all 350 million existing Windows 10 users that brings a host of new capabilities approximately one year after the first release of the OS.

Notable additions include extended support for inking and pen support across the OS and applications; more capabilities for Cortana, its voice-driven digital assistant (including access on the Windows 10 Home screen); and the ability to use its Windows Hello identity and authentication services across websites and supported applications (such as VPNs).

The Cortana additions should help make the service more useful, including the ability to ask questions when you aren’t logged into the PC (theoretically, a la Amazon Echo), as well as further integrating with Outlook and other personal information for more “assistant-like” capabilities.

The part I’m most excited about, however, are the extensions of Windows Hello identity management into the Edge browser. Leveraging extensions to the FIDO Alliance spec (previously dubbed FIDO 2.0, but now called Web Authentication), this is a major step towards a password-less world, finally. Essentially, the credentials from Windows Hello can be passed from the Edge browser to websites that require them, including online banking and commerce, and many more.

Everyone in the tech world acknowledges how horrendously broken passwords are and yet, there has been little real progress to solve the problem. While this development won’t fix everything, it does bring together biometric authentication and password management in an important way. In addition, the advanced FIDO 2.0 support in Windows 10 will enable the use of third-party devices, such as wearables, to pass authentication credentials over Bluetooth to a PC (or smartphone) in order to log in securely and automatically. (Apple announced some similar capabilities for the Apple Watch and iOS devices in the forthcoming version of iOS 10, so it looks like all the major players are finally moving in the direction of a less password-dependent world.)

The bottom line is the Anniversary Update for Windows 10 looks to be a useful one that should make the process of using a PC, both on its own and with other devices, a better one.

The First Autonomous Driving Fatality – Ben Bajarin

Unfortunately this past week, history was made in a very sad way. Tesla confirmed the first fatality involving a self-driving car occurred. Tesla put the event into perspective with the following paragraph:

We learned yesterday evening that NHTSA is opening a preliminary evaluation into the performance of Autopilot during a recent fatal crash that occurred in a Model S. This is the first known fatality in just over 130 million miles where Autopilot was activated. Among all vehicles in the US, there is a fatality every 94 million miles. Worldwide, there is a fatality approximately every 60 million miles. It is important to emphasize that the NHTSA action is simply a preliminary evaluation to determine whether the system worked according to expectations.

The point here is to underscore that self-driving cars are actually doing slightly better per million miles driven than human-only operated cars. But there are far fewer self-driving cars on the road compared to human operating ones, so it really isn’t a fair comparison for now. The reason for the crash may be the most interesting part. According to Tesla’s account of what happened:

What we know is that the vehicle was on a divided highway with Autopilot engaged when a tractor trailer drove across the highway perpendicular to the Model S. Neither Autopilot nor the driver noticed the white side of the tractor trailer against a brightly lit sky, so the brake was not applied. The high ride height of the trailer combined with its positioning across the road and the extremely rare circumstances of the impact caused the Model S to pass under the trailer, with the bottom of the trailer impacting the windshield of the Model S. Had the Model S impacted the front or rear of the trailer, even at high speed, its advanced crash safety system would likely have prevented serious injury as it has in numerous other similar incidents.

Self-driving cars have a tremendous amount of technology in them. Thanks to advancements in computer vision and very powerful GPUs in these cars, they are able to essentially scan the roads for all cars, anticipate and model their movement against their own system, and react faster than humans can in many situations. Except in this scenario, the trailer and light combination made the oncoming car relatively invisible to the sensors and computer vision systems on the Tesla. This showcases one area, among others, where there is a blind spot (excuse the pun) in our current machine learning and computer vision technology for autonomous cars.

As far as computer vision has come, it still has a way to go. But most technology and science points in a direction where technology can and will help prevent more accidents and protect humans better than if we were driving ourselves. This point is hard to argue with. However, unfortunate moments like these remind us of how far we still have to go and how much innovation is still needed in this area.

Unpacked for Friday, June 23rd, 2016

Instagram’s New User Numbers Demonstrate Continued Strong Growth, Engagement – by Jan Dawson

Instagram released new user numbers this week including 500 million monthly active users and 300 million daily active users. Symbolically, the fact Instagram’s daily active user number is very close to Twitter’s monthly active user number feels pretty important. That’s an indication of just how fast Instagram has grown even as Twitter has stagnated and, of course, Twitter has consistently refused to provide a daily active user number. That’s telling because, as a measure, monthly active users tells you very little about true engagement with a platform. Using an app every 30 days isn’t much different from never using it at all. For social and communication apps, the key is daily usage. “Time spent” is an even better measure because it tells you how people are really engaging. Facebook has provided those numbers for the core Facebook experience and now for Instagram usage and both numbers are impressive. Aside from Twitter’s lack of growth in user numbers, a key concern remains how engaged its reported users are (and how many of them are automated or spam accounts rather than real human users).

It’s hard to look back on Facebook’s acquisition of Instagram and see it as anything but an astounding success. Both the idea of the acquisition and the execution post-acquisition have worked well for Facebook, which has exercised admirable restraint in leaving the core experience intact while evolving it in meaningful ways. The same arguably goes for WhatsApp. Across the messaging and communications space, Facebook has created or acquired great properties, giving them the freedom to keep doing what they’re doing, at least from a user perspective. From an advertiser perspective, they’ve had more cross-pollination but there’s been very little homogenization across the various apps, which have retained their own distinctive branding and user experiences. Obviously, it failed to acquire Snapchat and that’s a continued thorn in Facebook’s side given how well it’s doing, but their other bets have all paid off nicely in terms of user growth and, at Instagram, in terms of revenue growth as well.

A lot of the growth is still coming from the expansion of the overall smartphone market, which is really the key enabler of all these apps, but some of them are also benefiting from rapidly increasing share either broadly or within certain demographic or geographic segments. Apps focused on visual media are benefiting from significant growth in interest in those areas, whether that’s photos and videos at Instagram, private Snaps or Stories and Discover on Snapchat, or live video on Facebook. Now that our devices have the capability to create high-quality content and ubiquitous bandwidth to both upload and view it, that whole category is taking off. This certainly explains why Twitter is so focused on video at the moment and tweaked its Vine app in important ways this week too. Yet the focus on visual media at Twitter doesn’t seem to be helping address its growth problem.

HTC Nexus 2016 Leaks: Why does Google Has a Nexus Program? – by Carolina Milanesi

On Thursday, Mobipicker published some pictures of what they believe to be one of the two Nexus products HTC will bring to market later this year. HTC is expected to sell the HTC S1 “Sailfish” and the HTC M1 “Marlin”, with the latter described as a cross between the HTC M10 and the Huawei Nexus 6P.

The Nexus One, the first device coming out of the collaboration between HTC and Google, was released in 2010 and it really took the market by storm as it delivered a high-end device at a very aggressive price point — around $500. With the next Nexus device, Google moved from HTC to Samsung. The Nexus S performed poorly compared to the Nexus One so, with the following Galaxy Nexus once again by Samsung, Google opened up to carrier partnerships as well as an unlocked version in the Play Store. It was not until the LG Nexus 4 in 2012 we saw a Nexus device really performing well thanks to a very aggressive unlocked price that started at $299. The success was such LG retained the Nexus baton for the Nexus 5 in 2013, also aggressively priced at around $350. So, for the first three years, Google used Nexus to show off the relationship with different vendors, a new version of the operating system, and mostly drive the price point down while improving quality so consumers could engage more and more with these devices. While selling direct has been a great limitation on the Nexus effort, the new data plans rolling out in the US over the past couple of years have certainly helped consumers be more aware of the real price of these smartphones and helped them appreciate “good value for money” devices like the Nexus 5. The Motorla Nexus 6 was a clear departure from previous years and with a price of over $600 it had very limited sales. LG brought to market the Nexus 5x many saw as a good upgrade opportunity for Nexus 4 and 5 users in 2015 and Huawei brought the Nexus 6P in 2015.

Over the years, Nexus sales have never been anything to write home about. While devices such as the Nexus 5 helped LG regain credibility in the smartphone market, Nexus volumes were always too low to really make an impact on vendors’ overall performance.

Aside from the initial Android One, it also seems vendors are doing less and less to differentiate these devices from their current flagship products. So the Galaxy 6 looked very much like a Moto X and the Nexus 6P looks like a Huawei Mate 8. So it is no surprise the new HTC Nexus will look like the HTC M10. If the channel remains limited and the devices are not bringing in true innovation, why is Google continuing to pursue these efforts?

Google is between a rock and a hard place at the moment, with rumors Huawei is considering coming up with a separate OS as a plan B and Samsung has started to reinvest in Tizen. Google needs to be careful about antagonizing its partners. At the same time, as vendors like Samsung and Huawei are focusing more on their own UI and ecosystems, Google needs hardware to show off Android as it was intended. The latter would call for hardware designed by Google and gets the widest possible channel opportunity but the former calls for a more subdued approach. The results of the two approaches would be considerably different from the opportunity to go WOW with the first and end on MEH with the second.

Live Streaming is Hot Again – by Ben Bajarin
It is has been a little over a year since the Meerkat and Periscope live streaming craze. A year removed, I’m still convinced there is a role for live streaming content but it will largely only be popular during a social moment. Meaning, something big happens socially that a community, a city, a nation, or the world tunes into and is able to see from many different perspectives, not just what professional news crews create. Of course, the other value is when there are no cameras. Or, in the case of our mid-week debacle here in the US where the Democrats took over a congressional meeting and demanded legislation for more sane gun control laws. Cameras were ordered to be turned off, yet people broadcast the protest live via Periscope. Millions tuned in between Facebook Live Video and Twitter’s Periscope to watch the whole thing unfold. Reality TV at its best.

Live certainly works in this case and many others but the area that appears to be hot is celebrity content. The most popular content with the highest views is that from celebrities. It opens the door to their own business empire of celebrity endorsements and the like. So it isn’t surprising YouTube/Google wants to get in on this action. It appears you can now live stream directly from the YouTube app.

The big takeaway is we are entering a point in time where accessing any number of live streams is only a click away. But these streams have the potential to go viral in much larger ways than live television ever could, thanks to the social graph of Facebook, Twitter, and many other social networks. No one is fooled to believe this is the only and constant way we will consume live video but it certainly is going to be one of our options. Seems like Snapchat will be the next to offer Live and it’s only a matter of time, in my opinion.

HP Offers Thinnest Notebook – by Bob O’Donnell
Since the breakup of HP last fall, there have been many questions about what kind of innovations the PC and printing divisions of HP—called HP, Inc.—would be able to deliver to the market. Even though HP Labs went along as part of the deal, much of the press around the split handicapped HP Enterprise as the bigger beneficiary of the split. Clearly, those predictions didn’t have the benefit of seeing HP’s new Spectre 13, officially the world’s thinnest notebook at just 0.41” and, in its extremely limited gold-plated, Swarovski crystal-encrusted $25,000 version, likely the world’s most expensive as well.

In person, the new Spectre 13, which actually starts at $1,169, is an extremely attractive machine, with its reflective copper trim and clever hinge design combining to create a high-end design at a respectable price point. The notebook features a full HD 1,920 x 1,080 resolution display, as well as an Intel Core i5 CPU, 8 GB RAM and three USB-C ports in its base configuration. Importantly, two of those USB-C ports support the 40 Gbps high-speed data transfer rates offered by Thunderbolt 3.0 and all three support alternate modes for USB-C, including power delivery and display. Given the competitive nature of the PC business, others are likely to match the specs before too long. For now, it’s clear HP Inc. still has plenty of innovation to bring to the market.

Unpacked: Most Used Messaging Apps by iPhone Owners

To set the table for how important iMessage is to the overall iOS experience and how much iPhone owners rely on it, I’ll share these stats around messaging apps. This is why bringing a developer store and inevitably deepening the capabilities for developers to hook into iMessage is so interesting.

78% of iPhone owners (mostly from the US and the major areas of Europe) say they use iMessage daily to send a message, photo, or video to someone. The next closest app for the same tasks is Facebook Messenger at 49%. When it comes to apps used more than any other on a daily basis, 55% of iPhone owners say iMessage. Facebook Messenger again comes in second place at 29%.

In certain markets, the messaging app of choice varies. Particularly with WhatsApp in India and WeChat in China, however, what will be fascinating to watch is now that iMessage has an API, it opens the door for deeper engagement of the primary app of most iPhone users. WeChat has arguably the most advanced API for a messaging app which has allowed it to create a vast ecosystem of third-party integrations to the platform. In fact, the best way to understand WeChat is as a platform and now iMessage is trending in that direction as well with arguably as many, if not more, daily active users than WeChat. Overall, WeChat users do more than iMessage users, thanks to the more advanced API, but all of that may be about to change.

As I look at usage data by messaging app in all major markets, simply sending a message to someone is the primary task. Which shouldn’t be too surprising. However, this may speak to the nature of the way interactions may evolve. This is why the conversational interface is the hot term to use. People are comfortable using these apps for messaging. For apps like iMessage where many of these new advanced tasks like banking, booking dinner, paying someone, etc., will be so new the conversational element may make it easier to advance the behavior more naturally.

While I’m not suggesting iMessage will replace WeChat in China, I have been very skeptical of the idea that conversational commerce and conversational platforms will be successful in the West. I’ve observed many friends in venture capital invest in companies like Magic, Operator, and even several I’m currently trying that are still in beta. All want to be your messaging platform to engage with businesses and in transactional commerce. With what Apple is doing with iMessage, I’m more confident what we see in Asia with WeChat can come to the West.

Apple is starting off modestly with their approach, taking an extension of an existing installed app model. But my sense is this is the first of many evolutions of the capabilities of iMessage. The messaging apps as platform wars are far from over at a global level. It makes the entire space much more interesting to observe and study. Luckily, we track each of them along with their core actions and usage each quarter, so there will be much more to say on this over the next year.

Unpacked for Friday, June 17th, 2016

Don’t Mistake the iPad Lack of Stage Time at WWDC as a Sign Apple is done with Tablets – Carolina Milanesi


At the end of WWDC, I read a few articles by disappointed reporters regarding the lack of an iPad presence during Apple’s WWDC keynote. The iPad was, of course, mentioned in the keynote either directly as in the case of Swift Playgrounds – the new app that teaches children how to code – or indirectly as in the new and improved Apple News app and split screens that will look very nice on an iPad.

Specifically, Swift Playgrounds is not only empowering the next generation of developers but is reaffirming Apple’s vision of the big role iPad has in education.

Apple focused a lot on the fact developers now have four different platforms to develop for: iOS, watchOS, tvOS and macOS. Thus far, iOS has catered to both the iPhone and the iPad but, over time, many users see these devices as serving different purposes.

Is this difference in usage enough to justify two separate operating systems? Some argue it is. However, adding a separate OS for iPad at this point in time seems to me like the wrong thing to do and here is why:

– iPad sales are down year over year and developers would not necessarily see a dedicated iPad OS as a priority vs. a watchOS which has the opportunity to grow to a larger market than tablets. Right now, the iPad is still getting diversified apps with little work required by developers.

– I have a feeling Apple sees the iPad’s real potential more and more as a productivity tool for consumers and IT managers alike. To grow in that space, the iPad needs more enterprise, go to market and device management apps and a new OS might set the iPad back at this point considering the process that most enterprises go through to integrate a new OS.

iOS 10 will come to the iPad of course and, with it, all the new features we have heard about on the keynote stage. Yet, the biggest concern investors have with Apple at the moment is iPhone sales, not iPad sales. Rightly or wrongly, many have already written off that category. So focusing on the iPad too much during the keynote would have sent the wrong message. It also makes more sense, considering the number of people using iPhones vs. iPads to focus on points a larger audience will understand. This does not mean Apple has changed its mind on this segment and that we will not see more differentiation going forward.

Snapchat Opens Up New Options for Marketers – by Bob O’Donnell

Like many messaging platforms, Snapchat has managed to capture an impressive number of users to its popular platform but questions about monetization have dogged it for some time. The company tackled many of these concerns head-on this week with several announcements related to new advertising programs, as well as a new API to allow the purchase of full advertising campaigns. In and of themselves, these developments are modestly interesting and somewhat expected from a platform everyone knew would eventually move to inserting various types of ads. But where Snapchat continues to stand out is in the types of advertising it is offering and they’re apparent effectiveness. Leveraging the fun, flashy style of the service itself, Snapchat has pioneered things like brand-sponsored Lens’, which overlay graphics of brands like Taco Bell or Gatorade onto your smartphone’s photos and videos. The end result is things like taco faces and other types of silly, crazy yet very engaging “snaps” that the decidedly younger demographic of Snapchat users are viewing as eagerly as the results from their friends and others.

Up until now, most of these clever types of campaigns required custom work and hence were limited in their ability to scale. With the variety of announcements Snapchat made this week, the idea is to bring these new advertising models to a much wider audience. The opportunity becomes doubly attractive to advertisers because of the millennial-heavy demographic of most Snapchat users. This gives advertisers access to an enormous number of exactly the people they want to talk to using advertising models and ideas significantly more effective than traditional ones. For many marketers, it’s a match made in heaven. As a result, Snapchat’s business prospects are starting to look as compelling as its user growth story, making it a formidable competitor in the growing world of messaging.

Microsoft acquires LinkedIn for $26 billion – by Jan Dawson

Microsoft managed to keep its acquisition of LinkedIn very quiet but decided to make the announcement the morning of Apple’s WWDC keynote this week. That timing made for a fantastic juxtaposition of Apple’s and Microsoft’s relative strategies and the moves that flow from them. While Apple updated all four of its major platforms and introduced new developer tools, almost all of them aimed at consumers, Microsoft doubled down on its increasingly enterprise-centric strategy with the LinkedIn buy.

I’m not convinced this move is a good idea, given all the ways Microsoft could have spent that chunk of money. $26 billion could have bought a number of smaller companies that would have been easier to integrate and bake into Microsoft’s core experiences without the scale of risk attendant to such a large purchase. But this is Satya Nadella’s first really big strategic gamble since he took over and a great indicator of where he wants to put Microsoft’s money. It seems he has been very directly involved in the discussions with LinkedIn board chairman Reid Hoffman from the beginning, which makes him even more pivotal to the deal than his CEO role alone would suggest.

LinkedIn is an interesting combination of strengths and weaknesses. Its stock had fallen quite a bit over recent months due to various concerns about its trajectory and the price Microsoft is paying isn’t even a premium over its peak share price earlier this year. Among the concerns are a lack of engagement from users (less than a quarter of members use the site regularly), slowing growth in site traffic, net losses for the past four quarters, and others. In general, LinkedIn has suffered from a sort of benign neglect when it comes to the user experience, in which new features are launched constantly while the core features of the site remain permanently broken. The cynic in me wonders to what extent extra page views are generated by people frustratedly clicking around the site trying to find things that should be much easier to find.

To my mind, the three biggest opportunities for Microsoft with this acquisition are:

– Fixing the core user interface, by allocating sufficient resources to the problem to really improve things rather than tinkering at the edges or getting distracted by shiny new things instead

– Executing much more quickly on LinkedIn’s vision for its future, which has always been compelling on paper, but which it has been very slow to bring to fruition

– Integrating LinkedIn deeply into Office, Dynamics, and other Microsoft functions.

The first two of these are primarily about throwing Microsoft’s money at LinkedIn’s problems. Microsoft clearly has more money to spend than LinkedIn did, but simply leaving the same people in charge may not be enough. With both CEO Jeff Weiner and Hoffman staying involved, it may be hard to make the kinds of changes in execution needed. The third is both where the greatest promise and the most uncertainty lie. In theory, bonding LinkedIn’s professional graph to Microsoft’s tools makes tons of sense but the vision here relies on the accuracy and completeness of the information supplied by LinkedIn. Though some users undoubtedly keep their profiles absolutely up to date and only accept connection requests from those they really know in real life, that’s far from universally true. A big test for Microsoft’s vision here will be whether the LinkedIn data is good enough to be truly valuable in this context. That problem becomes even greater outside the US, where 60% of LinkedIn’s revenue and a substantial portion of its users come from.

On balance, I remain skeptical about the wisdom of this acquisition but the rationale is reasonably solid. The price paid seems high and I continue to think ruefully about what Microsoft might have done with that money instead. But we’ll see if Microsoft can really justify the investment – it’ll be one of the biggest tests of Nadella’s leadership yet.

The War for Your Messaging App – Ben Bajarin
Any way you look at it, there is a war brewing for your messaging app. Without a doubt, messaging apps are one of the central experiences to our smart devices. These apps represent one of the largest blocks of time spent with our devices and are up there with social media and watching movies in terms of time spent. So it makes sense there is a battle to own that experience. In China the biggest app is WeChat, in the US and parts of Europe it is iMessage, in India it is WhatsApp and for many other parts of the world, it is Facebook Messenger. Both Facebook and Apple made announcements this week to deepen their messaging app experience. Microsoft also got in on some of the messaging app news by acquiring Wand Labs.

The theme of all of this, of course, is the idea that a conversational experience can function as a platform. Messaging apps becoming platforms for experiences that are beyond simply talking to friends and family is one of the largest trends out there and it is only accelerating. The concept that we can order food, book a ride, check movie times, buy tickets, check our bank account, pay someone and more through a conversational center like a messaging app is an extremely natural progression for a platform that better fits with how human beings function.

The key to watching these platforms evolve is to see what hooks they aalow outside parties to have into the core experience. That is why what Apple did with iMessage and launching an iMessage app store is interesting to watch. I’ve never evaluated WeChat’s development guidelines but others I have spoken to suggest Apple’s may be the most robust API offering in a messaging app available today. I am sure others will open up more to compete but it is fascinating how absent Google is from this extremely important theme.

There is long way to go and I’m slightly concerned that, in some markets, this trend may be confusing and hard to understand for consumers but, if the focus is on the customer experience, then I’m optimistic consumers will embrace the new found functionality of the conversational platform.

Unpacked: Amazon Echo, Siri, OK Google Frequency of Use

One of the thing we sought to understand in our quantitative study of Amazon’s Echo, Apple’s Siri, and Google’s Ok Google was how often people are using their voice to interact with their devices. We did this with our early adopter panel and what I want to unpack is the usage frequency of each by those who are primary users of the voice-based UIs in question.

I want to emphasize the early adopter point here. We know frequency of usage by mainstream consumers is not that high. So the initial question I had was how much different are early adopters regarding usage frequency compared to the mainstream. One would think early adopters would be heavier users of these types of solutions across the board.

Screen Shot 2016-06-05 at 10.11.13 PM

When we look at usage frequency filtered out by those who say they never use any of the above three, we get the following data. Although most people have tried Siri, it appears that, regarding frequency, the Echo is the most used voice-based user interface. There really is a lot to like about the Echo. In our quantitive interviews, we continually heard positive things from Echo owners who were impressed and found the device extremely useful in many different ways. Ok Google/Google’s voice search takes the top spot when it comes to this category by Android owners and iPhone owners mostly say they use Siri but only sometimes.

With the Echo, a key question I have is if the “very often” usage will sustain. Again, we are looking at just early adopters who get caught up in the shiny new gadget and the Echo has not been out as long as the voice-based UIs of Siri and OK Google/Google Voice. While we asked Echo owners how their usage has evolved, most said usage is staying about the same (48%) while 39% said they are using it more now than when they first bought it. This is an early sign that usage may not fade although I’d imagine Amazon needs to keep increasing the capabilities of the Echo to maintain usage.

Stepping back, the way I view the coming battle for voice-based assistants is one of tasks. Like the smartphone, which stole most of the major tasks from the PC, the voice assistant that covers the most ground regarding tasks is the one that will be “hired” by the consumer. If all a device is good at is playing a song or getting directions or returning a web search, then it will be confined to a few set of tasks. This is where the API will come in. Amazon is already letting people take Alexa (the Echo’s voice-based assistant’s name) and put the technology on anything they choose. OEMs can put the smarts of the Echo into their coffee pot, refrigerator, washing machine, car, and anything else they feel is in need of a voice-based interface. The Echo already has the largest potential ecosystem of smart home/connected home products by their support of many smart home standards. The largest is Wink (acquired by Foxconn) which has over 1.2 million active devices running Wink smart home technology. I use my Echo to control lights, tell me how much gas I have in my car thanks to the Automatic solution, turn on sprinklers, check the propane in my grill, lock my front door, and many other things thanks to the vast ecosystem of connected smart home products Amazon supports.

Both Google and Apple need to crack this wider ecosystem with their solutions or run the risk of Amazon’s technology stealing more tasks because it goes wider and deeper as the voice UI platform running on the most connected products. I’m not sure it is enough for our phones to connect to these things. I think some of this technology needs to be built into many parts of the hardware ecosystem as well. Hence, Google and Apple should strongly consider letting their voice-based platforms be portable and not just confined to their pocket computers, tablets, PCs, and whatever else. The winner here will be the one with the biggest ecosystem to capture the most potential tasks. Voice needs to be viewed, not just as a user interface, but also as an operating system.

This Weeks News Unpacked

“We’re still committed”, says Jawbone CEO, but it may be time to regroup/rethink – By Carolina Milanesi

Late last week, TechInsider published an article on the news that Jawbone was slowing production of its fitness trackers and had sold its remaining inventory to a third party and concluded that Jawbone was exiting the wearable market.

On June 1st, Jawbone CEO Hosain Rahman published a blog post renewing the company’s commitment to the wearables market:

“To be clear, Jawbone remains wholly committed to innovating in and building great wearables products. We have never been more excited about our pipeline of technology and products and look forward to sharing them with the world when ready.”

Jawbone, together with Nike, started the fitness band trend as we know it today. Tech enthusiasts were split between the two brands when Fitbit started to get its grip on the market. In the US, Pebble came and started to shift early tech users towards smartwatches. Other smartwatches, including the Apple Watch, did the rest and here we are. Jawbone does not even show up in market share reports. Kantar lists Fitbit, Apple and Garmin as the top three brands in the US for the March 2016 period.

So nobody would have blamed Jawbone for exiting a crowded market where vendors are already pushed on margins and consumers still need to be convinced. However, given the January round of funding that raised $165 million plus the money that will come in from the UP inventory sale and the rumored sale of the speaker business, it should give Jawbone enough cash to rethink and regroup.

Design was probably the biggest appeal of the Jawbone UP family. Feature wise, the devices ticked the core boxes for a fitness band but did not really go beyond what others were doing, leaving them out-priced. Design will certainly go a long way but, for serious fitness people, features win over design. For less serious fitness conscious users, price wins over both feature and design. This leaves Jawbone in a tight spot, forced to either innovate on features and software in order to position its devices at the higher-end of the market or focus on design and possibly partner with fashion brands either openly or by becoming a white-label. Outside of these two options, they could only try and compete on price and we know how that usually ends.

Major American firms sign hate speech code of conduct with European Union – by Jan Dawson

Facebook, Twitter, Microsoft, and YouTube signed a new code of conduct regarding hate speech with the European Union this week. Such speech is not just undesirable but illegal in the EU and the companies signed up to do more to combat such speech, to implement notification and takedown systems, and so on. However, perhaps the most troublesome part of the Code of Conduct is this bullet point:

“The IT Companies and the European Commission, recognising the value of independent counter speech against hateful rhetoric and prejudice, aim to continue their work in identifying and promoting independent counter-narratives, new ideas and initiatives and supporting educational programs that encourage critical thinking.”

That smacks of promoting one kind of thought over another and, while I think we can all agree speech that incites hatred and violence is undesirable, it’s quite another thing to actively promote counter-programming. That could run the risk of stoking fears Facebook and Twitter in particular have policy agendas which they will use their platforms to promote. Both companies will have to be very careful to avoid being seen as partisan or favoring one set of acceptable speech over another. Facebook specifically has recently strenuously argued it doesn’t favor certain political views or arguments over others, so it will want to be mindful not to do anything to damage that perception. As a practical matter, it’s not clear exactly what such counter-narratives would look like. Identifying incitements to racism and violence is relatively straightforward but what is its opposite?

It’s therefore worth asking what would prompt these companies to sign up to such an agreement? The answer likely lies in the complex relationship between the EU and American tech companies. On the one hand, Europe is a big and important market and one that looks a lot like the US in many ways. But, on the other hand, there’s a lot of protectionism and backlash against big American companies. There’s always a risk the EU decides to investigate and take action against one of these companies so they have to do whatever they can to keep the authorities friendly and avoid that outcome. Sometimes it means preemptively making smaller, less painful concessions to avoid larger, more painful ones. With the EU action against Google as a backdrop, I’m guessing that’s part of the calculus for the companies involved. I just hope they don’t come to regret making these commitments.

Amazon and Pebble partner around Alexa – by Jan Dawson

Amazon and Pebble announced on Thursday that Pebble’s new keychain device, the Core, will feature Alexa integration. The Core is currently the focus of a Kickstarter campaign and Pebble expects to begin shipping it to backers in early 2017.

As I’ve written previously, the Echo has been a surprising success as a home device, but Amazon’s biggest challenge for its Alexa hardware is getting it out of the home. Since Amazon lacks a major smartphone platform of its own (its Fire Phone was a complete flop), it will have to find ways to get the functionality onto third party devices. This Pebble deal does little to help with smartphones but it’s likely indicative of Amazon’s strategy – partner with third parties who don’t have strong service ecosystems of their own for a win/win. In some ways, this is analogous to Intel’s strategy of working with companies from outside the traditional consumer tech markets for wearables – both companies need each other and it makes for a symbiotic relationship.

Clearly, one device by itself isn’t going to suddenly make Alexa ubiquitous, except for the small number of people who buy it. There’s a long way still to go and smartphones have to be part of the plan at some point, but there will likely be other similar deals over the coming months. The other big question is whether Alexa can perform as well on a tiny device that’s not optimized for far-field voice recognition as it does on the Echo. The answer is almost certainly is that it can’t but it will matter greatly if the performance is significantly worse. One of Echo’s most important features is the sheer quality of its voice recognition. If that goes away, it’s no better (and arguably worse) than competing solutions like Apple’s Siri, Google’s voice search, and Microsoft’s Cortana, each of which can be more useful through integration with a smartphone. I’m not convinced this strategy will pay off for Amazon over the long term but it’s good to see it’s aware of the need to go beyond its current first-party devices.

Microsoft And the Mixed Reality Platform – by Ben Bajarin
Microsoft made a bit of news at Computex that didn’t get enough attention, in my opinion. Stepping back, we have to recognize the VR/AR computing era will need some standard development platforms. SDKs, APIs, and app/content stores will be necessary for developers and content producers to distribute their creations. Like mobile, there will not be only one platform and there may be more than just the two we have today in mobile. But, Microsoft has put themselves in a position to compete for the platform for mixed reality which will span both VR experiences and VR experiences.

Microsoft has opened up Windows Holographic as a platform and will allow other companies to build hardware and software on it. Microsoft is putting Windows at the center of this knowing a lot of this content development is already taking place on Windows PCs. By extending developer tool sets and, most importantly, creating standards for development in both VR and AR, Microsoft is making the smart move to blend VR and AR and broaden the tools to create both experiences with the same hardware and software.

Samsung updates Wearable line – Ben Bajarin
Samsung has released a new version of their Gear Fit and also released a new set of completely wireless earbuds with a heart rate sensor called the IconX.

I had a chance to see both of these products during a pre-brief and, being a fan of the concept of the first Gear Fit (a fitness tracker with a big bright screen), these new devices are even better and, more importantly, very comfortable. Samsung did quite a bit of work with the user interface, optimizing it for a vertical orientation. While these devices are quite competitive on features and even one-upping Fitbit with a GPS built in, Samsung still needs to build more credibility in the health space. Both Fitbit and Apple have the lion’s share of trust and credibility in the mind of consumers when it comes to fitness and health and this is the uphill battle Samsung faces.

The IconX is a very interesting product and I was impressed with both the heart rate accuracy and the comfort of these wireless earbuds. Samsung is making a strategic error in my opinion by not bringing these products to iOS. While they support all Android devices via the S-Health app which can be downloaded from the Google Play store, it is really iPhone customers who are the primary buyers of health and fitness technology today. This could serve as a Trojan Horse for Samsung or help them compete more with Fitbit by being cross-platform. But Samsung is leaving money and potential future customers on the table by keeping their health and fitness accessories off the iPhone. Doing this would be a smart move for them in the future if they are serious about this space.

Unpacked: Analysis of This Week’s Top News

Twitter – by Jan Dawson
Twitter this week announced that, in the coming months, it will start exempting some forms of content from its traditional 140 character limit, including pictures, usernames, videos, and polls. The news has been a very long time in coming as users have long demanded these changes. Twitter has hinted several times they were debating them, but it’s remarkable it has taken this long to finally announce the change (which won’t come for several more months as developers need time to adapt their apps).

However, these changes really do nothing to solve any of Twitter’s core problems, especially when it comes to attracting and retaining new users. This change really only benefits existing power users, who are more likely to be struggling with the character limit on long multi-user threads, for example. As a power user myself, I’m grateful for the change, but the change itself will arguably make Twitter even more complicated for people unfamiliar with the service and its quirks. Even some reporters who are regular Twitter users themselves botched their reporting of the change, which is indicative of how impenetrable some of these Twitter features can be.

What Twitter should be focused on above all else is making Twitter easier and more appealing for people who hitherto haven’t seen value in the service. That means getting away from single user accounts as the atomic unit of the service, moving towards “channels” based on topics and interests, and allowing users to tune to these different channels at will without having to explicitly follow many accounts on a permanent basis. Twitter now holds vast amounts of content and is particularly relevant for breaking news. Yet getting at that content continues to be very difficult without a significant prior investment in personal curation. That simply shouldn’t be the case – with all the data Twitter has about its content and its users, tuning to a topic should be as simple as changing channels on a TV remote. Indeed, I and others have used the TV analogy previously.

My biggest worry about Twitter at this point is that it’s going to continue to sharpen certain product elements while leaving the broad features of Twitter unchanged. The risk here is it continues to stagnate along with its user base even as other services and apps capture the vast majority of available ad spending and advertisers continue to target those other platforms. The set of priorities Twitter outlined at its shareholder meeting this week gives me little confidence this will change. The priorities include refining the core, live-streaming video, creators and influencers, safety, and developers, none of which sound like they’re about growing the base. Has Twitter finally given up?

Microsoft retrenching its smartphones focus to enterprise – by Carolina Milanesi

On Wednesday this week, Microsoft announced it was scaling down its smartphone business and refocusing its efforts on the enterprise and, in the process, cutting another 1850 jobs, most of which are in Finland.

I pointed out last week, commenting on the feature phone news, that I thought the mention of supporting current Lumia devices and continued development of Windows 10 mobile sounded like a pre-warning of Microsoft walking away from consumer smartphones. As it turns out and, sadly for the latest round of people who lost their job, I was right.

Hindsight is always 20/20 but let’s try and make sense of how we got to this news:

  1. Two years ago, Nokia was the only vendor with viable Windows devices and still had a considerable installed base of users across regions and a relatively strong brand in many emerging markets
  2. Nokia was deciding between Windows and Android. For Microsoft to leave Nokia to Android was too much of a risk. Had that happened, Microsoft would have lost the consumer market and could have also lost the enterprise market and not just in smartphones. Nokia knew how to sell to enterprise and how to work with IT managers. The Finns could have made inroads with Android faster than Samsung is doing today. With Android phones more rooted in enterprise, other devices would have had an easier entry path
  3. Two very different cultures and two different goals kept Lumia in limbo for almost a year after the acquisition. Microsoft was all about enterprise, Nokia was all about consumers. Microsoft was about software driving hardware, Nokia was about returning to being the top dog in mobile
  4. Last summer, Microsoft narrowed the scope of its smartphones to enterprise, Windows fans and smartphone value buyers. However, since then. market share in the consumer space has been free falling
  5. The app gap Windows has been suffering from would only get bigger as sales drop

Fast forward to this week and it is really hard to see any other outcome.

Windows 10 is enjoying good momentum in enterprise, making some IT managers wanting support across different form factors. Let’s be clear, Microsoft’s focus on enterprise does not mean they think they can be the third smartphone OS in the world just by playing in enterprise. It means Microsoft wants to cater to those IT managers that see an opportunity in a Windows 10 device that is not a 2-in-1 or a traditional PC. It also caters to IT managers looking at Microsoft Continuum as a cost savings for users who hotspot or for road warriors.

The end of Lumia as a consumer offering does not mean we will not see anything else coming from Panos Panay’s devices team. A smaller form factor that takes advantage of inking and Cortana could be a very compelling device. Not having to worry about a full consumer portfolio of products allows Microsoft to concentrate on what matters; software, universal apps in particular, and the next big computing paradigm, VR.

Microsoft still has a role to play in mobile and has the opportunity to own the engagement with consumers through apps and services running on iOS and Android.

Why Maker Faire’s are important to America’s Future – by Tim Bajarin

I have been following the Maker Movement as a part of my overall interest in STEM (Science, Technology, Engineering and Math) education. These shows have become an increasingly important catalyst to introduce kids all over the world to various aspects of STEM education. This is done through a hands-on approach to getting them acquainted with semiconductors, designing electronics, soldering and various scientific principles that are part of making things. There are demo stations as well as actual working stations all over these Faires where kids can play with robotic kits, try a hand at making a drone or a Arduino or Raspberry Pi-based vehicle of some type as well as tinker on various electronic or building projects available to them.

These shows include dozens of seminars and speakers who share what they are doing as it relates to the Maker Movement and are used to help people get ideas on how to become makers or better makers in the future.

The Maker Faire focus on getting kids interested in making things and especially STEM is where Maker Faire’s real importance lies.

Over the last few years, I have written multiple pieces on STEM, particularly how the NFL’s San Francisco 49ers, Intel, Boeing, and many companies around the world are backing STEM-based programs. All of them see the importance scientific disciplines will have in the future and, more germane to them, is the real concern that, if we cannot get kids trained in the sciences, we will not have the engineers and scientists to work in our companies in the future.

Indeed, just about every business is having to rely more and more on the role technology plays in their world and the need to get this generation of students interested in STEM and tech has become more and more a priority for companies, educators and parents. To that end, these Maker Faires can plant seeds of interest and help cultivate these future scientists and engineers and hopefully create the next generation of leaders who will guide and power our future businesses.

One concern of mine about the Bay Area Maker Faire though is very few minorities attend this show. This is not the fault of the folks who manage the Maker Faire as they try extremely hard to make this event inclusive to all. In fact, on the first day of the show they, along with sponsors Linkedin, Robo Terra and Think Logix, brought over 4000 students on 70 buses from underserved communities to the show to see demos and play with the various projects at the Maker Faire. However, this underscores the fact the tech community has to work overtime to get kids of all genders, races and ethnicity interested in STEM as these scientific disciplines will be more and more important to them and our world in the future.

Apple’s Set Back in India – Ben Bajarin
Despite Tim Cook’s visit to India, it did not help their case with local regulators. Indian officials dealt Apple a blow to opening local stores there by deciding not to wave a mandate that foreign brands source at least 30% of local goods in order to open a store in the region. Fascinatingly, local officials justified their decision by deciding Apple’s products did not fit the “state of the art” or “cutting edge technology” classification. To come to such a conclusion is objectively false and only underscores the truth that much of this decision is political.

Apple either has to come up with a creative way to source or sell in-store local goods or regulators need to bend the rules. Local stores are essential to Apple’s strategy in India and, without them, it will be a very slow uphill climb. Indian consumers have no doubt Apple makes quality products and has a quality brand. However, the value comparison away from a pure on paper spec, to ecosystem, experiences, quality of software, total cost of ownership, support, etc., are all things which can help change the equation and local stores are essential to this message.

Bottom line? A local store strategy is the cornerstone to Apple growing their presence in India and the way things look now, it will move very slowly.

Unpacked: Global Social Media Usage

Looking at many different social media networks/services from a global perspective, there are a few interesting trends, none larger than Facebook. Literally. On a global scale, Facebook not only has the most active users but also the most engaged ones. When consumers are asked how frequently they use specific social media sites/services, Facebook returns the highest at a global level than any other network.

Screen Shot 2016-05-22 at 9.00.50 PM

Between Twitter, Instagram, YouTube, and Facebook, the latter has the highest number of customers saying they use the service more than once a day. In terms of consumers using it daily, and even more than once per day, Facebook is more level with services like Instagram and YouTube. Ultimately, this statistic is the one I’m most interested. All these networks/apps/services can state their daily active user numbers. However, knowing how many of those people come back multiple times a day is a key understanding.

Engagement matters when you sell ads. Not just duration but frequency. Adding to this, tracking the duration of these multiple interactions is also a key statistic to understand. But only Facebook would have this particular data. I say this because there are many bodies of research which suggest the longer a person is on a site where advertising is common, the more their brain learns to ignore the ads during that session. People who go back frequently tend to see more ads than those who spend longer times on a site but only as one session. This is one insight I learned from working with ad networks a few years ago. Which is why looking at frequency per day is more interesting to me than just daily usage.

Looking at the chart you will see WeChat listed. I looked at this data by China only (since that is where most of their active users are) to show how engaged WeChat users are in China. This is actually Facebook’s goal since WeChat is a platform by most definitions in China and has a deeply engaged customer base. I also show WeChat in China vs. Facebook globally to demonstrate the uphill challenge Facebook has in China against WeChat. We know Zuckerberg wants badly to get into China and views it as a major growth area but I tend to think the dust has settled there with WeChat. Facebook will have a challenge becoming the dominant network in China the way they are in other countries.

Circling back to WeChat’s dominance in China from a frequency standpoint. While it comes in at 54% of their users using it more than once a day in China (compared to Facebook’s global number 49%), WeChat’s global number is below 30% of active users accessing it more than once per day. However, that 54% local to China number is higher than the local, country only, statistic of Facebook multiple user sessions per day. The country with the most active Facebook users saying they frequent the site more than once a day is Sweden at 37%.

WeChat’s high-frequency usage in their home market is a sign of what can happen when a commerce platform, messaging platform, and social platform all come together in a single product. Facebook wants this to happen and, if they do, we will be checking all the markets we cover to see if daily frequency goes up. Besides simply adding new customers, increasing their frequency is a key to their growth in my opinion.

Unpacked: Percent of Consumers Interacting with Brands on Messaging Services

With all the talk of bots lately, I thought it would be helpful to look at how many consumers globally are engaging in brand interactions in ways that make sense to integrate a customer service bot. First, the best way to think of a bot is as a customer service agent. Companies will look to automate certain processes and provide you with a bot interface to replace a voice automated function or speaking with a human. The clear reality is, humans don’t want to hold phones to their ears to interact with companies for service and support. We would rather text and for good reason.

That being said, most of the market is not engaging with brands this way yet. Part of this has to do with a lack of available ways to do so but this will also require a slight behavioural change. Looking at global data, only 7.3% of consumers have interacted with a brand via a messaging app. Only 14% globally say they chatted with a customer service agent online last quarter. Both numbers increase, but not significantly, when we isolate the answers by millennials.

Looked at on a country by country basis, markets like the US and China bode better but the data, again, does not change dramatically. When it comes to interacting with brands online today, it seems most people either don’t interact with them directly very often and, when they do, it is on the phone.

Trying to find some encouraging points, I looked at whether consumers were interacting with brands on social media. This could be mentioning a brand on Twitter or facebook or asking them a question directly, like a customer support question or something in that vein. Unfortunately, the numbers were not much better with only 11% of global consumers saying they interacted directly with a brand via social media in the past 30 days. Interestingly, the heaviest users of Snapchat, LINE, and WeChat were much more likely to interact with a brand directly either by social media or messaging app.

Overall, as I was looking through the data we have on this subject, my goal was to see what encouraging or discouraging habits we see in action today that suggests chatting with bots, or artificial assistant agents, is a habit that can easily be embraced by the mainstream. As is the thesis of many, the data certainly suggests this practice will be embraced sooner by a younger demographic than other generations.

The real question of mass market adoption of bot agents will be predicated on true natural language support. The same is true for voice assistants so, perhaps, solving one problem will help solve the other. But, looking at the ways bots can be a stepping stone to bringing artificial intelligence to the masses will be an area to keep an eye on.

Unpacked: Snapchat Rising

For whatever reason, over the past few months I’ve observed Snapchat gaining popularity. Between a blend of a noticeable number of people I follow on Twitter saying they are now on Snapchat and friends and family getting on the service, it seems there is a new level of heightened interest. That is why I was looking at our quarterly app usage study to see what percent of consumers now say they use Snapchat at least once a month and see whether it rose from last quarter or the quarters before. Sure enough, no single app on our list had as much of a quarterly increase in usage than Snapchat.

Screen Shot 2016-04-08 at 7.20.22 AM

The above chart is for the US only but, when we look at the data globally, Snapchat usage went from 5% to 10.5% QoQ showing strong global growth as well. You can see Snapchat went from 10.5% of consumers in the US saying they use it to 18.5% in just one quarter. If you have read any of my commentary on Snapchat, you will know I’ve pointed out time and again how Snapchat is largely popular with the younger, under-24 demographic. However, for this type of growth to happen, my hunch was Snapchat is experiencing some growth outside of their core younger cohort. Looking at the above data by age of respondent and this is exactly what happened.

In the US, the Gen X demographic’s usage of Snapchat went from 5.6% in Q4 2015 to 14.6% in Q1 2016. Snapchat also added more millennials as well last quarter with that demographic going from 23% to 39% who say they use Snapchat at least once per month.

I’m beginning to wonder if we are at a tipping point for Snapchat. I’ve watched the data for the past year and growth was mild but consistent. To see usage jump as much as it did globally and in the high-value advertising market of the US may be signaling Snapchat is rising. The timing would be impeccable for them as the media advertising tides have shifted in the direction of mobile and Snapchat may be getting to a place where they have the right metrics to compete with Facebook and Google for media ad dollars. The key for them will be to make sure the advertising return on investment metrics is also there. This was something Facebook struggled with early on in their advertising push where many large advertisers did not get the return from spending with Facebook. Snapchat, by allowing users to touch any ad and quickly get rid of it, may need to make some tweaks to the service to get the right returns for advertisers.

While it is positive they are growing their user base outside of the Gen Y demographic, we need to see if the service is sticky enough to keep them engaged or if this quarter (and a few to follow) are one-off anomalies where people try Snapchat and quickly stop using it. Nonetheless, the QoQ spike is impressive and worth keeping an eye on.

Unpacked: Wearable Tech Adoption

Toward the end of last year, the consensus research suggested wearable penetration in the US was around 20%. In early February, a study we conducted suggested the number had risen to 23% and our most recent data suggests it is now 26% of US consumers with a wearable.

Without question, this category continues to grow and is still the fastest growing category in consumer tech. Even if the technology is not bleeding edge innovation — it is trying to keep a low-price after all — it is striking a chord with consumers for reasons of health, fitness, and communication primarily.

While the majority of the consumer market still has no immediate plans to buy a wearable, a recent sentiment study we conducted suggests the category has potential to continue to break into the mass market. Here are a few data points of interest.

  1. 28% of respondents said they could see themselves owning a wearable technology product someday
  2. 26% said they were not opposed or turned off by the idea of a wearable but they still don’t see a need for one
  3. 16% said they were more interested in a wearable today than they were a few months ago
  4. 6% said they will never own a wearable technology product

I gave consumers many statements and allowed them to check all they agreed with. I came away encouraged as the sentiment toward wearables was not overwhelmingly negative, quite the opposite actually. I interpret much of the data we captured as positive for the category.

While we can debate whether every person in major markets will own some kind of wearable technology, I do believe it will reach and likely surpass tablet penetration in the US which is in the 50-60% range if we include owners who were handed down a previous generation tablet. The question in my mind is, when will wearable penetration cross 50% in the US? Using some historical comparables, current growth rates, and several market studies we have done to understand intent and interest, my educated guess has wearables passing 50% penetration in the US sometime in 2018. That would put its adoption cadence similar to tablets in crossing 50% penetration in a market in roughly 5 years.

The tablet’s penetration speed, which was the fastest adopted technology we have seen to date, was a bit more impressive given its price. Given the cost of a Fitbit and other products, some that start below $100, we are still on a 5-6 year adoption cadence to get to 50%. It’s telling that the category is a bit harder for consumers to wrap their brains around but our research indicates directionally there is value, It just needs time and product maturity to help sell the value to the mass market.

Unpacked: Digital India

I’ve been studying the Indian market for consumer tech for a little over two years now. We have been keeping a close eye on the digital transformation happening in India with the rise of millions of people now accessing the internet. India is a market our broad consumer behaviour surveys cover and we have quite a lot of data on the market already. India is just coming on to the tech industry’s radar but I want to share a few key statistics to help everyone understand where digital India is today.

  1. Internet penetration is about ~30% or around 375 million people
  2. Smartphone penetration is around 80% of that 375 million people or around 300m
  3. There are more Windows Phone devices in use in India than iPhones 10% to 4%. Over 70% of Indian consumers are on Android
  4. PC (notebook or desktop) penetration is around 10% or 100m devices in use
  5. Indian consumers average 9.1 apps which are regularly and actively used, among the top of all countries and above the global average of 7.1
  6. Indian consumers estimate they spend around 3 hours per day online via their smartphone, ranking among the highest of any country
  7. 52% of smartphone users are on a 3G connection and a scant 5% on a 4G connection. 17% of Indian consumers say they use a Wifi connection as their primary connection to the internet
  8. Indian consumers have an average of 7 social media accounts, among the highest of any country and above the global average of 5.2
  9. Google’s services dominate the market with Google Maps, YouTube, Google Play, and Google Music having the largest lead of any other core services in the market
  10. Facebook and WhatsApp are the two most actively used apps
  11. 41% of Indian consumers make an online purchase from their smartphone on a monthly basis, near the top of any market with only China coming close in m-commerce
  12. Internet penetration skews male with 71% of men being online vs. 29% women

I could go on with a range of other statistics but I’d rather tease out a few points. Over the last two years, India has come a long way but still has a long way to go. Bangalore, Delhi, Hyderabad and Mumbai are the cities with the highest levels of internet penetration and are among the more developed in the region. In 2014, internet penetration was only 18% compared to around 30% today. It is growing but not quite at the rate other big markets like China did. Forecasts to date have Indian internet penetration growing to 37% in 2019.

Android and Google services have a stronghold on the India market. Some Microsoft services, like Skype in particular, have heavy usage there, but every bit of data we see coming out of India skews heavily in favor of Android and Google services. When we think about Apple’s uphill climb in India we must note this, which is not a dynamic present exist in China since Google’s services are blocked there. On the positive side for Apple, the largest part of that 5% of smartphone connections on 4G are iPhones. This is why Apple has been touting their upside to 4G growth in markets like the US and China because most 4G/LTE connections in use are iPhones.

Lastly, the gender imbalance in India is an interesting one to watch. While there are cultural dynamics at play, nearly every major economics study I’ve seen on the global economic landscape can tie data and regions flourishing when women begin to get active on the internet. This is a particular stat I watch closely and would love to see greater progress on.

I hope this gives you a high-level overview of the digital landscape in India and some things to look for in the years ahead.

Unpacked: iPhone Sentiment from Android and Windows Phone Users

I recently conducted a study trying to understand smartphone platform loyalty. My goal was to seek out some insights on what keeps people with a platform and what are the catalysts to make them switch to another platform. A few very interesting things stood out.

As I often do with surveys, the types of answers you give take you to different sets of questions. So in this study, those who said they had an iPhone got separate questions from those who said they owned an Android phone, a Blackberry, or a Windows Phone. My goal for each user base was to understand what kept them there, if they had ever considered switching to another platform and, if so, why. Two questions in particular were intentionally placed to measure hostility toward Apple from each non-iPhone base. Below are the question and the results.

Screen Shot 2016-02-25 at 4.59.40 PM

A few observations. First I’m comparing like questions, in this case, two specific ones. What we observe is the key stronger sentiments from both Android owners and iPhone owners. In the case of Android consumers, the “Apple is not as open” choice was the second highest reason chosen as a barrier to switching. The first was “iPhones are too expensive.” Given what we know of some of the more passionate Android users, I thought the “will never buy anything from Apple” sentiment was going to be higher but that is not a hostile view shared by mainstream consumers.

However, with Windows Phone users it was a different story. The “I’ll never buy anything from Apple” ranked higher in total percentage from Windows Phone users than it did with Android users. While this 20% of “hostile” Windows Phone user sentiment was higher by these owners than by Android owners, the percentage of respondents who said they plan to switch to Android or to iPhone from the Windows Phone user base dominated the percentages of answers.

We know the Windows Phone market is not that large. But I did find the stronger hostility of their base toward Apple intriguing, although somewhat understandable when you think about the type of consumer who purchases a Windows Phone and the history between Apple and Microsoft.

The openness argument is common of Android owners and, considering it was as high as it was in this representative mainstream sample, it is certainly still there. However, cost was the biggest inhibitor as indicated by Android owners in our panel. Showing the price sensitive nature of most Android users in the market.

It was interesting to see the different nuances of sentiment toward iPhones from both the Android owners and Windows Phone owners and how some animosity from the PC era battles has carried over into mobile.

Unpacked: Wearable Tech Ownership

I recently completed a “first half of 2016” wearable technology study. I sought out to understand many things related to this space, including purchase drivers, whether the product purchased met or exceeded expectations, why people aren’t buying or interested in wearables and, if they intend to buy one, what is driving their interest. I came away with a very comprehensive look at the market today and can draw out some insights on where it might go over the next year or so. But one thing in particular stood out and is worth more thought. I’ll share this simple stat for this Unpacked post. These are US and UK specific data points.

It will not surprise anyone to say that most consumers do not own a wearable. It will also not surprise our readers that Fitbit and Apple dominate the market in terms of ownership. Garmin came in a somewhat distant third. In hard numbers, 81% of consumers in this study said they do not currently own a smartwatch or fitness band. What did stand out to me as I dug into this was the gender divide in terms of wearable ownership as it stands today. The headline of this slide is “Apple Watch is for Men and Fitbit is for Women.” Here is the demographic breakdown of ownership.

Screen Shot 2016-02-18 at 9.25.28 AM

The majority of Fitbit owners skew towards women while the majority of Apple Watch owners skew towards men. Given where the watch is in its adoption cycle, it is not surprising more men bought v1 of the Apple Watch when we know men tend to be more tech enthusiastic than women. The over-indexing of Fitbit owners by women is most interesting to me. The simple answer is to say women may be more interested in fitness than men. However, we know owners of Garmin’s products skew highly athletic as runners and cyclists tend to prefer Garmin. Looking at Garmin owners, there were more male than female. Perhaps the basic exercise tracking is of interest to more females than males if we use the exercise angle as an explanation.

Whatever the reason, I’m intrigued by the idea that the wearable category may be the first consumer tech segment to truly have a gender divide. Meaning, specific products need to be developed for different genders. For the most part, PCs, tablets, and smartphones are gender neutral. A wearable tech product likely aligns more with subjective fashion and other tastes more so than things like PCs, tablets, and smartphones. Which makes the case that we may see more gender specific designs from a wearable tech standpoint but also that this is an important strategy to keep in mind when developing a wearable plan. If one size does not fit all, and it likely does not in this category, then an entire portfolio of products is key to succeed in this space.

Unpacked: Consumer Interest in Virtual Reality

With Tom’s article on VR today, I thought I would share a stat from a VR-focused study we did. It is no secret VR is early and we shouldn’t expect the mainstream to have experienced it yet. I still wanted to gauge what the current market sentiment is as we seek to understand the market today.

Screen Shot 2016-02-11 at 8.06.50 PM

When we look at current sentiment, nearly half of respondents have either no interest or have not heard of virtual reality, while just over half have some interest or is very interested. We live in an increasingly technologically savvy world so it is not surprising there is interest in the idea of a new way to experience content and media. Most consumers, 76% of them, have yet to experience a true VR solution.

Within the past year, VR solutions had gotten good enough that those who experienced it could see its potential. I emphasize that is the stage of the market we are in and the job I have to do analysis of. Right now, we are focusing on its potential. It is unhelpful to judge the current crop of products as they will change dramatically over the next 5 years. What is helpful is to spend time thinking about the potential of what we have experience of so far.

I have personally experienced every major VR/AR solution on the market or will be in the next year. I’m optimistic others who experience these solutions over the next year will be able to see the potential. Currently in my house, we are vetting the full Gear VR and Oculus experience. Both Samsung and Oculus continue to add new content in the way of games, videos, pictures, movies, and more, which keeps the experience fresh. My girls love to show their friends a video where divers take you scuba diving in many exotic locations. You explore the ocean floor, coral reefs, and learn about different underwater species in each location. They also show their friends a tour of Disney World that takes you on roller coasters and shows many highlights of the parks.

What I’ve enjoyed the most is having friends or family over who I help to experience VR for the first time and to get their feedback and reactions. Every single person was blown away by how immersive it was and they came up with many use cases from travel, education, entertainment and more they thought were interesting.

Imagine you had a 360-degree capture camera and used it for family events, kids soccer games, etc. You would be able to capture moments and re-live them on more than just a flat screen. But the one experience which has still stood out to me today was the Sony Morpheus. Gaming will clearly play a role in this first wave of adoption. If you play and love video games, as I do, VR is going to change your life. Sony has an installed base of over 36 million PS 4 consoles, all of which can support their VR solution. I expect Sony to be the winner of this first phase.

Ultimately however, the units need to be untethered. Solutions which require cables will not stand the test of time and ones that either use a phone or, more likely, have the technology built right into the headset like the Microsoft Hololens, will ultimately win the day. I believe in the cordless solutions since, after experiencing them, it becomes clear you need freedom to move around. Especially with those that will blend both virtual and augmented reality together.

There is still an odd hostility around VR. I experience it on Twitter whenever I show pictures of my kids enjoying their experience with it. As to be expected, certain demographics do not like change. New things are approached with skepticism. Fortunately, the demographics that will drive this technology forward, the younger generation, have no such reservation.

Now, no one believes we will all walk around with our heads in VR/AR headsets all day. But they will be a tool similar to how our PCs, TVs, smartphones, tablets, and smartwatches are tools today. Our modern technological tools are good for work, play, and education and VR/AR will fit nicely into the mix.

Unpacked: Global Stats on Uber, Lyft, Didi Kuaidi, and Ola Cabs

Last week at CES in Vegas, we saw the good, the bad, and the ugly with regard to cabs vs. Uber and Lyft. While cabs still had their own designated lines right in front of the convention center, Uber and Lyft had their areas in a nearby parking lot. Both still had lines.

While we study app usage in many categories across 30 countries, the US, China, and India remain focus areas given their size and unique dynamics.

Each quarter we ask which apps/services consumer use on a monthly basis. Consumers can now choose from over 100 of the top apps and we add more each quarter. Below are the most recent Q4 results on ride sharing/cab services.

Screen Shot 2016-01-14 at 6.06.23 PM

Click the image to expand.

As you can see, Uber faces some competitive dynamics in countries like India and China where local players are more popular. It does start to get interesting, however, when we start to segment these answers by age group. Perhaps unsurprisingly, the number of millennials using these services spikes as a total percent of age groups using one of these ride sharing services. In India, over a quarter (28%) of millennials surveyed say they use Ola Cabs on a monthly basis. 13% said they use Uber. In China, 12.7% of millennials say they use Didi Kuaidi on a monthly basis compare to 5.4% using Uber. And in the US, 7% of millennials say they use Uber on a monthly basis compared to 2.7% who use Lyft.

While we have to acknowledge Uber is up against tough local competition, it can be said Uber is global while the others are not. While Didi Kuaidi did invest in Lyft, and that may help its global footprint, Uber is expanding into more markets than anyone else. When we zoom out and look at all 30 countries, more people use Uber on a monthly basis across the globe than any other ride-sharing service.

Just to add some additional perspective to the grand Uber narrative, Automobile sales in the US hit record numbers in 2015. Guess which demographic did the bulk of that purchasing from our research? If you guessed millennials you are right. When we asked what major purchases consumer bought in the last six months, millennials were the largest buyers of cars of any demographic at 19%. Gen X came in at 14%. Looking forward at major purchase intentions, millennials again take the top spot at 13% stating they intend to buy an automobile in the next six months.

So, while it is true a younger demographic, particularly in dense city populations, are the major consumers of ride-sharing services, it is also true these services are not killing the car, or car ownership quite yet.

Unpacked: Stats on Voice Search on Mobile

I’ve been spending a lot of time thinking about the role of voice in the future of computing. Whether or not science fiction becomes self-fulfilling prophecies, the genre always assumes we will talk to computers in the future. The building blocks for voice and more importantly, the artificial intelligence engine powering them, are just being built and developed today. However, we have pockets of data and use case examples which help us see the direction this signpost is pointing.

Let’s start with some of our research.

Screen Shot 2016-01-07 at 5.39.43 PM

We looked to see what the underlying sentiment behind using voice search today was with average consumers. The vast majority feeling it’s faster. This I think is the key response to hone in on because it speaks deeply to a convenience factor. To begin speaking with our devices there will have to be a dramatic decrease in friction. Since, after all, it is not that hard to pull out our phone and open an app or browser and search for something. But the fact that nearly half of those who regularly use voice search state speed as a factor is telling of what can drive a behavior change.

As a part of the survey, we discovered 56% of smartphone users use voice to search for something every month with 24% of those doing so a few times a week and 12% doing so every day. I track this usage quarterly and will keep an eye on it to see if it trends up and, if so, how quickly we may see a fundamental behavior changing.

I’ll call attention to the car driving statistic. This also signals the convenience in what is both a private environment, a key point to usage, and a need to be hands-free. I’ve articulated before my thoughts on the hands-free computing future where we are free to be more present in the world around us without our faces in screens all day. I’m convinced voice has a role to play here.

When we simplify how we interact with computers to a basic I/O and frame it within the present interfaces being keyboard, mouse, touch, and recently voice, we can frame voice as just another I/O option. But one that may even be more natural than any input/output that has come before it.

This data was related to search and that may be the entry point and first experience for many. But one glaring use case that cements this for me is using, and have my family use, the Amazon Echo. I have about half a dozen things connected to Alexa from my thermostat, light bulbs, car (via the Automatic adapter), door lock, etc. It is much more convenient to say “Alexa, turn off living room lights” or “Alexa, turn off the Christmas tree (a recent use case)”. “Alexa, lock the front door.” “Alexa, how much gas do I have in my car?” Now, certainly all these systems have apps but I cut out a series of steps by simply being able to use my voice to initiate a command. What’s more interesting is how often my wife uses the Echo. She is on the farthest part of the adoption curve and loves to tell me daily how much she hates technology. She married the wrong dude if that’s her conviction. 🙂 However, her adoption of the Echo is really something. It warms my heart when I hear her speaking to the Echo with ease and even more delight when the device actually does what she says! A small anecdote but a very telling one.

These are powerful interactions and voice will open a new input/output paradigm for computers. After all, once our homes are fully connected and all the devices speak to each other, leveraging the resources of one another, our house will actually be a computer.

I consider whoever can play a major role in voice and AI as critical as those who own the operating system of our computers today.

Unpacked: Smartwatch Purchase Intent

Smartwatches will be a strong consumer tech storyline in 2016. In a few weeks, I will publish a post on my candidates for products that could play a role in ushering in the next paradigm shift in computing and the smartwatch will be on that list. Given the importance of this topic, today’s first edition of Unpack will dive into a couple of statistics shared in Deloitte’s latest Swiss Watch industry Report.

The Data

Screen Shot 2015-12-31 at 11.29.46 AM

Deloitte commissioned a study to look at smartwatch vs. classic mechanical watch purchase intent over the next 12 months. The results are above.

The three standouts are China, Italy, and France, which I find interesting for several reasons. First, China has not yet been a major factor in Apple Watch sales in particular and even less so with other smartwatches. Which suggests if the purchase intent holds up, Apple may see a big swing in China soon, perhaps as early as Chinese New Year. Italy and France are both fashion hubs, which could make an impact from this perspective if we see more rapid adoption of smartwatches from a fashion standpoint. The results of this part of the study in particular will cause me to keep a closer eye on how the fashion industry embraces smartwatches and thus overall influencing the mainstream over 2016.

The study went on to look at specific smartwatch brands being considered to purchase in each country.

Screen Shot 2015-12-31 at 11.38.28 AM

No huge surprises here, although China will be an area to watch as other companies like Huawei increase their investment in this area and Xiaomi likely enters the smartwatch market as well. In many cases, watches are more high-end purchases and, in all the countries covered, both Apple and Samsung are the larger players in the high-end smartphone segment. Still, this data, plus deeper intent to data of my own, confirm Apple is well positioned to capitalize on the upswing in 2016.

Lastly, the study looked at reasons consumers were not interested in a smartwatch. I consider questions like this important in understanding market sentiment of non-consumers of a category.

Screen Shot 2015-12-31 at 11.46.15 AM

You have to admire the commitment of the Swiss. But outside of super high-end mechanical watches for the wealthy, I’m convinced this industry is about to transition. The report I wrote a year ago still holds water on the matter. The results of the Deloitte survey also echo some of the results from the Wristly dissatisfaction data we gathered on Apple Watch owners. Price and need to unbundle from the phone are primary detractors at this point.

It needs to be mentioned that smartwatches are a brand new category. Some of the capabilities and most interesting use cases are ones consumers have no frame of reference for. Which is why many of us continue to emphasize the adoption cycle may be longer as consumers become more aware of the benefits.

From this data and more I’ll share over the next few months, we have enough proof points to justify that there is something here with this category. The “what” may still take time to flesh out but I’m confident at this point this is not a fad or a flop.