iOS

Miscellaneous Musings On Apple’s Earnings And The Future Of Personal Computing

Yesterday Apple released their earnings for the fourth quarter of 2012. It is important to note that Apple had 14 weeks, as compared to the normal 13 weeks, in their year ago fourth quarter. In order to equalize results, all comparisons will be done on a week to week, rather than on a quarter to quarter basis.

(All quotes are from the Apple earnings call.)

(Chart via Ars Technica)

Mac

Apple sold 4.1 million Macs compared to 5.2 million in the year ago quarter. That’s a decline of 16% on a week to week basis. My initial reaction to this news was that Macs were suffering from the same malaise that is plaguing all notebook and desktop computers. I’m sure that this is somewhat true, but Apple laid the blame squarely on supply constraints. In other words, they couldn’t make their Macs fast enough to meet demand.

…we were significantly constrained with respect to the new iMacs and we’re only able to ship them for the final month of the December quarter. We believe our Mac sales would have been much higher absent those constraints. ~ Peter Oppenheimer

Further, it does not appear that Apple is confident that they will be able to make enough Macs for the upcoming quarter either.

On iMac we’re confident that we’re going to significantly increase the supply, but the demand tier is very strong and we’re not certain that we will achieve a supply/demand balance during the quarter. Peter Oppenheimer

iPad

Apple sold 22.9 iPads compared to 15.4 million in the year ago quarter. That is an increase of 60% on a week to week basis.

Clearly the iPad Mini was a big seller, although Apple didn’t break out the specific numbers. Again, Apple couldn’t make enough iPad Mini’s to satisfy demand and they’re still struggling to make enough, even now.

…the iPad mini was very constrained.

We believe that we can achieve supply-demand balance on iPad mini later this quarter.

One interesting note is that the popularity of the lower priced iPad Mini brought the average sales price (ASP) of all iPads down by $101 on a year-over-year basis.

iPhone

Apple sold 47.8 million iPhones compared to 37 million in the year ago quarter. That’s an increase of 39% on a week to week basis.

Again, for much of the quarter, Apple simply couldn’t make enough iPhone 5’s to satisfy demand. More surprisingly, Apple was unable to make enough iPhone 4’s to satisfy demand and they are still struggling to do so.

If you look at the iPhone sales across the quarter, we were very constrained for much of the quarter on iPhone 5.

iPhone 4 was actually in constraint for the entire quarter…

…supply of iPhone 5 was short to demand until late in the quarter and iPhone 4 was short for the entire quarter.

We believe that we can achieve supply/demand balance … on iPhone 4 during this quarter.

This information, along with reports from Verizon, would seem to suggest iPhone 4 sales were growing in caparison with the iPhone 5. However, we have two statements in the earnings call that seem to counter this conclusion.

…the ASP for iPhone was essentially the same year-over-year in the quarter that we just finished.

If the mix of iPhones was drifting towards the older models, one would expect the average sales price to go down, not remain the same.

…if you looked at the mix of iPhone 5 to total iPhone and then in the previous year you look at 4S to total iPhones towards the top iPhone those mixes are similar.

That’s about as plain as it gets (although I still wish it were plainer).

All told, Apple sold over 75 million new iOS devices this quarter bringing their total to over half a billion. Kantar estimates that Apple gained 6.3% market share in the U.S. and maintained market share in Europe with growth of only 0.2%

Revenue, Income & Cash

Apple’s revenue for the quarter was 54.5 billion compared to 46.3 billion in the year ago quarter. That’s an increase on a week to week basis of 27%. To put that into perspective:

— Apple generated more revenue in one quarter than Google did in all of 2012.
— Apple is getting close to generating as much revenue in one quarter as Microsoft does in one year.

Apple’s net income (profit) was 13.1 billion. That’s an increase on a week to week basis of 8%. To put that into perspective:

— Apple made over a billion dollars in profit a week.
— Apple made more in profit (13.1 billion) than Google made in revenue (11.34 billion). Further, Apple generated as much profit in three weeks as Google did in three months ($2.89 billion).
— Apple’s 13.1 billion in earnings this quarter was the fourth largest of all time.

Apple’s cash totaled $137 billion compared to $121 billion at the end of the September quarter. That’s a sequential increase of almost $16 billion.

The Future Of Computing In Two Parts

I have a pet theory that mobile computing is breaking into a premium iOS operating system and a commodity Android operating system. Please pardon the following very long quotes from Apple’s earning call, but it appears that Apple is thinking along the same lines:

While other mobile devices and operating systems faced increasing security risks and fragmented inconsistent user experiences iPhone and iOS continue to deliver an exceptional experience that people love. They also provide a secure and trusted ecosystem that IT departments require. iPhone continues to be embraced by government agencies and businesses across the globe.

Many U.S. government agencies are issuing iPhones by the thousands as part of their new mobile strategies. Some examples include NASA and National Oceanic Atmospheric Association, Immigration and Customs Enforcement, and the Transportation Security Administration.

We’re also seeing continued growth iPhone growth in business across the board from companies replacing existing smartphone deployments to businesses adding first-time smartphone users. Companies around the world like Neiman Marcus, Skanska and Volvo are issuing iPhone to their employees to improve interactions with customers and give workers access to essential corporate data.

In addition to the tremendous response from consumers, iPad continues to be the tablet of choice for businesses and government agencies, transforming the way their employees work. Financial institutions like Barclays, Nomura Securities, and Bank of Beijing are deploying iPad to enable employees to better service customers and work securely with financial portfolios and products. In particular, Barclays’ rollout of over 8,000 iPads has generated tremendous employee engagement and feedback, making it the most successful IT deployment in Barclays’ history.

State and local governments in the United States are also rapidly adopting iPad. Court systems, accounting inspectors, and law enforcement agencies use iPad to streamline processes and replace huge amounts of paper. And state legislatures in Virginia, Texas, and West Virginia are all using the iPad to give lawmakers instant access to government documents and information.

Outside the U.S., 10,000 iPads are being deployed as part of broad adoption of the local government workflow solution in Sweden and over 5,000 iPads have been purchased by the government in the Netherlands for the Dutch tax authority and the Dutch court system.

Note the adoption of iOS devices in business, government and education. These were areas where Microsoft ruled supreme but now their dominance seems to be waning. And these are areas where Android is struggling despite its massive mobile market share.

Conclusion

Apple is engaged in a battle for control over the future of personal computing. Microsoft and Intel won the last battle but, in terms of unit sales and potential profits, that battle seems almost trivial. While Microsoft and Intel controlled the desktop and notebook markets, it appears that the combination of the smartphones and tablets is going to eclipse the PC’s numbers and profits by far.

There are many companies vying to become the king of personal computing. Each company has its strengths and each has its weaknesses. Apple has the hardware and software in place, but the future of computing is the cloud acting as the digital hub for all of that hardware and software and Apple has not yet proven its competency in that realm. Google has the most popular mobile operating system in the world but they haven’t figured out how to monetize it…yet. Microsoft is the king of the notebook and the desktop but that market is diminishing and Microsoft can’t seem to get any traction in mobile (smartphones and tablets). Samsung is making money – though not as much money as Apple – but they are not in control of their operating system or their ecosystem. Amazon? Geez, how does one evaluate Amazon? The less profit they make the more successful people think they become.

Tech is involved in its own personal game of thrones. And there are many new contestants waiting for their chance to steal the crown. It’s difficult to predict the future of personal computing but it’s easy to see that it’s going to be fascinating to watch.

Game on!

Why Android’s Market Share Is No Threat To Apple’s iOS Platform

iOS Is Winning The Profit Battles

Everyone concedes that Apple’s iOS is currently winning the mobile profit battles. However, many pundits still contend that Apple is losing the mobile wars because Apple does not have the most market share. How can this be? In almost every industry in the world it is profits – not market share – that matters and profits – not market share – that matters most.

Tiffany’s does not care how much costume jewelry their competitor’s sell. Nor do we judge the sales of cars, blue jeans, steaks or any other good or service soley by its market share. Companies like Best Buy, Radio Shack and K-Mart stand as stark testaments to the fact that the one with the most stores or the one that sells the most low cost items is seldom the one with the best prospects.

Does Platform Matter More Than Profits?

Ah, but apparently in a platform war it is platform – not profits – that matters most because it is platform – not profits – that inevitably leads to profits. And it is market share – not profits – that matters most because it is market share – not profits – that inevitably leads to platform victory.

John Koestier of Venturebeat puts it this way:

“As Android hits 75% market share, can anyone tell me why this is not Mac vs PC all over again?”

Dan Lyons, writing for ReadWrite, goes even further:

If this sounds familiar, it’s because we’ve seen this movie before, only in the original version Apple was losing out to Microsoft in personal computers. Now Google is using the same game plan in smartphones: Come in late with an alternative product and gobble up market share by licensing the OS to loads of hardware makers instead of trying to do everything yourself.

Look, when three out of four phones sold worldwide run your operating system, I think it’s safe to declare victory.

And Henry Blodget attempts to spell it all out:

The reason market share is important is that mobile is a “platform market.” In platform markets, third-party companies build products and services on top of other companies’ platforms. As they do, the underlying platforms become more valuable and have greater customer lock-in.

Building products and services for multiple platforms is expensive, so platform markets tend to standardize around a single leading platform. As they do so, the power and value of the leading platform increases, and the value of the smaller platforms collapses.

iOS Is Winning The Platform Battles Too

Only there’s one little problem with the theory that market share matters most in a platform war. By every imaginable measure and in every way that conceivably matters, it is iOS – not Android – that is winning the platform wars. And it isn’t even close.

A computing platform is made up of any number of attributes. Some examples of those attributes are:

adoption of operating system updates; accessories; advertising revenue; app primacy, quantity, quality and profitability; business adoption, BYOD, commerce; consumer assurance, entrustment and confidence; content revenue; control of the platform; credit card numbers; culture; demographics; developers; ease of use; eCommerce; ecosystem; education adoption; engagement; enterprise adoption; government adoption; in-app commerce; integration; lock-in; loyalty; monetization; profits to developers, content providers and publishers; popularity with teens; re-sale value; reliability; repeat customers, retention; safety; satisfaction; security; shopping; stability; stickiness; store quality; switching costs; trust; usage; video views; web traffic.

In every platform attribute listed, it is iOS – not Android – that is leading and in many cases it is iOS that is dominating.

Market Share Does Not Equal Platform

The pundits got it halfway right. Platform matters. But market share does not equal platform. Not by a long shot.

How can this be? The equation of “market share equals platform” is the foundation of the Network Effect – the idea that the value of a product or service is dependent on the number of others using it. Only here’s the thing. In computing platforms, it’s developers and dollars – not units and users – that count towards market share.

This just isn’t that hard. The two basic realities that matter most to a platform are that developers get paid to develop more and better apps and that consumers get incentivized to buy more apps and pay more for those self-same apps.

When the facts do not fit the theory, you either question the facts or you question the theory. The theory that “market share is all that matters” is flawed because the opposing facts are incontrovertible:

1) Developers are deveoping for iOS first;
2) Developers are making more money via iOS;
3) Consumers are downloading more content and apps, engaging in more eCommerce and consuming more advertising via iOS; and
4) Consumers are spending more on the content, apps and items they buy and the advertising they consume on iOS.

The Network Effect that John Koestier, Dan Lyons and Henry Blodget are banking on is alive and well. But it is iOS – not Android – that is reaping all of its benefits and rewards.

Why Android’s Market Share Is No Threat To Apple’s iOS Platform

Again, from Henry Blodget:

The biggest and most important difference between the PC market of the 1990s and the mobile market today is that many of the most common smartphone “apps” are available on all phones, regardless of platform. These include:

Phone
Email
Web
Texting
Popular games and apps

What this means is that you’re going to get most of your smartphone functionality regardless of which platform you use.

Ironically, spot on.

The pundits – including Henry Blodget – have it exactly backwards. You don’t HAVE to have a great platform to be successful in mobile. Android is living proof of that. Remember, when Android first emerged, it was iOS that had a 200,000 app head start. If platform was all that mattered – if we were re-living the PC v. Mac wars – then Android would have played the role of the Mac – or worse, the Amiga – and never have emerged from its nascency.

The bottom line is that there are really two smartphone markets. Android is an excellent smartphone. iOS is an excellent platform. Both can, and do, co-exist. And therein lies the answer to the seeming paradox.

The Right Diagnosis But The Wrong Prescription

Let’s re-review Henry Blodget’s argument:

The reason market share is important is that mobile is a “platform market.” In platform markets, third-party companies build products and services on top of other companies’ platforms. As they do, the underlying platforms become more valuable and have greater customer lock-in.

Building products and services for multiple platforms is expensive, so platform markets tend to standardize around a single leading platform. As they do so, the power and value of the leading platform increases, and the value of the smaller platforms collapses.

Henry Blodgett’s diagnosis – that platform matters – is entirely right. His prescription – that market share cures all ills – is entirely wrong. Android can continue its unit and user market share dominance without impinging on iOS’ platform dominance because it is developers and dollars that are the only market shares that really matter.

— It is iOS – not Android – that is attracting the third party companies to build products and services on top of their platform.
— It is iOS – not Android – that is becoming more valuable with greater customer lock-in.
— It is iOS – not Android – that developers, content providers, advertisers and eCommerce sites are standardizing around.
— And it is Android – not iOS – that is in danger of having the value of their smaller platform collapse.

Conclusion

Don’t get me wrong, Apple has plenty of things to worry about. But a flawed theory regarding platform and the Network Effect isn’t one of them.

Let’s stop focusing on market share without context and let’s start focusing on what matters. Market share does not necessarily equal profits. Market share does not necessarily equal platform. And in the long run (and in the short run too), market share that doesn’t ultimately lead to profits is meaningless.

Anyone can get market share. All you have to do is give away your product at cost or, better yet, for free. But you can’t beat Apple’s iOS just by losing money. Somewhere, somehow, sometime you’ve got to make a profit. Let’s stop pretending that market share is the bottom line or the only thing that matters. Profit and platform matter. Let’s focus on them, instead.

Of Tablets, Phones, and Apps

This began life as a reply to a comment on Part 4 of John Kirk’s “Why Android Is Winning the Battles, But Google Is Losing the War,” but quickly got out of hand.

John’s post sparked a discussion of Apple’s and Google’s different approaches to developing apps for tablets vs. handsets. Commenter rj said that Apple’s approach is to favor development of “Universal” apps that will run on either the iPad or iPhone. This is correct, but it rather misunderstands what a Universal app is. If implemented following Apple’s user interface guidance, a Universal app will effectively create two different versions in a single package.

The Android guidelines focus heavily on scaling and are marked by a belief that, at worst, developers need make only modest adjustments to phone apps to make them suitable for tablets:

Provide different layouts for different screen sizes

By default, Android resizes your application layout to fit the current device screen. In most cases, this works fine. In other cases, your UI might not look as good and might need adjustments for different screen sizes. For example, on a larger screen, you might want to adjust the position and size of some elements to take advantage of the additional screen space, or on a smaller screen, you might need to adjust sizes so that everything can fit on the screen.

Apple is much more concerned with the need to redesign apps for different display types:

Ensure that Universal Apps Run Well on Both iPhone and iPad
If you’re planning to develop an app that runs on iPhone and iPad, you need to adapt your design to each device. Here is some guidance to help you do this:Mold the UI of each app version to the device it runs on. Most individual UI elements are available on both devices, but overall the layout differs dramatically.

Adapt art to the screen size. Users tend to expect more high-fidelity artwork in iPad apps than they do in iPhone apps. Merely scaling up an iPhone app to fill the iPad screen is not recommended.

Preserve the primary functionality of your app, regardless of the device it runs on. Even though one version might offer a more in-depth or interactive presentation of the task than the other, it’s important to avoid making users feel that they’re choosing between two entirely different apps.

Go beyond the default. Unmodified iPhone apps run in a compatibility mode on iPad by default. Although this mode allows people to use an iPhone app on iPad, it does not give them the device-specific experience they want.

But reading the two sets of programming guidelines, I noticed a much deeper difference. Both, of course, are intended as developer references and contain a great deal of nitty-gritty information about APIs and how to implement specific features. But the Google version is full of code snippets and parameter definitions while Apple’s approach is much more concerned with reminding developers that what matters is the user experience and how good app design contributes to that experience. The Google approach is more practical, but Apple’s may be more useful. I don’t want to read too much into a couple of pages from developer manuals, but at least to me, they do sum up important differences in how Apple and Google approach the world.

Windows, iOS, and Android All Have Something to Prove This Week

Prior to Apple developing iOS and over the last 25 years, there had never been much of a threat to the Windows ecosystem. With iOS, Apple proved many things, including the value of a holistic experience delivered through purpose-built combinations of hardware, software and content. Now in mobile, it’s Microsoft looking into the window wanting to get inside. After iOS came Google’s Android, which was focused on the same areas as iOS. This week, with multiple announcements, Windows, iOS and Android all have some things to prove and I wanted to dive a bit deeper into some areas.

Windows 8 Launch

For decades Microsoft has been the uncontested PC market share leader. Macs made a little bit of a dent, but for the most part, Microsoft ruled and for years it looked like Microsoft would have uncontested dominance. That was until the iPad. While the iPad isn’t trying to be a PC, it did provide an optimal experience for specific usage models the PC once delivered. Sure, you can surf the web on your PC, but when kicking back on the couch is it the best way to do this? Not for me and not for 100s of millions of other people. I still must have my PC, but I prefer my iPad for certain tasks my PC previously performed.

With Windows 8, Microsoft hopes to bridge the gap between PC and tablet. They will attempt to do this by releasing Windows 8 on about every conceivable form factor possible and seeing what sticks. This is a huge risk in that they are also sub-optimizing the experience for desktop-only experience by adding the Metro layer and removing the start button. The Windows 8 experience is optimized for devices with touch and an accessible keyboard, turning the devices into a Swiss Army device. I have used my iPads for years with an extended keyboard, so I absolutely see the value here. This week, Microsoft must prove that flexibility of Windows 8 trumps the purpose-built focus of an iPad.

Windows RT adds another proving ground. For decades, Windows equated to compatibility with the past, which is inextricable linked to Microsoft’s IT roots and the fact that many consumers are peeved about wasting a prior, large investment. I am not saying that consumers care less about backward compatibility, but they care more about what the device does today and in the future then the past. Unlike Windows 8, Windows RT will not run all the older Windows 7 desktop applications. Microsoft bridges the gap with some key Office apps, but forget about loading up iTunes or Quicken that you have. Hardware compatibility with USB devices is an unknown as well. This has never been an issue with the iPad, but then again, neither iPad or Apple stands for backwards compatibility.

Finally, we have Microsoft Surface, the first Microsoft-branded PC that directly competes with its ecosystem. This test will take a long time to play out but rarely do these examples of suppliers competing with customers work out well. While we don’t know exactly how pricing and features will work out over time, few premium-branded Windows tablet makers are excited about this. If Ballmer’s email to its stakeholders wasn’t clear enough, future Microsoft does two things: devices and services, and those devices that its customers currently provide.

While we will need to wait months and some cases years to fully understand how all these play out, the official launch for Windows 8, Windows RT and Surface this week will give better indications on where Windows is headed.

Windows Phone 8 Launch

Windows Phone was very respectable in the early days of smartphones and was one of the few phones until RIM’s Blackberry to be accepted by businesses. Then came the iPhone and iOS, which undoubtedly changed Microsoft’s mobile fortunes for the foreseeable future. Instead of a commanding 90-95%% OS market share like it does in PCs, in mobile, Microsoft is looking right now, at best, 3% share of the mobile market. Given how Windows Phone 7.X has done, there must be some huge change for Microsoft to start gaining share.

Microsoft’s biggest challenge in smartphones is consumer apathy. Metro is differentiated, the maps are good and Nokia has some really good imaging but consumers are not yet all that excited about Windows Phone. Microsoft needs more black and white, differentiated, and demonstrable features to break consumers out of their addiction to iOS and Android phones if they are to make big progress.

With the launch of Windows Phone 8, Microsoft could start to reverse its fortunes. If Microsoft can show that a Windows Phone 8 is a must-have device to pair with a Windows 8/RT PC or tablet and an Xbox, I do believe they can start to make faster traction with those audiences.

iPad Mini Launch

Apple, plain and simple, invented a new category with the iPad. Sure, there were previous Windows Tablets, but the biggest issues were a lack of apps, pen requirement and very high prices. Tablets , particularly iPads have started to eat into the PC market. It’s not that an iPad can replace a PC, but some consumers are choosing to buy the new category (and shiny thing) instead of buying a replacement PC.

The iPad Mini will be interesting for Apple. Apple has always been able to command a price premium in, quite frankly, all devices. Whether it’s an MP3-playing iPod, iPhone, iPad, or Mac, consumers are willing to pay more. The iPad Mini will test this pricing elasticity more than ever. I believe to hit its profit goals, Apple will need to be priced at least at $299, which puts it into that 30-40% gross profit range. They could margin blend on the rest of the iPad line to get the price even lower, but that’s pushing it.

With Amazon Kindle Fire at $149, a $299-349 price will be pushing the pricing power farther than I have seen in a long time. I do expect an iPad Mini to have a much better experience than a $149 Kindle Fire, but with many consumers just glad to be able to have an affordable tablet, many will opt for the Fire. Apple will sell truckloads of the iPad Mini this holiday season, but not nearly as many as they could have if the Nexus 7 or Kindle Fire didn’t exist.

Google Nexus 10” Android Tablet Launch

While Android has done well on smartphones and 7” tablets, anything above 7” has been a business and marketing disaster. Google had clearly deprioritized the 10” category as the smartphone market eclipses the size of the tablet market. At some point though, Google needs to bring their “A” game to large tablets and incent developers to create high quality tablet apps. Right now, Google does not allow anyone to easily count the tablet-specific apps as they number in the 100’s. Not 100’s of thousands, I am saying hundreds.

Google is rumored to announce this week a Google Nexus 10” tablet with Samsung. Price is almost inconsequential in that without more native Android tablet apps, a new Nexus tablet could be worse than bad. I expect 10″ Android tablets this holiday to be relegated to the bottom of the pricing barrel below Windows 8 and iOS. Unless Google can pull off something completely amazing and unexpected, this Nexus 10” will sell as well as all the other Android 10” tablets, not well.

An Amazing Week

Yes, this week will be one that all the ecosystems will have something to prove. When I step back a bit, I marvel at the amount of innovation and competition that is happening and just know this will be great for consumers this year and five years into the future. Competition and innovation are important as evidenced more than ever by this week’s announcements.

Office for iOS and Android Embodies Microsoft’s Strategic Failings [Updated]

Microsoft product manager Petr Bobek has confirmed that (Microsoft) is planning to release native iOS and Android versions of Office 2013 next year. Speaking at a press event in the Czech Republic earlier today, Bobek told Czech site IHNED that native apps will be made available from March 2013. ~ via The Verge

— Office for iOS will be introduced almost 5 full years after apps for iOS were introduced in April of 2008.
— Office for iOS will be introduced over three full years after the iPad was introduced in January of 2010.

Those gaps in time embody the lapses in Microsoft’s strategic thinking. Either Microsoft should have made Office available or they shouldn’t. And if they were going to make Office available, they should have done so at the earliest possible moment. The fact that it took Microsoft five full years to make up its mind and implement its policy is emblematic of why Microsoft has gone from the most valuable computing company in the world to a company that is being out-profited by a single device (the iPhone).

UPDATE: Microsoft today disavowed comments made by its Czech subsidiary that the company will roll out iOS and Android apps of its Office suite early next year.

“The information shared by our Czech subsidiary is not accurate. We do not have anything further to share at this time,” a company spokesman said in an email Wednesday. ~ via Macworld

Mea culpa. I usually don’t comment on rumors and this is one of the reasons why. However, this one seemed rock solid. I’ll refrain from building my analysis on rumors in the future.

It’s Good to be Back on the iPhone

I wasn’t terribly vocal about this fact but since June I have been using an Android phone exclusively as my smartphone. Which has been by far the longest I have ever used an Android smartphone for any length of time. I get sent a lot of Android devices and often I pop my SIM into them to use them as my primary phone. This is the only way I feel I can get a true sense of a product and form an opinion, by fully integrating it into my life. Most Android devices I try never last a full week before I have to go back to the iPhone.

The device I used was the Galaxy Nexus running the latest Android OS Jelly Bean. I tried the Galaxy Note 5.3 and the Galaxy SIII for a short time as well but both only lasted a week or so. I much preferred Jelly Bean over the customized versions Samsung put on the Note and the SIII. I was surprised at a number of things I thought were pretty good about Jelly Bean. One I wrote about here, where I talked about Google Now and how Google is building an anticipation engine.

I was also drawn to the larger screen which is probably the strongest feature keeping me from going back to the iPhone. The Galaxy Nexus screen is 4.65 inches and after using it even for a short while, my iPhone 4S felt small. Email was the hardest thing for me to handle with Android. The email client that supports Microsoft Exchange server (which is what my company uses for corporate email) is tolerable at best—at BEST. Email is essential to my work flow because it is my day to day communication with clients. Not only did I dislike the Android email UI, it had weak Exchange support, often failed miserably, and would fail to make a connection to the server several times a week. Leaving me without access to my email while mobile for hours at a time. I am convinced that if Microsoft made a rock solid Outlook client for Android, they would have a healthy revenue stream

The temptation was always there to go back to the iPhone but I committed to trying Android until the iPhone 5 came out and I am glad I did, if for nothing else but to be able to speak more intelligently about that platform’s strengths and weaknesses.

Feels like Home

Then I got my iPhone 5, synced it, got it set up with all my stuff and all of a sudden it felt like I just came home from a long trip. There is just something about iOS that makes me feel comfortable. Part of that is most certainly because I had been using the iPhone since day one, but I also did so out of personal preference and choice. I had concluded that the iPhone was the best product for the needs, wants, and desires that mattered most to me.

Interestingly, I have run into a number of people in my social circles who had the same experience. They took the opportunity to take a break from the iPhone to try some of more popular Android devices. Just about everyone of them switched back to the iPhone 5 and had the same comfortable return and have not looked back.

Often I heard the battle cry from the Android community complaining that the iPhone 5 was just not innovative enough and lacked many of the cutting edge features common on Android smartphones. Many with that sentiment miss an important perspective, one that I truly didn’t fully grasp before using Android for a length of time. This perspective is that comfort and familiarity are actually features. And I would argue that for many consumers comfort and familiarity are just as valuable as a cutting edge spec is to others. The simple truth is that many consumers aren’t interested in going through the hassle to learn a new mobile OS, invest in new applications, and try to set up and get comfortable with a new ecosystem. For many comfort, convenience, and familiarity matter and Apple delivers this plus a great experience, tight integration with other products, amazing industrial design, and a host of other things as well. When you add it all up, it is easy to understand why millions of consumers are staying loyal to the iPhone.

This is why it is important for Apple to cater to their customers, not the customers of other platforms. I believe Apple is perfectly aware that there are groups of consumers out there who simply won’t buy an iPhone. I’m also sure they are ok with that since everyone is free to chose what is best for them. But there are many millions of people who will continue to buy Apple products and it is important that Apple bring them the key features they need and want.

Apple didn’t need to make the iPhone 5 have the largest screen on the market. Rather they needed to make the screen size that is relevant and usable for their customer base. Apple didn’t need to pack every feature and latest spec under the sun. They simply needed to include the ones relevant to their customers.

As I pointed out in my TIME column Monday, personal preference is personal preference. What consumers choose is their business frankly and not the business of others who feel the desire to criticize the choices of those who choose differently than them.

My preference is the iPhone and my own personal experience with the iPhone 5 is that it is practically perfect in every way—for me.

The Future of Apple’s Maps

It looks like the Apple Map story may dominate the conversation today, so I figured I would write something I have been thinking for a while. If you follow much of what I write or much of our focus at Creative Strategies, you will know that we like to look at the big picture. When you look at things from a big picture perspective, you rarely get stuck focusing only in the here and now. All roads lead somewhere and we can choose to look 5 ft ahead or we can look down the road trying to anticipate where it leads. I try to focus on the latter.

Most of the criticism I have seen is not that Apple created their own map software and experience. But that they deprived their customers of what was a superior experience with Google Maps. For iOS customers, Google Maps was the standard and even though it didn’t have turn-by-turn navigation, it sufficed as a map and location service.

The bottom line is, Apple is in transition, this is necessary for the future, and yes it could have been handled better. The open letter from Tim Cook to Apple customers says it all. I personally believe that Apple’s Maps, as it relates to the iOS experience will provide the best possible experience across the platform and is essential to the future of iOS. Many may reasonably suggest that Apple could have added their own map app and left Google Maps on the platform during transition. But as Tim pointed out in his column today, including Google maps would only be letting Google gather more valuable data from iOS customers and thus continue to help their competition.

With that in mind, it is interesting to think about where the Apple Maps road leads. Earlier today Tim pointed out why this move was necessary for Apple for their strategic future and to provide better experiences for Apple customers. I want to look at the future.

More Than Navigation

I used to use Google Maps on iOS as often as anyone. I commute all over Silicon Valley going to meetings at different tech companies all over the Bay Area. Turn-by-turn navigation was what I was missing most from Google Maps on iOS. In fact since I am sent many Android devices, I generally always kept an Android device with me so I could use the turn-by-turn feature. Then my behavior changed. I recently purchased a new car, the Kia Optima Hybrid, which has in-dash navigation included. All of a sudden turn-by-turn navigation is no longer that important to me. In fact I made an interesting observation while car shopping. The vast majority of entry level packages from most major car companies, include in-dash navigation as a feature.

This leads me to believe a strong case can be made that over the next decade, and as people get new cars all over the globe, turn-by-turn may not be the key feature of maps going forward. For Maps, it must be about more than just navigation to compete in the future.

Search, Discover, Decide

What then is the bigger picture task or job that we will be asking a map application to do for us, both now and in the future? Maps is an interesting application in this regard, because it is fundamentally different than a web search. When using a map application, I am desiring something relative to a location. How do I get somewhere from where I currently am? What is around me of interest? Have my friends said or done anything interesting relative to my current location? Are any establishments near me offering any special deals? What are others saying about an establishment near me? I want Dim Sum for lunch, what are the best places around me and what have others said or recommend? The list goes on.

Google handles this in a very interesting way and one that always frustrated me, specifically when it came to reviews or offers. Google Maps on Android prioritizes Google services. Google Maps on Android was recently updated to include Zagat official reviews but user reviews are still only from Google users. Apple’s Maps, however, integrates Yelp consumer reviews right into the map application. A quick search for my favorite BBQ joint near my house on Apple’s maps resulted in all several thousand Yelp reviews. While the same search on the latest Google Maps app yielded 30 reviews from Google users. This got me thinking that it appears Apple is building a map platform that will extend value to app developers to integrate their location based services and data into. This approach is fundamentally different than Google Maps and to be honest Apple’s approach is better for developers.

This is not to say that Google can not or will not take this direction in the future but I would point out that they would be following Apple in this regard if they do. From the short time I have been using Apple’s maps to search for places to eat or go near me, I have already found the experience more useful in making a decision then I ever did Google Maps. And I have been using Jelly Bean on the Galaxy Nexus exclusively for the past three months.

The future of Apple’s Maps looks to be something both consumers and app developers working on location based services can get excited about. Apple is taking an approach that looks to let developers integrate and extend the valuable services and data they are generating into the overall map experience. This approach is good for others, while the other is good for just one company and that companies services.

The Real Reason why Apple Dropped Google Maps

I have been fascinated with all the bluster and vitriol thrown at Apple since they tossed Google Maps in favor of their own Map app without these detractors trying to get to the bottom of why Apple made this move.

If you have followed Apple for a long time like I have, you know that Apple does not make rash decisions and in fact, all of their decisions are rooted in sound business reasons with an ultimate goal in mind. That is the case with the new iPhone Maps. Contrary to many peoples thinking, the move was not to punish Google in any way. Rather, the decision was a very pragmatic one that in the end will be good for Apple and really good for their customers.

One key reason for Apple dumping Google Maps is that Apple wanted turn-by-turn directions and for obvious reasons, Google did not want to license this feature to Apple because it gave them a competitive advantage over Apple. When it comes to iOS Map apps, turn-by-turn directions were at the top of the list of requests by Apple customers. We can debate Apple’s timing, how the transition was handled, etc., but my stance is that strategically this move is necessary for the future of iOS. Interestingly, Apple released a press release this morning re-inforcing their commitment to Maps and apologizing for what many are calling mis-steps. If it wasn’t clear before, this mornings release clearly stated that Apple’s goal is to ultimately provide the best user experience to their customers and they feel that can only happen if they design and control the future of their mapping software and that required a re-build from the ground up.

However there is an even more important reason Apple took this action. In a column I did for TIME earlier this year, I wrote a piece entitled “Why Google and Microsoft Fear Siri.” In it, I explained that at the heart of Siri lies a rich database of content that Siri can draw from to give users the answers to the questions they ask. However, when Apple introduced it they never even uttered the word “database” in explaining how it works. What they did say is that Siri was in its early stages of learning and over time, as people use Siri, it would get smarter. It was almost positioned as a beta release.

But this is consumer speak for the fact that Siri is based on a database of initial content and as it learns about what info people want, it adds it to its data base to make it smarter or more accurate. If you have tried Siri in the newest version of iOS, you know that indeed, Siri is smarter this time around. And as it continues to build its database as it learns what questions people ask, it will become better and even more accurate.

As I point out in the piece for TIME, what Siri is and will continue to become, is a voice front end to a very rich search engine that gets more accurate and useful as it adds info or content to its database. With that in mind, I suggested that Google and Microsoft, who’s search engines dominate the market today, could eventually be threatened by Apple if Siri gets smarter and develops a rich user contributed database that is really a search engine for at least 60,000 Siri capable iOS devices on the market today.

Over the years, we at Creative Strategies have done at least four major projects for companies with navigation software. As we dug into these projects, it became pretty clear that the navigation databases they use are at the heart of their real usefulness. However, getting the info for a mapping database is very difficult. While these companies do field work to add content to their maps as much as possible, their software only gets better when their users gave them feedback and helped them add more accurate data to their mapping database.

Google has done a great job of creating a rich database of mapping data, but like these other navigation companies, counted on users to feed them even more accurate data that continues to fine-tune Google maps’ accuracy. But what Apple understood a couple of years back is that Apple has delivered at least 70 million iOS users to Google who were feeding them map data and literally giving their competitor the ability to have a major edge on them especially with Android based smartphones.

As you can imagine, that did not make Steve Jobs, when he was still with us, very happy. So for solid business reasons and with a pragmatic approach to this problem, Apple made the important decision to create their own map app and with their users help, fine-tune their own database of Map data over time. TeleNav gave Apple the underlying Map database and Apple has been adding its own information to it for at least a year. More importantly, from this point on, Apple now owns their own custom mapping database and their customers will continue to help it become more accurate. This way it keeps Apple’s customers away from giving Google any more valuable data for their maps.

At the iPhone launch, Apple probably should have stated, as they did with Siri, that this new map app is a work in progress and more like a beta. That would have at least tempered the criticism to a point. But by praising it and then people finding a lot of inaccuracies, it comes off as a wounded product instead of what it really is; a mapping database that will become more accurate over time.

Interestingly, Google has said that they may not do an iOS version of Google Maps. But that is like shooting themselves in the foot. In fact, if they are smart, they rush an iOS Google Maps app to market quickly so that they can try and keep iOS users from using Apple’s Map app given its accuracy issues. If I were a betting man, I would put money on the fact that Google is not willing to give up the feedback they get from 70 million iOS customers that helps build their mapping database and we could see a Google apps map for iOS within the next 2 months.

Apple’s decision to jettison Google Maps was not an emotional one. Indeed, the decision was done to make sure they owned their customers data and did not give Google any help with Android. And as iOS users give Apple feedback on map data and accuracy, a very rich mapping database will emerge that could be even better than what Google offers today.

If you have time read Ben’s take on the Future of Apple’s Maps.

With Apps, Size Matters

Ben Bajarin has written an important article entitled: “Windows 8 Tablet Fragmentation and the App Dilemma“. I highly encourage you to follow the link and read. it.

His main thesis is so important that I’m re-stating it here in the hope that it will draw even more attention to his article and even more attention to this vital issue.

“(Apps) are specifically designed for the current … screen size. (E)verything is placed where it is for a reason.” ~ Ben Bajarin

There is a FUNDAMENTAL DIFFERENCE between an app designed for a smaller (3.5 to 7 inch) screen and an app designed for a 9.7 inch or larger tablet. The pundits don’t get this. Google doesn’t get this. Amazon may not get this. And Microsoft may be ignoring this fundamental truth because they simply have to. Let me explain.

The Pundits Don’t Get It

“And this size (7 inches) is useless unless you include sandpaper so users can sand their fingers down to a quarter of their size.” ~ Steve Jobs

This Steve Jobs quote baffles many tech observers. There are literally hundreds of thousands of useful apps availabe for our phones and our phones are much smaller than a 7 inch tablet. Why then would Steve Jobs say that apps on a 7 inch tablet are useless when apps on the much smaller phone are perfectly usable?

Steve Jobs wasn’t talking about EXPANDING 3.5 inch phone applications up to fit on a 7 inch screen. He was talking about SHRINKING 9.7 inch tablet applications down to fit on a 7 inch screen.

You can blow up a phone app and make it run adequately on a 7 inch screen but if you take an iPad app running on a 9.7 inch screen and shrink it down to run on a 7 inch screen (which is only 45% the area of a 9.7 inch screen) it will be virtually unusable. As Steve Jobs said, you would need to sandpaper your fingers down in order to make them thin enough to interact with the app’s interface.

Google Doesn’t Get It

“Nonsense,” the critics cry. “Phone apps work perfectly well on tablets. Even Google’s Andy Rubin says so.”

It’s true that he does say that. When the Nexus 7 was introduced, Andy Rubin made a point of saying that he was sticking with Google’s strategy of encouraging developers to write a single app for both phones and tablets. This same philosophy was reflected in one of his earlier quotes on the subject:

“I don’t think there should be apps specific to a tablet…if someone makes an ICS app it’s going to run on phones and it’s going to run on tablets.” ~ Andy Rubin

And there, ladies and gentlemen, is the exact reason why Android’s 10 inch tablet strategy lies in tatters and its partners tablet sales lie moribund. Google doesn’t get it.

Optimized apps matter.

iPad Developers Get It

There are 700,000 apps in the iOS App Store. 250,000 of them – one quarter of a million – are specifically tailored to run on the iPad.

Developers don’t develop tablet apps for their health and consumers don’t buy tablet apps for no reason. Some phone apps run adequately when blown up to fit on the iPad’s increased screen real estate. However, most phone apps are less than optimal. Some are virtually unusable.

If you want an optimal phone or tablet experience, you have to tailor the app to the device’s specific screen size.

Where Does This Leave Android?

Until Google changes its philosophy on tablet apps, its tablets will merely run oversized phone apps and they will never have any success with the larger screen sizes and they will never seriously compete with any platform that has tablet optimized apps.

Where Does This Leave Amazon?

Amazon just introduced larger sized tablets. As smart as Jeff Bezos is, I think that he’s about to find out that there is a huge difference between a 7 inch tablet that can run stretched out phone apps and a larger tablet that demands apps optimized for the increased screen size(s). Without knowing a thing about the new, larger, Kindle Fire devices, I will predict that the larger form sizes will fall flat because they don’t add much in the way of content viewing over that of a 7 inch tablet and their lack of apps devoted to their form factor means that apps won’t add much to their value either.

Where Does This Leave Microsoft?

“In essence (developers) are not simply shrinking or expanding their apps to work on smaller or larger screens, they are in essence creating new app experiences for those screen sizes.

…..
Windows 8 touch based hardware will be so fragmented in screen size that we will see touch based Windows 8 hardware ranging from 10” all the way up to 27. If developers feel the need to optimize their software for a screen that is anywhere from a half-inch and even a 2” difference, what will they do when they have 4, 5, or 6 different screen sizes to target in the Windows 8 touch hardware ecosystem?” ~ Ben Bajarin

Do you want to know the future of Microsoft’s tablet efforts? Then ask yourself: “How many apps are optimized for each of the various Windows RT and Windows 8 tablet form factors? If the answer is “a few” or “not many”, then that form factor is going to struggle.

And while Windows 8 tablets run both Metro and desktop apps, what is the point of owning a tablet if the tablet apps are missing in action and it only ends up only serving as a lessor substitute for a notebook? You’d be better off buying a notebook instead.

Conclusion

Apple’s iOS has 250,000 9.7 inch optimized apps.

— How many apps are optimized for the various Android large screen tablets?
— How many apps are optimized for the large screen Amazon Kindle Fire tablets?
— How many apps are optimized for the various Windows RT and 8 large screen tablets?

Do you want to know the future of tablets? One of the keys is optimized apps. If you don’t got ’em, you don’t got no future.

Read Ben’s article and enjoy. Understanding his article is essential if you want to fathom the future of tablets.

For Apple’s iOS Owners, It’s Christmas In September

On Wednesday, September 19, 2012 iOS 6 will go live. For tech devotees, this is old news. But for the vast majority of iOS (iPod Touch, iPhone and iPad) users, iOS 6 will deliver about 200 gifts – some big and some small – to make their i-devices a bit more fun, a bit more useful, a bit more valuable.

If adoption goes as it did with iOS 5, we can expect to see iOS 6 on 60% or more of all iOS devices – including the now three year old iPhone 3GS – within a month or so. Due mostly to hardware constraints, not every device will support all the additions but all the devices will support the vast majority of the additions.

Compare that to Android. As of this date here are the adoption percentages for Android’s three most recent operating system updates:

— 01.2% Jelly Bean
— 20.9% Ice Cream Sandwich
— 77.0% Gingerbread or older

What good does it do Android to add great new features to their operating system if they can’t deliver those features to their users? It’s like buying Christmas presents and never letting anyone open them.

Operating System adoption is one of iOS’s greatest strengths and one of Android’s greatest weaknesses. When it comes to operating system updates, Apple is a bit of a Santa Claus…and Google is a bit of a Scrooge.

Android v. iOS Part 6: The Future

RECAP

Last week, we took a deep dive into the Android and iOS operating systems, looking at market share, profits, developers and platforms. Today we wrap up the series and attempt to peer into the probable futures of these two great mobile operating systems.

The truth is, seeing the futures of Android and iOS isn’t so much about following the signs – there’s plenty of them and they’re almost all pointing in the same direction – it’s much more about unlearning some of the lessons that we’d thought we’d learned. When it comes to Android and iOS, it’s not what we don’t know that hurts us so, it’s what we “know” that just ain’t so. Once we free our minds from past preconceptions, the scales will fall will from our eyes and the broad outlines of what is and what is about to happen will become clearer.

1) It is a mistake to assume that the “best” operating system will “win”

“Best” is a subjective opinion, one of the weakest forms of evidence.

“Best” is contextual. What’s right for one may not be what’s right for another. A school bus is a poor form of transporatation- unless one is a school bus driver. What’s “best” needs to be what’s best for the user, not what’s best for you or me.

“Best” is often irrelevant. Betamax may have been the best video recording device on the market, but it didn’t win out over the VCR. Things such as distribution, production, costs, marketing, first to market, and a slew of other factors often trumps “best”.

Let’s take our focus off of our subjective opinions as to what is “best” and rest our gaze, instead, on objective, measurable, factual information.

2) It is a mistake to assume that any operating system will “win”

Android v. iOS is undoubtably a platform war, however, not every platform war ends with a single standard.

— Musical records split into two standards with the 33 1/3 being used for albums and 45’s being used for singles.
— Gaming consoles are currently split into three different standards.
— Petroleum is split into two standards, with gasoline (the American term) being used for most cars and diesel being used for most trucks and other heavy commercial vehicles.

All of these standards exist side-by-side and serve different markets. And that is what is happening with Android and iOS too. We need to stop focusing on the idea that one mobile operating system is going to serve every market and, instead, start focusing on which markets are being best served by each operating system.

3) It is a mistake to let the exception swallow the rule

An exception to a rule does not invalidate the rule. So long as something is true most of time, it’s worth noting. Too often we focus on the exceptions and let those exceptions blind us to the overall patterns.

It’s important to recognize the exceptions to a rule. But it’s even more important to recognize which is the rule and which is the exception.

4) It is a mistake to assume that market share equals profits for Google

Whenever it’s pointed out that iOS is making a lot more money for Apple than Android is making for Google, or when it is pointed out that that iOS is making a lot more money for iOS developers than Android is making for Android developers, we’re told that Google has a different business model than Apple – that Google is selling eyeballs (advertisements) and that market share matters because every Android device is another pair of eyeballs consuming Google services and Android advertisements.

That’s a fine theory and all except for one thing: It’s simply not happening.

Google’s business model is no where near as profitable as Apple’s. Google gives away Android in order to make money from Google services and Google ads on a per device basis. It is estimated that Google makes $6.50 per device. Apple, on the other hand, makes an estimated $300 per iPhone and Apple sells apps and ads on top of that. For Google’s Android to come close to matching Apple’s, Android devices would have to outsell the Apple’s iOS devices by a factor of 30 to 1. (Source)

Further, Google’s mobile ad model is not working all that well. There is little correlation between Android’s market share and Android’s ad revenue. According to e-Marketer, Google earned $125 million in mobile display ad revenues in the US last year, compared to $92 million by Apple. While that’s 30% more ad revenue than Apple, Google has acknowledged that two-thirds of their mobile revenues come from iOS, not Android, devices.

All in all, Mobile ads are simply not shaping up to be the same kind of money maker for Google that desktop ads are. According to research by Internet Retailer, Invodo, and Comscore, mobile video appears to be a more effective than display ads in converting potential customers into paying customers. And 70% of the retail videos accessed by mobile devices are accessed by an iOS devices, not Android devices. (Source)

An even more disturbing trend for Google is the migration from search to apps. Users are increasingly using apps rather than search, and Apple leads in the app market by the number of apps, the amount of money made in apps, the number of developers developing apps and the “buzz factor” surrounding new apps too. (Source)

Flurry Analytics reports that on mobile devices, 94 minutes per day are spent on apps compared to 72 minutes on the web. Mobile users are spending more and more of their time going directly to an app that gives them exactly the information they want and they are spending less and less of their time searching the mobile web. (Source) That’s good for apps. That’s bad for Google search revenue model.

Android may have market share, but that market share is not translating into dollars – not for Google and not for Android’s developers either. With mobile users trending toward the use of apps and away from the use of search, despite Android’s greater market share, it’s going to become more and more difficult for Google to keep up with Apple’s revenues and for Android’s developers to keep up with the revenues being made by iOS developers.

One final point on profits. I can anticipate the argument that it is unfair to compare Google to Apple – that Google’s business model and Apple’s business models are nothing alike – that Google gives away the Android operating system; that Apple sells both the operating system and the hardware; that, of course Apple makes more money than Google. This argument complete rubbish.

There’s nothing fairer than comparing profits to profits. Profits are the great equalizer. The top lines of companies can often be quite different, but the bottom line is how every company is ultimately measured. It’s not unfair to compare profits – it’s exactly what we SHOULD be comparing.

It is true that Google and Apple have very different business models. So what? Business models are a strategic decision made by the companies themselves. Google chose it’s business model. Now that have to live with the results.

5) It is a mistake to assume that market share equals retention

One argument for the value of Android’s greater market share is the contention that Android gets to new smartphone owners first, builds unshakable loyalty in the Android brand and locks iOS mobile devices out of the market thus insuring iOS’s demise and Android’s future market domination. Only thing is, all of the existing evidence points in to the exact opposite conclusion.

— iOS has a 75% satisfaction rating with Android coming in a distant second at 47%. (Source)

— iPhone has topped J.D. Power’s semi-annual satisfaction list 7 straight times. (Source)

— iPad has an astonishing 98% satisfaction rating. (Source)

— iPhone owners are the least likely to switch from their carriers – even when that carrier’s service is deemed to be just awful. (Source)

Goldman Sachs recently conducted an extensive consumer survey of over 1,000 Apple iOS users and reported that:

— 71% of respondents are “highly likely” to choose an Apple device for their next tablet or smartphone purchase, while 23% are “likely” to stick with the platform. In other words, 94% of respondents are “highly likely” or “likely” to purchase their next tablet or smartphone from Apple. Only 1% of respondents said that their next device purchase was “unlikely” or “highly unlikely” to be from Apple. Further, a surprising 21% of respondents to the survey said: “there isn’t a discount that would make it worthwhile” to leave the Apple platform. Now that’s brand loyalty.

— A study by Gene Munster at Piper Jaffray indicates that only 47% of Android users expect to buy another Android device and 42% expect to buy an iPhone. (Source)

— Another study by Gfk in the UK indicated that 84% of iPhone users will repurchase an iPhone compared to just 60% who would repurchase an Android phone. (Source)

— A survey of more than 2,000 smartphone users by Robert W. Baird analyst William Power shows that 48% of Android smartphone users plan on buying another Android device for their next smartphone while 17% say they plan to buy an iPhone and 34% say they’re undecided. The story is much different for fans of Apple’s smartphone, however, as 77% say they plan to buy an iPhone for their next smartphone, with just 5% planning to switch to Android device and 18% still undecided. (Source)

Android may be winning the race to the new smartphone consumer, but Android is not retaining those users. Switching is primarily a one way street, with Android users going from Android to iOS, but iOS user seldom leaving the iOS platform.

6) It is a mistake to assume that market share domination equals app ecosystem domination

When it comes to platform, developer share – not end user market share – is what matters. And iOS dominates Android in developer share.

iOS developers are paid better, develop for iOS first and iOS customers buy more apps and pay more for them.

It has been argued that Android’s platform is every bit as good as the iOS platform. That is demonstrably untrue.

— iOS overall developer revenue is six times greater than Android developer revenue. You don’t generate that much more revenue without having first generated much more value to your customers.

— There are over 43 thousand Apple iOS developers and 10 thousand Android developers. 33 thousand additional developers add a lot of value to the iOS platform.

— There are seven iOS apps for every three Android apps. Arguing that more apps has no more value than less apps is not an argument, it’s an assertion that reality doesn’t exist.

Argue as loudly as you like that the Android platform is as good as the iOS platform. The iOS developers, the iOS apps and the iOS buyers will shout you down.

For additional details and sources, see: Android v. iOS Part 4: Developers

Some day, all this may change, but if it does change, it will be because of a change in developer share, not a change in market share.

ANDROID IS THE SUPERIOR SMARTPHONE DEVICE. IOS IS THE SUPERIOR PLATFORM

Android and iOS have different inherent strengths and weaknesses and instead of fruitlessly trying to decide which operating system is going to win everywhere, we should be focusing our efforts on determining which markets each OS is destined to dominate. Neither Android nor iOS is going away. Instead, each OS is going to go their separate ways.

Android’s value is in the device. iOS’s value is in the platform. Android will take the low end of the market. iOS will take the high end.

Android will appeal to third-world nations, emerging markets, tech aficionado’s who admire the virtues of “open”, those who require more freedom, those who require more options, those who require more diversity, those who use a single device, the cost conscious, and those who admire the value of free.

iOS will appeal to more established nations, maturing markets, non-technical users who admire the virtues of easy and intuitive, those who require more security, those who require more consistency, those who require more integration, those who need multi-device management across multiple device form factors, the quality conscious, and those who fear Google’s ad-supported business model.

iOS will appeal to Enterprise, businesses, governments, institutions, organizations, and other entities that require more structure and control. (As one who lived through the Windows v. Mac wars, the irony of this statement is not lost on me.)

THE ONCE AND FUTURE PRESENT

“It’s tough to make predictions, especially about the future” – attributed to Yogi Berra

The truth is, we’re already living in the future of the Android and iOS operating systems. Both are well along on their respective paths. The future is going to be much the same as the present – only more so.

Android will continue to grow like a weed. iOS will continue to grow like a well tended farm.

Android will continue to rapidly iterate their hardware and their operating system. iOS will continue to relentlessly integrate their hardware with their software and their platform ecosystem – methodically moving both their iOS and their OS X software platforms forward together in lock-step.

Android will continue selling a mind-numbing array of diverse products. iOS will continue selling products like the three year old iPhone 3GS because iOS’ value is found primarily in the platform, not in the the device itself.

These two great operating systems actually complement one another. The Yin to the others Yang. And one unintended consequence of that symbiosis is that they will continue to hold the dogs of anti-trust at bay. No one is going to sue Apple for anti-trust so long as Android has most of the market share. And it’s going to be awfully hard to say that Android has a monopoly on mobile phones when Apple’s iOS has most of the profits.

Android and iOS is less about which one is superior and more about their relative strengths and weaknesses. It’s less about how they compete with one another and more about how they complement one another. It’s less about their radically different futures and more about how the future is going to be an extension of the present.

The future is uncertain and there are sure to be lots of twists and turns along the way. But don’t expect this war to come to a head any time too soon. The two sides are too evenly matched and yet too divergent in form. Like Britain and France during the Napoleonic wars, Britain ruled the sea and France ruled the land and seldom did the twain meet. But unlike the Napoleonic wars, don’t expect there to be a decisive battle of Waterloo. A lingering, uneasy state of detente is far more likely.

Android v. iOS Part 5: Android Is A Two-Legged Stool

RECAP

This week we’ve been looking at the Android and iOS mobile operating systems. In part 1, we looked at how Android was dominating market share. In part 2, we looked at how iOS was dominating profit share. In part 3, we tried to reconcile that seeming paradox. Turns out that, with regard to platform, developer share – not market share – is what gives the platform its value and developer share is what makes a platform strong. In part 4, we showed that iOS was, by far, the stronger of the two platforms. Today we look at why iOS has an inherent advantage in platform, why Android has an inherent disadvantage in platform, and what that means for the futures of these two great mobile operating systems.

A PLATFORM IS MUCH MORE THAN JUST HARDWARE AND AN OPERATING SYSTEM

A computing platform is made up of (at least) three parts: hardware, operating system and an application ecosystem. An application ecosystem is also make up of three parts: well-paid developers, a high volume of quality applications (apps) and lots of happy customers buying those apps.

Android boasts some of the finest hardware in the world. And their operating system is arguably second to none. The Google team is world class. Their operating system is chock full of features and it iterates at an incredible pace.

But when it comes to application ecosystem, iOS rules and it isn’t even close. While Apple’s iOS leads the world in profits, apps, well-paid developers, paying customers, customer satisfaction and retention, Android leads the world in:

— Malware (Source)
— Piracy (Source)
— Cloning (Source)
— Confusing buying options (Source)
— Belated operating system updates (Source)
— Hardware fragmentation (Source)
— Underpaid developers (Source) and dwindling developer interest; (Source) and
— Customers who won’t pay for Apps (Source)

WHEN IT COMES TO PLATFORM, iOS HAS AN INHERENT ADVANTAGE

As Tim Bajarin previously wrote for Tech.pinion in “How Apple is Cornering the Market in Mobile Devices“:

“While all of (Apple’s competitors) think that they can compete with Apple when it comes to hardware, and maybe even software, what they all pretty much know is that the secret to Apple success is that they have built their hardware and software around an integrated ecosystem based on a very powerful platform. And it is here where their confidence level lags and the “iPodding” fears raise its head. And to be honest, this should really concern them.”

“Apple is in a most unique position in which they own the hardware, software and services and have built all of these around their eco-system platform. That means that when Apple engineers start designing a product, the center of its design is the platform . For most of Apple competitors, it is the reverse; the center of their design is the device itself, and then they look for apps and services that work with their device in hopes that this combination will attract new customers. In the end, this is Apple major advantage over their competitors and they can ride this platform in all kinds of directions.”

WHEN IT COMES TO PLATFORM, ANDROID HAS AN INHERENT DISADVANTAGE

Android is based on an “open” philosophy. In software and web-based architectures, an open platform:

“describes a software system which is based on open standards, such as published and fully documented external programming interfaces that allow using the software to function in other ways than the original programmer intended…” – Wikipedia

Open has many advantages – but it has many inherent disadvantages too. The very same open policies that make Android’s sales stronger are the very same open policies that make Android’s platform weaker.

An open policy towards carriers encourages rapid dissemination of devices but it also permits the carriers to take unwanted liberties with Android’s core services and allows them to shirk their responsibilities with regard to operating system updates. An open policy towards manufacturers allows for rapid hardware iteration but it also creates rapid hardware fragmentation. An open policy towards the sales of applications leads to a wide variety of apps but it also leads to a wide variety of piracy, cloning and malware too. An open policy towards the operating system allows for rapid feature iteration but it also allows competitors to split off a confusing variety of competing operating systems and App Stores too.

Open is not bad or good, it’s a tradeoff. But what open giveth Android in sales, it taketh away in application ecosystem. The very same things that makes Android sales strong are the very same things that makes Android’s platform weak. It’s inherent and intractable. The only way to make Android’s platform stronger is to make it less open. And the less open Android becomes, the fewer advantages in sales it has.

THE ANDROID PLATFORM RESTS UPON A TWO-LEGGED STOOL

A stool needs at least three legs to support it. A platform needs at least three legs to support it too. The first leg is hardware. The second leg is operating system. The third leg is application ecosystem. For the sake of argument, let’s assume that the Android hardware and the Android operating system are equivalent or superior to iOS.

Android’s third leg – its application ecosystem – is weak. Terribly weak. And just as two legs are insufficient to support a stool, the two legs of hardware and operating system – no matter how strong – are insufficient to support a computing platform.

The Android and iOS wars are not what they’ve been made out to be. The combination of great hardware, great operating system and an open architecture has made Android THE premiere smartphone of our times. The sales numbers prove it.

But the story doesn’t end there. The combination of great hardware, great operating system and a great application ecosystem makes iOS THE premier smartphone platform of our times. The profit numbers prove it.

Android aspires to be a great device. iOS aspires to be a great platform. Both have achieved their objectives – which will lead them down radically different paths with radically different futures.

Coming Next Week: Android v. iOS Part 6: The Future

Android v. iOS Part 1: Market Share
Android v. iOS Part 2: Profits
Android v. iOS Part 3: Network Effect
Android v. iOS Part 4: Developers

Android v. iOS Part 3: Network Effect

RECAP

We’ve looked at Android and iOS market share and profit share. Android is winning in market share and iOS is winning in profit share. In any other industry, the analysis would probably be over at this point. Profit is literally the bottom line in business and iOS has it in spades.

FIXATED ON MARKET SHARE

However, everyone in mobile is fixated on market share rather than on profit share. This is because mobile operating systems are software platforms and the lesson we learned from Microsoft Windows in the eighties and nineties was that the platform with the largest market share won. Period. This was due to the Network effect.

NETWORK EFFECT

The Network Effect is when “the value of a product or service is dependent on the number of others using it.”-Wikipedia.

The classic example is the telephone. In the early 1900’s, there were over 40 separate phone providers in the United States. This kind of fracturing of the service was inefficient in the extreme. If you joined network “A”, you could only speak to others who had also joined network “A”. You could not speak to anyone who had joined networks “B” through “Z”. It was only when Bell began to consolidate the phone services that the benefits of the Network Effect truly kicked in. The more subscribers Bell had, the more value – and the more lock-in – they obtained.

THE PC PLATFORM WARS

This is exactly what happened in the PC wars too. There were many competing platforms. Microsoft licensed so many copies of its Windows operating system to its hardware partners that they overwhelmed the competition. The more copies of Microsoft Windows they sold, the more valuable Windows compatible hardware and Windows compatible software became. The Network Effect that had propelled Bell to dominate phones, propelled Microsoft to dominate personal computers.

THE MOBILE PLATFORM WARS

The Network Effect dictates that market share matters and that it matters a lot. If Android has almost all of the market share, even if it makes little or no money, at some point Android’s Network Effect will kick in making iOS irrelevant just as Windows made the Mac irrelevant in the nineties. Then all those lovely Apple profits will disappear or, at least, they will shrink appreciably.

At least that’s the way it was supposed to work.

IF ANDROID HAS ALL OF THE MARKET SHARE, THEN WHY DOES iOS HAVE ALL OF THE BENEFITS FROM THE NETWORK EFFECT?

In addition to garnering most of the profits:

— iOS developers are much better paid. (Source)

— iOS developers develop for iOS first and Android second, if at all. (Source)

— iOS Customers buy more iOS Apps and pay more for them. (Source)

If Android has all the market share and market share triggers the Network Effect and the Network Effect guarantees platform victory, then how can this be?

ONE OF THESE IS NOT LIKE THE OTHER

The value in the phone network is the end user. The more customers there were – the more people you could call – the more powerful the Network Effect and the more valuable the platform.

The value in a software platform is the software, not the end user. The more developers there are, the more applications you can buy and the more powerful the Network Effect and the more valuable the platform.

The customer is everything to a phone network. The developer is everything to a software platform. The only value a customer brings to a computing network is the number of dollars they transfer to developers in exchange for the Apps, content or advertising they consume.

THIS EXPLAINS EVERYTHING

Now the Gordian knot is cut and the paradox unraveled. While we’ve been manically and obsessively focused on customer market share, we should have been focusing on developer market share. It is developers, not customers that bring value to the platform and trigger the Network Effect.

Apple knows this. Microsoft knew this. Google? Maybe not so much.

End users buy the platform that has the most software because it provides the most value. It’s the software that initiates the Network Effect and creates the famous virtuous cycle.

We think that developers chase customers, but they do not – they chase customer dollars. A customer who does not pay for Apps, content or advertising has no value to a platform. They are an empty cipher.

Coming Tomorrow: Android v. iOS Part 4: Platform

Android v. iOS Part 1: Market Share
Android v. iOS Part 2: Profits

Android v. iOS Part 2: Profits

RECAP

Yesterday we looked at Android and iOS mobile operating system market share. Today we look at mobile operating system profit and profit share.

ANDROID HAS WON THE MARKET SHARE BATTLE BUT…

On the strength of market share alone, TechCrunch has (and many others have) declared Android the inevitable victor of the mobile operating system wars.

“The latest numbers are in: Android is on top, followed by iOS in a distant second. There is no denying Android’s dominance anymore. There is no way even the most rabid Apple fanboy can deny that iOS is in second place now. Android is winning.” – Android Is Winning

However, a funny thing happened on the way to the Android victory parade — they forgot to bring along the industry’s profits.

…IOS HAS WON THE PROFIT WAR

“However beautiful the strategy, you should occasionally look at the results.” – Winston Churchill

— Apple made 77% of the entire mobile industry’s profits in the second quarter of 2012. (Source) The Android operating system may be outselling the iPhone 4 to 1, but Apple’s iOS operating system is out profiting not just Android but the entire mobile industry 3 to 1.

— iOS second quarter 2012 revenue was approximately $28 billion.

— iPhone revenue in it’s five years of existence is over $150 billion. (Source)

— iPhone, by itself, is worth more than all of Microsoft. (Source)

— Apple’s stock has soared in comparison with Google’s stock since the launch of the iPhone. (Source) In fact, Apple is now worth one Exxon more than Google. (Source)

— Not only has iOS made Apple the most valuable publicly traded company in the world, (Source) but if the iPhone were split off as its own company, it is probable that it would be, all by itself, the most profitable public company in the world. (Source)

SOME QUESTIONS

— If Android has won, then why does Apple have all of the profits?

— If Android has won, then what exactly have they won?

— Which is more important, market share or profit share?

— Isn’t profit literally the bottom line in business?

MYOPIC MARKET-SHARE MADNESS

Market share is a means, not an end. Profit is the end for which market share was meant. Without profit, market share is meaningless.

Honestly, what is up with our fixation on market share? This simply isn’t that hard. Ask any business person whether they’d rather have market share or profit share – whether they’d rather sell more product or make more money – and they would, without hesitation, take the latter every single time.

Every CEO knows this. Every business owner knows this. Every entrepreneur knows this. Every mom working out of her home knows this. Every guy working out of his garage knows this. Every teen working out of his mom’s basement knows this. Heck, even the kid down at the corner selling Kool-Aid off of a folding table knows this. Ask that kid if they would rather sell more Kool-Aid or make more money and, “duh”, they’d say “make more money.”

But hire that kid to work for Google or write for TechCrunch or provide analysis of the tech industry and boom! They lose their minds. They reverse themselves and declare market share all important and profit share a mere side show. It’s as if these pundits were metaphorically drinking the market share Kool-Aid.

IS THERE MORE TO THE STORY?

If this were any other industry, the analysis end here. In no other industry does anyone seriously contend that market share is more important than profit share. However, this isn’t any other industry. This is computing and this isn’t just the sales of goods and services. Android and iOS are platforms and this is a platform war.

Clearly iOS is winning – in the short run. But in a platform war, is market share more important than profit share? Does market share lead to platform dominance, which eventually leads to industry wide dominance, which eventually leads to profits? Tomorrow, we’ll take a look at those questions and more.

Coming Tomorrow: Android v. iOS Part 3: Network Effect

Android v. iOS Part 1: Market Share
Android v. iOS Part 3: Network Effect

Android v. iOS Part 1: Market Share

INTRODUCTION

This is the first article in a multi-part look at the Android and iOS operating Systems. An operating system (OS) is the software that manages computer hardware resources and provides common services for computer programs. Applications (or Apps) require an operating system in order to function. The most famous and prevalent operating system in the world is Microsoft Windows. However, Google’s Android and Apple’s iOS operating systems are the two prevailing operating systems in the world of mobile devices, and since mobile appears to the future of computing, one or both of these two operating systems may well be the future of computing too.

There has been much confusion and even more debate surrounding the Android and iOS operating systems. Some see Android v. iOS as a repeat of the Windows v. Mac wars in the nineties with Google’s Android playing the role of Windows and Apple’s iOS playing the role of the Mac. Others think that, this time, Apple’s iOS is the operating system destined to rise to the top. Still others think that the entire debate is moot – that the new OS wars are already over and that Android should be declared the de facto winner. Their argument rests on Android’s staggeringly rapid growth and massive market share numbers:

“According to research firm IDC, Android devices made up a whopping 68.1% of all smartphone shipments in Q2 2012. That calculates to 104.8 million of the 154 million smartphones that left manufacturers plants in the quarter. By comparison, Apple shipped 26 million iPhones in the quarter, good for 16.9% of the market. – As reported in ReadWriteWeb

TechCrunch takes these numbers and sums up the thoughts of many:

“The latest numbers are in: Android is on top, followed by iOS in a distant second. There is no denying Android’s dominance anymore. There is no way even the most rabid Apple fanboy can deny that iOS is in second place now. Android is winning.” – Android Is Winning

AN HONEST COMPARISON

When making comparisons, we should always be careful to compare like with like. Android is an operating system. The iPhone is a single device within an operating system. Comparing Android to the iPhone is an unfair and incomplete analysis. A better comparison – in fact the only accurate comparison – is to compare the Android operating system to the iOS operating system. When you do that, the market share numbers take on a whole new look.

QUARTERLY MARKET SHARE

The iOS operating system includes not only iPhones but iPod Touches and iPads as well.

We know that over half of the iPod’s sold are iPod Touches and we know that Apple sold 6.8 million iPods last quarter. That means there were at least 3.4. million iPod Touches sold last quarter and perhaps many more as well. While it’s true that Samsung has an iPod Touch-like device on the market, their sales numbers for this device appear to be nominal.

Turning from the iPod Touch to tablets, we know that Apple sold 17 million iPads last quarter or about 70% of the total tablets shipped. That number includes all tablets, including those by Amazon and others, but just to be conservative, let’s assume the the entire remaining 30% of tablet shipments can be attributed to Android devices.

Add the iPod Touch, the iPad, and the additional Android tablet numbers back into IDC’s figures and Android’s market share numbers, while still impressive, don’t look nearly so intimidating.

TOTAL MARKET SHARE

We also know that if one combines iPod Touch, iPhone and iPad sales numbers all together, that Apple surpassed 410 million cumulative iOS devices by the end of June 2012. It’s almost certain that total Android sales now exceed those of iOS (it’s hard to know for sure since virtually no Android manufacturer announces numbers) but even if they do, they exceed iOS’ numbers by a couple of percentage points, at most.

MEASURING WHAT MATTERS

Experts often possess more data than judgment. – Colin Powell

If market share is the measure by which one determines who is “winning”, then we need to measure again. And while we’re at it, maybe we should be asking ourselves whether market share is the be all and end all of metrics. Tomorrow, we do exactly that – we explore whether market share is the only way, just one of many ways, or just a component of the way to measure who’s really “winning” the mobile OS wars.

Coming Tomorrow: Android v. iOS Part 2: Profits

Android v. iOS Part 2: Profits
Android v. iOS Part 3: Network Effect

Why Apple Won’t Merge OS X and iOS in the Near Future

One of the interesting rumors floating around the Valley these days is that Apple is on track to merge OS X and iOS and move Mac users over to their ARM based processors and leave Intel. If you follow Apple and know their history, you understand that they are more then capable of doing this. Over the Mac’s existence, Apple has actually moved the Mac OS to three different chips sets and has migrated their core OS from one processor core to the other quite seamlessly.

The reasoning goes that Apple could bring the two operating systems together to run on their own chip sets and save them having to pay Intel for their chips and instead use their own ARM processors to run a single merged OS and UI environment. Although this is a plausible idea and could possibly happen some day, the soon-to-be released updated OS X Mountain Lion suggests that this will not happen any time soon. This new OS, which brings a lot of the greatest features of iOS and many of its apps to Mac OS X actually makes the two operating systems even more alike then they have been. But each OS still serves a purpose and these enhanced cross OS functions makes it possible for both operating systems to co-exist and compliment each other for some time.

In fact, I think we are seeing more of a pattern in which OS X will continue to harness the robust power of Intel’s Core architecture for some time yet. And Intel’s 3D chip architecture that is in the works could continue to advance Moore’s law in ways that it would still make sense for the Mac OS to mine the Intel X86 based chipset for many more years. I have a good handle on Intel’s roadmap and I don’t see anything coming from ARM that could match what Intel will have two or three years from now. It is much more likely that Apple will continue to use Intel for many years to come and thus will need two distinct operating systems to meet the needs of both sets of customers.

Keep in mind that the Mac is still optimized for what I call heavy lifting computing. While simple word processing, email and even a bit more advanced applications can be done with iOS apps, the more power hungry apps still require the advanced power of OS X and advanced processors. This is especially true for those using it for graphics design, electronic publishing, video editing, advanced photo editing and many engineering applications where the Mac is used for managing IT functions, especially in education environments.

Yet, many who use the Mac for these apps also use an iPad and iPhone and have enjoyed many of the features in iOS and want the same ones on Mac OS X. This is where Mountain Lion really shines. Although it adds more then just iOS features, a lot of its value is in bringing over these features to the Mac. And there are a couple of really good examples of this.

One thing many iOS apps excel at is the ability to share info from an App or Safari via a drop down menu that lets you post directly to twitter, an email account, iMessage, and more. Now, that little arrow that signifies info sharing in iOS is in the tool bar in Safari on OS X. But more importantly, Apple is publishing the API for this feature so that developers can also include this sharing feature into apps for Mac OS X. If you use this feature on an iOS device you know who handy it is in iOS apps. Now the Mac gets the same functionality.

iMessages: Now any iMessage that comes up on your iOS devices is also displayed on the Mac in the Messages app. Again, cross OS functionality at its best.

Reminders: Many times I jot a reminder on the reminder app on my iPad, but to access it while working on the Mac, I have to literally pick up the iPad to see it. Now the reminders that I enter on an iOS device will also show up in my reminder app on the Mac.

Notes: I use this constantly to make lists, record meeting notes etc but they are isolated to iOS devices. But with Mountain Lion, all of the notes I have created on my iPad or iPhone will now be readily available for me on my Mac as well via iCloud sync.

Notification Center: This is one of the great features of iOS. Users can set alerts and notifications, which can then be accessed by a drop down scroll page that can be seen when the iPhone or iPad is still locked. This is a handy feature and with Mountain Lion it too comes to the Mac when this OS update ships this summer.

Airplay Mirroring: Here is another feature that is used a lot with iOS devices. Consumers use this to “push” their pictures and video to their Apple TV and now this type of mirroring comes to the Mac. This is really cool if a conference room uses a TV for presentations and has an Apple TV connected to it. That means that your Mac can use Airplay Mirroring over Apple TV and there is no need for messy wired connections at all.

These are just a few of the iOS features that come over to the Mac and make the Mac even more functional and in ways, an extension of your other iOS devices. But at the same time the Mac keeps its own powerful OS structure and supports the thousands of apps built for use on this platform as-is.

This is important to understand if you look at the future of the Mac. As I stated above, Apple could migrate Mac OS X so that it can use their ARM processors and it could happen. But given the ARM roadmap, it probably will never compete with Intel’s continued exploitation of Moore’s law.

But Mountain Lion really does bridge the gap and gives people who love these features in iOS many of the same functions now on a Mac. And it makes sure that at the same time all apps written for the Mac continues to work out of the box.

Also, if you look at the advanced tools Apple has for creating apps for the Mac and the new Mac App store that in many ways mirrors the app store for iOS devices, you see that both operating systems could co-exist together for some time and keep users of both quite happy. But the Mac OS, with its greater horsepower will continue to be valuable to power users and those who need the Mac for heavy lifting tasks. I see Mountain Lion giving Apple more time to focus on other innovations in the short term. This would take the pressure out of trying to even do an OS X port to their own ARM chips, especially if ARM can’t keep up with Intel’s offerings.

As Tim Cook has pointed out, the real growth and profit center for Apple has shifted from Macs to iOS devices and it is here that I think they will put most of their resources. Although the Mac is still important to them and continues to grow, innovation with iOS software and iOS driven devices seems the priority for them now. I see Mt Lion filling a big gap and allowing Apple to continue to have cross device functions but still give their power users and their consumer audience everything they want and need from Apple.

Why Apple Needs a 7 Inch Tablet

Last week, most of the tech industry was consumed with Google I/O, Google’s annual event to woo software and hardware developers to Google and consequently away from Apple and Microsoft. In addition to Google Glass-adorned daredevils jumping out of blimps and scaling down the sides of buildings, the Nexus 7 Tablet, the first full-featured, no-compromise tablet was launched at $199. What’s very clear is that the Google Nexus 7 will sell well and take business away from Apple’s $399 iPad 2. This is exactly why Apple needs a 7” tablet or else face the prospect of losing market share and profit dollars.

The Kindle Fire was released back in September 2011 to big fanfare. I was accurate in stating it would take share away from the $499 iPad 2, which was true until the iPad 3 was launched and iPad 2 reduced down to $399 back in February. The situation has changed now as the Fire is slogging away and is losing share to the iPad 2 and even to the $199 Nook Tablet and the $169 Nook Color. It makes sense, as the Fire is a stripped down tablet and the iPad 2 is not, and many consumers were willing to pay the extra $200 to have the full experience. The Fire used a smartphone operating system, had an SD display and users got a large smartphone experience. It wan’t a great experience, but it wasn’t horrible, particularly at the ground-breaking price point. The Fire also lacked access to the broad Google Play content and application environment, too, which, to some, was limiting.

The Google Nexus 7 Tablet is an entirely different animal. It comes with the top of the line NVIDIA Tegra 3 with 4-PLUS-1 processor, the latest Android Jelly Bean OS, NFC, an HD display, camera, microphone and full access to the Google Play store. After seeing Jelly Bean in action, it is a marked improvement over prior Android operating systems I have used that just didn’t quite feel right and toward which I have been so critical. The Google Nexus 7 will sell well, which is good for Google, Android, ASUS and NVIDIA, but bad for Apple, unless they act before the holidays.

Historically, Apple has been OK taking the high road on unit market share, particularly in PCs. The situation changed with the iPod, iPhone and the same is true for iPad. Apple wants market share and will do what it takes to get it, as long as it’s profitable, they can deliver a great experience, and stay true to their brand. Apple could do just this with a 7”, $299 tablet. Apple would be very profitable as well, as the most expensive piece-parts of a tablet are the display and touch-screen, which are priced somewhat linear with size. Apple may have redesigned some of the innards of the new iPad 2 as they lowered the price, but not nearly enough to offset the $100 price reduction, so a mini-iPad would be additive, not dilutive like the $399 iPad 2.

Would consumers pay $100 for the Apple brand and experience? In most traditional geographies, yes, they would, as consumers have shown the willingness to pay more than $99 more for iPods and $199 more for iPads. This is exactly what the mini-iPad would be; a large iPod. That’s not bad, that is good in the sense that the iPod is still the most popular full-featured personal media player out there.

Will Apple productize what they undoubtedly have running in their labs? I will leave that to the numerous Apple rumor sites, but one major occurrence suggests they will not, and that was one of the great proclamations from the late Steve Jobs. According to Wired, in October of 2010, Jobs apparently said the following during an earnings call: “7-inch tablets are tweeners: too big to compete with a smartphone and too small to compete with the iPad. These are among the reasons that the current crop of 7-inch tablets are going to be DOA — dead on arrival.” Does this say Apple would never do a 7” tablet? Actually it does not, as it is really a statement about non-Apple products and Jobs left Apple some wiggle room to maneuver. What I know for sure is that Apple must act in the next few months or risk tablet share degradation to the Google Nexus 7.

The Apple iPad Tablet vs. the Microsoft Surface Anti-Tablet

Last night, Microsoft introduced us to the their Microsoft branded Surface Tablet. Never have we seen such a clear line of demarcation between Apple’s and Microsoft’s visions of what a tablet should be. And at the end of the day, it is those differences in outlook that will determine the fate of each company’s respective tablet offerings.

Historical Background

For ten long years Microsoft tried to get us to use their desktop operating system on a tablet device. What we really wanted, they told us, was the brain of a desktop in the body of a tablet. Didn’t work.

In 2007, Apple introduced us to the first modern tablet to use touch – and only touch – as the user input. They called it the iPhone. Three years later, Apple introduced us to the iPad, and while the tech world sat on its collective hands, Apple proved that size really does matter – at least when it come to tablets.

Microsoft’s Tablet Vision

Now here we are just over two years later and what is Microsoft telling us with the introduction of the Surface Tablet? They’re telling us that what we really want is a keyboard so that our tablet can be used more like a notebook computer. What we really want is a pen so that our tablet can be used like a PDA. What we really want is a kickstand so that our tablet can stand more like a notebook computer. What we really want is a trackpad so our tablet can BE a notebook computer. (A trackpad on a tablet computer? Really? Just think about how redundant that is.)

The Microsoft Surface is not a touch tablet, it’s the ANTI-touch tablet. While Apple is doing everything in its power to embrace touch on the tablet, Microsoft is doing everything in its power to negate the influence of touch on the tablet. Microsoft is saying: “Sure, touch is nice, in a pinch, but what you really wanted all along is a tablet that runs like a notebook.” With the Surface, Microsoft has come full circle, back to where their tablet efforts began. But they’ve added a twist. Not only did they put the brain of a notebook in the body of a tablet but they made the tablet look and act like a notebook too.

The Lure of Everything and the Best of Both Worlds

“But wait,” you say. “Microsoft is not giving us the anti-tablet. They’re giving us a tablet AND a notebook. They’re giving us both. They’re giving us the best of both worlds.”

It’s a compelling argument. Why not do both? Why not have both a desktop and a touch OS on a tablet? Why not add a pen? Why not add a keyboard? Choice is good. Why not let the customer choose to use the device the way they see fit? Why not have it all?

Before we answer that question, ask yourself this one: Do you think for even one second that Apple – who had a two year head start on Microsoft – could not have added a kickstand, added an integrated pen or added an integrated keyboard to the iPad? Apple did not neglect to do those things…they CHOSE not to do those things. Why?

Focus and Simplicity.

“That’s been one of my mantras — focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it’s worth it in the end because once you get there, you can move mountains.”-Steve Jobs

One of Steve Jobs’ greatest talents was as an editor, selecting what not to include in a product. Think of all the products that have way too many features. Now think about the iPod. The iPhone. The iPad.

“…the result of that focus is going to be some really great products where the total is much greater than the sum of the parts.”-Steve Jobs

Every iPod killer, iPhone killer and iPad killer had one thing in common – they all had more features than did their Apple counterparts. Yet they all had less success. How could this be? Simply put, simplicity may be the greatest feature of all.

“Simplicity is the ultimate sophistication.”-Steve Jobs quoting Leonardo da Vinci

Apple realized – long before anyone else did – that touch was the key to tablet computing. Styluses and keyboards are useful, but they pull the tablet away from its essence. They’re to be used, if required, to supplement, not sustain, the tablet.

“People think focus means saying yes to the thing you’ve got to focus on. But that’s not what it means at all. It means saying no to the hundred other good ideas…”-Steve Jobs

Diverging Philosophies

Now, more than ever, we can see how differently Apple and Microsoft view tablets. Apple thinks less is more. Microsoft thinks more is more. Apple thinks “both” is the enemy of focus. Microsoft thinks “both” is the best of all worlds. Apple thinks that simplicity is the key to everything. Microsoft thinks that having everything is the key to success.

Apple’s philosophy is clear. The iPad is a touch device. It excels at doing the things that tablets are excellent at doing. If you want the benefits of a computer, buy a computer. Preferably one of ours.

“…we have a vision for the tablet. It’s a tablet that works and plays the way you want to. A tablet that’s a great PC. A PC that’s a great tablet. Surface.”-Steven Sinofsky, introducing the Windows Surface Tablet

Microsoft’s philosophy is also clear. The tablet is a PC. The PC is a tablet. If you want a PC that functions as a tablet, buy the Surface. If you want a tablet that functions as a PC, buy a Surface. Heck, we’ll make this easy for you to understand: Buy a Surface.

There Can Be Only One

To paraphrase that great philosopher, Sesame Street:

One of these things is not like the other,
One of these things just doesn’t belong,
Can you tell which of these won’t work like the others
Which is right and which is wrong?

Was Steve Jobs and Apple right about the what’s important in a tablet or will Steve Balmer and Microsoft’s vision prove to be the more perceptive of the two?

I’ll tell you this much – we’re about to find out.

The Terrible Tablet Tsunami and the Future of Computing

IDC just issued a press release updating their expectations for tablet shipments. Here are their numbers, year by year:

2010: 19.5 million tablet shipments.
2011: 69.6 million tablet shipments.
2012: 107.4 million estimated tablet shipments.
2016: 222.1 million estimated tablet shipments.

When looking at the above numbers, you need to keep two things in mind:

1) These numbers DO NOT include the anticipated shipments of Windows RT and Windows 8 tablets. If Microsoft has its way, that’s a lot of missing tablets. Further, IDC expects the coming Windows tablet shipments to be ADDITIVE to their existing tablet estimates.

2) IDC has consistently UNDERESTIMATED the number of tablet shipments in each of its previous forecasts. By a lot.

For example, in March 2012 – just three months ago – IDC increased their estimates of tablet shipments in 2012 by 21% from 87.7 million units to the 106.1 million units. That still wasn’t enough of an upward adjustment and three months later IDC had to tweak their totals from 106.1 million to 107.4 million.

Further, if you look at the current growth in tablet shipments and compare it with IDC’s predicted 222.1 tablet shipments in 2016, you can see that their estimated growth rates are far below current levels and conservative in the extreme.

What does this all mean? It means that if desktop shipments continue to stay flat or modestly decline as they have for the past several years, then tablet shipments will be on a par with desktop shipments within the next 4 years.

The implications are industry shattering.

First, he who makes the most tablets makes the most growth.

Second, only platforms that are able to sustain significant market share in tablets will remain viable in personal computing in the long run. The first implication is self-explanatory. The second may require some justification.

Three Categories of Computing. Today, there are three distinct categories of computing: smart phones, tablets and desktops (including notebooks). Some consumers own devices in only one category, some own devices in two categories and some consumers own devices in all three. The trend is definitely toward multi-category computing ownership.

If you’re going to buy devices that span multiple categories, it only makes sense to buy devices that run on the same or a compatible platform. In other words, if your platform doesn’t support phones, tablets and desktops, then your platform is going to become marginalized.

I don’t hear analysts, pundits or commentators talking about this much and I don’t know why. Platforms are “sticky” – they have high retention rates. Multiple device platforms are like glue. Once you own two or more devices on one platform you’re very unlikely to every leave that platform. The company or companies that work well across all three computing categories will dominate personal computing for the next five to ten years.

APPLE: Right now, only Apple has a multi-category solution in place. Apple’s mobile operating system (iOS) runs on both its phones and its tablets and Apple is working hard to make the transition between their mobile OS and their desktop OS (OS X) as familiar and as comfortable as is possible.

Apple not only has a lead in creating solutions for all three computing categories but they are working hard to extend that lead as well. Last Fall, Apple announced that they would synchronize their mobile and their desktop operating system updates and put them on an annual schedule. This commitment to parallel development makes it much easier for Apple to move their two operating systems in lock step.

With iCloud binding their phones, tablets and desktops together in a seamless whole, Apple is well positioned for the multi-category computing market that lies ahead.

MICROSOFT: Currently, Microsoft has a big problem and an even bigger proposed solution. Right now, Microsoft dominates the desktop, has minuscule share in phones and no share at all in tablets. That’s a big problem.

Their big solution? This Fall Microsoft intends to introduce Windows RT tablets, Windows 8 tablets and, perhaps, even an ebook reader. Microsoft is currently well behind Apple but they intend to provide a solution that spans and ties together all three computing categories. And they plan to do it in a hurry.

Can they make it happen? Unknown. We’ll have to wait and see. If they don’t, they are in deep, deep trouble, at least so far as personal computing goes. If Microsoft’s tablet solutions are only as popular as their phone solutions have been thus far, then those who seek a multi-category computing solution will soon learn to look elsewhere.

Microsoft has its work cut out for it but if they can gain acceptable market share numbers in the tablet sector (which will presumably translate over to the phone sector, as well) then they are well positioned to create the type of ecosystem that makes multi-category computing such a joy. Microsoft has flaws like any company, but ecosystem is not one of them. If Microsoft can just get back in the game, they can play the multi-category computing game as well, or better, than anyone.

ANDROID: So wither Android? Right now Android dominates overall smart phone sales. But just as Microsoft is currently stranded on the desktop, Android is currently stranded on phones. Their struggles with tablets have been well documented and they’re not even trying to provide an Android solution on Desktops (Chrome, yes. Android, no.) If you want a single platform to support your multiple category devices, Android is currently the last place you’re likely to turn.

Can Android turn things around? Of course they can. Google has committed to putting more resources into Google Play (I still don’t understand why they re-branded Google Marketplace as Google play – Google Play is an awful name) and they’ve promised us a tablet “of the highest quality” this summer. But promises are only promises, nothing more. Just as Microsoft has to prove that they can field a successful tablet product, Google has to do the same. And while Microsoft has a proven track record in building strong and vibrant ecosystems, Google seems to struggle in this oh-so-crucial facet of the multi-category computing game.

Conclusion: Right now, Windows dominates desktops, Android dominates smart phone sales and Apple dominates the cross-category solutions. But rapidly growing tablet sales may not only be the key to computing growth, it may also be the key to the future of all three categories of personal computing.

As tablet sales grow, not only will Apple’s share of the computing market grow but the current positions of the big three operating systems will necessarily shift as well. Like a monstrous game of Jenga, as the pieces move in and out of place, there will be a titanic shift in power as someone, or several someones, find themselves unable to satisfy the desires of a demanding consumer base.

Apple’s place in the new world order seems assured. But as Google and Microsoft fight to gain tablet share, the one who fails to become relevant where they are weakest, will also risk becoming irrelevant where they are currently strongest, as well.

The future is uncertain, but one thing is for certain. If you like tech, the next 18 months are going to fascinating to watch.

Does Apple Love PCs More Than Microsoft?

Does Apple, the post-PC company, have more faith in the future of PCs, than Microsoft?

Photo of Mac Book Pro — Mac Book Pro 15 with Retina Display

The idea may seem a stretch, seeing how Apple’s business is now dominated by iPhones and iPads, but it may well be true. Microsoft very much depends on the PC for its future, but it doesn’t seem to be serving its PC users well

Much of the analysis of Apple’s Worldwide Developer Conference announcements has focused on the impact on Google. Dumping Google Maps from the iPhone and enhancing Siri search definitely pose some challenges for the search giant. But the larger near term impact may well be on Microsoft, as it struggles to hang onto its PC business while gaining traction in the elusive phone and tablet markets. Microsoft was having a hard enough time catching up with where Apple has been, but Apple, of course, is not standing still.

It’s significant that the new features of iOS 6.0 and OS X Mountain Lion, while impressive, are not earth-shaking. In the past five years, Apple has built a comprehensive infrastructure that ties all of its products together. This effort, while still evolving, has achieved considerable maturity, which is why we should expect that changes will be incremental. The lack of new features that knock your socks off may disappoint ardent fans and the markets, but it’s really a sign of how far Apple has come.

Keeping things separate. Microsoft maintains its dominance of the enterprise back office, but is struggling everywhere else against an upstart it though it had vanquished nearly 20 years ago. In the consumer space, it is betting pretty much everything on on Windows 8, I’ve made no secret of my belief that Microsoft’s decision to go with a common software platform for traditional PCs and tablets is a mistake. As Ryan Block of GDGT tweeted, there are a lot of former PC tasks now routinely handled by tablets, but “for the tasks that remain, computers are as important than ever. The user base isn’t contracting so much as the use cases are clarifying.”

Apple raised the stakes at WWDC as it revealed the refined features of Mountain Lion and iOS 6.0. Where Microsoft is merging the desktop with the tablet, Apple is continuing to converge the two. The difference is critical and, I believe, all in Apple’s favor. Apple is adding iOS-like features to OS X when they make sense. So Mountain Lion gets reminders, notifications, and messages. But it retains its distinctive look and feel and an environment that is optimized for the sorts of complicated tasks for which users will continue to rely on traditional PC hardware. In particular, the multi-windowed Mac desktop is retained along with the traditional icons, menus, and pointers. And while Apple has made it possible to manipulate the user interface through touchpad gestures, it shows no inclination to move to touch screens on either iMacs or MacBooks.

Microsoft, by contrast, is forcing Windows 8 users to deal with a Metro UI that seems to be optimized for tablets and touch screens. Metro apps are designed to run full screen, with some very limited screen sharing possible on larger displays. Metro actually looks like a very nice tablet UI, superior in some ways to both iOS and Android. But it find the Consumer Preview painful on a laptop. Even if you spend most of your time working in traditional Desktop apps, which continue to work in multiple windows as always, you are forced to put up with a jarring switch to Metro for some critical tasks. Metro apps feel like they waste an awful lot of space on a 13″ laptop and are truly ridiculous on a 27″ desktop display. (Microsoft’s developers used to be criticized, only half in jest, for thinking that everyone worked, like them, with dual 30″ monitors. Now they seem to think that everyone works on a 10″ tablet.) I suspect that most serious PC users are going to want to stick with Windows 7 for as long as they can; it will be interesting to see if Microsoft will allow a downgrade option on new consumer systems.

Microsoft has made some progress integrating Windows, Windows Phone, and Xbox and Windows 8 will push the process along. But again, Microsoft has not yet caught up to Apple even as the competition takes the next leap ahead. iCloud still has a ways to go and iTunes is a hairball, but you can wake me when Windows matches the magic of PhotoStream.

Then there’s hardware. Spurred mainly by Intel, Microsoft’s OEM hardware partners are finally beginning to catch up with the notebook revolution set off by the Mac Book Air. But Apple, of course, is not going to sit still. The 15″ Retina Display MacBook Pro (a product that desperately needs a better name) is not likely to be a huge seller. Its starting price of $2,199 is two to three times that of a typical Windows notebook and it tops out at a staggering $3,700. But it sets a new standard an definitely shows the direction laptops will be taking.

In a typical Apple move, it dispenses with an optical drive, long thought to be an essential in a 15″ professional notebook. It is a third of an inch thinner an 1.3 pounds lighter than Hewlett-Packard’s Envy 15. Its most important feature is a 2,880×1,800 pixel display; Windows competitors top out at 1,920×1,080, less than half the pixel density. And make no mistake about it: Apple will be pushing Retina displays throughout the MacBook line. They are expensive, but they justify charging prices that generate fat margins and let Apple capture a vastly disproportionate share of PC profits. And, have been proven with the new iPad, they produce a far superior user experience simply by making everything more legible. In the year or so since Intel introduced the Ultrabook concept, Windows machines are arguably losing ground to the company that supposedly wants to kill the PC.

Microsoft was caught seriously off-guard by the iPad and was right to shift massive resources into tablets when it became clear that the post-PC phenomenon was real. But PCs remain a very important part of the ecosystem, and right now, it’s not clear that Microsoft cares as much about them as Apple does.

Afterthought: If this report from VR-zone is correct and Microsoft plans to charge manufacturers $85 or so for each copy of the tablet version of Windows, it is going to be almost impossible for these devices to come to market at a competitive price. I hope it is wrong, because if true–and Microsoft has not responded to the report–it will leave Microsoft with an OS optimized for tablets no one will want

The Apple Ecosystem Just Got Stronger

Apple today at their World Wide Developers Conference released a number of things that have made their ecosystem even stronger. I am of the opinion that one of the best ways to analyze computing platforms is to look at them as ecosystems. When consumers purchase a personal computer like a desktop, notebook, tablet or smartphone, whether they know it or not they are investing into an ecosystem.

Related Column: It’s All About Ecosystems

Not too long ago computing platforms were islands unto themselves. Each product stood on its own and wasn’t connected to other devices in a meaningful way. But now that consumers are purchasing more and more computing products they began to demand that their devices begin to work seamlessly together for a more fulfilling experience. This demand has led to the birth of more holistic computing ecosystems. And interestingly software companies who offer platform software for desktops / notebooks, tablets, and smartphones are the companies building the most robust ecosystems on the market and right now only Apple and Microsoft fit that bill. Today Apple with the release of new and updated Mac hardware and software and the release of their newest mobile operating system iOS 6 just strengthened their ecosystem all together.

It all revolves around iCloud

Tim Cook said something that made perfect sense to an Apple observer like me. He said that iCloud isn’t just a product, it’s a strategy for the next decade. With that fundamental point in mind it becomes easy to see why Apple is integrating so iCloud into the core of their OSX and iOS software. iCloud is the glue that holds all of Apple’s hardware and software together. Take for example some simple features they have added with the newest Safari.

It may seem small but this little thing is just the tip of the iceberg when it comes to the value of Apple’s ecosystem. Imagine you use a notebook, tablet, and smartphone regularly. In the usage of all three of those products it would seem logical that you would browse the web frequently on each of them. Now what if you where on the couch looking for a recipe and you wanted to view that very same recipe on your tablet or smartphone. Most people would either have to re-search for that recipe on the other device or you could email yourself the link. With the latest version of Safari for OSX Mountain Lion every single web page you have open as a tab is available to you on any of your OSX or iOS devices. So if I want to look at a web page I have open on my Mac from my iPad, I simply click the new iCloud tabs button on the top of Safari and all the same tabs open on my Mac are available for me on my iPad or iPhone.

This seems like something small but it is extremely useful and demonstrates the value of iCloud integration across hardware and software to create a consistent and useful experience. This is just one of many new features and advancements Apple is making through software to better delight their customers by solving current and future problems.

The Vertical Advantage

The tight integration of software innovations with specific hardware innovations all around a service like iCloud is easier when you control all the moving parts. I have emphasized this time and time again but it is this fundamental point that gives Apple such an advantage. The Apple ecosystem has no external variables. Apple doesn’t need the support of hardware or software partners in order to advance their ecosystem. This point can not be stressed enough.

It is because of this vertical advantage that Apple can annually release a unified launch of new hardware and new software all designed to work better together. And it is this better together that creates the fundamentals of the Apple ecosystem, which just got stronger.

Making The Devices We Know and Love Better

The last key point about the strength of the Apple ecosystem is that with this latest software for Mac, iPhone, and iPad, Apple has made the experience even better. I would contend that many of the devices we know and love have become even more useful. Now many may argue that some of the new features released are available on other devices or platforms. That is all fine and good for customers of other platforms but the bottom line is I and hundreds of millions of other people have invested in Apple’s ecosystem when it comes to my personal computing needs. So for me the fact that Apple has developed new features to make my experience with their hardware even better is most welcomed.

At the end of the day it is those features that add to our experience, make these products easier to use, and more importantly make using these products in our daily lives that much better. It is the small things like being able to ignore an incoming call with a text message or reminder to call the person back is extremely useful. The improved maps and elegant navigation is also a welcomed additional improvement. Perhaps the biggest improvement of all is the major upgrade to Siri.

All of these things and more are focused on one singular thing, making the devices we know and love better and more useful. Apple is continuing to make their hardware more functional every year. I am not sure it is possible to say that any other company is delivering their customer base new and improved features and functionality to all their hardware on an annual basis.

This is just one more thing adding to the already strong Apple ecosystem and it will be very interesting to see how the competition responds.

The Case for More Choice in the iPhone Line of Products

There is much to be said for Apple’s current iPhone and iPad strategy being very focused and very limited in terms of product line diversity. Of course you can make the argument that Apple already offers a line of products being the 3GS, iPhone 4, and the iPhone 4S. What I want to explore is why I think it makes sense, or will make sense in the future, for Apple to offer a more comprehensive lineup of current generation iPhones.

There used to be a time 10+ years ago when I was in the minority of computing users who used, loved, and passionately defended my usage of Apple products. Back in the day being an Apple consumer made you feel like you were going against the flow, like you were unique. I used to show up to Industry Analyst meetings or go into the press room of events (before the time of bloggers) and be the only one with a Mac. Now it seems everywhere you go you see as many Mac’s as Windows products and in some locations, businesses, departments, etc., Windows client hardware is entirely extinct.

To be honest I sometimes miss those days where I feel like I was in the computing minority. Where I had the feeling like I had discovered a secret that no one else knew about and I was better off because of it. I know those days are gone and there is simply no going back. I am also extremely happy that millions upon millions of new consumers are coming into the Apple ecosystem and discovering the secret we Apple loyalists have knows for years. But like I said, I still miss those days when I was in the minority. I know there are folks out there who can relate to this.

I have racked my brain on how some glimpse of those days can exist again and the only thing I have come up with is a more robust line of products. Perhaps ones for the super high end, ones for the middle and ones for the low end. Again I see this as similar to cars where a brand like Mercedes-Benz would have their luxury lines that only few would dare go after and aspire to acquire. But Mercedes-Benz also has lines like their E-Class which is more middle of the road when it comes to their price points and the C-Class for entry level customers. The key to the Mercedes brand and the C-Class is that it isn’t the cheapest car on the road in its class but there are those who will aspire to pay a little more because of the Mercedes brand and experience.

I could see Apple doing something like this where they have some designs that truly push the envelope in design and engineering and cater this iPhone and or iPad to the upper end of the customer class. This line could cater to those who want to be in the minority and use these products as status symbols. I am fully aware of the vanity I am promoting but again I am thinking out loud here.

This would ultimately offer existing and new Apple customers slightly more choice than currently available. I know this goes up against conventional wisdom of a simplified line of products but I believe the simplified line works best when a market is maturing but more choice is desirable once a market is mature. The market for smartphones is still maturing as many consumers are still experiencing their first or second smartphone. Consumers needs to be on at least purchase number three or four before their tastes are refined and they start knowing what they want, why they want it, and shopping with those specific needs, wants, and desire in mind. It is when consumers reach this point that I feel they would desire more variation in form and function related to the iPhone.

The key however is to vary the design not the experience or the software. I am simply advocating for some variation in hardware design related to a specific line. It will be key that the software experience remain consistent while the hardware design be free to appeal to different tastes of consumers. This is not uncommon in other Apple products where they offer different screen sizes, colors as in the iPod Nano and Shuffle, and even varying capabilities.

In fact if you think of the progression of products from the first iPod all the way up to today you would find that the varying degree of choice started off limited but then expanded as the market matured. In fact the iPod from 2001 to date, is the example I hope Apple continues to follow. Even as there was no competition and Apple utterly dominated the portable MP3 market, they continued to innovate, differentiate, and never became complacent but rather continued to make the best products year after year–again, all without any competition. (Thanks John Kirk for mentioning this to me)

This is why I think the case can be made for Apple to offer more choice in the current generation iPhone lineup–if not now in the near future. Perhaps it will have something to do with market maturity or even perhaps designing products for people like me who just want something different from the masses. But in my opinion, offering designs that cater to unique segments needs, wants, and desires will be key for Apple to continue to satisfy their customer base.

The Case Against a 4-Inch iPhone

As a regular part of my job I evaluate many different devices. I don’t always publish this analysis publicly but nearly every new device passes through our “labs.” When it comes to smartphones, or pocket computers as I like to call them, I get to test and review and analyze all the new android devices, Windows phone, and Apple products. In case you haven’t noticed the trend, smartphones are getting larger screen sizes all the time.

For me, to do the kind of analysis I want, I always use the device as my primary phone. The current device I have been using is the HTC One X, which I like a lot. As I review these devices one very interesting thing stands out. As much as I love using a larger screen smartphone, you notice very quickly that it is very difficult to operate with just one hand. What I mean by that is that my thumb cannot reach all four corners of the screen without having to shift the phone a bit and adjust my hand somewhat awkwardly. This is less of a big deal on Android devices home screen because generally app icons don’t fill the entire home screen. However, during the using of applications, all of the screen real estate is used and with many apps this is when the difficulty of one handed operation becomes noticeable. This is something that does not become glaringly noticeable until you use a smartphone with a larger screen as your everyday phone in everyday situations.

I’m roughly the average height for a US male and I have to imagine that my hands are roughly an average if not slightly smaller than average size. The iPhone’s 3.5 inch display is exactly perfect for me to hold the device in one hand and reach all the active areas of the devices screen. This is not the case with every phone that I use where the screen size is larger than 4-inches. I can only imagine the pains humans with smaller hands go through in using such large screen smartphones.

Yesterday I came across an article pointing out roughly the same thing but making a bigger deal about some of the developer issues around a 4 inch screen and particularly apps being used in landscape mode. There’s a lot of merit to that argument but I would emphasize that the lack of being able to operate with one hand easily could be the strongest case against a 4 inch iPhone. On that point Dustin Curtis makes the same point about screen size issues and one handed navigation on this post and has a nice chart between the iPhone 4s and the Galaxy S II.

I genuinely like using smartphones with larger screens but they certainly come with tradeoffs. I firmly believe that a 4.3-4.7-inch screen is probably the largest possible screen size for the mass market with 4.7 perhaps pushing it. Many of these larger screen smartphones sell well and I do believe there are segments of the market that desire 4-inch and larger smartphones.

So the debate really comes down to how important is an uncompromising one handed operation to the overall smartphone experience. One of the things I have found in my own personal analysis is that because I use an iPad regularly I find less of a desire for a larger smartphone. This is why a strong case may be made for larger smartphone screen sizes in other parts of the world where the smartphone is the primary computing device–for the time being. I believe this is why the 5-inch Galaxy Note is selling well in Korea.

Of course, should Apple decide that a 4-inch screen should become the new normal or as a part of a larger iPhone lineup, I would have to imagine that they would take this issue into consideration. Perhaps one way to solve this problem could be adding more device operation support into Siri. This way voice would become a more fundamental way to operate your iPhone. This would eliminate to some degree any issue with one handed device operation and make voice operation a more prominent feature.

Speaking of lineups, Apple clearly now has a strategy to have an iPhone portfolio of products in the market. Currently it is a good, better, best, strategy with the 3GS, 4, and 4S. The question will be in the longterm about how different form factors may play into this good, better, best, product lineup. The same can be said with the iPad, which is why I think the iPad Mini is such a hot rumor.

Ultimately, variety in a product portfolio is a good idea. Apple is yet to vary the screen size offering in the iPhone and iPad–yet they do with other computing products. I do believe it is logical that this trend would continue in all the screens in which they choose to compete in hardware. My personal use case may be that 3.5″ is the right screen size given how I use the device but for others their use cases may demand a larger screen. That being said, understanding the tradeoffs and use cases for different size screens is key for both the device experience and the problems that need to be solved in order to maintain a consistent quality experience.

I’d love to hear more opinions on this topic.

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Should Apple Create an iWatch?

Last fall, I wrote an article on our site here suggesting four industries Apple could disrupt and one of the industries I mentioned was the watch industry. When Steve Jobs introduced the iPad Nano, he mentioned that one of his board members said he was going to find a way to strap it on to his wrist and use it also as a watch. And shortly after the Nano was released, a cottage industry of Nano watchband makers started to emerge and today you can find over 100 colorful watchbands that turn the Nano into a watch.

But in this article I stated that for the Nano to be disruptive, it would need a Bluetooth connection to the iPhone and serve as kind of a visual companion by showing on the Nano who might be calling, iMessages, news alerts, etc that would come through the iPhone and not make me take it out of my pocket to see these alerts or key bits of information unless I needed to act on them.

To date, Apple has not added any of these features to the Nano but even if they do, they will now not be the first to take this idea and concept and run with it. Last week there were two announcements of watches that would work as companions to smartphones and both show a lot of promise. One is coming from Sony and the other is coming from a small start up called Pebble Technology.

Sony’s Watch is basically like the Nano but with Android’s OS inside and works in a similar manner. It uses a color OLED and connects and serves as a companion screen to Android smartphones. It sells for $149 and is on the market now. But the Pebble Smartwatch is the one that is the most interesting to me since it can be used with Android or the iPhone. And while it’s screen is not a color OLED like Sony’s, its eInk screen means this product has a very long battery life and can be even thinner then Sony’s version. Both connect to smartphones and deliver info on calls from a phones caller ID system, messages and other alerts that can be programmed into the watch and tied to a smartphone.

While Sony’s smart watch is coming from a major company, Pebble Technology’s approach to creating their smart watch is quite unique. Instead of raising funds to build this from friends and family as many start-ups do, they appealed to the public for pledge funds that will be turned into actual shipping orders of their smart watch when it ships in September. They are not the first to try this approach but their pitch seems to have struck a nerve, especially with the early adopters. They had hoped to raise $100,000 from these pledges but in their first week, they actually got order/pledges worth over $2.6 million.

With all of this interest in the Nano being used as a pseudo smart watch and these new entries from Sony and Pebble, as well as earlier models from Motorola and others, is it time for Apple to create their own iWatch with iOS on it and tied directly to the iPhone? Given this competitive pressure, you would think the answer should be yes. But if history is our guide, doing something just to counter the competition at this early stage of smart watch interest is not their style.

We have solid examples of how Apple actually looks at these market opportunities and eventually responds. For example, Apple did not invent the MP3 player. But once these devices had become established as a product with major potential, Apple then brought out the iPod and today it owns 75% of the MP3 market. Now consider the iPhone. Apple did not invent the smart phone. But once these took off, they brought out the iPhone and today their smart phone owns a major position in this market. And Apple did not invent the tablet. But their model with this, as well as with the iPod and iPhone, is to look at the fundamentals surrounding each of these products and then apply their genius of design, eco system and marketing to any category of devices they feel that they can make better.

While they may not be first in a new product category, their approach to making them better and then using their design and marketing prowess to take very strong positions in these markets is at the heart of the way Apple works. Today, Smart watches tied to smart phones are in their very early stages and show promise. But don’t expect Apple to respond in kind just because the competition in this space is heating up. Instead, look for Apple to glean from these early smart watch trail blazer’s and once they believe they can create something that is very sleek, elegant and innovative, then, and only then would they bring out an iWatch.

One side note to this is that watches on a whole have been on a decline since cell phones have come out. This is especially true with Gen Y users who rely mostly on their cell or smartphone to find out what time it is. But if the watch is tied to their smartphone, this could actually reverse some of this decline in watches and even Gen Y and those younger than them just might start wearing watches again.

Where in the App Store is Carmen Sandiego?

One of the goals we have in my household is to develop and maintain an inquisitive culture and the desire to learn. Being immersed in the technology industry as I am, I naturally add technology as a part of that process. One of my favorite examples of how we have done this was with an app called iBird Explorer Western.

My family and I live just outside San Jose in an agricultural / rural part of the area and because of that we see quite a wide variety of birds we never encountered in the city. My oldest daughter (age 9) and I both have the app on our iDevices, mine on my iPhone and hers on the iPod Touch. It has been remarkable to see how quickly she can spot a new bird in the wild and quickly use the app to identify the bird and learn interesting facts.

Even more recently in this process she has begun playing a game called Stack the States fairly regularly. This game teaches her facts about US states as well as how to identify them and place them on a map. It does so in a way that makes learning fun and technology at its best should accomplish that goal when it comes to education.

Because of my desire to integrate technology into the learning process and inquisitive nature of my kids, I began thinking of games I appreciated as a kid that did the same. The first one that came to mind, for my wife and I, was Where in the World is Carmen Sandiego?

This game did a great job, in my opinion, of integrating game play with lessons on geography and other facts that was fun and educational. I had been watching for a while, and still to no avail, the arrival of this game in the iTunes App Store. This game seems like an ideal game for iOS devices and I am still surprised it is not there. The company that owns the rights called The Learning Company also owns the rights to The Oregon Trail, a game that is available for iOS and quite popular.

Game developers are smart to be using legacy franchises to bring games into the touch computing era. As devices like the iPad get integrated more into the learning process at different age levels, these games can provide a solid base to build upon and bring to tablets and more.

Apple’s re-invigoration of the software community is creating new possibilities with game software on computing devices and especially those that are touch based.

Where in the World is Carmen Sandiego is one of many legacy franchises that I hope make it to touch devices. Such software and the software development communities focus on creating games that are fun and educational are positive trends that I would like to see continue.