The Death Of iPhone. The Death Of Android. The Rebirth Of Facebook.

Brian S Hall / February 3rd, 2014

Well, that was a heckuva week.

Google sells Motorola for billions less than they paid for it. Apple sells millions fewer iPhones than nearly everyone expected, then directs guidance lower. Facebook becomes a mobile first company, for real this time. Amazon investors prove they don’t quite have unlimited patience. Yahoo remains last decade’s news. Microsoft probably has a new CEO, one with zero connection to Nokia. Oh, and they now make better commercials than Apple.

Anything else?

What we learned from last week’s machinations is that everything we think we know about the smartphone wars is completely, utterly false — or  worse, meaningless. Barely a fortnight ago, on this very site, I told you: “The smartphone wars are not over.” Nothing has been settled, least not the future. After last week’s fun-bumpy-tweet-filled ride, does anyone still dispute this?

Know this: The current market for smartphones, and all they are subsuming, transforming, re-making, inspiring — which is in fact all of the things — is itself under threat, betrayed by its own relentless innovation and rapid success. Yet, far too many analysts and bloggers stubbornly cling to the fiction that somehow, smartphones can alter every market they touch while continuing on a merry upward slope unscathed by their own destructive deeds.

The most basic assumptions about this market are nothing more than faith-based analyst alchemy.

Time now to kill the dominant fictions in the smartphone wars.

The Death of iPhone

Fiction: Apple owns the high-end of the smartphone market.   

If you are making assumptions re iPhone (or Android) sales growth based on an imaginary perceived share of a market that is already on the cusp of disrupting itself, then you are making faith-based decisions. It’s that simple.

As I wrote months before last week’s earnings announcement, if Steve Jobs was alive he would never approve the iPhone 5c. The 5c is a rare self-inflicted wound, the elevation of profits over values. Only, that is not the cause of Apple’s weakness in their iPhone business. The trouble is the smartphone market itself, which I am beginning to suspect does not actually exist. Bear with me.

The persistent belief among analysts that  as much as 90% of the current mobile phone market (nearly 5 billion users) will transition to smartphones is a religious ideal, nothing more. Repeat after me: There is no total addressable market (TAM) for smartphones. The very concept is a fiction. Indeed, we may already be within months of Peak iPhone, a year or two from Peak Smartphone. For billions of people, voice, robust SMS/MMS services, and perhaps some form of digital identity is more than they will ever need. What can Apple provide them? Even at, say, $300, nearly everyone on this planet cannot afford and will never need an iPhone.

It gets worse.

I carry my smartphone with me all the time and use it for far more than I can list here. For the majority of that time, however, I don’t actually need a “smartphone”. What I really need is something like a credit card-sized piece of glass that supports rare but necessary voice calling, possibly video calling, can display a virtual keyboard for texting, and includes a mag-stripe (and/or chip) for payments. Create this and the smartphone market is gone, reduced to the equivalent of the dusty home desktop PC. Given the rapidity of innovation in this market, I should reasonably expect to have my (truly) smart card by no later than mid 2016. No iPhone necessary — in barely two years.

Tim Cook must know this. This is likely one reason why Apple stockpiles so much cash. When you’re dependent upon a single product line, iPhone, for about 60% of your revenue, and that market may vanish in a few years, then your focus necessarily shifts to maximizing profits of that product line and funneling those profits into entirely new offerings.

Apple doesn’t release many new products. I suspect that is about to change in a very big way. Expect to see several new products and product lines from the company over the next year alone. Some designed for nothing more than padding iPhone margins. Others, desperately in search of that next big thing.

The Death of Android

Fiction: Android is unassailable

Google cut itself free from the anchor that was Motorola. They strong-armed Samsung into more closely following the sanctioned Google Android playbook. Wise moves.

I sense fear.

Yes, Android dominates smartphone market share. Look closer. What many call ‘Google-free’ Android, AOSP, now garners a solid second place — and is growing at a rate much faster than ‘real’ Android.

smartphone OS

AOSP is the “open-source software stack for a wide array of mobile devices with different form factors.” It can power Amazon’s Kindle line, or smartphones made for use in China, for example, where Google search, map, Play and other services are not terribly popular and not welcome by the government.

Does this matter?

Absolutely. Google no doubt believes that AOSP is a necessary sacrifice. It’s availability ensures the rapid spread of the  “Android” template and prevents iPhone or Windows Phone, for example, from garnering another new user. It seeds the future for ‘real’ Android — and it is hoped, heavy usage of those most profitable Google services. Except, this is false.

The fact is, the rapid, global embrace of smartphones has altered the entire value proposition of web search and web services — Google’s bread and butter. AOSP may presently be little more than Android without the Google, but it could ultimately become a fully-fledged ecosystem alternative in its own right, one that directly competes against Google on everything that matters to them, and not just in China, but in Japan, South Korea, Brazil, USA, everywhere.

Thus, while I suspect last week’s moves by Google signal the company’s preparations to launch an assault on the Chinese market, it may already be too late. The world’s biggest market for data and smartphones can do just fine without Google. Which means: everyone can.

It gets worse.

Extremely popular mobile services may now have a vested interest in supporting AOSP’s growth. Popular social messaging apps such as Line, WeChat or WhatsApp no doubt noticed that Google made its Hangouts service the default messaging app for Android Kitkat. They won’t sit still for such bullying. What’s to stop them from integrating their service and AOSP and offering a low-end smartphone in the developing world?

In the short-term, perhaps none of this happens. In fact, I expect Google to best Apple as the world’s most valuable tech company, possibly within a few weeks. Save the celebrations. Google’s value arises strictly from it’s ability to capture more of our habits, more of our actions, and monetize them across a near-endless supply of strangers and brands. What we are learning, however, is that despite the rapid spread of Android in all its forms, there are effective alternatives to Google services across every smartphone platform — even its own. Little wonder, then, that Google is moving quickly into moonshots, driverless cars, the connected home, consumer hardware, health and more. Such moves are driven by fear, even if they are shrouded in boilerplate Silicon Valley boasting.

The Rebirth of Facebook

Fiction: Unbundling Will Kill Facebook

Like that persistent meme that teens are abandoning Facebook, the idea that Facebook is being unbundled to death — via messaging apps, social picture apps, Christian dating sites and the like — is simply false. Facebook is benefitting from the unbundling trend.

In fact, after badly stumbling on mobile, after the laughable dung heap that was Facebook Home, the brief marriage to HTML5, and the spats with Apple and Google, Facebook is doing better than ever. More than half its revenues now comes via mobile — no smartphone OS necessary.

This is in large part because the company is embracing the unbundling strategy, shrewdly leveraging its billion users and their extant Facebook identity and eagerness to share everything. That some people want to share only some aspects of their lives with only some others at some times and places, via text or image or video, is fine — every 1 and every 0 feeds the growing Facebook engine.

Let a thousand apps bloom. Facebook will be there.

Barely a year ago, analysts were convinced Facebook was doomed given its utter dependence upon iOS and Android. Now, a case can be made that smartphones, once thought as the device to bring the developing world into the global sphere of the Internet, is already on the cusp of being disrupted. In this new world, it is Facebook (and our Facebook ID) that will connect us all to one another.

The Dogs of War

What I think last week’s official numbers and clever machinations reveal is that the “smartphone” market, which most still believe is a pitched battle between iOS profit share and Android market share, is, in fact, merely the initial wave in a coming tsunami, one that will deliver highly personal, nearly ubiquitous and ever-engaging computing and connectivity to all who want it and nearly all who do not, and in forms we have yet to imagine. Hardware profits and OS marketshare, be damned.

The smartphone itself may be no more than a fleeting, ten-year-blip in computing history. There will be no 30th anniversary for the iPhone. Android will betray its maker. Owning your own smartphone ecosystem does not matter. Everything is in flux. My verse is the destruction of everything — and the great tech companies of our day happily, foolishly oblige.

As Jim Morrison said, “no one here gets out alive.”

Brian S Hall

Brian S Hall writes about mobile devices, crowdsourced entertainment, and the integration of cars and computers. His work has been published with Macworld, CNBC, Wall Street Journal, ReadWrite and numerous others. Multiple columns have been cited as "must reads" by AllThingsD and Re/Code and he has been blacklisted by some of the top editors in the industry. Brian has been a guest on several radio programs and podcasts.
  • iPhone WILL NOT DIE. Android WILL NOT DIE.

    They will grow and prosper.

    But Facebook is much bigger than them. In the language of Bollywood slang, “Facebook yeh dono ka BAAP hai”.

    Microsoft’s mission was “A computer on every desk”. The mission got fulfilled circa 2000 and Microsoft is on a downward spiral ever since.

    Facebook’s mission is, whether they vocalize it or not, “Internet II (or Social Internet) in every purse/pocket.” and to do that not only they need mobiles to grow but on top of that they need iPhone, Android and bandwidth to grow. IT IS NOT A ZERO SUM GAME. Facebook is on simpler mobiles NOT BY CHOICE BUT BY NEED.

    Facebook NEVER DIED so it is not a rebirth and IPhone and Android WILL NOT DIE for a forseeable future.

  • klahanas

    “The world’s biggest market for data and smartphones can do just fine without Google. Which means: everyone can.”
    Please clarify that assumption. China is among the nations that censor the internet. It’s not so much that they can, but that they can’t. Now, are they thriving without it? Yes. What we don’t know is where they would be with it. By Google, I mean any service offering Google’s function. Or do you mean just the OS?

    • I now no longer use any Google service — except Gmail, which I can do without.

      • klahanas

        My point is you are using something else instead, which in China would also be censored. I don’t think using China as an example of “since they can do it…”, China can do it because they have no other choice but to do without. Maybe in another story you could list all the Google alternatives so we can dump them too if we choose.

      • I found your article through Google+, which search engine do you use? You never watch videos on YouTube? Google probably makes $60 per year on you alone and Google probably makes tens of thousands of dollars based on the content you publish and how them bringing people to your content makes them a whole lot of money.

        • I don’t use Google+, though Google has thoughtfully created an account for me. I use Bing for search, Nokia and Apple maps, iTunes and Windows stores, Facebook and Twitter, etc. However, I did forget that periodically I do use Youtube, though primarily via an app workaround that let’s me search the videos I want then downloads them.

          • Even if you try hard not to use Google search, which I have a hard time believing, you probably browse the web. Ergo you probably go on those huge percentage of the web with adsense on it, thus Google makes money on your web browsing. And your web browsing sends Google signals that improves their search and thus increases their monetization on everyone else also.

        • benbajarin

          Commenters: I know what you are thinking. Please resist the urge to comment on this point.

  • jfutral

    The cell phone market is as fickle and volatile as the restaurant market. Everyone’s hold of whatever share is fragile.

    Joe

    • FalKirk

      I do not agree with this. There is nothing fickle or volatile about the cell phone market. The best are rising to the top and those who have failed to innovate are going bankrupt. It’s as simple as that.

      • jfutral

        If by that you mean everyone has their own (occasionally collective) definition of what is best, even as that morphs I can see your point. I don’t think Samsung or Android was innovative enough to vault to the position they have nor do I think they have accomplished all that much on their own to be considered the best. Even in the Android market alone, I don’t think Samsung is the best or most innovative.

        But the market for cell phones pre-iPhone was wrought with ebbs and flows (or was that flotsam and jetsam?) that created the term “churn”, as that was the only way it seemed carriers believed they could deal with customers coming or going.

        Motorola was the best until their brand was diluted by mediocrity from copies (regarding first the MicroTAC then resurgent with the Razr. The Razr is still one of my all time favourite cell phones).

        I know we keep making a big deal about fragmentation with smartphones. And to developers that is a large issue. But for the cell phone market/customers, this is how it has always been. The foundation that the cell phone market, which the smartphone market has inherited, is not one built on the best or the most innovative rising to the surface. But that depends largely on how you define “best” and “innovative”.

        But I will proclaim to my dying day that this is the biggest disruption Apple created in the cell phone market, that both cell/smart phone makers and customers did not _have_ to be at the mercy of the carriers, except for those who are. How cell phone makers and carriers did business pre-iPhone does not strike me as one built on “best” and “innovative”. That is a legacy still being combated.

        Joe

  • Space Gorilla

    “Apple sells millions fewer iPhones than nearly everyone expected, then directs guidance lower.”

    I have to admit I’m puzzled by this sentence. Apple sold a record number of iPhones (and iPads), and fiscal Q2 for Apple is always much lower sales/revenue than the holiday quarter. Guidance is in line with fiscal Q2 2013, which was a record quarter. I don’t find that worrying at all, especially considering that Apple has now shifted product launches to line up with fiscal Q1.

    You seem to be spinning much more than usual Brian.

    • AD1980

      Apple sells more iPhones every year than they do the year prior, hence every year becomes record sales. The problem is that their sales growth is declining even as the over all market is growing. This is why wallstreet reacted negatively even though Apple set another record.

      • Space Gorilla

        Apple’s rate of sales has to slow down, that much is obvious. How big do you think Apple can get? I’d have to dig up the numbers but roughly speaking Apple is on track to sell about as many iOS devices in 2014 as the entire PC industry will sell Windows PCs.

        You should do the math on what it would look like if Apple was able to maintain its peak sales growth (iPhone and iPad) for just a few more years. It’s not a reasonable expectation. It’s actually quite silly.

        • AD1980

          The market is expanding. Slowing sales growth in an expanding market is usually not a good indicator.

          • Kizedek

            Total phone market? Or just “smartphone” market? If the latter, you can check out the discussion on Benedict Evans’ article: Smartphone market share is not a metric.

            That Apple would at some point be competing for Android users was always a given — Android has merely become the de facto standard, free, lowest common denominator phone OS. OEMs have to install something on their phones. If Apple is carving out 25% of all phones, in an Android world, that is sustainable.

            Of more interest is Ben Thompson’s article “Two Bears Revisited” on Stratechery, which includes these snippets:
            “Samsung is being challenged by lower-cost competitors; the company’s average price per phone fell by $30 last year, and its share of >$400 phones slipped from 40 percent to 21 percent. This kept up Samsung’s volume – they now account for one in three smartphone sales – but the result was their first profit decline in nine quarters.

            Still, growth primarily matters for its impact on AAPL the stock. The iPhone as a platform is in fine shape: the iPhone is increasing its dominance of high end customers, and its those high end customers who dominate usage. More importantly, they aren’t going anywhere. User experience is a sustainable differentiator in consumer markets, and any analysis that ignores iOS and Apple’s integrated approach as a differentiator is as useless as a Macbook review that ignores OS X.”

          • Majipoor

            It is only an indicator that the market is currently expanding mostly in low- mid-range segments which are not covered by Apple’s product portfolio.

            And it is Apple’s choice not to cover these segments: you can argue whether they are right or wrong, but it is not about Apple failing to keep or grow its market share, it is about Apple considering it is a better business strategy not to enter segments which would force them to start a price ware with Chinese OEM.

          • Mayson

            And of course, Apple’s share of the mobile phone market keeps going up.

          • Space Gorilla

            As others have said, it’s not useful to attempt analysis of Apple by looking at the entire market. Apple only operates in chosen segments. Take my ridiculous math example one year further and you have Apple selling almost 6 billion iOS devices in 2018. Surely you understand that isn’t even possible. Now, there will of course be many billions of mobile devices sold and in use by 2018, but those cannot all be from a single company, that’s impossible. This is why we have many, many, many, many, many companies serving the entire market. And most of those companies use some flavor of Android. But there is no single company called Android that is able to serve billions of customers. It’s interesting to note that the truly spectacular growth in Android right now is non-Google Android.

        • qka

          I’d have to dig up the numbers but roughly speaking Apple is on track to sell about as many iOS devices in 2014 as the entire PC industry will sell Windows PCs.

          Asymco has stated that OS X + iOS will exceed Windows in 2014.

          • Space Gorilla

            Yes, Horace had a couple articles on the subject I think. And Ben Evans has a recent post as well, just Google ‘Apple passing Microsoft’. The comments are closed on his article now, and rightly so, they were insane. Apparently there’s a lot of people not ready to hear that mobile is the next computing platform and the era of Windows PCs is coming to a close.

          • steve_wildstrom

            I do wish people would stop saying the era of PCs is coming to a close, because it isn’t. The era of PC dominance, definitely. The era of PC exclusivity, certainly. But PCs are going to be around and be an important part of the computing environment for a very long time. Even mainframes are still around and important.

          • Space Gorilla

            I thought it was obvious that I meant the dominance of PCs. I suppose I should have been more clear about that. We’ll have PCs for a long, long time. It’s also obvious that there’s an ‘old guard’ that seems fairly bent out of shape about this. The comments on the Ben Evans article were pretty wild and raving at times. I’m not sure why people are so angry about the decline of Windows PCs, it is what it is.

      • Space Gorilla

        Okay, it was kinda interesting so I did the math for you. Conservatively, if we assume Apple could have somehow kept growth rates even somewhat near their peak, by 2017 we’d be looking at about 2.3 billion iPhones sold annually and just over 1 billion iPads sold annually, for a total of over 3 billion iOS devices sold in 2017. I hope this demonstrates how ridiculous it is to think that Apple’s growth rates were going to stay where they were. A single company can only do so much, especially when you consider that Apple does not seek to serve the entire market.

    • Idon’t Know

      Its a flatly false statement which Brian knows.

  • TheEternalEmperor

    Oy…the analysis is getting worse and worse. So, let’s get the story straight this time: Despite ALL appearances to the contrary, Apple doesn’t hold the premium market, no matter what sales and profits say.

    People, who frankly, have almost no real insight into Apples sales, because no one outside of Apple can properly follow all the moving parts, were wrong, and the iPhone is dying.

    But making one OS for touch and the desktop, despite the double shot failure of Windows 8 and Surface, makes sense to you.

    Yep.

    • I believe the smartphone is on the cusp of being unbundled. We don’t need all that hardware and all those features with us even most of the time. Being at the top of a market that is about to be disrupted is not necessarily a good thing.

      • Kizedek

        What is “all that hardware”? I kinda agree: because most of the time, Apple is vilified for not jumping on larger-screen bandwagon, not providing USB slot, SD card slot, radio, extra SIM slot, removable battery, and a load of other stuff.

        Meanwhile, the iPhone increasingly becomes an even slimmer, single slab of metal/plastic and glass.

      • TheEternalEmperor

        But yet we need all the complexities of touch and desktop combined? We need larger phones so Apple must make one.

        I guess that’s my point. You seem to argue for all sides simultaneously. How do you reconcile the desire for the combined desktop touch OS, with a credit card sized piece of glass(with a virtual keyboard no less on something the size of a CC) with the increasing popularity of larger phones.

        And really “Tim Cook must know this.” Talk about interpreting the facts to fit the theory. From where I stand, this is just more of the the same “Apple is doomed.” talk. The same kind of talk that is suggesting that Apple is in trouble because Google sold Motorola( whose purchase of which was supposed to spell trouble for Apple) is now saying that Apple being on top is, in fact, a bad thing. Again, only Apple can have so many advantages, so much money and much talk about barely holding on to their existence.

        Right off the top, Apple, in its entire history has ever seemed to want to service every potential customer, so why would they start now? So Apple can’t make a device for every one. This is news? And this “unbundling” is going to happen because you, the only guy in the world who wants a combined touch/desktop OS wants a CC piece of glass with a phone, keyboard and magnetic stripe for payments. And you think THAT is going to be the dominant piece of technology by 2016? Billions of people will want that? Not access to Wikipedia in their pocket, but a way to buy more stuff?

        And Apple, headed by Tim “must know this” Cook, a company, who just put x64 processor in a pocket computer is preparing for this day, less than two years hence?

        And this seems reasonable to you?

        • If Tim Cook is not preparing for the unbundling of the smartphone, he should be fired.

          • Space Gorilla

            The mistake you’re making is thinking Apple is in the smartphone business. They are not and never were. They are in the business of making computers. I do think we’re going to see the iPhone become a hub, with accessories which are mostly sensors. First up a gorgeous bracelet packed with sensors that goes days or weeks between charges and tracks every vital sign and health related bit of info you can think of. Perhaps second or third a Star Trek communicator badge thingy that you just talk to. Apple will ‘unbundle’ the computer as it makes sense, but they are always coming from the perspective of creating personal computers, ‘for the rest of us’.

          • TheEternalEmperor

            Let’s leave alone the eventual obsolescence of the iPhone alone for a moment. I suspect Tim has info than you on this.

            How do you reconcile your wildly contradictory positions vis a vis, the unification of touch and desktop, desire for large phones and a CC sized piece of glass that has no internet access, but has a virtual keyboard and a payment stripe, yet is appealing to the vast billions of the world? How do you reconcile this?

          • I want what I want. There is no need for reconciliation.

          • Space Gorilla

            “Do I contradict myself? Very well, then I contradict myself, I am large, I contain multitudes.” — Walt Whitman

          • TheEternalEmperor

            Fair enough. Analysis this is not, impossible to gratify desire it is.

          • N

            As someone who uses Camera, Mail, Safari, and Yelp among others a lot when out, I disagree. For example, do you not look up reviews of bottles of wine at restaurants and snap a photo of the label if you like it? That’s just one of many examples that a smart card can’t handle. Now, will the iPhone become as slim as a credit card someday? Yes it will but with more functionality, not less (not in 2016; more like 2024).

            But let’s say you’re right. Preparing for unbundling goes in both directions. You write of a stripped down smart card. Apple doesn’t offer that yet, but it offers the opposite in the iPad and iPad mini, which are more versatile than an iPhone because of screen size yet much easier to use than a Mac or PC. This past quarter the iPad grew faster than the iPhone.

          • Mayson

            “Now, will the iPhone become as slim as a credit card someday?” Highly unlikely, if it’s still going to have a decent camera.

          • Idon’t Know

            Amusing that you know what Steve Jobs would have done and presume to know what Tim Cook should do. So what have you done other than write a bunch of page view whoring bullshit like this article?

          • chano1

            You seem determined to live up to your name.
            Brian is right on that point, as you might understand if you would only stop to think.
            Being CEO is about more than counting the paperclips dontchaknow.

          • chano1

            Agreed. It is akin to being asleep at the wheel.

      • Glaurung-Quena

        “We don’t need all that hardware and all those features with us even most of the time”

        That’s a profoundly ignorant thing to say.

        Stripped of its apps and its email/internet access (which I’ll concede you can argue are useful mainly to geeks rather than real people), today’s smartphones are all about combining many devices that ordinary people want to have with them *almost all the time* into one single device. Instead of carrying around a phone, pager, camera, GPS, music player, flashlight, and gameboy, you just carry around a smartphone. Not everyone is going to need a music player and not everyone is going to need a GPS, but enough people are going to want to have enough of those pieces that it makes sense to create and market an all in one device that does all those things.

        And the minute you create that all in one device, you discover that you need to fill it with silicon, with wireless data capabilities, with flash storage. In order to make it take good enough pictures that you’ll be willing to leave your point and shoot at home, you have to give it a beefy DSP to compensate for the teeny little lens that will fit in a phone and several gigabytes of storage. In order to make it a good enough replacement for a dedicated GPS box, you need to make it give spoken driving directions and accept spoken requests for directions — which requires a capable CPU, more silicon.

        By the time you make the phone capable of doing the bare minimum of things that allow it to effectively replace those multiple dedicated devices, you’re giving it enough silicon, enough storage, and enough wireless data capabilities that the added hardware cost of making it capable of downloading apps and accessing the internet and email, of being a full-fledged smartphone, is ZERO. And since there is a tiny but nonzero market of geeks (and executives with no life) who DO want to surf the net/check email on their phone, paying to implement those extra features in software is more than worthwhile. Finally, since those extra features are in separate apps that the non geeks will happily ignore, the frustration/ease of use cost is also zero.

        I know this goes against the whole “disruptive innovation happens when the incumbents are over-servicing their customers” meme, but I say that features implemented in software can be fundamentally different. As long as their presence does not negatively impact ease of use, and as long as they don’t add to the cost of the product, having extra functionality in the form of extra apps does not constitute overservicing your customers and does not make you ripe for disruption. Because all your customers have to do is ignore those extra icons on the home screen that they don’t need or want, and the device suddenly is perfectly aligned with their own individual needs, neither too much nor too little.

      • chano1

        Surely it IS all about having just the one swiss army knife of a device that does it all. What does unbundling mean, after all. Will you smile as you go back to carrying a phone, PDA, alarm clock, camera, diary, notepad, laptop, address book and portable gaming set and much much more?
        Or have I misunderstood your take on unbundling, Brian?

  • Scott Sterling

    This “credit card sized” piece of glass you need is what Apple will release fairly soon. iWatch or whatever. Initially it will have to be an iPhone complement, then it will eventually replace the iPhone for some people, but only happen as the technology advances to make it possible.

    Overall Brian, I’m with you. I don’t need an iPhone, although I’ve had one since Day 1 and love it to death, and use it as my personal and business “digital hub”. What I need is something more like a $250 iPod Touch with cellular, not for calls but for universal data availability.

  • stefnagel

    “What I really need is something like a credit card-sized piece of glass that supports rare but necessary voice calling, possibly video calling, can display a virtual keyboard for texting, and includes a mag-stripe (and/or chip) for payments.”

    Brian, by your propositions, the iPhone dies, and it’s replaced by a device without web/mobile display. If so, how does Facebook survive? Surely not with voice or video or simple messaging. Facebook is presently crawling onto mobile/web platforms.

    Otherwise, I hoped something like the iPod Touch should win the day. Maybe so.

    • Great point. What I am suggesting is that perhaps the smartphone is *far* too much computer for what we need it to do most of the time. With my tiny piece of glass, I can still ‘check in’ and leave a brief note, for example. I can record whatever data my “iWatch” displays.
      There is one area where my theory breaks down, however: millions of us (perhaps billions of us) are obsessed with taking pictures of everything. If that wins out, then we will always want a camera with us. At present, this favors Nokia and Apple.

      • stefnagel

        Spot on. Voice carriers are fatted, fetid cows. Food for crows. On the other hand, iPod Touch with cheap data and maybe fingerprint security? Killer.

        • I wrote here many months ago about my dream for ‘glass everywhere’ that uses something like iCloud and Touch ID so that anywhere I go, there’s always a personalized computer with all my data at my beck and call. I think this is no more than 10 years away.

          • Space Gorilla

            As I’ve said many times, the screen is the computer.

        • Mayson

          I love my retina iPad mini, especially with 200 MB/month of free TMobile LTE data. It is a little bit too big though.

      • Space Gorilla

        “What I am suggesting is that perhaps the smartphone is *far* too much computer for what we need it to do most of the time”

        I dunno, that sounds a bit like ‘640K is more memory than anyone will ever need on a computer’ (whether Gates actually said that or not doesn’t matter). I would argue that new uses will always eat up the available computing resources. You never have enough.

      • sgns

        Actually that does not sound like the end of the smartphone at all to me. It sounds just like what Apple has always been looking for: an opportunity to make things accessible and useful, then inevitable, for even more people. I agree that the smartphone may be too much technology, but hey, that’s not a new problem. That’s the opportunity that never stops giving.

        On another note: glass.

  • Google never planned to own Android, they merely guide and push it forward. For the mobile smart device market to grow faster. The sooner all people in the world have smart devices, the sooner Google is the biggest company in the world. Most Chinese Android devices actually ship with Google apps pre-installed. Simply cause Chinese hardware makers don’t care to remove the Google apps from the device. Especially Google Play Store, Google Maps and Chrome are pretty much pre-installed on most Chinese Android devices. Anyways, Google doesn’t need those apps pre-installed to make more money. Google makes more money, the more people use the web, regardless how they use the web. It’s automatic. Of all that web activity, Google can get signals that improve their search and other services, and based on that, Google can position themselves to be the best at monetizing the whole web. Also in China. Also in India and everywhere in the world. Also, the more people use the web in China and India, the more Google makes money in Europe and the USA. It’s magic and automatic. How, because those people create content which Google can monetize on the web, automatically. Even if those Chinese websites may not display adsense, Google makes money crawling and directing people to better and more web content.

    As for the Smartphone getting ultra cannibalized, yes this is happening. The $25 Android phone is available now. This is mainly a problem for Apple, because 98% of Apple profits come from smart devices that now can be made for $25 using Android. This is a massive threat to Apple.

    On the other hand, Google makes virtually none of their money selling hardware. Google makes money when people use those smart devices, regardless of the price, and regardless of the OS and platform on each device. Thus if everyone in the world buys $15 Android devices in 2015, and that nearly nobody in the world still buys $700 iPhones and Galaxy devices in 2015, Google makes more money, not less.

    On the other hand, Facebook is worthless, Facebook is not much more than a big php script, and soon enough, like the bitcoin, Facebook stock is going to be totally worthless.

    • Thanks for the comment. I believe your views rest on a primary assumption that I think is itself being disrupted. To wit: “Google makes more money, the more people use the web.” Even as Google expands its reach, the fact is, more and more of us are discovering that we can do almost anything on the “web” without any Google involvement whatsoever. Perhaps even worse, our data that is captured by Facebook and via iPhone, for example, is far more valuable to advertisers as it is far more personal and location/time-based. Honestly, abandoning much of Google has been far easier than I ever suspected.

      • Google knows this better since they have all the stats for how they make money, and I don’t know if Google clearly explains this, but here’s what I think:

        Google makes more money per iPhone user than per Android user (averaged, because way more cheap Android devices are sold, but if limiting to $600+ Android phones such as high-end Galaxy/HTC/Sony/LG/etc, they make pretty much same).

        Google makes nearly as much money per Kindle user than any other Android tablet user.

        Google makes nearly as much money per Baidu OS user as Android user in China.

        Google makes nearly as much money per Windows Phone user as per Android user.

        Google makes nearly as much money per Bing user as they do per Google search user.

        Google makes nearly as much money per Windows/Mac user as they do per Chrome OS user.

        Google makes nearly as much money per non-adsense publisher as they do per adsense publisher.

        Some of these may be hard to imagine or understand. But I really think this is the case. The way Google makes money on each user is not at all limited to how exactly each user uses which device, not limited to platform, not limited to apps, merely measured by how intensive each user uses the web.

        You for example publish a lot on the web. Thus Google automatically makes a lot of money on you. Even if you try very hard not to use Google services. If you generate content on the web that generate let’s say 1 million pageviews per year (all platforms combined), if you browse on 200 web pages per day in average (regardless which websites/platforms), if you use a mobile smart device like a smartphone, I estimate Google is making thousands of dollars per year on your online activity (mainly the content publishing), but they also make tens of dollars per year on your own personal web activity, even if not happening on Google sites directly.

        • klahanas

          Well… here’s where I cross the street! 🙂

          Since Google is making money over me, regardless of whether I CHOOSE to use them or not, what exactly are they offering me in return?

          AdSense is a service to the website I’m visiting, what do I get out of it? Better ads? Targeted ads? What? On TV we get ads whether we like them or not. It used to be that’s what paid for TV. But I’m already paying for internet, how do I opt out of ads?

          • jfutral

            You choose to use iOS devices, of course! 😀

            (Just kidding really. I have no idea the answer to your question. When you find out, please tell me, too.)

            Joe

          • klahanas

            Ouch! That was funny! 🙂
            Clearly, we being “herded” into various barns, and we have to choose which devil we sleep with. Since Google (or someone else, if not Google) would have controlled this, it’s a common devil. I’m sure glad I’m a geek.

          • Here are some of the things you get from Google, whether you use their sites and services directly or not:

            – Google backbones transport something like 30% of the worldwide bandwidth.
            – Google’s massive services improve all the worlds ISPs, they all have to constantly improve their bandwidth and services.
            – Google sponsors a huge chunk of the web. Something like I dunno how many hundred million websites are funded by Google Adsense technology (which is based on search relevance etc). It’s pretty near impossible for you to browse only on websites that don’t use Google at all, and again, even if they don’t use Google, they improve Google which Google makes money on.

            How you can choose for Google to not make money on you, you can disconnect from the web. Google pretty much is the web. And you should probably also not talk with other people, because when you talk to other people, you give them ideas, and you giving them ideas makes them want to use the web more to research and to create more content on the web.

          • klahanas

            Or…I can load an ad-blocker!
            Backbones, and the like, yes, I pay indirectly.

          • Ad-blockers are totally insignificant. And at some point, many websites could block you from looking at their content if they detect that you are blocking their ads.

          • klahanas

            And that would be fair.

          • jfutral

            Sure would be nice to at least be given the choice of direct financial support rather than ads.

            Joe

          • klahanas

            Upon further thought, you seem to be, inadvertently or not, supporting the notion that the Google’s of the world should be treated as public utilities. I support that notion.

          • The situation is that world Government are clueless and aren’t doing any of the important things humanity needs on the Internet. So yes, Google is one very important entity that society has to count on to improve the way we can use technology. Sure it sucks, because I think Google doesn’t work fast enough to fix and to provide technical solutions to many of the worlds problems, but they are also a chance. Without Google, we may be relying on really bad companies like Microsoft, Apple, AOL or I dunno who to do something important to link the web together. Google is lucky, because they somehow linked their profits with the fundamental growth of the web and they figured out how to be the best link between consumers and businesses worldwide. It’s kind of crazy, but that’s where they are. Going forward, I think Governments, and any other major corporations should all massively invest in improving the web and improving how people can use the web.

          • DarwinPhish

            You get the content of the site you are visiting. Without ad revenue, the content might not be otherwise “free”.

          • jfutral

            I don’t think that is what Charbax is talking about. He seems to be talking about Google gathering information on you without regard to the ads a particular site may or may not have. Just by the sheer virtue of you surfing the web, Google gathers information on you and adds that into their own revenue stream.

            But I could be wrong.

            Joe

        • stefnagel

          Big scenery changes ahead:
          * Already Google is shut out of Facebook, an enormous piece of the market.
          Already Google is precluded from the humungous iOS app environment; lots of search goes on within apps that precludes Google ads and services. And apps may subsume all the other content areas: books, tunes, shows. It’s really big.
          * Google will not be a player in China by the government and by local OEMs who do not want Google services; it’s shut off from one third of the world’s population.

          * Google bought Nest cus’ it’s scared it will get shut out of another huge chunk of data flow, home devices that don’t use search or services. Let’s see how that goes.

      • chano1

        DuckDuckGo serves me well enough as a means of dumping Google search.

      • mhikl

        Brian, I use StartPage which piggybacks off Google but keeps my data free from prying eyes. There is also DuckDuckGo. Both seem better than Yahoo and Bing and StartPage near enough to Google in usage (& with fewer advert sites repeated and scattered over each next page.)

        Mail.com and yahoo are my mail of choice, though for the time being I keep gmail around for old accounts that I may or mayn’t eventually move to my other mail account(s) and for junk mail.

        I would dearly love to give up YouTube and have begun searching for the magic of which you speak. In the mean time I download and exit as fast as possible.

        Then I hope to be truly Google free or as free as is possible.

  • DarwinPhish

    “There is no total addressable market (TAM) for smartphones.”

    The real issue is that there is no accepted meaningful definition of what constitutes a smartphone. Right now smartphones are defined based on the OS a device is running, which tells us little. If the glass card you described supports voice and runs iOS, Android, Windows Phone or even Symbian it would be counted as a smartphone.

    The more relevant figure is the TAM of cellular connected data devices. This number is currently far less than the number of mobile subscribers.

    • I’ve looked at many attempts to define these numbers. Assume at least 4 billion mobile phone users and at least 5 billion mobile phones. Analysts believe 4-5 billion is the total addressable market for smartphones — that at the very least, close to every mobile phone user will eventually replace that with a smartphone. I say this is an entirely made-up view, has no basis in data nor does it align with the rapidity of smartphone innovation. By the time the smartphone market reaches that 4 billionth person, for example, smartphones will have long since morphed into something that’s currently unrecognizable.

      • DarwinPhish

        I agree. Though there are 4-5 billion people with access to affordable mobile voice and SMS service, the number with affordable access to mobile data service is much, much lower. There are also a lot of very good, very inexpensive dumb-phones. The same can not be said for smartphones.

        • Kizedek

          Apple is on its way to 1B iOS users / iTunes accounts. The only thing that matters is whether that 1B represents a “sustainable” piece of the pie.

          But then again, the iPod wasn’t sustainable at its peak levels for ever; and the product enjoyed a life span of only 10 years or so. The iPad already follows the iPhone. Apple is likely already working on what is to follow the iPad… and so it goes

  • JoeS54

    I think I partially agree with you, but you’re going too far. I think would be better said that the whole paradigm that came into existence starting with the iPhone is reaching a saturation point – the mobile device with a mobile OS and apps. Whether that’s the iPhone, Android phone, or tablets based on the same model. I don’t think they’re going away, but I think it’s self-evidently true that there is a point where the explosive growth stops. A point where the novelty wears off, and instead of needing the newest, latest thing, people start asking themselves, “What devices do I really need, and what do I really need them to do?”.

    I think the smartphone will continue to be essential for many people, and I think Apple can continue to do well with the iPhone if they don’t screw it up. Unfortunately, iOS 7 is very close to screwing it up. I had a chance to sit down and compare an iPhone 5 running iOS 6 to a 5S running iOS 7 side by side. iOS is a better-looking, much more consistent, high-quality interface than iOS7. iOS 7 almost seems as if it was thrown together half finished, and handed over to kindergarteners for coloring. Neverheless, the iPhone is still a very appealing device because of what it does and how it does it. It strikes a good balance between what you need and don’t need a smartphone to do. Android is much more like a traditional PC experience, which is frankly too much hassle for a phone. On a tablet, those dynamics are reversed.

    Google is the company that I think is most suspect, and which I personally dislike. Their entire business is ephemeral. They produce a bunch of junk software and services whose purpose is to drive advertising. I suspect they are vulnerable as people get sick of dealing with them. I hope they are. I now avoid Google as much as possible. I even use Bing out of spite.

    • Great comment. Thanks. Too many are turning my view that iPhone will die into…”Apple will die.” The thought never even crossed my mind.

      • JoeS54

        I think the iPhone will only die if Apple kills it by screwing it up. They have to continue to evolve it, but they also have to only make changes for the better. It’s a needle they used to thread well. iOS 7 is a bad sign, even though the problems are mostly cosmetic.

      • Kizedek

        No, the common perception already out there is that “if the iPhone dies, then Apple dies”. (“Look, iPhone accounts for 60% of Apple’s revenue”; etc., just witness many comments on this site).

        Rather, people should be thinking that Apple will kill the iPhone itself, when it is good and ready, and when the time is right!

  • poke

    Personal computers have always over-served. Maybe for the vast majority of the world general purpose computing belongs in data centres and we’ll see a proliferation of connected special purpose devices once the technology is there.

    • Yes, and look at the progression — continuous unbundling: mainframe to mini to PC to notebook to smartphones to…
      The only difference is that I think this is going to happen super-fast in the smartphone market.

      • Space Gorilla

        Maybe you should make it clear what you mean by unbundling, because your example here isn’t unbundling. As computers got more powerful and more capable a single computer could handle many more jobs than the previous computer. That seems like bundling actually. The progression seems more like iPhones and iPads will slowly grow more capable and take over more and more jobs that PCs used to do. Again, that seems like the opposite of unbundling.

        • I gave one example — a piece of glass with voice and video calling and payments, essentially nothing more. Make this available for, say, $50 — at high quality. I don’t really give other examples as I just think that’s asking for trouble. I did not predict an iPad, for example.

          • Kizedek

            And Apple has shown itself capable of this kind of product unbundling, such as with the iPod Shuffle.

            But, more than likely, having set the bar in phones and tablets, Apple is already hard at work on the next big type of product.

          • Space Gorilla

            I suppose a kind of iPhone Shuffle might be possible, but I think it’s more likely we’ll see convenient peripherals that are tied to the iPhone computing engine. That’s much more in line with your mainframe to mini to PC idea, where each new generation of computer was tied to the previous one and then cut those ties as it grew powerful enough and took over all the jobs of the previous computer.

            There’s a lot of jobs-to-be-done that become much more convenient when you can leave your iPhone in your pocket or bag/purse, and do more focused tasks on peripheral devices.

      • jfutral

        But I think the only direction left for unbundling is implants. Part of your unbundling illustration is portability. I imagine that’s what the thinking is for a smart watch or wearables in general, i.e., the only thing left after something you carry around with you is something that is always on you, not carried. But glasses or watches are only marginally something more than “carried”. They are still easily forgotten or left somewhere. An implant is all that is left in that direction.

        The suggested unbundling of the smartphone you present only serves to complicate life, not make it simpler. All the things a smartphone currently offers helps keep the number of things down to at least one, two at most. That’s why people don’t need music players OR watches anymore. It’s all on their cell phone. Supposedly that is the draw of phablets (which I think make terrible smartphones, but to each his own), one device vs smartphone and tablet.

        Joe

  • capnbob67

    I think you’ve watched the movie Her and been bewitched by Scarlett Johanssen in your ear and a small screenless device in his pocket.
    However, if the recent progress suggests anything, it is that in the future the smartphone gets smarter while only the bloggers get dumber. Unbundling is not a smart idea (and not really what you describe needing)… utter seamlessness and simplicity (tho not unsophistication) is much more likely to be the order of the day for the developed world (which will include increasing tranches of China and India and other BRICs).
    The form factor of the device is irrelevant (touchscreen, card, earpiece, etc.) – it still needs data, web,
    apps, content, etc. regardless of how you relegate your use of those
    features by saying you use them a lot but don’t really need them in your
    device. Isn’t it a schoolboy error to conflate your needs for the market? If a commenter did that, they’d be laughed off the page.
    The high-end of the market that demands these super smart devices will continue to grow (if more slowly than the low end for the foreseeable future) as people with needs and means continues to grow around the world. We are a long way from the seamless AI but both Apple and Google are laying the foundations today for these devices. To pretend they are not is foolish.

  • Idon’t Know

    I’ve read a lot of nonsense from Brian Hall but this one takes the cake. Flatly false statements followed by foolish speculation. Ugh.

  • aardman

    It’s probably an interesting and informative article, if only the two browser apps on my iMac can display it.

    • steve_wildstrom

      Displays fine for me in both Chrome and Safari.

      • aardman

        I have both browsers. I can read the other Techpinion articles but for some reason this one flashes the article for a split second then shows only comments. Oh well.

  • sgns

    The funny thing here is that Brian’s glassy smart card is easy to envision and a horror to implement. Sound familiar?

  • iKrontologist

    Facebook is a FAD that’s over ran it’s course. Will it continue to do so? That’s another question that can’t really be answered. I personally abandoned Facebook ages ago. Simply because of it’s privacy invasion issues and selling you the idea of being an interconnected CLOSED BOX NETWORK!

    Yet in reality it’s a closed box of Lab Rats held under a Reality TV like Microscope much like an experiment gone terribly wrong. Here people thought their lives were private and that they were certainly NOT one of the Lab Rats held under a Corporation like FACEBOOK’s Microscope to extract profits from SELLING YOU…. as a Commodity and not really about selling selling Ads at all. YOU are what FACEBOOK is actually selling and only takes opening our eyes to that reality, before you get even sicker to the stomach about them invading your privacy than the NSA. Which in all reality are doing so for an entirely different reason. NSA isn’t doing it for Corporate GREED, as in OWNING YOU! ……..like FACEBOOK, GOOGLE, APPLE, YAHOO are doing.

    NSA if held properly accountable are doing it to protect us. But it’s these company’s Corporate FUD and Propaganda Machines that would hope you believe otherwise! It’s the good old Shell (Con) Game in substituting or hiding the real reason that Corporations want to OWN….. US….. EVEN….. MORE SO….. than our Government! ;=P

    Now….. as to Android? Oh come on….. get real! IBM launched a campaign for linux in the early 90’s spending a record over a $1 Billion Dollars on an Ad campaign for Open Source Linux:
    http://www.youtube.com/watch?v=sOtKZA9ri7M

    Perhaps this campaign was even more successful at spreading Open Source than we ever believed. Perhaps by merely changing the name of Linux to Android….. Google has changed the Future by turning Android into the good guys that only want to help you. Yet…. for Google, that means they sold it better than they expected and it’s going to end up with Open Source owning the Market over it’s own Corporate Sponsorship!!! ;-P THE FUTURE IS NOW! OPEN SOURCE OPENS OUR EYES TO THE FUTURE OF SHARED CROSS PLATFORM REALITIES!!!

  • jfutral

    This isn’t part of unbundling, I’m sure, but it sure would help if my smart phone could also recognize phone numbers given in voicemails.

    Just sayin’,
    Joe

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